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Can NRM’s new economic proposals survive its implementation jinx?

Analysis

Can NRM’s new economic proposals survive its implementation jinx?

Government has taken what could be interpreted as radical steps targeting the revival of Uganda’s economy.

 

Prime minister Ruhakana Rugunda

Prime minister Ruhakana Rugunda

Key among the resolutions that were reached at Kyankwanzi, > are steps to give priority to local companies in the award of major contracts such as for dams and roads.

A communiqué released by the Office of the Prime Minister states: “Government shall ensure that, where technically possible and financially viable, local industries shall benefit from the projects (such as dams and roads) that are being undertaken in the country,”

This resolution comes in the wake of complaints by Ugandan entrepreneurs that the government has  sidelined them in the award of tenders in favour of foreign companies such as from Chinese and India with serious economic consequences to the economy.

Another related resolution targeting boosting the local industry revolves around the need to boost Uganda’s agricultural sector, increasing access to long term credit, while also lessening the country’s dependency on imported inputs.

The resolution states that: “Relevant Ministries shall actively promote production of acaricides, animal drugs, pesticides and fertilizers within the country, with appropriate technical advice to the farmers;”

Capitalise UDB

Facing complaints about high cost of borrowing particularly for the agricultural sector, the government has decided to recapitalise Uganda Development Bank (UDB).

The resolution states thus: “Government shall continue the systematic capitalization of Uganda Development Bank (UDB), to reduce the cost of borrowing for investment and long-term financing.” In similar fashion, the government has decided to recapitalise the Energy Fund to support the completion of ongoing energy projects by the Ministry of Energy.

At the same time, the government has decided to reduce the level of corporation tax currently standing at 30%. Corporation tax is charged on profits of companies at the end of every year.

Discipline in borrowing

Realising the spiraling level of Uganda’s debt, the ministers have taken steps to introduce some discipline in the way ministries contract loans. Importantly, ministries will have to ensure the availability of counterpart funding before the loan contract is concluded.

The resolution states: “The Ministry of Finance, Planning and Economic Development,  shall submit loan requests one MONTH in advance to the Rt Hon. Prime Minister and the Rt Hon. Secretary General for inter-sectoral scrutiny before loans are contracted, to confirm that the said loans are aligned to NRM Manifesto, Strategic Guidelines and Directives.”

It adds: “Pre-contractual processes such as feasibility studies, project design and related documentation shall be ready before loans are secured/contracted. All ministries shall build and develop this capacity.” The resolution adds: “Counterpart funding shall be secured before the conclusion of the contracting of loans that require such funding,”

The resolution comes amid concerns that Uganda’s debt is running out of control with serious consequences on the economy through high interest charges. Bank of Uganda officials recently revealed that Uganda’s total debt commitment has hit US$10bn. But that around a third of the debts are yet to be received due to lack of counterpart funding.

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