Of political power and the economy

He who pays the piper calls the tune.  Legislators in favour of the age amendment bill are grappling with a whole range of problems at the moment, while simultaneously facing a challenge to their authority from the local people who feel that the prevailing approach has been mistaken. More than that, masses argue that terms under the Age limit amendment bill have been set more with reference to the interest of the ruling party than to the concerns of the ordinary voters.

Certainly, it is possible to look at Uganda’s economic history as a variant on the old saying; he who pays the piper calls the tune. What determines economic policy? Politicians will tack with the prevailing winds to ensure they stay in office. Political or economic ideas will be adopted when they are useful to that process.

To the extent that groups gain economic power, political power will follow; think of how: In October 2017, the Ministry of Finance released Ugx.12.6b (US$3.4m) cash to facilitate Members of Parliament (MPs) during their consultations on the presidential age limit amendment bill. Each MP received estimated Ugx. 29m (US$8,055) to go to their constituencies and consult masses about a bill that Summit Business magazine deems not economically driven. This money jogs our memory to that disbursed before and during elections. A whooping Ugx. 2.4 trillion was spent by parties during the 2016 election period. An amount that saw the shilling plunge by over 20% and inflation rates to all-time highs. It was mainly attributed to the unaccounted for sums of money that were disbursed by these parties to convince voters to favour them.

‘History repeats itself,’ goes a popular saying. Already, Ugx. 12.6b has been given to MPs except for the few who returned back the money. Such money is set to enter into the financial market thus an increase in money circulation. Yet, this comes shortly after Central Bank’s efforts to control the year-on-year inflation rate that has increased by more than 24% to 5.2% in October 2016 from the 4.8 percent recorded in October 2016. The rise in inflation has been attributed to the increase in money circulation that is not backed up by a corresponding production of goods and services. This has further weakened the shilling against the dollar with a 6.7% decline in value of the former. And with the unaccounted age limit cash in circulation, Uganda’s economy could be en rooted to inflation rates close to those that sore towards, and during elections.

Bank of Uganda already endorsed expansionary monetary strategy; reducing the CBR rate to 9.5 percent to increase access to credit for the locals. However, this has been undermined by the age limit cash. More money than was planned for is circulating the economy aggregating inflation rates to levels the central bank has failed to control as demand for basic commodities upsurges and prices rise. The cash in circulation has indeed reached its limit. Just when Ugandans had full confidence in the central bank in boosting their financial inclusion by stimulating reduction of lending rates, BoU might have to drop back into the protective contractionary policies it has previously adopted in order to control this highly volatile inflation that might get out of hand

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