Obote became Prime Minister at Uganda’s independence with the tacit backing of foreign interests. During the initial years he pursued an economic policy based on the World Bank’s recommendation to continue a colonial economic policy of growing and exporting raw agricultural materials in exchange for manufactured products. He would also allow foreign companies to continue business as before October 1962 when Uganda became independent. Besides, being Protestant Obote was preferred to Kiwanuka who was Catholic (W. O. Oyugi et al., 1988).
In the second half of the 1960s Obote began to make adjustments in economic policy including partial nationalization of foreign enterprises. Foreign business interests and their governments were not happy and Obote’s government was shown the exit in January 1971. A gentle giant and pliable Amin was installed. When Amin like Obote before him nationalized private companies, he incurred the wrath of the British and the UK government cut off $58 million of credit to Uganda.
Commentators have noted that Obote’s return to power in 1980 had the tacit support of foreign interests, witness the favorable remarks in the Commonwealth report on the elections. President Obote got off to a good start with donors who made generous financial contributions after an agreement was reached with the IMF with stiff conditions. When domestic pressure forced Obote to prepare a budget that went beyond what had been agreed with the IMF, Obote’s relations with that institutions deteriorated resulting in breaking off negotiations for a new agreement.
Obote’s relations with the West remained tenuous at best. Besides, he was still considered a socialist at heart. And in Uganda Western powers wanted a more reliable leader given Uganda’s strategic location in relation to Kenya and the DRC. In this regard, Victoria Brittain (1990) notes that in overthrowing Obote’s second government in 1985, Western powers “were interested in seeing another pliable government come to power in Uganda.
When Museveni came to power in 1986, he had strong views against the World Bank and IMF because of stiff conditions that accompany their loans and make life difficult for ordinary people. He was not ready to join hands with these two institutions. For a year and half the NRM government bypassed IMF and tried to mobilize external support through bilateral arrangements but it got nowhere.
Eventually Linda Chalker formr British Minister in Thatcher’s government who had apparently known Museveni visited Uganda and advised him that he needed to establish good relations with the IMF, sign an agreement with it and donor funds will flow in thereafter – not before! Museveni got the message (he had witnessed what had happened to Obote for failing to maintain good relations with donors) and in May 1987 the usual agreement with the IMF and its stiff conditionality was signed. The ten-point program and its mixed economy model for its implementation were abandoned in order to be on good terms with the IMF, World Bank and bilateral donors.
Before the IMF agreement was signed, Museveni had talked genuinely and passionately about the imperative of good feeding in adequate quantity and quality, secondary and tertiary education, technology development and industrialization as cornerstones in nation building. He wrote and spoke extensively at home and abroad about his uncompromising position not only of poverty eradication (not reduction) economic growth policy but more importantly of transformation. In fact Museveni used a stronger term – metamorphosis – to stress his point!
However, as time passed after May 1987 the requirements for keeping good relations with the donor community began to conflict with his development philosophy. Museveni wanted to feed Uganda people first, the donors wanted export diversification including foodstuffs traditionally consumed at home; he wanted higher education and technology transfer to modernize Uganda, the donors favored mass education at the primary level, he wanted to process raw materials to add value and earn more foreign currency, the donors stressed comparative advantage, specialization and exchange. Uganda’s comparative advantage had been determined by external advisers to be in raw materials and not in manufactured products.
To maintain good relations with donors and stay in power longer, Museveni carved in. His ministers began to talk about pragmatism, rather than idealism and to use expressions like “the one who pays the piper calls the tune”. From then on Uganda became a major food exporter even when her people were going hungry, launched primary education even when Museveni knew tertiary education was more appropriate, Uganda liberalized the domestic market allowing all sorts of cheap imports that quickly out competed domestically manufactured products forcing some businesses to close and unemployment to rise.
Rosemary McGee has summarized the situation beautifully when she wrote that the government adopted alternative economic perspectives “… to be functional to political interests and the imperative of maintaining good relationships with key creditors and donors” (K. Brock et al., 2004). The cost to Uganda in economic, social, political, cultural and ecological terms has been very high indeed.