Invest in local production to stop imported inflation, experts urge Uganda govt

Economic experts have urged the government of Uganda to put its efforts in investing in Ugandans by increasing local production so as to offset imported inflation.

According to the experts, the government’s reactionary approach to the current economic approach is not helping the local population and instead creates a desperate and angry people.

Speaking at a Policy Workshop on High Commodity Prices organised by the Ministry of Finance and Bank of Uganda on Wednesday, 25 May 2022 in Kampala, Mr Daniel Birungi, the Executive Director of Uganda Manufacturers Association (UMA), said government should look at increasing production for some of the most consumed items locally.

“We need to leverage on what we have, promote domestic production to tackle issue of imported inflation,” Mr Birungi said.

Prof Augustus Nuwagaba said: “You cannot solve a problem by the same level that it was created. Let us invest in Agriculture that employs the largest population, the budget allocation has never exceeded 4% against the 10% by the Maputo declaration.”

“There is a need for inclusive and well-distributed growth to address poverty. This will increase the resilience of households to such price shocks,” he added.

Mr Julius Mukunda, the head of the Civil Society Budget Advocacy Group (CSBAG), added: “If we increase production and productivity, we will avoid shortages “If for instance more companies produce soap, cooking oil, the price will definitely reduce.”

However, Mr Mukunda urged government to cut down its expenditure.
“When government is telling us to tightening our belts by eating cassava, is it also doing the same? Efficiency is critical and key in times like this,” he said.

Dr Joseph Muvawala, the Executive Director of National Planning Authority (NPA), urged government to review its taxation system.

“What are we doing in this country on a daily basis to achieve macro-economic stability? We need to target our taxes better and check whether taxes are effective. Unless we know our people, the vulnerable, we cannot do much, its important we choose where our money goes and invest to get results running,”

Dr Joseph Muvawala, Executive Director of National Planning Authority

“What are we doing in this country on a daily basis to achieve macro-economic stability? We need to target our taxes better and check whether taxes are effective. Unless we know our people, the vulnerable, we cannot do much, its important we choose where our money goes and invest to get results running,” he said.

“In this country, we plan very well but when it comes to implementation, we are doing badly. Given current times, our priorities should change,” he added.

This comes as Ugandans call on government to lower taxes so as to help ease the inflation burden amid rising prices of food and other items.

But in his address on Sunday, President Museveni said this would be disastrous as government would not have money to fund the budget and offer the required services.

In the workshop on Wednesday, 25 May 2022, Izabella Karpowicz, the IMF Resident Representative Uganda, acknowledged that whereas inflation has been exacerbated by the war in Ukraine and sanctions on Russia, among other global factors, Ugandan monetary authorities should monitor “pass-through of rising international prices to expectations and second round effects by support the vulnerable and keeping fiscal soundness.”

“Our studies have shown that enabling strong institutions and free markets are more important for attracting investment, private sector development and foreign investments,” Karpowicz said.

Dr Michael Atingi-Ego, the Deputy Governor of Bank of Uganda (BoU), said Uganda needs to avoid knee-jerk approach to rising commodity prices but rather look at the long term and data dependent approaches.

“So far, Uganda has avoided a knee-jerk reactive approach in dealing with the spike in commodity prices. Taking the long-term view and subject to the outlook of inflationary developments, the Bank of Uganda has adopted a measured and data-dependent response to the upturn in inflation, so far,” he said.
Dr Ramathan Ggoobi, the Ministry of Finance Permanent Secretary and Secretary to the Treasury, agreed that investment in local agricultural production is key to economic transformation.

“Finalizing the Agriculture revolution is key in transforming people in Agriculture into industrialization and services. What happens elsewhere affects us and whatever happens in Uganda affects other regions, there is need therefore to allow domestic prices follow international prices,” he said.

The minister of state for Finance-in-charge of General Duties, Mr Henry Musasizi, said: “Increase in price commodities is temporary and it will soon normalize. Taxes are not the main cause of price increase and providing subsidies is not an alternative because it will benefit the rich at the expense of the poor.”

He said the government will support citizens and businesses to recover their livelihoods through programmes such as Emyooga and small business recovery fund.

He said despite the economic recess occasioned by the Covid 19 pandemic, the economy continues to show signs of recovery and economic growth is projected to grow from 3.8% to 4.5%.