Uganda: We Shouldn’t Dig One Hole to Fill Up Another

Government on Thursday re-tabled a request to Parliament for approval of a Shs700 billion ($200 million) loan. The money is, ostensibly, to be used to stabilise the weak Shilling.

There is no doubt something needs to be done about the Uganda Shilling that has taken a battering against the US dollar and other major world currencies in the last eight months.

From exchanging at a strong Shs2,600 to a dollar in June last year, it hit an all-time low of Shs3,700 exchange rate to a dollar. This week, the Shilling had made some tepid recovery, trading at Shs3,300.

When the request was first tabled in December, the MPs dismissed it outright and directed that government finds better and more sustainable ways of stabilising the Shilling (and there are many ways in the economics manual to do this) rather than digging one hole to fill up another.

They were right! Some of the things they suggested was that government should resuscitate production notably in the agricultural sector, cut down the bloated public administration expenditure, among other interventions.

It is apparent that the government did not apply itself in this direction and has returned with exactly the same request, and for the same reason!

One could argue that the electioneering detracted technocrats and the political leadership from following up on this. Even then, as it was before, there is no justification for digging up one hole to fill up another that is even much deeper than what we are trying to fill up because we will only end up with several holes.

There are certainly no easy ways to fix an economy such as ours where many indicators are in red - unemployment is estimated at 80 per cent, exports are falling while imports are rising, inadequate infrastructure, failing health and education systems, etc.

But choosing the easy approach of borrowing, not to finance production but to manage an unstable currency by occasionally throwing money in the foreign exchange market, is not a solution.

Now that the electioneering is over, the country would like to see a well-planned economic resuscitation plan that is not hinged on rewarding political supporters and feeding patronage networks but rather on sound economic principles.

We have seen many countries turn the leaf by making the hard decision and instilling discipline in management of public affairs. That is what we must do and that is what will ultimately rescue the frail shilling!

Source: All Africa