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Bailout? The economic genesis of the problem and some solutions

The media has been awash with the bailout buzz over the last couple of weeks. Most commentaries expressed displeasure at the idea that some distressed private businesses would need to be bailed out using public funds. In this article, I look beyond the individuals who have taken centre stage in the heated debate and instead discuss the macroeconomic genesis of the problem and offer some solutions. First I argue that the distress in the private sector points to a much larger problem with a struggling economy, misdirected investments and a weak indigenous private sector. The genesis of the problem dates back to the years following the global financial crisis. Initially, the Ugandan economy appeared to have been spared the gruelling after effects of the crisis. Economic growth averaged 8% between 2007 and 2009 a period in which the crisis unravelled. That Uganda enjoyed limited integration with the world financial markets helped. The ensuing loss in foreign direct investment, rem

Can Uganda raise more tax revenue?

Taxes are the life blood without which governments are unable to sustain government expenditures for service delivery. The overall tax morale in a given country is driven by the citizenry’s expectations about the state of service delivery. Taxes, therefore, represent an important contract between the government and the citizens by giving citizens a stronger stake in what their government does and a stronger incentive to demand accountability. Uganda’s tax system is comparable to global benchmarks. Income and corporate tax rates in Uganda are 30 percent; value added tax rate is 18 percent; and import duty rate is 25 percent of the import value. The major tax handles are: 1) direct domestic taxes – including pay as you earn; corporation tax, withholding tax, tax on bank interest, casino tax, and other incomes taxes 2) indirect domestic taxes including excise duty, value added tax 3) taxes on international trade 4) and Fees and licenses. One major challenge facing policy makers in Ug

How much do social networks help agrarian households?

There is growing evidence showing that social networks can bridge barriers in access to information and exchange of production factors, and provision of the often lacking public capital and insurance. In Uganda, like in many other developing countries, the state lacks adequate capacity to fully facilitate household access to markets for their farm produce. This is due to a combination of limited budgets and poor governance. In such circumstances, the people rely on their collective effort to overcome market failures and to take advantage of market opportunities. Therefore, social network capital and group activities play a huge role in shaping socioeconomic outcomes. Past studies have identified two broad concepts of social network capital. The first concept presents social network capital as vested in norms, trust and mutual affection and care for others that permits cooperation, facilitates collective action and therefore leads to the provision of some sort of public goods The sec