Low inflation alone won’t develop Uganda’s economy
In 1987, NRM government launched a stabilization and structural adjustment program (SAP). The first three years under the stabilization component were devoted largely to cleaning up the house through reducing inflation from triple to single digits, achieving a realistic exchange rate and balanced budget and promoting exports. This was a period of belt-tightening which reduced budget allocations to social sectors of health and education as well as agriculture. After these goals had been reached within a short period, the government was expected to relax belt-tightening and begin the process of development and economic transformation and distribution of growth benefits including increased government revenue to increase funding for social sectors and agriculture. Inflation control as well as monetary and fiscal policies would be relaxed as well. But they have remained a priority area since then, limiting economic growth and job creation prospects.
In the budget speech on June 14, 2012 the minister of finance stated that “Tackling inflation remains government’s overriding macroeconomic objective in order to protect macroeconomic stability”. Therefore a tight monetary and fiscal policy will remain in place as well. This policy poses problems for economic growth and job creation. In the financial year 2011/12 characterized by tight fiscal and monetary policy, economic growth of 3.2 percent was the lowest since NRM came to power and for the first time less that the population growth of 3.5 percent. Although inflation was reduced significantly, economic growth slowed tremendously and poverty rose to the tune of 81 percent.