Donors are partly responsible for Uganda’s underdevelopment

Uganda’s economy since independence in 1962 has been driven by donors. Reports from the World Bank, United Nations Industrial Development Organization (UNIDO) and Commonwealth etc made recommendations that have driven Uganda’s economy and society. Dependence on donors for advice, funds, technical assistance and supervision has been particularly strong since the 1980s coinciding with the launch of the Washington Consensus or structural adjustment programs except for a short period between 1985 and mid-1987 when major donors withdrew support because of human rights violations, non-compliance with IMF conditionality and ideological differences. Therefore the donor community has been an integral part of Uganda’s development equation. It should therefore accept praise or constructive criticism as appropriate.

Contrary to popular belief based on GDP and per capita growth rates and macroeconomic stability, Uganda has become an underdeveloped country meaning that the standard of living of the majority of Ugandans has declined. Here are a few illustrations.

When you shift from three balanced meals (carbohydrates, proteins, fats, minerals and vitamins) to one meal a day mostly of carbohydrates from maize and cassava; when you shift from buying new products to used or second hand goods such as clothing and vehicles etc; when you shift from using electricity to cook your meals to charcoal; when you shift from bathing in warm to cold water; when you shift your children from good private to poor public schools; when you move from a private house to an apartment; when you shift from full time to temporary employment etc, you are getting worse off in your standard of living. And that is what has been happening to the majority of Ugandans. This is under-development no matter what statistics are portrayed! And this has happened when donor influence has been strongest. How and why did this happen?

First, in 1986, Linda Chalker then Britain’s Minister of State for Foreign and Commonwealth Affairs in Margaret Thatcher’s government which was strongly in favor of structural adjustment visited Uganda “and echoed the opinion of most major creditors that the solution to Uganda’s problems depended on reaching an agreement with the IMF” (New African, 1987). This is confirmed by P. Mutibwa (1992) when he writes that some important western countries insisted that their economic assistance depended on Uganda’s acceptance of IMF and World Bank conditions. The urgent need to access foreign currency to repay external debt and import badly needed products forced the government to reluctantly comply.

Between 1986 and July 1987, a battle of ideas raged between staff in the Ministry of Finance on the one hand and the Ministry of Planning and Economic Development on the other hand. Staff in the Ministry of Finance wanted a gradual and sequenced approach to structural adjustment to minimize negative effects. On the other hand staff in the Ministry of Planning and Economic Development pushed for a ‘shock therapy’ approach demanding a comprehensive, rapid, and simultaneous implementation of all elements of structural adjustment which was favored by the donor community. In the end the Ministry of Finance lost the battle. The Minister was fired and senior staff either lost their jobs or was marginalized. The same happened in the Central Bank.

Subsequently, the Ministries of Finance and Planning and Economic Development were combined into one very powerful ministry (run by staff from the former Ministry of Planning and Economic Development) and charged with the overall responsibility for directing Uganda’s economy under the watchful eye of donors who seconded their staff to the ministry and central bank.

Second, many Ugandans who held senior positions in the government after 1986 were poorly educated or inexperienced as George Kanyeihamba (2002) admitted.

Third, following signing of the agreement with the IMF in July 1987, the NRM government switched from a balanced, mixed economy ten-point program to a neo-liberal ideology based on economic growth, macro-economic stability including keeping inflation at five percent per annum and raising interest rates, diversifying exports, increasing foreign currency reserves, privatizing the economy, weakening trade unions and launching labor flexibility, introducing user charges in social sectors and public utilities, removing subsidies on essential goods and services, introducing indirect taxation and relying on foreign aid and technical assistance, etc.

Fourth, by focusing on economic growth, the donors and their junior national counterparts in the new combined Ministry of Finance, Planning and Economic Development and in the Central Bank ignored income distribution; by focusing on export diversification they forgot food security; by focusing on accumulating foreign reserves Uganda became an importer of cheap and mostly used products that undermined domestic manufacturing enterprises; by liberalizing labor Ugandans were hired cheaply and fired at will; by introducing user charges for education and health care students and patients stayed away – youth marriages increased and raised population growth rate and many patients died in their homes; by encouraging agricultural diversification the donors and their counterparts ignored ecological deterioration. I could go on!

Meanwhile donors and Uganda officials reported false economic growth and poverty reduction figures (S. Mallaby, 2004) in publications, media and at international conferences including the United Nations. Donors turned a blind eye to rampant corruption, mismanagement, sectarianism and division of the country into economically unviable districts.

At the same time, donors tightened ownership of Uganda’s economic policy. One senior World Bank official is reported to have remarked that despite all the favorable press on Uganda, Tanzania was actually about four years ahead of it (Uganda) in terms of truly nationally-owned (and thus sustainable) economic policy for overall development (D. A. McDonald and E. N. Sahle, 2002).

Eventually, the diseases of poverty could no longer be kept hidden under the carpet, reports on unemployment gave figures of some 85 percent including 50 percent university graduates, under-nutrition of children under the age of five hit 40 percent, famine spread forcing children to eat poisonous cassava, crime, violence and prostitution increased rapidly to make ends meet. In the circumstances, the World Bank and IMF admitted they had made mistakes. Government meanwhile clung to false statistics until September 2009 when the truth could not be hidden any longer.

At a September retreat of Ministers and Permanent Secretaries presided over by the President, using an independent report, the government finally and officially admitted that the development model implemented since 1987 had failed to produce the desired results and had therefore been replaced by a national development plan.

Admitting failure is not a sign of weakness but of wisdom. Therefore groups or individuals in the donor community and among Ugandans who are still clinging to the value of macro-economic stability especially very low inflation rates should accept the reality and offer positive suggestions to improve the national development plan and support its implementation.