Page 19 - DMEA Week 28 2022

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macroeconomic industrialisation has, impact of the Russia-Ukraine war started to taxes on diesel would cost the treasury Shs1.15
however, had limited successes. become pronounced. trillion.
“Most of the factories we have are small In May, President Museveni was forced He said since this€”and other proposed
and they need diesel. Actually, Uganda to address himself to the soaring fuel and interventions€”would impact negatively
needs more diesel than we are importing at commodity prices. on funding the Budget, “removing taxes or
the moment if it’s to fully industrialise,” Mr He ruled out any fuel subsidies. subsidising many of the imports is suicidal
Lakuma says. “If we get a diesel shortage now “If we subsidise or even just remove the and a blunder.”
when the prices are already high, the economy taxes on imported commodities, the level of This was in tandem with what Mr
will contract further, leading to loss of jobs,” consumption will either remain the same, Ramathan Ggoobi, the Secretary to the
he adds. but this time each litre takes more dollars€¦ Treasury, proffered when he said “tax cuts to
In January, Uganda was hit by a fuel The dollar drain will now increase per litre address exogenous shocks” is “economics that
supply shock after Covid-19 pandemic curbs and also, worse, people may buy more of doesn’t work.”
triggered a logjam of fuel tankers at the this expensive commodity,” the President If there’s a prolonged scarcity of diesel,
Malaba border snaking nearly 130km. In the said in a national address, adding, “In the analysts believe the government’s resolve not
aftermath of the shock, Ms Ruth Nankabirwa, Great Lakes area, there is another problem to intervene will be tested.
the Energy minister, described the spike in €“ smuggling. When an item is cheaper in “We will most likely see a government
pump prices from Shs4,000 to Shs12,000 as one country€¦there is a powerful incentive policy shift from non-intervention to direct
“cheating.” for smugglers to buy cheap in Uganda and intervention, especially for diesel prices that
She also warned that the culprits “would sell expensively in the neighbouring country. are major cost drivers for domestic industry
be arrested and prosecuted.” With no arrests Therefore, cheaper petrol in Uganda, would be and manufacturing,” Mr Silver Kayondo, a
in sight, and fuel prices still soaring, Prime cheaper for the region.” lawyer who specialises in oil and taxation
Minister Robinah Nabbanja tried to allay fears Mr Museveni also warned that any state issues, says, adding, “Gains made in local
by setting a price ceiling of Shs5,000. interventions would “seriously encroach on dairy, sugar, tiles, paints and coatings, etc.,
Pump prices normalised at that price our reserves.” face the risk of reversal.”
ceiling and soon started shooting up when the He further revealed that any removal of MONITOR

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