'Infrastructure alone cannot make Uganda's economy competitive'

Jun 23, 2015

Dr. Fred Muhumuza of FSD Uganda argues that investment in infrastructure alone will not make the country competitive.


By Billy Rwothungeyo                                                     

Finance Minister Matia Kasiaja continued with a recent trend of allocating a big portion of the national cake to works and transport in his reading of the national budget. Of the sh23.9 trillion 2015/2016 national budget, the sector was allocated sh3.2trillion.

However, Dr. Fred Muhumuza of FSD Uganda argues that investment in infrastructure alone will not make the country competitive.

“We have been told that the roads and energy will give us competitiveness. I sometimes call this Senior Five economics.

"At this level is when we were told some kind of linear analysis, that when prices go up, supply goes down but as you go higher in economics, you realise it is more than just prices. Other things must be in place,” he said.

Speaking at a recent budget breakfast meeting organised by Institute of Certified Public Accountants of Uganda (ICPAU), Muhumuza said exchange rates will be key to the competiveness or Uganda’s economy.

“Competiveness of Uganda is not going to come from infrastructure alone, it is also going to come from what is the level of our exchange rate. This is a major competition variable globally,” he said.
 


From left: Deo Kayemba Ronald Kalema, Gervase Ndyanabo (Vision Group, moderator) Albert Beima, Nobert Kagoro and Hovey Malinga,  during the 16th National Budget Breakfast of Certified Public Accountants of Uganda at Imperial Royale. (Credit: Peter Busomoke)


Muhumuza noted that much as inflation has been checked, the prices of commodities have either remained relatively high.

“The prices have not come down; this can only be counter balanced by nominal increases in wages. If salaries of people do not increase, that means they will buy less, and less.’

“It is actually logical, if one wants to do good economic management, to say while I need to improve infrastructure, I also need to manage demand. My argument is government should have got sh120b out of the infrastructure share and given it to the teachers,” he said.

The economist said increasing the salaries of civil servants such as teachers and medical officers would boost local demand, as they would have more spending power.

“You also fit into the theme of the budget of improving service delivery. Service delivery is not going to improve if teachers and medical workers are earning what they do today. If they cannot afford rent, they are not going to sit in that class and continue teaching.”

 

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