PROF AUGUSTUS NUWAGABA: Here is how govt can address the current economic hardships

I would like to put it to Ugandans that the current inflation we are experiencing is a global phenomenon. It is largely imported inflation, caused by three factors namely: 1. Disruption in supply chains of oil products, leading to rise in prices of fuel (petrol, diesel )and gas.

There is no way the government can subsidise energy costs, simultaneously with  huge tax cuts, in a situation of high inflationary pressures, bordering on a recession.

The British Chancellor of Exchequer was fired because of this mistake after markets roiled and the British Pound nose-dived to a level not seen in 100 years.

There are a number of measures government can take to address the current economic hardships of imported inflation and declining growth;

 1. Immediate measure: The Central Bank must provide “fire brigade”, as the prices are “red hot”. They must be “cooled down”. This is through the monetary policy transmission of raising CBR, which will result in rising interest rates, hence bringing down money in circulation, reducing of demand, and subsequent fall of prices. However, it should be a temporally measure.

2. Short term measure:

Investing in production: provision of high quality  seeds, acaricides, pesticides, value addition on agriculture products, storage and post-harvest management.

3. Medium term measures: a) instituting import substitution and export promotion policies. This should base on already developed value addition in agro-processing.

b) Adopting a strong industrialisation policy with sufficient investment in policies to attract foreign direct investment, working on tax regime to make it attractive to investors, creating market infrastructure, including negotiating for favourable international trade architecture including guarantees.

4. Long-term measures: a) investing in irrigation infrastructure to control agriculture production. b) investing in the population. This is what most countries (China, Singapore, South Korea) adopted as a magic bullet that transformed their countries.

c) Fighting corruption and wasteful expenditure

d) Reducing borrowing; leaving borrowing to only critical areas that have high multiplier effects.

5. The benefits of a highly skilled population include; high productivity, high earning capacity which translates in high aggregate demand, which a major factor in driving economic activity.