“Someone please call 911, yeah yeah (pick up the phone yo)
Tell them I just got shot down, tell them I just got shot down
And it’s piercin’ through my soul (I’m losin blood yo)
Feel my body gettin’ cold, oh, so cold
Someone please call 911 (can you do that for me)” – Wyclef Jean ft Mary J. Blige – ‘911’ , April 2000
In an election year in the Republic, the economy usually runs loose. The State House lacks suddenly funds, the President needs more and so fourth. That is standard procedure. However, on the 19th March 2020 Matia Kasaija has now announced that the plans to borrow USD 190 million to cover a short-fall of funds, because of the COVID-19 or Coronavirus.
This is deemed fit because of the pandemic and the financial disruption it has. Not that the Republic is alone in this. Other big states and plenty in the Western hemisphere is putting up packages of economic stimulus to salvage the economy because of it. So, the sentiment is understandable. However, the Ugandan republic is already heavily indebted and every single development project of late is covered by debts and debt relief. Not like its sustainable to take up nearly USD 200 million to suddenly boost a dying economy.
Here’s the quotes:
“The low activity in industry and services sectors will result into loss of jobs further leading to a decline in economic growth and an increase in the level of poverty. The number of people that could be pushed into poverty is estimated at approximately 780, 000” (STATEMENT ON THE ECONOMIC IMPACT OF COVID.19 ON UGANDA,, 19.03.2020).
“To deal with the financing gap in the Government budgets for FY 2019/20 and FY 2020/21, my Ministry will seek for a budget support loan on concessional terms worth US$ 100 million for FY2019/20 and US$ 90 million for FY202021 from the World Bank” (STATEMENT ON THE ECONOMIC IMPACT OF COVID.19 ON UGANDA,, 19.03.2020).
It’s seems like they have the perfect cover for rising debt. They need to do something, because lots of industries are shut-down or silenced by the lack of tourism and foreign exchange. Also, the diaspora is hit and can therefore, not remit enough funds to boost the economy either.
The MoFPED really want to stain the economy more. To quote the IMF:
““Rising debt puts more strain on the budget as more resources need to be allocated for interest payments. One shilling paid for debt service is one shilling less going to a school or a health clinic. The current ratio of interest payments to revenue is comparable to what countries with high risk or in debt distress typically face” (IMF – ‘Uganda’s Economic Outlook in Six Charts’ 09.05.2019).
By borrowing close to USD 200 million is really pushing the envelope. As the interests needs to be served, the grace period might be short, as the state of finances across the board is souring. Therefore, the state will not get to favourable terms with this. The World Bank also has all other states begging for funds and possible grants to push the set-back of the pandemic. Not like Uganda is the only one crying out loud and applying for money.
This money will not be free money, but tainted money. This sort of funds is needed, because the state wasn’t planned nor had the capacity to have a rainy-day fund. The Petroleum Fund has already been raided and therefore, couldn’t come in handy now. This is the mismanagement, your already in a negative spiral with more and more loans. This is just adding two more and they are big. That will cost in the long run. It might salvage today and tomorrow. However, it will scar the next generation. Unless, someone is forgiving like these entities was in the early 1990s. Before the state again took up huge loans to cover deficits.
This is just the way it is now. Not a good look. Understandable in the growing crisis. However, that shouldn’t undercut the possible pain it will bring in the future. Save the day, but cause more harm tomorrow. Peace.