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Uganda’s GDP Contracts under COVID-19, Investing in Uganda’s Youth Key to Recovery

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The latest World Bank economic analysis for Uganda projects the economy to contract by up to 1% in 2020 due to COVID-19 disruptions to trade activities and production, down from 7.5% growth in 2019.

According to the Uganda Economic Update, Investing in Uganda’s Youth, real Gross Domestic Product (GDP) grew at only 2.9% in fiscal year 2019/20, less than half the 6.8% recorded in fiscal year 2018/19, while real GDP in per capita terms is likely to contract for the first time in a decade by about 4.5% in 2020.

The COVID-19-related demand shock, together with tax and spending measures to manage the crisis, reduced revenues, increased current spending, and led to a significant widening of the fiscal deficit. The collapse in consumption and investment reduced imports and incomes earned by foreign investors, which narrowed the current account deficit. Meanwhile, higher coffee, maize and gold exports helped offset some of the losses in export revenues caused by the halt in international tourism.

At the household level, incomes have fallen as a result of widespread firm closures, job losses within industry and services, particularly the urban informal sector. Up to three million more people could fall into poverty on top of the 8.7 million already in poverty in 2016, increasing high levels of vulnerability and reversing the poverty gains of the last 15 years. This threatens to reverse the gains Uganda has realized from a gradual structural transformation that shifted labor from rural to urban areas and subsistence agriculture to industrial and service activities, and in the process supported the steady reduction in poverty over the past three decades.

The government has responded by deploying strong fiscal and monetary policies to support healthcare and vulnerable households, but social assistance has been limited with fewer than 2% of Ugandans receiving direct cash transfers. More worryingly, the pandemic may severely hamper human capital development and the country’s chances of benefiting from its growing young and working-age population. In addition to creating jobs for the rapidly growing population, a key challenge facing Uganda’s development agenda is the delivery of basic education and health services for all.

Uganda has a great opportunity to build back better from the COVID-19 crisis if investments in human capital and the youth are made a priority. Accelerating quality education and health service delivery quickly will ensure that its young people have access to the basic services they need to make the most of their potential,” said Tony Thompson, Country Manager, World Bank.

Uganda’s population is set to increase in the next 20 years to around 74 million, up from an estimated 46 million today, and more than double to around 104 million by 2060. But human capital development and opportunities for the youth are unequal. On average, a child born in Uganda today will only be 38 percent as productive when she grows up as she could be if she enjoyed complete education and full health as the World Bank’s Human Capital Index (HCI) suggests. To this end, the economic update makes several policy recommendations to enhance investments in the health and education sectors, including strengthening health promotion and disease prevention through multi-sectoral collaboration, and diversifying low-cost service delivery platforms through investments in remote learning, including distance education and online learning at the secondary level.

“Uganda should strive to maintain debt sustainability – it is in an enviable position compared to many other countries. To improve access to concessional financing, particularly from bilateral creditors, government will need to take a more balanced approach with respect to investments in infrastructure and the social sectors,” said Richard Walker, co-author and Senior Economist World Bank.

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Mozambique: Violence continues in Cabo Delgado, as agencies respond to growing needs

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A woman and her baby who fled their home in northern Mozambique in November 2020 are now living in a camp for displaced people. © UNHCR/Juliana Ghazi

Civilians continue to flee armed conflict and insecurity in northern Mozambique, more than two months after militants attacked the coastal city of Palma, located in Cabo Delgado province, UN agencies reported on Friday. 

The UN refugee agency, UNHCR, reports that some 70,000 people have fled the city since 24 March, bringing overall displacement to nearly 800,000. 

People have been escaping daily for districts further south, or to neighbouring Tanzania. Thousands more are reported to be stranded in areas around Palma, with restricted humanitarian access. 

Shots fired, houses burned 

“Those fleeing have told UNHCR staff that the situation in Palma remains very unstable, with regular gunfire at night and torching of houses”, Spokesperson Babar Baloch said during a briefing in Geneva. 

UNHCR and partners recently assisted people living in dire conditions in remote areas around Palma, distributing relief items to some 10,000 who have been displaced. 

The agency continues to advocate for internally displaced people to receive protection and assistance, and for those seeking safety in Tanzania, to access asylum. 

Forced back into danger 

Mozambican authorities report that many people attempting to cross the river, which marks the border between the two countries, have been forcibly returned.  More than 9,600 have been pushed back since January, with 900 removals occurring over a two-day period this week. 

“UNHCR reiterates its call for those fleeing the conflict to have access to territory and asylum, and, in particular, for the principle of non-refoulement (no forced return) to be respected”, said Mr. Baloch. “Refugees must not be forced back into danger.” 

‘A children’s crisis’ 

The UN Children’s Fund, UNICEF, said needs are enormous in Cabo Delgado, located in a region that has barely recovered from a deadly cyclone in 2019.  

In the wake of the attack in Palma, some 2,000 children have no idea of the whereabouts of their parents, or even if they are alive, agency Spokesperson James Elder told journalists

“What is happening in Cabo Delgado is a children’s crisis – an emergency on top of an emergency – a deadly cocktail from the impacts of climate change, conflict and COVID-19”, he said. 

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Kenya Receives $750 million Boost for COVID-19 Recovery Efforts

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To reinforce Kenya’s resilient, inclusive and green economic recovery from the COVID-19 crisis, the World Bank approved $750 million in development policy financing to support policy reforms that will strengthen transparency and accountability in public procurement and promote efficient public investment spending.

This development policy operation supports measures to improve medium-term fiscal and debt sustainability through greater transparency and efficiency in government spending, building on ongoing World Bank support to enhance public finance management systems. The operation provides for the establishment of an electronic procurement platform for the public sector that seeks to make government purchases of goods and services transparent. This will help increase accountability in public spending and reduce opportunities for corruption. The support also strengthens public investment management by seeking cost-savings and applying rigorous selection and monitoring and evaluation criteria to all projects. Both measures are expected to yield fiscal savings of up to $2.6 billion.

“The operation prioritizes reforms in hard hit sectors, such as healthcare, education, and energy, which have been made urgent by the impacts of the COVID-19 crisis,” said Keith Hansen, World Bank Country Director for Kenya. “In recognition of the severity of the crisis and need for a comprehensive response, we are supporting the government’s post-COVID-19 Economic Recovery Strategy, which is designed to mitigate the adverse socioeconomic effects of the pandemic and accelerate economic recovery and attain higher and sustained economic growth.”

The policy operation also prioritizes energy sector reforms to improve electricity access and ensure that Kenyans benefit from least-cost, clean energy sources. Further, the new policy framework will help strengthen Kenya Power and Lighting Company’s (KPLC’s) finances with a new competitive pricing regime.

Kenyans will also benefit from better healthcare and disease prevention, especially for the poorest and most vulnerable households, through National Hospital Insurance Fund (NHIF) governance reforms and the establishment of the Kenya Center for Disease Control (KCDC) to strengthen disease prevention, detection, and response. Reforms will further seek to provide Kenyans with more equitable access to higher education, through a performance-based funding method to reduce the imbalances and inefficiencies created by the existing funding model for universities.

“Stabilizing the debt trajectory and reducing high debt costs is a top priority,” said Alex Sienaert, Senior Economist and Task Team Leader, World Bank Kenya. “This policy operation supports measures to reduce the budget deficit over time, such as by making public spending more efficient, whilst minimizing debt costs by helping to meet the government’s current financing requirements on concessional terms.”

DPOs are used by the World Bank to support a country’s policy and institutional reform agenda to help to accelerate inclusive growth and poverty reduction. The negative impacts of the COVID-19 crisis have made reforms that improve governance and service delivery, including those covered by this operation for Kenya, even more critical because they create better conditions for Kenya to inclusively and sustainably recover from it. Financing provided by the World Bank is offered on concessional terms, making it significantly lower than commercial loans. The total annual interest and service cost of the Kenya DPO is 3.1%.

* The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of assistance for the world’s 76 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change to the 1.6 billion people who live in IDA countries. Since 1960, IDA has supported development work in 113 countries. Annual commitments have averaged about $21 billion over the last three years, with about 61 percent going to Africa.

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Risk of COVID-19 surge threatens Africa’s health facilities

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Health workers on Bwama Island on Lake Bunyonyi in Uganda prepare to administer COVID-19 vaccines. © UNICEF/Catherine Ntabadde

Critical health facilities across Africa risk being overwhelmed by surging COVID-19 infections, the UN health agency said on Thursday.

The appeal to the continent’s authorities to boost lifesaving facilities comes as the World Health Organization (WHO) warned that vaccine shipments were at “a near halt”.

“The threat of a third wave in Africa is real and rising”, said Dr Matshidiso Moeti, WHO Regional Director for Africa. “Our priority is clear – it’s crucial that we swiftly get vaccines into the arms of Africans at high risk of falling seriously ill and dying of COVID-19.”

20% uptick in cases

As the continent struggles with vaccine shortages, the care of critically ill COVID-19 patients has lagged behind other parts of the world. While Africa has 2.9 per cent of cases globally, it accounts for 3.7 per cent of deaths.

Weak observance of preventive measures likely contributed to the crisis, along with increased population movement and interaction, and the arrival of winter in southern Africa.

In the last two weeks, the continent has recorded a 20 per cent increase in coronavirus infections, compared to the previous fortnight. “The pandemic is trending upwards in 14 countries and in the past week alone (and) eight countries witnessed an abrupt rise of over 30 per cent in cases,” WHO said in a statement.

Intensive care filling up

South Africa has seen “a sustained increase in cases”, while Uganda reported a 131 per cent week-on-week rise last week “with infection clusters in schools, rising cases among health workers and isolation centres and intensive care units filling up”.

Angola and Namibia have also witnessed a resurgence in cases, WHO said, noting that 48.6 million doses have been received in Africa and 31.4 million doses have been administered in 50 countries on the continent.

Poor treatment

Only around two per cent of the population has received at least one dose of COVID-19 vaccine, compared with the 24 per cent global figure.

“While many countries outside Africa have now vaccinated their high-priority groups and are able to even consider vaccinating their children, African countries are unable to even follow up with second doses for high-risk groups,” said Dr. Moeti. “I’m urging countries that have reached a significant vaccination coverage to release doses and keep the most vulnerable Africans out of critical care.”

Globally, as of 3 June 2021, there have been 171,222,477 confirmed cases of COVID-19, including 3,686,142 deaths, reported to WHO. As of 2 June, a total of 1,581,509,628 vaccine doses have been administered.

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