The World Bank has warned that Uganda’s slow but steady economic recovery could be short-lived due to the second wave of Covid-19 that has been compounded by shortage of vaccines.

The World Bank also warns that rising security spending, environmental degradation and increasing non-concessional borrowing and fast rising debt are other threats to Uganda’s economic recovery.

This is contained in the latest report titled ‘From Crisis to Green Resilient Growth: Investing in Sustainable Land Management and Climate Smart Agriculture’ released in June 2021.

According to the report, whereas the medium-term outlook for Uganda has improved since the end of 2020 due to advances in domestic demand conditions and the continuing global recovery as COVID-19 vaccines are rolled out, “risks are tilted heavily to the downside.”

“However, if the vaccine programs do not reach a significant proportion of the population and there are additional waves of the virus globally and in Uganda, this could deter the recovery in Uganda’s exports; adversely impact a rebound in FDI, tourism and remittances; and further depress the domestic economic recovery,” the report adds.

The World Bank report comes at a time when vaccines are running out yet many vaccine recipients are also due for the second round. The government has said it is increasing efforts to bring in more vaccine doses as the first batch of AstraZeneca vaccine, which it received in March, gets finished by the end of this week.

 The World Bank further warns that such developments could also worsen the external and fiscal imbalances, and lead to more severe social impacts.

“Near term macroeconomic management also faces major challenges and risks related to the oil sector development, shrinking fiscal space amidst rising security spending, increasing use of non-concessional borrowing and fast rising debt; and increasing concerns over governance that could reduce access to external funding,” the report states.

According to the sector allocations for the 2021/2022 national budget, Governance and Security will take Shs7.7 trillion followed by Human Capital Development with 6.8 trillion and Integrated Transport Infrastructure and Services in third position with Shs3.9 trillion.

Uganda’s rising fiscal deficits which is now standing at 9 per cent of the GDP for this fiscal year 2020/21, is putting more pressure on the government to borrow more which is also dangerous for the country in terms of debt servicing.

Furthermore, continued degradation of the country’s natural capital combined with the increasing frequency of climatic shocks could impact many farms and households in Uganda given their limited adaptive capacity to natural disasters and climatic stressors, generally low technology adoption rates management policies and longer term actions that will spur a greener, resilient and inclusive recovery, the report says.

According to the National State of Environment Report, which was released early this year, there has been a sharp decline in wetland coverage from 15.5 per cent in 1994 to 13 per cent in 2017 and of the remaining wetlands, 4.1 per cent is degraded. The country is also experiencing high levels of air and water pollution which is leaving huge public health effects and affecting the economy through the death of fish in water bodies such as Lake Victoria, according to the report. 

Nevertheless, the World Bank report states that investments could surge further if the Final Investment Decision agreements are signed quickly to pave the way for production of oil in Uganda. “In that scenario, real GDP could grow beyond 4.6 and 6.4 percent projected for FY22 and FY23, respectively,” the report states.

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