Target politicians use situations to confuse gullible voters

I don’t think Uganda is at “war between the old and new generations”. Both generations are embedded in all political parties competing for electoral positions. Besides, both generations have coexisted. It is an imagination to think that the new and/or the young generation are at war. Let’s live in harmony as we have always been. We should jealously guard against destruction of our “small” infrastructure so that we live today to lead tomorrow.

The opposition and Ugandan dissidents living abroad for reasons known to themselves are using the growing public debt to undermine government effort to accelerate pubic investment in infrastructure. While the acknowledge tremendous gains in this aspect, they are concerned with the “expensive” source of funding these projects – loans – to be paid by taxpayers. Today, I will demonstrate that investing in badly-needs but we’ll designed infrastructure now is an obvious areas to securing our future.

In my previous writing, I highlighted that investing in infrastructure such as roads boosts short-term demand and long-term supply. In short- term, constructing or rehabilitating road or power network for example can boost aggregate demand through increased construction activity and employment. In the long-term, infrastructure investment can boost economic growth by increasing the potential supply capacity of an economy.

For example, improving transport facilities could make workers more mobile, so making labour markets more efficient and increasing productivity. While there are a number of other factors which influence labour productivity, including skills and technology, there is a strong positive correlation between the quality of physical infrastructure and labour productivity. The long-term benefits of infrastructure investment are supported by the literature. But this money does need to be spent effectively to realize these gains.

As a a journalist working on infrastructure project and an economist by training, I have confidently claim that government has prioritized and allocated funds for infrastructure development based on four principle:

1. Ensure it meets a need

This is being done by identifying current and future needs. The former is done by analyzing usage data, or through surveys. For example, construction of power projects such as Bujagali, Karuma, Isimba and other projects are informed by robust energy demand forecasts analyses.

This has helped to address power supply deficit which the country experienced in 2001-2006. The strategy is to tackle energy demand by ensuring that energy projects are in place. We can only complain about prices but not supply.

2. Ensure consistency with other objectives

Infrastructure projects are designed to fit with the government’s broader policy agenda, including social and environmental as well as economic goals.

3. Ensure the numbers add up

Successful infrastructure projects in Uganda are financially viable. This includes making sure funds are available to finance the project. Even where budget deficits remain relatively high, there is always a case for prioritizing infrastructure investment over current spending.

4. Ensure it will benefit the wider economy

All of the potential impacts of an infrastructure project should be considered.

The assessment factors in both the long-term effects as well as the direct and indirect impacts relative to a scenario where the project does not go ahead.

Are loans optimal sources of financing unstructured projects?

Let me now discuss the issue of worrisome increase in public debt that Uganda has opted for to finance infrastructure development.

The reality is concessionary and private loans have supported several infrastructure development projects in Uganda since Independence. But why? Public debt is just one among various ways in which governments may raise up revenue.

Raising finance through loans, for example, is a way of funding the public sector by market exchange means (the loan is serviced and returned) and with effects into the future (depending on the number of years over which the loan is serviced and repaid).It is on the market exchange means side, then, that government looks at. Borrowing provides financial resources that can be invested into development work.

Alternatively, forms of commercialization of public services – possibly combined with forms of capital financing like in the public-private partnerships (PPPs) – can also help attract capital while servicing it through the revenue from infrastructure services, like for example highway tolls and airport fees. Making debts is one main tool to kick-start the expansion and upgrade of transport, energy, water and communication infrastructure.

Concerns with debt overhang should not be easily dismissed, however. Infrastructure development that stimulates economic growth would result in greater fiscal capacity to service and return borrowed capital.

Debt gets harder to be repaid, instead, when money is invested in assets that are not needed, or are poorly designed, or whose construction costs escalate with detrimental effects to the financial sustainability of development projects.

Ugandans should be concerned with the growing debt as much as with the choices that are made about how the money spent. Based on the four principles informing government’s decision to invest in infrastructure projects explained earlier, I can categorically state that such public investment is securing our future.

No other governments will change this approach as long us the global economic structure remains as designed. Let’s ensure continuity of peace, stability, unity and security.