When the National Resistance Movement (NRM) government came to power in 1986, it inherited an empty treasury and many problems that needed vast amount of foreign currency. The export sector and tax base had collapsed. The government tried to raise money through bilateral engagement with western governments to no avail. It was advised to reach an agreement with the International Monetary Fund (IMF) first (New African 1987-88). The IMF and World Bank were looking for another African country to experiment stabilization and structural adjustment programs (SAPS) model which had failed in Ghana. Paul Nugent (2004) observed that “…Ghana quietly dropped off the World Bank/IMF list of high performers, to be replaced by other countries like Uganda”.
The signing of a structural adjustment agreement between the IMF and the government in 1987 was of mutual benefit to both parties. It gave the IMF and World Bank the opportunity to introduce a rapid and comprehensive (shock therapy) form of structural adjustment which included inflation control to single digits, balanced budget, economic liberalization and privatization of public enterprises, export diversification and labor flexibility. Donor funds would be released contingent on adherence to the terms of the agreement.
A shock therapy version was preferred to a gradual form of reform because speed was necessary to prevent opposing groups from mobilizing and blocking reforms, to shorten the period of uncertainty and to remove state’s engagement in constant fine-tuning exercise (EBRD 1999). Because the government wanted money quickly and to stay in power long, it went along with the shock therapy form of reform even when it knew it would hurt Ugandans and damage the environment because NRM had strongly opposed it under Obote II (1981-85) regime.
The government reduced inflation from triple to single digits by controlling money in circulation and raising interest rates that reached thirty percent. While most economists agree that an inflation rate in excess of forty percent is an indicator of instability in the economy, there is “no compelling evidence that inflation rates in the 10-20 percent range have significant negative effects,…Indeed, the cost of trying to keep inflation below those levels (using monetary policy) may be higher than any cost associated with those levels of inflation” (World Bank, UNAIDS and UNDP 2008 and W. K. Tabb 2002).
In spite of these findings, NRM government has insisted on maintaining an inflation rate of 5 percent per annum through monetary policy resulting in high interest rate that has discouraged borrowing by small and medium enterprises that create jobs. Although the government has been praised by development partners for price stability, lack of adequate investments has resulted in high unemployment rate including 50 percent of university graduates. High unemployment has had many negative outcomes including crime, violence, poor feeding, clothing and overall living conditions.
While efforts to balance the budget have endeared the government to the donor community, they have hurt Ugandans and the economy in many ways. Many public servants were retrenched without an alternative source of earning a livelihood and subsidies were withdrawn or drastically reduced from many sectors including education, health care, agriculture and energy and replaced with user fees. These actions resulted in a collapse of education and health care systems, a decline in agricultural productivity and total production.
Many children withdrew from schools and got married in their teens and increased population growth, many patients stayed at home, got healed by traditional medicines or perished and many households switched from electricity or kerosene/paraffin to charcoal and fuel wood and damaged the ecological system.
Diversification of exports to increase foreign currency with which to retire debts and build reserves has been hailed by the international community because it has conformed to the terms of agreement with the IMF. As an agricultural country, Uganda’s traditional and non-traditional exports are derived from agricultural commodities of food and non-food items. Diversification has come from export of foodstuffs traditionally farmed for domestic use such as fish, maize and beans. The export of foodstuffs has continued since the 1990s even during the global food crisis and high prices of 2007/08 with serious domestic food insecurity.
During this 2007/08 global food crisis which was described as a ‘silent Tsunami’ or ‘perfect storm’, many governments temporarily controlled the export of foodstuffs or subsidized consumers. On the one hand, in Egypt and Turkey for example measures were taken to stabilize prices (President of the UN General Assembly May 20, 2008). On the other hand, Uganda stuck to the IMF agreement of not subsidizing consumers or controlling food exports causing food prices to rise beyond the reach of many households. This rigid export policy, together with droughts and floods, has contributed to massive hunger and ill-health. Consequently over thirty percent of Ugandans go to bed hungry. Those who eat one meal a day access cassava or maize that are nutritionally deficient and have resulted in high rates of under-nutrition reaching 40 percent for children under the age of five. Under-nourished mothers are producing underweight children with permanent disabilities or early death. When they survive they develop degenerative diseases such as diabetes, stroke and those related to the heart.
In order to continue to export and earn foreign currency, the government has encouraged the production of cut flowers that have replaced food crops in areas around Kampala and Entebbe cities, promoted production for cash rather than for the stomach and has refrained from providing school lunches adopted by NEPAD for all African countries. The government fears inter alia that school lunches will reduce food available for exports to neighboring countries and beyond and for purchase by the World Food Program (WFP). Lack of school lunches that have improved attendance and performance especially of girls has resulted in many children mostly girls dropping out reaching some 80 percent in some areas.
Uganda’s export of fish fillet has been hailed as a success story on the international stage. Uganda and Tanzania success was captured in a presentation at the United Nations conference on sustainable development (Innovation Briefs Issue 3 July 2007). The brief observed that “After Iceland and Norway, Tanzania and Uganda are the two largest suppliers of fresh fillets in the EU market, with market shares of 14 percent and 13 percent, respectively, as of 2004. Fishing exports represented approximately 10 percent of total merchandize exports in both countries, of which fish fillets accounted for 70 percent and 60 percent, respectively…Despite barriers [tariffs, sanitary requirements and technical standards], Uganda and Tanzania were able to respond to increased demand for fresh water fish in the beginning of the nineties and have become important suppliers of an essentially ‘new’ product, fish fillets, which happens to be among the most dynamic commodities in world trade and has a high unit value”(United Nations July 2007).
Fisheries including fish farming in Uganda were developed to provide an affordable source of protein to low income families. With the demand for fish in international markets rising, Uganda’s fish has been diverted from domestic to external markets to earn foreign exchange at the expense of food and nutrition security of Ugandans. Apart from depriving Ugandans of an essential source of protein, fish exports have resulted in overfishing of Uganda lakes, rivers and wetlands and overall decline in fish harvesting, reduction in foreign exchange from fish and fish consumption in Uganda.
Trade liberalization while applauded at the international level, has caused a lot of damage especially to local industries. The removal of tariffs and other barriers to trade have opened Uganda markets to all sorts of products and services. For example, the import of cheap especially used clothes has undermined the local textile industry and weakened forward and backward linkages with unemployment and low incomes as the result.
The application of market forces and individual freedom has resulted in the few industrial enterprises and services to be located in the capital city of Kampala and vicinity. Consequently 70 percent of GDP is generated from Kampala city where only 2 million work/or live out of 33 million Ugandans. Uganda is thus being developed like Singapore which has no agriculture sector whereas in Uganda agriculture and rural development constitute an important part of the economy in terms of employment, exports and domestic food supplies. This policy of focusing on economic growth of the capital city (Kampala) is not only inequitable but is also attracting rural migrants in excess of the city’s capacity to provide goods and services with slums, crime and a breakdown in the cultural and social fabric as the outcomes.
As an aside, the government of Rwanda, like that of Uganda, has adopted the policy of developing towns particularly the capital city of Kigali at the expense of the countryside resulting in ethnically skewed distribution of economic growth benefits. “Tutsi dominate the government, the towns and the monetized economy; Hutus [who constitute 90 percent of Rwanda’s total population] have been mostly forced back into subsistence agriculture” (M. Mann 2005).
To keep Uganda politically stable and prevent opposing groups from organizing against the harmful effects of SAPs that have resulted in much suffering as manifested by the spreading diseases of poverty, Uganda has become a police state. Intelligence agents are everywhere, demonstrations are discouraged and when they have taken place government has used force including military intervention to disperse demonstrators, resulting in deaths and injuries. The torture of dissidents has increased and is being reported in the local media and internationally. The office of the United Nations High Commissioner for Human Rights (UNHCHR) acknowledged that in Uganda “At the national level, torture and other forms of ill-treatment continued to be reported” (OHCHR 2008).
The United Nations General Assembly has passed resolutions condemning all forms of torture and other cruel, inhuman or degrading treatment or punishment, including through intimidation, that are prohibited at all times and in all states. The General Assembly has called upon all states including Uganda to implement fully the absolute prohibition of torture and other cruel, inhuman or degrading treatment or punishment. It has also stressed that all allegations of torture and other cruel, inhuman or degrading treatment or punishment must be examined promptly and impartially by the competent domestic authority so that those who encourage, order, tolerate or perpetrate such acts are held responsible, brought to justice and punished commensurate with the severity of the offence.
In the end, the government and her major sponsors (World Bank and IMF) could not hide the domestic failures of shock therapy economic reforms hinged on macroeconomic stability, export diversification, labor flexibility of hire and fire at will, economic liberalization and privatization and starvation of agriculture, health care and education of funds.
The images of diseases of poverty, rising teenage marriages of drop-out school children in large part for lack of school lunch, and massive environmental degradation were so powerful that the World Bank/IMF and the government officially admitted failure of structural adjustment which was formally abandoned in September 2009 severely damaging Uganda’s image abroad. Structural adjustment in Uganda has been replaced by a five year development plan built around private-public partnership incorporating Keynes’ and Smith’s economic elements.
While President Museveni was reporting to his fellow heads of state and/or government in the United Nations General Assembly Hall in New York City in September 2009 that structural adjustment in his country had failed to deliver as expected, Ugandans gathered outside that hall and accused the government, in full view of world reporters, of poor and deteriorating economic, social, environmental and political conditions including torture and the fatal shooting of unarmed demonstrators in Uganda’s capital city of Kampala a week before the General Assembly met in New York. At the time the demonstrators were shot in Uganda’s capital, President Museveni was Chairman of the Commonwealth.
Thus domestic failures have brought down the success story image of Uganda and its NRM government that was built around the failed economic reform or Washington Consensus model. If the government and partners had not ignored constructive warnings from external and domestic commentators, they would have reversed domestic deterioration and saved their image abroad.