Uganda’s Economic Overview
Uganda’s economic recovery in the last fifteen years has been remarkable. Regarded, as a star performer, Uganda is a pioneer of macro-economic stabilization and structural adjustment in Africa. In 1986, the Government of President Yoweri Museveni inherited a country in shambles, mismanaged by dictatorial and murderous regimes. The economic and social indicators painted an abysmal picture.
Against this background, the country’s economic performance over the last decade has been impressive. The average real rate of annual growth in GDP has been about 6.9% resulting in an annual increase of 3.7% in real GDP per capita. Inflation has fallen from 24.6% in FY1991 to -0.2% in FY1999. The Government reform program has succeeded in imposing fiscal discipline, restructuring public expenditure, opening the economy and anchoring its reliance on market forces.
The country’s debt overhang has been reduced under the Heavily Indebted Poor Countries (HPIC) initiative. Uganda was the first country to access the original HIPC initiative, in April 1998, and the enhanced HIPC Initiative in May 2000. Poverty, as measured the headcount index in the household Surveys, declined by more that 20% between 1992 and 1997 an achievement aided by high economic growth.
The reduction of poverty is the first priority on the country’s development agenda. The Government has invested heavily in Social Services, and human development. Key education and health indicators have improved in the past decade. The main challenge in the education sector is quality. In health, the major issues are adult mortality, life expectancy and limited availability, and the aids epidemic. However, Uganda is one of the first Countries in Africa where the incidence of HIV/AIDS is declining as a result of the Country’s aggressive response to epidemic.
Uganda was also the first Country to present a full Poverty Reduction Strategy paper (PRSP) to the boards to the Bank and IMF in May 2000.
PRIVATE SECTOR DEVELOPMENT FOR ECONOMIC GROWTH
To ensure Continued high economic growth and decrease vulnerability to exogenous shocks, an economic transformation is needed in Uganda. Specifically, as emphasized in the PRSP, agriculture must be modernized, and non-farm private sector activities encouraged. Uganda has lowered tariff and non-tariff barriers to regional trade and removed all restrictions on international Capital transactions. The Government is pursuing a comprehensive privatization program and has already successfully liberalized the marketing of Uganda’s coffee. In the past decade about two-thirds of Uganda’s public enterprises have been privatized. A recent success was the privatization of telecommunication utility in the Spring of 2000 and an accompanying sector reform. Those changes attracted a second national operator and a second cellular licensee, resulting in expanded service operations and lower prices. Reforms of the power utility, airline, railways, water, and other public enterprises are ongoing. Overall, private investment as a share of GDP increased from 7.8 percent in FY 1991 to 11.7 percent in FY1999.
STRATEGY FOR ECONOMIC TRANSFORMATION
The Government’s Strategy for economic transformation is spelled out in its Poverty Eradication Action Plan (PEAP), a medium – term development plan that guides government policy and provides a framework for detailed sector and district plans. The PEAP appeared in 1997, after 18 months of consultation with key stake holders. It was revised in Spring 2000.
THE POVERTY ERADICTION ACTION PLAN
The overall goal of PEAP is to develop policies and resources allocations that will reduce poverty in Uganda (as measured by headcount index) from 44% in 1997 to 10% or less by 2017. In addition, the PEAP sets forth the goals of achieving universal access to primary education, primary health care, and safe drinking water. It guarantees political freedom and human rights and establishes a disaster relief system to serve the poor.
A raised summary of PEAP was listed as Uganda’s poverty reduction strategy paper which was presented to the boards of the world Bank and IMF in May 2000.
According to the PRSP analysis, the government’s goal to reduce poverty to 10% or less by 2017 can be achieved if real GDP grows at 7% per year and if growth is equally distributed. The government’s strategy for economic transformation and poverty eradication is based on four key pillars:
- Directly increasing the ability of the poor to raise their income;
- Directly increasing the quality of life of the poor.
- Creating an enabling environment for economic growth and structural transformation;
- Ensuring good governance and security.
STRATEGY AND PRIORITIES IN PRIVATE SECTOR DEVELOPMENT
The Government of Uganda’s medium – term competitive strategy for private sector development and identifies five major priorities for public intervention.
Reforms in infrastructure provision: The government’s strategy aims to improve access to infrastructure, and to lower the cost of utility services, with private sector assuming responsibility for providing utility services. It focuses on three sections: transport, power and telecommunications.
Strengthening the financial sector: The government’s policy reform is designed to improve the framework for financial services. Reforms focus on three areas: the formal banking sector, micro finance institutions, and financial services for small firms.
Commercial justice sector reforms: Reforms in this sector are intended to develop an effective commercial legal system and to make contracts enforceable. They aim at improving institutional capacity, commercial court procedures, and enforcement of laws.
Institutional reforms: The government’s focus on institutional reforms concentrates on reducing corruption in public administration, improving the public procurement system, simplifying administrative procedures, and improving tax administration.
Promotion of exports: The government’s policy is designed to promote export – led growth. It focuses on removing any remaining anti-export bias, mitigating risks associated with export finance and guarantees.
Overall, the government of Uganda’s economic strategy of prudent fiscal discipline, transparent and good governance and focus on poverty alleviation programs have launched the country on a sustainable growth path to economic development. For more details on the status of Uganda’s economy, please, visit the official web site of Uganda’s Ministry of Finance, Planning and Economic Development.