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Covid -19 impact on Uganda’s economy and public and private sector response

Hitesh Mehta, Managing Partner at Nexia HMS Associates offers a cross – sector summary and his insights into the current economic state of play in Uganda in response to the pandemic

Logistic, Access to raw materials/input

Recent increases in cases from Coronavirus are seen in truck drivers coming from across borders that has resulted in the slowdown of incoming cargo.

Perishable items are almost impossible to import to the country.

Major input and capital items mainly for the manufacturing industry are being impacted due to this logistic challenge that will also affect the supply side.

 

Additional operating expenses

COVID-19 containment measures such as hand sanitiser, soap, hand washing facilities, and social distancing have resulted in a slight increase in operating expenses for businesses.

 

Domestic demand for products

Approximately half of the businesses in the country have experienced decline in demand for their goods by more than 50%.

 

Employment

Approximately three-quarters of the surveyed businesses report a reduction in the number of employees.

 

Credit and Liquidity constraint

Risks associated with COVID-19 have exacerbated credit and liquidity constraints among SMEs & large businesses.

 

Tourism

The Minister of State for Planning David Bahati says the country’s tourism sector earnings will drop to US$ 700 million in the current financial year 2019/2020, meaning the drop will be 39 percent compared to the previous financial year. Uganda’s Tourism sector has in the past been the country’s main export fetching on average US$ 1.4 billion annually.

 

Education

To contain the virus, schools and colleges have been closed down since 18th March, 2020 till date & will be remain closed up to 30th June, 2020. Though almost all education institutions implemented distance and online learning, all have  felt it ineffective and the schedule of timely tests and examination has been impacted.

Schools are asking for fees after offering little discount, but parents are struggling to pay the fees as their income from jobs and businesses have been impacted drastically.

 

Real Estate

According to Bank of Uganda, Uganda witnessed a credit advance from Banks into real estate up to a tune of Shs3.19 trillion in the year ending 2019. However, because of Covid-19, this growth has been under attack and a massive slow-down is being witnessed ever since the outbreak of the pandemic.

Before Uganda’s borders were closed, Uganda Investment Authority had already recorded a decline in the number of people coming to Uganda.

 

Policy considerations

The government should work to further improve the business climate for the private sector and continue undertaking serious reforms to overcome institutional weaknesses. The crisis may also provide an opportunity to strengthen analytical capacity in Uganda to provide policy-makers with research-based solutions for safeguarding Uganda’s economy during future pandemics and other crises.

 

 

 

 

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