You want another rap? Nah, didn’t think so. Even if President Museveni wants a BOP. Not a DaBaby track or anything. His just approved the US$500 million dollars to the Republic. This was reported earlier this month and he approved it on the 6th of May 2020, but stamped by the Ministry of Finance, Planning and Economic Development (MoFPED) on the 11th of May 2020.
What is unique here is that this loan is given on the idea of “Balance of Payments”. Economist would know that this to cover the deficit and the balance the budgets. This is to ensure the state has enough revenue to already cover the deficit it has. That is why grants and loans comes to ensure the levels of revenue covers the spending. This means that the state has spend a hundred dollars, but only had 50 dollars in liquidity. So, to ensure the accounts are balanced, the BOP comes in and fix the shortfall.
Museveni writes this in the letter:
“The money that goes to the Bank of Uganda is for “balance of payments support”. “Balance of Payments supports” does not only mean helping the country to “import more” but must also mean helping the country to “import less” by manufacturing these products here. With this undertaking, I approve the loan” (Museveni, 06.05.2020).
Because what the support does in the instance of the hundred dollars budget with a shortfall of 50 dollars revenue. The BOP support is the missing 50 dollars and makes it zero. Meaning, the accounts and financial flows should turn into zero. That means with the budget with its expenditure and its revenue its should be a nil or zero sum game. Therefore, when the President claims this helps local industry and less imports. I don’t see it.
Especially, if this is a BOP. Because, a BOP is a fixated way of balancing the budgets, not secure more trade. Its to cover deficits between expenditure and revenue. This isn’t a magical sphere of happiness and joy. This is budgetary measure to cover the shortfalls and lack of domestic revenue. To cover expenses that appeared or was already budgeted. Therefore, the need of Balance of Payments from the IMF to cover those.
This can be seen as a Financial Inflow to cover the deficit.
Like this:
-100 dollars budget/Import
+50 dollars revenue/Export
+50 dollars Financial inflow (BOP Support)
= 0
That is why, when the man says like this. Its a game of balancing the budget. Not putting a wand on the thing and swiftly changing things. This is just a financial measure to cover a deficit. A short-term solution to a shortfall. That will not solve anything, but by time. Not cover debt, not create a market nor make a big difference. Its just covering expenditure. Nothing else.
The President can make it seem so, but that wouldn’t be a BOP. That would be another instrument and another measure. Where the funds was actually meant for investment. This is covering the basics.
Let me end with DaBaby: “I needed some shit with some bop in it (Let’s go)” (DaBaby – ‘BOP’ of KIRK, 2019). Peace.
MinBane 