NRM economics has failed to create jobs and distribute income
Uganda’s NRM government adopted stabilization and structural adjustment program (SAP) in 1987 under the assumption that after a short period (three to five years) of austerity and debt repayment, the economy under the guidance of market forces would begin rapid and sustained growth, create jobs and distribute income to all Ugandans through a trickle down mechanism. The government estimated that by 2017 poverty would be history in the Republic.
To lay the ground work for eventual sustained growth and equity, the government focused on monetary and fiscal policy to balance the budget, control inflation, establish a realistic exchange rate; privatize public enterprises and promote exports to earn foreign currency, pay external debt and use surplus for investment in productive sectors. Government participation in the economy and funds for social sectors would be reduced significantly.
Mindful that inflation was indiscipline, NRM government worked hard to bring it down to a low and stable rate of five percent per annum. This required drastic reduction of money supply in the economy and increased interest rate to encourage savings. However, high interest rates of some thirty percent discouraged borrowing by small and medium enterprises that create most jobs and spread income.