Prime
What will stop Uganda’s economy from falling from the skies?
FRED K. MUHUMUZA
What you need to know:
- Rising social tension. The failure to enhance salaries and excessive borrowing for infrastructure will simply crash the economy. The excess capacity in factories amidst increased imports, lack of jobs, slow growth in tax revenues, increase in social tensions, growing insecurity, etc. point to an economy in a stall position. The failure to enhance salaries and excessive borrowing for infrastructure will simply crash the economy.
Saturday, June 1 marks 10 years since Air France Flight No. 447 from Rio de Janeiro to Paris crashed into the Atlantic Ocean killing all the 228 passengers and crew. The pilots failed to respond effectively when the autopilot disconnected and the plane entered into an aerodynamic stall following invalid speed signals after ice crystals blocked the pitot tubes.
The senior pilot had just taken his scheduled sleep and the other two failed to coordinate as one pointed the nose of the plane upward as he tried to recover from the stall position.
The trend of economic growth in Uganda over the same period of 10 years is pointing downwards with a slope of close to minus 0.2 – reflecting a stall or unscheduled descent situation.
The ‘economic pilots’ have decided to increase the speed and point the nose up to recover the economy. Instead, they have triggered a series of up-down swings that crashed the Ethiopian Flight 302 when a computer software misinterpreted the raising of the plane’s nose as a stall position. What should one do when an economy stalls?
Professional economic analysis provides an extra layer of information just like laboratory results amplify the doctor’s knowledge after hearing from and observing the patient.
The recent IMF report on Uganda (Article IV for 2019) forced me to look back to my childhood years when we would celebrate eating hailstones from the skies. We had no refrigerators so the rare ice was a delicacy! But the real bitter moment would come later on realization that the icy hailstones had also destroyed almost all our crops.
Despite the trillions committed to roads, energy generation and transmission, industrial parks, railways, airports, etc, the growth trend is still pointing down as though the economic plane is falling out of the sky.
Poverty reduction has stalled, job creation is a far cry from the required 600,000 per annum, and 20 per cent of tax revenue is sucked into paying interest on debt alone.
Like the mixed signals of Flight 447 and the confusion between the pilots, Uganda continues to draw from wrong indicators of debt-to-GDP ratio of less than 50 per cent. We have ignored the fact that the real danger lies in the debt structure whose quality is deteriorating as officials seek to raise the ‘nose’ of the economy and recover growth.
In the absence of proper professional analysis, the practitioners can be ‘sincerely wrong’ as they try to do the ‘right’ thing. The pilots of Flight 447 should have lowered the nose, stabilise the plane and increase the forward speed.
Sadly, they had wrong information and limited experience. After too much investments in infrastructure that is tainted with corruption, not to say there are no gaps left, Uganda needs a stimulus budget to get out of the aerodynamic stall position.
The failure to enhance salaries and excessive borrowing for infrastructure will simply crash the economy. The excess capacity in factories amid increased imports, lack of jobs, slow growth in tax revenues, increase in social tensions, growing insecurity, etc, point to an economy in a stall position.
Salary enhancement, especially for the lower cadres, is not a favour to them, but has multiplier effects that ‘kick-start’ the rest of the economy. Otherwise, the rains that recovered economic growth in 2017/18 can also carry ice crystals that destroy crops and give wrong speed signals.
Somebody needs to wake up the senior economic pilot – whoever that is.
Muhumuza (PhD) is a development policy analyst committed to inclusive growth. [email protected]
