Is Uganda’s new development plan dead on arrival?

Before we examine the emerging fear that Uganda’s new development plan may be dead on arrival, let us outline the background to, and major players in the death on arrival of NRM’s mixed economy ten-point program launched in 1986.

The serious development challenges of the 1970s marked by slow economic growth, rising inflation, unemployment and external debts undermined the Keynesian economic model based on state demand management with a focus on full employment and welfare benefits. The model was replaced by the neo-liberal economic model with inflation control as its principal goal. (It was feared that inflation rather than unemployment constituted a more serious challenge to governments).

The 1980s witnessed elections of conservative governments in developed countries including in the United States and United Kingdom. The leaders in USA and UK believed that governments were the problem and not the solution to development challenges. Consequently, they favored a return to the invisible hand of market forces and laissez faire capitalism. There was no room for mixed economy models because they contained elements of socialism and central planning.

The neo-liberal ideas were consolidated into stabilization and structural adjustment programs (Washington Consensus) requiring indebted developing countries to enter into agreement with the IMF before they could get new loans. The main features of IMF agreements included restriction of money supply to control inflation; economic growth with trickle down effects; export expansion and diversification to generate hard currency to retire external debts and accumulate reserves; liberalization and privatization of national economies to increase efficiency and productivity; high interest rates to encourage private saving and investment and create jobs; labor flexibility to facilitate downward movement of wages and maximize profits; elimination of state intervention in national economies; maintenance of balanced budgets by retrenching public servants, freezing or slowing hiring and wage increases; removing subsidies and introducing indirect taxes to mobilize government revenue; maintenance of macro-economic stability and reliance on foreign advisers.

The NRM government launched its mixed economy ten-point program in 1986 against this backdrop. With external debt of $1.2 billion and an empty treasury, the government needed urgently donor assistance of $160 million for emergency and rehabilitation programs.

Having severely criticized the World Bank and IMF-supported programs in Uganda during the Obote II regime, the government would not approach these institutions for assistance under similar conditions. Instead, the government chose to mobilize funds from bilateral sources but the efforts ended up in failure.

Meanwhile inflation continued to grow reaching 200 percent at the start of 1987 and GDP growth rate to decline at 5.5 percent. Reluctantly, the government entered into negotiations with the IMF which demanded a ‘shock therapy’ approach (rapid and simultaneous implementation of all elements in the agreement) rather than gradual and sequenced methods. To speed up and conclude negotiations in order to obtain the badly needed foreign currency Ugandans who favored a gradual approach were fired including the Minister of Finance and Governor of the Central Bank or marginalized. Linda Chalker, then Minister in Thatcher’s government which was a staunch supporter of neo-liberalism, sealed the deal when she visited Uganda and “echoed the opinion of most major creditors that the best solution to Uganda’s problems depended on agreement with the IMF” (New African 1987).

The government swallowed its pride and in July 1987 signed an agreement with IMF in effect killing the ten-point program on arrival. Uganda proponents of shock therapy gained control of the new Ministry of Finance, Planning and Economic Development and the Central Bank. Under foreign direction, Uganda implemented one of the most extreme version of shock therapy on earth (macro-economic reforms) making Uganda a ‘success story in economic reform and darling of the capitalist west’.

After 23 years of strict adherence to the Washington Consensus, the negative social and ecological outcomes have become so overwhelming that the government, donors and foreign advisers can no longer hide behind defective economic growth and inflation control figures. These outcomes have led to hunger that is killing Uganda citizens when the country remains a major exporter of food; serious ecological deterioration as de-vegetation gathers pace to increase agricultural exports; children dropping out of school largely because they are hungry; unemployment rising rapidly because government cannot start public works as they would increase inflation through an increase in money supply thereby threatening macro-economic stability, rising infant mortality rate that has signaled a decline in the nation’s economic and social health, increasing theft, absenteeism from work, alcoholism, domestic violence, road accidents, neurological problems due to poor diet and stress, crime and prostitutions as desperation takes its toll, etc.

With loss of confidence in macro-economic statistics and value of government’s excuses that many Ugandans are lazy and drunkards; that opposition parties undermine development efforts; that foreigners interfere in Uganda’s domestic affairs; and that acts of nature such as droughts undermine agricultural productivity, the World Bank and IMF admitted in 2008 that they had made major mistakes in their advice to Uganda since 1987.

The government and its staunch neo-liberalists at home and abroad would not budge. They have continued to rely on so-called “outstanding macro-economic performance” (and to praise staff at the Ministry of Finance and Central Bank for a job well done) relating to high GDP growth, low inflation and rapid poverty reduction to justify that the country is doing well economically. (They do not address the negative social and environmental deficits).

However, government’s consistent use of exaggerated macro-economic statistics became even more suspect and have consequently been rejected at home and increasingly abroad. Witness the decline in Uganda’s invitation to speak at international conferences on her so-called “outstanding macro-economic performance) notwithstanding the efforts of Uganda’s well funded lobbyists!

With criticism becoming louder on all sides and the rapidly approaching elections in 2011, the government, like the World Bank and IMF before it, finally and formally admitted failure of its grand development experiment. Consequently the government ‘reluctantly’ abandoned the Washington Consensus in September 2009 and replaced it with a development plan.

The launch of the plan marks the return of Keynesian model of state demand management, full employment, welfare benefits and central planning which remains unacceptable to the die-hard followers of Adam Smith and Milton Friedman – the neo-liberalists.

Following the launch of the new plan, the neo-liberalists including Linda Chalker and IMF who were behind the demise of the ten-point program have visited visited Uganda. Other foreign advisors have begun to give lectures in Uganda reminding the audience that “Uganda has had one of the most outstanding macro-economic performances on earth”. Also Uganda neo-liberalists who criticized the NRM’s mixed economy model have begun criticizing the plan for lacking a macro-economic framework and capacity for sustainability. While we do not know yet what the foreign visitors discussed with government, we hope that they will give the new development path a chance. In this regard, Chile and Brazil offer useful lessons.

Finally, Ugandans and their supporters who favor the Singapore model in the implementation of the new development plan should think again because Singapore and Uganda have major differences in at least three critical areas.

First, Singapore is a small city-state with a total absence of an agricultural sector. Second, Singapore has had political leadership that is committed, honest and with people-centered vision. It’s analysis of challenges and planning is matched by execution and implementation of programs. Above all the successful implementation of Singapore’s policies has been built on a strong foundation of personal examples of integrity and self-discipline, human resource development, provision of infrastructure, institution building, firm and serious sanctions against inefficiency and corruption, meritocracy and efficient and impartial civil service.

Third, Singapore has rejected advice especially when it is imposed from abroad that does not match rational analysis of challenges and opportunities, interests and experience of Singapore (Singapore International Foundation, 1994).