Uganda’s economic growth alone is insufficient for poverty eradication
In May 1987, the National Resistance Movement (NRM) government under the leadership of President Museveni signed an agreement with the International Monetary Fund (IMF) for assistance. The government opted for the ‘shock therapy’ or extreme version of structural adjustment or Washington Consensus. The agreement called for the abandonment of employment policy in favor of disciplining inflation, promotion of economic growth and export-orientation, privatization of state corporations, retrenchment of public servants, and significant state withdrawal from the economy and virtual abandonment of social policy especially in education and health sectors.
Investments in infrastructure and the economy generally declined considerably. For example in 2008 budget allocation to agriculture, Uganda’s economic mainstay, declined from 4.2 percent in 2007 to 3.8 percent against African Union’s 1993 decision to allocate at least ten percent of national budget to the sector.
The government handed over responsibility for economic management to the invisible hand of market forces and laissez faire (let alone) capitalism as required under the neo-liberal economic ideology. A trickle down mechanism was expected to distribute the benefits of economic growth through employment creation in the private sector. As expected under the Washington Consensus the government focused on law and order by investing heavily in the armed forces, police and intelligence sectors to contain any resistance against the harmful effects of structural adjustment. To mobilize resources for this effort, the government had earlier imposed a 30 percent charge for converting old currency into the new notes against the advice of the IMF.