Uganda's Economic Overview

Uganda's economic recovery in the last fifteen years has been remarkable. Regarded as a star performer, Uganda pioneered macroeconomic stabilisation 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 a yearly 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 by the headcount index in the household Surveys, declined by more than 20% between 1992 and 1997, an achievement aided by high economic growth.

The reduction of poverty is the priority of the country's development agenda. The Government has invested heavily in Social Services and human development. Critical education and health indicators have improved in the past decade. The main challenge in the education sector is quality. In health, the significant issues are adult mortality, life expectancy, limited availability, and the aids epidemic. However, Uganda is one of the first Countries in Africa where the incidence of HIV/AIDS is declining due to the Country's aggressive response to the epidemic.

Uganda was also the first Country to present a full Poverty Reduction Strategy Paper (PRSP) to the boards of the Bank and IMF in May 2000.

PRIVATE SECTOR DEVELOPMENT FOR ECONOMIC GROWTH

An economic transformation is needed in Uganda to ensure Continued economic growth and decrease vulnerability to exogenous shocks. Specifically, as the PRSP emphasises, agriculture must be modernised 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 privatisation program and has already successfully liberalised the marketing of Uganda's coffee. Over the past decade, about two-thirds of Uganda's public enterprises have been privatised. A recent success was the privatisation of a telecommunication utility in the Spring of 2000 and an accompanying sector reform. Those changes attracted a second national operator and 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 per cent in FY 1991 to 11.7 per cent in FY1999.

STRATEGY FOR ECONOMIC TRANSFORMATION

The Government's Strategy for economic transformation is spelt out in its Poverty Eradication Action Plan (PEAP). This medium-term development plan 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 stakeholders. It was revised in Spring 2000.

THE POVERTY ERADICATION ACTION PLAN

The overall goal of PEAP is to develop policies and resource allocations that will reduce poverty in Uganda ( as measured by the 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 people experiencing poverty.

A raised summary of PEAP was listed as Uganda's poverty reduction strategy paper, presented to the World Bank and IMF boards 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 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 people with low incomes to raise their income;
• Directly increasing the quality of life of people with low incomes. 
• 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 identifies five major priorities for public intervention.

Reforms in infrastructure provision: The government aims to improve access to infrastructure and lower the cost of utility services, with the 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 the formal banking sector, microfinance institutions, and financial assistance 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 promotes export-led growth. It focuses on removing any remaining anti-export bias and 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 website of Uganda's Ministry of Finance, Planning and Economic Development.