Ugandan economists are calling for better fiscal management as the nation faces economic uncertainties exacerbated by reduced foreign aid and high public spending during election cycles. Experts urge the government to learn from past crises, prioritize essential expenditures, and reduce dependency on external funding to ensure sustainable growth.
Economists in Uganda are urging the government to adopt a more sustainable approach to fiscal management, particularly in light of ongoing global economic challenges and local inflationary pressures. A recent discussion highlighted the implications of reduced aid from the U.S. due to changing fiscal policies under former President Donald Trump, which have affected numerous nations, including Uganda, as it heads into a critical election phase characterized by increased governmental expenditures.
Dr. Fred Muhumuza, an economic researcher, emphasized that while Uganda navigated the COVID-19 pandemic relatively well, it has failed to draw meaningful lessons from such crises or from the impacts of the Ukraine conflict. He cited the example of the Irish Republic, which strategically refocused on essential sectors following economic downturns, questioning Uganda’s preparations for potential future economic shocks. Dr. Muhumuza criticized the government’s excessive spending, particularly on an expanded vehicle fleet, suggesting that prioritizing essential needs could save an estimated 1 trillion shillings.
The United States is reported to contribute over $1.2 billion to Uganda annually, with a significant portion supporting governmental operations. Dr. Muhumuza indicated that the allocation of these funds is crucial to the country’s economic stability. He reiterated that if Uganda does not engage in serious discussions regarding government expenditure, future economic progress will be stunted. Meanwhile, Dr. Adam Mugume, Executive Director of Research at the Bank of Uganda, acknowledged the potential impacts of reduced U.S. aid but noted that the country must work to diminish its dependency on foreign support.
Experts express a cautious yet optimistic outlook for Uganda’s economy, emphasizing growth driven by coffee and gold exports alongside agricultural production. However, Christopher Legilisho from Stanbic Bank pointed out the vulnerabilities associated with reliance on global commodity prices that could fluctuate unexpectedly. Additionally, potential adverse weather conditions could affect agricultural yields.
While the oil and gas sector shows promise for economic growth, the government must continue investing in critical infrastructure to support production and economic stability. Dr. Mugume suggested that lessons from the hyperinflation period post-2011 elections have led to more proactive economic management. Dr. Sebastien Walker from the IMF stressed the importance of nurturing local investors and improving governance to build a sustainable economy amid external challenges and regional geopolitical issues, particularly regarding neighboring conflicts.
Francis Karuhanga, Chief Executive of Stanbic Uganda Holdings Ltd, emphasized the necessity of addressing both global and regional geopolitical factors to ensure economic stability and growth for Uganda’s businesses.
In summary, Uganda faces significant economic challenges amid global uncertainties and excessive government spending. Economists advocate for strategic fiscal management, emphasizing the need to learn from past crises, refocus investments in critical sectors, and reduce reliance on foreign aid. A balanced approach that considers both local and regional geopolitical dynamics is essential for fostering a sustainable and resilient economic landscape for the country.
Original Source: www.independent.co.ug
