Expect no growth in Uganda’s economy in 2020, Muhakanizi warns

Muhakanizi warns accounting officers over loan deductions
Mr. Keith Muhakanizi

Kampala, Uganda | URN | The Secretary to the Treasury, Keith Muhakanizi has said Uganda will be lucky to grow at all in the calendar year 2020, underlining the extent of battering the coronavirus (COVID-19) has had on the country’s economy.

Muhakanizi was on Thursday 28th, May 2020 speaking at an event to open the pre-budget dialogue week in Kampala, organized by civil society. Muhakanizi said “we will be lucky to get above 0% growth for the calendar year.”

Muhakanizi’s candid projection speaks of a spectacular fall from the 6% projection that government had hoped for without the COVID-19 crisis.

For the financial year 2019/2020, which runs from June 2019 to June 2020, growth is still projected at 3.5%, also a drop from 6% earlier projected. Low growth means limited employment and less tax revenue. Several companies have laid off employees or cut their pay to stay in business.

The Ministry of Finance Permanent Secretary said while many people have been commenting on the economy, he was in the ‘kitchen’ cooking and knows exactly what is going on.

“The treasury itself is in emergency,” said Muhakanizi, signaling the dire need for money that the country is in. Government has been asked to amend the budget for next financial year and reflect the situation.

Muhakanizi said government will immediately be adjusting the Shs 45 trillion budget “not just on the revenue side but also on the expenditure”. Government will present its 2020/21 financial year budget next month.

Some sectors not seen as priority will see cuts as resources are re-allocated to more critical sectors. Cutting unnecessary expenditure including on travel and conferences is expected. This was one of the promises that government put up to the International Monetary Fund as it sought for a loan in April.

“The fiscal space is almost zero,” Muhakanizi says due to Uganda’s inability to fund most of its priorities. “It is not just Uganda alone but across Africa.”

The technocrat lashed out at parliamentarians for going ahead to create new governance entities with no budget to run them. Last month, Parliament approved 15 new municipalities expected to start operations on July 1. Muhakanzi insisted there was no money to run them.

Julius Bakunda, the Civil Society Budget Advocacy Group (CSBAG) executive director, said he was pleased government saw the need to refocus the budget to reflect the available resources.

Dicksons Kateshumbwa, the Uganda Revenue Authority (URA) commissioner for domestic taxes said what the tax body has witnessed in the last three months has never happened in the entity’s history.

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He said imports have dropped, domestic production also down together with employment, taking away key areas where they collect money.

URA only collected 960 billion Uganda shillings in taxes in April – registering a shortfall of Shs 630 billion. Government expected to collect at least 1.6 trillion Uganda shillings in taxes in April.

Kateshumbwa said the collections were better than they expected, given that the entire month of April was under lockdown.