Uganda’s Economic Response to COVID-19
Uganda’s Economic Response to COVID-19 – The case for immediate household relief. PHOTO/Twitter/Matia Kasaija

Uganda’s Economic Response to COVID-19 – The case for immediate household relief as the country continues to fight Coronavirus

The Government of Uganda’s rapid and decisive action to put the country on lockdown to contain the coronavirus is commendable and necessary to avert a public health disaster. In addition to this, bold and rapid action will be needed to avoid an unintended socio-economic disaster.

The pandemic is already wreaking havoc across the global economy, with immediate and far-reaching implications for large sections of the Ugandan population. In the worst-case scenario, an estimated additional 2.6 million Ugandans could be pushed into poverty. 

The roughly 7.7 million workers in the informal sector and those relying on the everyday income to secure basic needs of food, water, medicines, and basic services will be hit particularly hard.

Locking down a largely hand-to-mouth economy like Uganda’s will therefore only work without disastrous effects on socio-economic wellbeing and public order if an effective social protection package is rolled out immediately. 

In a rapid response scenario, the government will need to resort to imperfect targeting criteria for household relief efforts, such as residence in certain neighbourhoods or membership in certain trade unions, and distribution channels such as mobile money operators, Local Councils, and/or associations.

Uganda’s Economic Response to COVID-19
Uganda’s Economic Response to COVID-19 – The case for immediate household relief. PHOTO/Twitter/Matia Kasaija

4 possible ways Uganda can deliver Protection to households dependent on income from the informal economy

1. Increasing household purchasing power

The most straightforward way of supporting people whose revenue streams have been turned off overnight is to give them cash to ensure their continued consumption of goods and necessities. 

The government should consider repeated monthly transfers targeted at the poorest urban households for the duration of the lockdown.

2. Decreasing the cost of goods and services

Additional measures to reduce the cost of nutrition, fuel, utilities and rent might also be necessary. Price controls of staple goods and services may be an option to prevent speculation and thereby maintain the purchasing power of low-income households. 

Service providers (including the utilities) may need to be supported by the government to enable them to continue providing their services. 

A rent moratorium for the duration of the lockdown could act as an immediate transfer of resources to vulnerable households from landlords.

3. Distributing essential goods and services for free

The free distribution of goods and services is possible as long as people are accessible in their homes and the distribution can be done in an orderly fashion. To ensure social distancing does not break down, the delivery of in-kind aid has to be strictly organised and order enforced. 

In some settings, it may be more effective to set up pick-up points in spacious places and then regulate the flow of people from homes to those pick-up points.

4. Maintaining the flow of essential goods and services

During the lockdown, it will be vital to find ways to keep supply chains for basic supplies active. Where activities in these supply chains contradict the movement bans put in place, special exemptions will need to be issued and implemented under close oversight. 

It may also be useful for the government to subsidise essential businesses to keep their operations running.

Finding smart ways to reduce the risk of movement instead of outright banning it would help maintain access to essential goods and services. 

For example, public transport could be kept running but with reduced passenger loads and free distribution of masks at bus stops. The government might also consider lifting the curfew to spread economic activity throughout the day to reduce crowding in markets.

Markets are the crucial tail-end of the food supply chains across the country, but they are also one of the riskiest settings for the spread of a virus. Keeping markets operating will be important to ensure food reaches households.

To keep markets open, they will need to be reconfigured.

Feasible Recommendations.

Repeated monthly support package to be mobilised within the lockdown days. For the sake of argument, a monthly relief package worth UGX 50,000 for 7.7 million informal workers (using CDA estimates) would cost UGX 385 billion, or about 0.36% of GDP (per month). 

In reality, the number of people reached could be far smaller than 7.7 million – due both to more effective targeting of the most vulnerable and to the difficulty of reaching that many people.

Multiple channels for financing a household relief package should be explored. The Government of Uganda has already requested a supplementary budget of UGX 284 billion (USD 75 million) and is preparing to approach the World Bank and IMF for credit. 

It should also include a well-thought-out, bold, and immediate relief package to help households that depend on incomes from the informal sector get through the lockdown.

This article is a shortened version of the Centre for Development Alternative’s policy brief by Max Walter and Juliane Bing, which can be accessed here.