The Government of Uganda is set to borrow about Shs720bn as the economy struggles in the face of the COVID-19 aka Coronavirus pandemic.
According to Matia Kasaija, the Minister of Finance, Planning and Economic Development, Uganda Revenue Authority’s revenue collections will register an additional shortfall of about Shs82.4 billion for the remaining period of the FY2019/20 (March-June) and about Shs187.6 billion in FY2O2O/21.
“The coronavirus will mainly impact international trade taxes (reduction in value of imports) as well as consumptive taxes (VAT and Excise duty) due to the slowdown in the industry and services sectors,” Kasaija said in a recent statement presented to Parliament.
Government adds that if coronavirus spreads fast, economic growth for FY2019/20 would decline to between 4.6 percent and 5.1 percent. It is estimated that an additional 2.6 million Ugandans would be pushed into poverty.
“In total, the Government of Uganda is faced with a preliminary additional financing gap of approximately Shs370 billion (equivalent to approximately US$ 100 million in FY 2O19/20) and Shs350 billion (approximately US$ 90 million in FY 2O2O/21 due to revenue shortfalls and additional expenditure needs to deal with the challenges in the health sector, needs arising from the desert locust invasion and related support to people whose livelihoods will be affected,” Kasaija said.
He added: “To deal with the financing gap in the Government budgets for
FY 2019/20 and FY 2O2O/21, my Ministry will seek for a budget support loan on concessional terms worth US$100 million for FY2019/20 and US$ 90 million for FY2O2O/21 from the World Bank.”
Government says to deal with this economic shock, both fiscal and monetary policy adjustments would be required. The fiscal policies will play a critical role in mitigating the negative impact of the pandemic on economic activity and the challenges in the affected sectors particularly health, while monetary policies will help to reduce the impact of the deterioration of the Balance of Payments.