Uganda News

Uganda’s President Yoweri Kaguta Museveni in his address to the nation last night announced a nationwide lockdown for the next two weeks as the country battles the covid19 pandemic.

Uganda last week banned public transport and sealed its borders and urged the population to stay home, but stopped short of a full shutdown.

Museveni said that from 10:00pm Monday private vehicles would also be banned, seeking to avoid give a more advanced warning that would see people flee the city, as has happened across the continent where many poor residents see better chances of survival in the countryside.

“I would have given the public time to adjust but… a longer time would give people time to go to the villages and in so doing they would transfer the very sickness we’re trying to prevent. This freezing of movement will last for 14 days,” he said in a televised address.

Museveni also ordered a 14-day nationwide curfew from 7:00pm.

Shopping malls and businesses selling non-food items were ordered to close.

Food market vendors who continue to trade are forbidden to return to their homes for the duration of the 14-day lockdown, while factories could stay open if remain on the premises for the duration of the shutdown.

People are still allowed to move around on foot but not gather in groups of more than five at a time.

Several Kenya and Uganda-bound trucks and fuel tankers are stuck at the Busia-Kenya border after foreigners, especially Ugandan drivers, were stopped from crossing into Kenya.
 Most of Uganda’s fuel is transported through Kenya; so the closure of the border over coronavirus threatens to hurt exports and fuel supplies.

Uganda is a landlocked country and depends on Kenya to bring in her imports.

The blocking of trucks started on Monday morning.
Mr Sulaiman Sadique, a driver of a fuel tanker, said he had spent more than 12 hours at the border yet he was supposed to get fuel from Eldoret and deliver it to Kampala.

“They are giving us hard conditions to release our fuel tankers to Kenyan drivers which is impossible,” he said.
Mr Sulaiman Kavuma, a truck driver who was taking milk to Kenya, on Tuesday said he arrived at the border on Monday.
“I arrived here on Monday but up to now we have been denied entry into Kenya,” he said, adding that instead, Kenya police told him to hand over his truck to a Kenyan driver to deliver the milk to Eldoret.

Empty fuel tankers heading to Kenya to pick fuel, plus trucks carrying Uganda’s exports, especially sugarcanes, are among those stuck at the border.

By Tuesday evening, the queue of trucks had stretched to more than three kilometres.

Kenya and Uganda have since closed their borders to foreign travellers following directives from presidents Uhuru Kenyatta and Museveni, respectively.

Mr Michael John Amodoi, a clearing agent on the Uganda side, said whereas Uganda had allowed Kenyan drivers to enter their country, it was different on their side.

“Here, we have allowed drivers holding Kenyan national Identity cards to freely drive into Uganda, but in Kenya, it’s different,” he said.

Mr Amodoi said Kenyan clearing agents had refused to hand over papers exiting fuel tankers and trucks to Uganda.

“The Kenyans are insisting that unless they are allowed to cross into Uganda and clear their trucks and fuel tankers, they will not release any papers to Ugandan agents,” he said.
Mr Mophat Odiambo, a Kenyan clearing agent, said they will only allow trucks from Kenya if they are allowed to cross the border and clear on the Ugandan side.

“Under the East African Community (EAC), we are allowed to work on either side of the border,” Mr Odiambo said.
On the Kenyan side, trucks and fuel tankers were equally held up after Kenyan clearing agents held on to their exit documents.

Mr Carlos Wanyama, a clearing agent on the Ugandan side, thinks allowing the Kenyans to cross over and clear trucks and fuel tankers on the Ugandan side will flaunt the presidential directive.

Mr Simon Esunget, a customs supervisor at the Busia border, told border agencies that after a lengthy meeting with Kenyan authorities they had allowed Kenyan clearing agents to cross the border and clear trucks on the Ugandan side.
“We have adjusted on the restrictions and allowed Kenyan and Ugandan agents to clear on both sides of the border,” Mr Esunget said.

He, however, added that the clearing agents will have reflectors for identification and hoped this will allow trucks bringing supplies into Uganda to cross.

Uganda has lost more than Shs130 billion between February and March because offshore investors, who have been investing in Uganda securities stopped, Bank of Uganda (BoU) has said.

Officials from Bank of Uganda say a number of investors exited Uganda’s economy, making investments in government securities decline.

They also say the global value chains are being disrupted by factory shutdowns and delayed resumption of operations. Domestic manufacturers and traders, who rely on supplies from China and Europe, are facing challenges and are likely to shut down if the coronavirus pandemic persists.

Mr Adam Mugume, the director for Research at BoU, told Daily Monitor that offshore investors have exited government securities market to seek safe investment havens.

“For instance, between February 21 and March 13, offshore holding of government securities declined by Shs130 billion. This, plus negative sentiments, resulted in the shilling depreciation against the US dollar from Shs3,676.9 in February to Shs3,820 as of March 20, a depreciation rate of 3.9 per cent,” he said.

This means that Ugandan currency value will continue to decline against the dollar if the coronavirus continues. Mr Mugume also said tourism, a major source of foreign exchange earnings, is shrinking as a result of declining demand and expanding travel restrictions.

According to him, imports will definitely decline. He said currently about 71 per cent of imports come from countries severely affected by coronavirus and are under lockdown.

“It might be impossible to get alternative sources in a short time. This suggests a severe supply disruption. Given that about 77.8 per cent of imports are raw materials and capital goods. This will gravely affect domestic production process,” he said.
Mr Mugume said domestic capital, human as well as financial resources, are becoming underutilised as workers in factories and tourism are being laid off or furloughed.

“Commodity prices are declining sharply. Whereas a decline in oil prices is beneficial to Uganda as an oil importer, the harm caused by decline in agricultural commodity prices, for instance coffee, outweighs the benefits of oil price decline,” he said.
“A combination of the exchange rate deprecation and supply disruption will ultimately result in higher inflation in the coming months. The uncertainty that it is creating is also likely to affect domestic spending. Household spending is expected to grow at a slower pace amid moderate income growth. Private sector investment activity is projected to grow moderately but public infrastructure investments are to remain solid underpinned by ongoing projects,” he added.

He also said ultimately credit conditions will tighten, economic growth will be weaker, and the diversion of government resources to fight the outbreak will reduce funds available for key development priorities.

“In particular, private sector borrowing costs could rise, and financial conditions tighten, as commercial banks suspect consumers and firms may be unable to repay their loans on a timely basis. Higher borrowing costs will expose financial vulnerabilities leading to a heightened risk that debt cannot be rolled over. A reduction of credit will amplify the downturn arising from the supply and demand shocks,” Mr Mugume said.

Central bank response plan
Mr Mugume said Uganda’s economy, being small and open, is sensitive and therefore the central bank stands ready to react to disorderly financial market movements.

He said the BoU will ensure that financial institutions continue to operate effectively.

“We shall provide exceptional liquidity assistance for a period of up to one year to financial institutions supervised by BoU that may require it and waive limitations on restructuring of credit facilities at financial institutions; engage Mobile Network Operators and commercial banks to further reduce fees on mobile money transactions and other digital payment charges in order to limit the use of cash and bank branch visits, increase daily transaction and wallet size limits for mobile money transactions,” he said.

Bank of Uganda says they have already intervened in the foreign exchange market to smoothen volatility while letting the shilling adjust to external pressure.

Mr Adam Mugume, the director for Research at BoU, said easing monetary policy could boost confidence and assist with the recovery of demand once the outbreak eases and travel restrictions are removed. “Therefore, as the Covid-19 effects begin to fade, BoU should be in position to ease monetary policy and provide liquidity in the event that the financial system is constrained.
Second, the BoU could consider encouraging commercial banks, on a temporary and time-bound basis, extensions of loan maturities, especially for the sectors that will be hit hardest. These measures would lift confidence,” Mr Mugume said.

The government of Uganda is seeking $267 million for the Kampala-Jinja expressway project. The money is to be obtained from the African Development Bank and the French Agency for Development.

The loan request was presented by Mr. David Bahati, the State Minister for Planning. Both loans have a grace period of eight years and 25 years maturity period. However, the tentative interest for the African Development Bank is 2.25 percent, with a commitment fee of 0.25 percent or the non-disbursed amount.

On the other hand, money from the French Development Agency will attract a tentative interest of 1.5 percent while failure to pay commitment fees will attract a 0.5 percent annual interest on non-disbursed amounts.

The billion-dollar project forms part of the Northern trade corridor from Mombasa in Kenya through Kigali in Rwanda. This is a strategic corridor which serves as a trade link to the sea for landlocked countries of Uganda, Rwanda, Burundi, South Sudan as well as the eastern Democratic Republic of Congo.

The initial project preparation commenced with a feasibility study in 2010 before it hit a snag due to unknown reasons.

This project will be the first built in the country using a public-private partnership model. This implies that the contractor awarded the contract will design, develop, and operate the route for 30 years, earning profits by charging tolls before transferring the ownership to the state.

Road transport is by far the most dominant mode of transportation in Uganda, carrying over 95% of passenger and freight traffic.