Government should bail out the economy

The Ministry of Health recently announced five new cases of the Corona Virus in Uganda. The government has since responded by closing all schools, religious gatherings, and all means of public transport. Uganda is largely a subsistence economy and these measures are already having negative consequences on the economy.

Different countries are responding to the Corona Virus pandemic in different ways. Trump is injecting $2 trillion dollars into the USA economy. This is the largest economic bailout in the country’s history. The UK is providing £330bn of loan guarantees and a £20bn fiscal intervention including further business rate relief for companies. It has also promised to pay companies to stop them sacking workers at 80 per cent of each employee’s salary. Uganda needs to follow suit to avert the negative economic effects of the Corona Virus.

First of all we need to reduce taxes and offer tax rebates to businesses and individuals. Kenya has reduced individual income taxes from 30% to 25%. It has also reduced Value Added Tax from 16% to 14%. Kenya has also eliminated taxes for anyone earning below KES 24,000. The government can also consider suspending the social media taxes to help disseminate information on the Virus. Now is the time to relax some of the stringent tax obligations on businesses.

Secondly the government needs to massively invest in the health care system. The USA is investing $130BN into health care infrastructure. Mass recruitment of health workers and volunteers is also imperative. We also need to enlist the help of the private health care providers. We need to facilitate them to collect samples and provide some basic first aid to patients. This an opportunity to fully facilitate the health sector.

Thirdly the Central Bank should reduce loan interest rates. Kenya has stopped listing of loan defaulters by banks.The government should also provide cheap credit through commercial banks. The Central Bank should also intervene in the Forex market to stabilize the shilling. The government should pay outstanding arrears to suppliers. This will help to prop up struggling businesses which are employing the majority of the population.

Fourth, we should make cash distributions to vulnerable people (sick, elderly, unemployed, etc.) We should also distribute essential supplies like soap, salt, etc. This calls for budget re-allocations from other non-critical sectors. Food rationing and placing price caps on essential items (food + medical kits) maybe necessary. Kenya has allocated KES 10BN to the vulnerable population. We can also mobilize the population to donate and fundraise to the cause. 

Finally the government needs to mobilize additional funding to support all these initiatives from international agencies and other nations. We may need to re-negotiate more relaxed repayment terms for our existing loans. Without direct government intervention, unemployment is going to skyrocket, businesses will close, and the economy will come to a standstill. I call upon everyone to do everything within their power to support our economy.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s