Uganda’s rapid economic growth still falls short

Because of pressure from the donor community which did not believe in a mixed economy model with elements of socialism, the National Resistance Movement (NRM) government decided to pursue a neo-liberal economic growth model based on the Washington Consensus – also known as structural adjustment program (SAP). The decision was formalized in an agreement with the International Monetary Fund (IMF) in May 1987. It was consolidated at the seminar of parliamentarians and other stakeholders in December 1989 after a period of intense puasuasion. 

Since then, the government has stressed economic growth, low inflation, balanced budgets, export diversification and privatization of public enterprises. In return, the government became the darling of the donor community, receiving generous donations in money and experts and debt relief.  The export-oriented economy would be driven by the private sector and the market mechanism and the government would provide an enabling environment for that purpose. The program would focus on the productive sectors which excluded the social ones such as education, healthcare including water and sanitation, food and nutrition security, housing and employment. Those in government that opposed these arrangements or favored a gradual approach were sidelined. Senior staff changes and reorganization of key ministries were undertaken to signal a new dawn. The ministry of finance and central bank were empowered to run Uganda’s economy.

The excess human and physical capacity accumulated over 15 years of political instability and remittances from Ugandans living abroad and the return of Asians, together with improved security in parts of the country helped the economy to grow rapidly, albeit from a very low base.  By the mid-1990s, economic growth had reached 10 percent, inflation had been tamed, exports had increased, public enterprises had been privatized, market-oriented policies were in full force and foreign investors had begun to return. Economic growth was expected to remain high and its benefits trickle down to all social classes and regions and make poverty, hunger, disease, and ignorance history in a very short time.

In the judgment of the World Bank, IMF and other members of the donor community Uganda performed as expected and graduated from corruption, tyranny and economic disaster to a ‘success story’ category. The torch was passed from Ghana to Uganda because the former’s glory had vanished and Ghana was no longer Africa’s star performer. Other adjusting countries were called upon to emulate Uganda, not Ghana. Missions to Uganda from the United Nations and other parties increased. Uganda’s exemplary performance was reported on front pages of many major newspapers around the capitalist world.
Like Ghana before, Uganda began to experience weaknesses in her economic growth as the excess capacity got used up and the shortcomings of a natural resources-based economy came to be felt. Originally the economy which was growing at an increasing rate began to do so at a decreasing and fluctuating rate eventually averaging some six percent per annum with various parallels and implications.

The average growth rate of six percent was the same as that experienced from 1963 to 1970. Second, the six percent growth rate was lower than the minimum level of 7 percent required for meeting the Millennium Development Goals (MDGs).  Third, the trickle down effect did not happen as expected. Poverty remained above national average of thirty percent, unemployment increased, income inequality widened, hunger spread and deepened,  many in the lowest income bracket got worse because of ill health, inadequate access to productive assets, transport and communication bottlenecks.

Unemployment forced men to abandon their families as they unsuccessfully looked for jobs leading to a breakdown in moral and cultural values. Frustration led to alcoholism by men and increasingly women abandoning their children, crime and domestic violence increased. Children dropped out of school, got married at an early age and began having families thereby contributing to rapid population growth.

Uganda’s success story came under strain. Researchers and commentators began to question what was happening. As social conditions continued to deteriorate, the government made cosmetic changes under political pressure in a country that was beginning to test the fruits of democracy including elections. It announced free primary education, later free secondary education and free health care. But actions did not match official announcements. Children continued to drop out of school, health facilities continued to operate without adequate staff, medicines and supplies, some mothers continued to give birth to babies with low weight, a manifestation of under-nutrition, and the number of stunted under-five children increased raising questions about the caliber of future generations. It became clear that Uganda’s economic model was no longer suitable for emulation by others.

Questions about who was in charge of Uganda’s economy were also raised. Comparisons were made between Tanzania and Uganda in this regard.  It was found that despite all the favorable press on Uganda, Tanzania was doing better in terms of nationally-owned economic policy making. And although Tanzania was moving more slowly in economic reforms than Uganda, it was doing so on a firmer and more stable basis.

In these circumstances, the success story torch passed to Mozambique but Uganda continued to have full faith in a market economy driven by the private sector and export orientation and an import of cheap imports most of then second hand.

Notwithstanding, there are signs that welcome changes might be on the way. The recognition that economic growth is necessary but not a sufficient condition, used imported products including clothes are harmful, primary school completion rates are low, health system continues to suffer from poor service delivery and inefficiency, export of food must be limited to surplus beyond domestic requirements to ensure domestic food security and raw materials should be processed to add value, reduce wastage and create jobs is an important step in the right direction. The minister of finance and indeed the entire government should be congratulated for these announcements in the June 2008 budget speech and other statements.

However, the seriousness of government commitment for real change will be judged by the extent to which and how soon it will introduce bold actions and allocate commensurate resources. The public should monitor these developments very closely pointing out deviations as they occur.