THE national development plan is not sustainable and has no practical macro-economic framework, Tumusiime Mutebile, the central bank governor, has warned.
“Although the development plan is still a draft, I can say that its fiscal framework doesn’t consider the possible revenues from oil and this plan is supposed to be for 10 years,” he explained at a press briefing held on the sidelines of the fourth competitiveness forum at Serena Kampala Hotel last week.
“Clearly, oil will start flowing, therefore, oil revenues should be considered. “The macro-economic framework of the draft plan doesn’t contain estimates for revenues and therefore the expenditure does not reflect oil revenues.”
Mutebile had earlier told the forum that he had written to the chairman of the planning authority Kisamba Mugerwa. “He replied me, but his reply is inadequate,” he said.
The governor expressed concern about the lack of technical capacity among Uganda’s workforce. “Unfortunately, almost all vocational training institutions have been turned into universities. No country has ever developed on the basis of university graduates alone. We need vocational skilled workforce.”
According to Mutebile, Kigumba Agricultural Institute, which will be turned into an institute to train oil workers, is not enough. He called for the establishment of more vocational centres. Meanwhile, the governor said the global economic crisis, which resulted in dampening Uganda’s gross domestic product growth to 7%, down from 9%, was beginning to wane.
“There are indications that the negative external shock has begun to subside. The balance of payment has started to improve with a rebound of worker’s remittances from abroad and a return of portfolio investment in Treasury Bills and bonds.”
He attributed this renewed interest from portfolio investors to the excellent macro-economic stability in the country for the past 15 years. He, however, warned that the external environment over the medium-term would not be as it was in developing countries before the downturn.
“Foreign investors will be more cautious of risk and Uganda will have to work harder than before to attract investment,” he explained. “Sourcing capital from international capital markets will be more expensive than it was. Therefore, we should tighten our belts and face the hard times ahead.”
Mutebile said the worsening of fiscal balances in developed countries showed prospects of decline in real value of aid at the global level. “We should not premise our development plans on mobilising larger inflows from external resources.”
He added that the anticipated decline in demand for Uganda’s exports to the developed countries would be offset by improved exports to the region. He said it was vital that Uganda signs the extractive industry transparency initiative to boost investor confidence.
Mutebile said it was crucial to have a good fiscal policy which will take into account volatility as oil revenue begins to flow and provide room to adjust to negative shocks without jeopardising macro-economic stability.
“Because fiscal policy is so crucial to macro-economic stability, a public commitment by government to a sound medium-term fiscal framework is a minimum requirement for ensuring that that macro-stability is preserved,” sid Mutebile.
