COVID-19 has caused an unprecedented economic and health shock in Uganda, as has been the
case globally. After the World Health Organization announcement that COVID-19 was a global
pandemic, the government of Uganda undertook decisive measures to abate the spread of the
virus through adopting COVID-19 containment measures. Also, in anticipation of the distortionary
effects of COVID-19 on Uganda’s economy through the external and domestic effects channels,
the government adopted an expansionary fiscal and monetary policy alongside financial sector
interventions. Fiscal policy interventions involved the following: tax relief measures; government
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3 Efficacy of COVID-19 Macroeconomic Policy Responses in Uganda
expenditure through extending seed capital to vulnerable groups; strengthening health
systems; enhancing the supply of agriculture inputs through the use of e-vouchers; banning the
disconnection of users from utilities such as water and electricity; and payment of domestic
arrears, among others. Monetary policy interventions included reducing the central bank rate
(CBR) to 7%, its lowest level since inception in 2011. Financial sector intervention involved credit
relief, asset quality support and liquidity support measures alongside supporting a reduction in
mobile money charges. As such, this paper explores the macroeconomic impact of COVID-19 on
Uganda’s economy, the macroeconomic policy choices undertaken and, finally, inclusiveness and
viability of the various macroeconomic policy choices undertaken. The study used high frequency
macroeconomic data to tease out the impact of COVID-19 on Uganda’s economy. Furthermore,
through exploring the policy choices adopted, we also assess policy choice viability and extent
of inclusiveness. The aforementioned policy interventions mitigated the extent of COVID-19
distortions on Uganda’s economy. Indeed, although economic growth was slow at 2.9% in the
financial year (FY) 2019/20, with especially the service and industrial sectors paying the highest
price, the supportive environment ensured that the industrial sector picked up quickly in the first
quarter (Q1) of FY2020/21. The roll-out of public works in urban and peri-urban areas was aimed
at hedging livelihoods against the impact of COVID-19 on households as a result of dampened
production in the industrial and service sectors. While inflation remained subdued, the reduction
in aggregate demand and trade disruptions suppressed inflationary pressure on food thereby
undermining rural incomes and thus perpetuating rural poverty. Even then, the introduction of
the Emyooga fund1
and the rolling out of the e-voucher system to 10 additional districts in an
effort to enhance the distribution of agricultural inputs are attempts to strengthen livelihoods in
the rural areas in the midst of COVID-19 headwinds. Interest rates were relatively low on account
of expansionary monetary policy and confidence in Uganda’s financial sector. This was largely
on account of the Bank of Uganda’s interventions in the financial sector, which ensured a stable
financial sector albeit with reduced profitability. The external sector was characterised by reduced
foreign direct investment, tourism receipts and remittances. Overall, the policy interventions
were inclusive as fiscal policy was both sensitive to the formal and informal sectors (except
for households in urban, peri-urban and rural settings). Also, monetary and financial sector
interventions were sensitive to commercial banks, credit institutions and microfinance deposittaking institutions implying sensitivity to formal and informal businesses irrespective of size
and location.
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