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Advancing the Ugandan Economy

Advancing the Ugandan Economy: A Personal Account

Copyright Date: 2014
Pages: 224
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    Advancing the Ugandan Economy
    Book Description:

    The first twenty-five years of Uganda's independence from British colonial rule were characterized by internal conflicts, dictatorship, and economic disintegration. Since then, the country has benefited from relative political and economic stability and economic growth.Advancing the Ugandan Economyis an account of the remarkable policy changes that took place from 1986 to 2012 and their effect in contrast with the turbulent, violent events after independence.

    Author Ezra Suruma demonstrates that African countries can achieve economic stability and sustain rapid growth when they meet at least two interdependent conditions: establishing a stable and secure political framework and unleashing the entrepreneurialism of the populace. He also highlights the strategic areas that still require fundamental reform if Uganda is to become a modern state.

    Rarely in African history has so much positive political and economic transformation of a country been achieved in such a short time. Suruma's account of the commitment, determination, vision, and dexterity of the Ugandan government holds invaluable lessons in managing the still complex policy challenges facing the African continent.

    eISBN: 978-0-8157-2590-9
    Subjects: History, Business

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Foreword
    (pp. ix-xiv)

    The first quarter century of Uganda’s independence from British colonial rule (1962–85) was characterized by internal conflicts, dictatorship, and economic disintegration. However, the subsequent years (1986–2012) were marked by relative political and economic stability as well as sustained economic growth. During this period of transition, Ezra Suruma held many high positions in the arena of Ugandan politics and economics and served with distinction as Uganda’s minister of finance and economic development from 2005 to 2009.Advancing the Ugandan Economy: A Personal Accountis his account of the remarkable policy changes that occurred in Uganda from 1986 to 2012...

  4. Acknowledgments
    (pp. xv-xviii)
  5. 1 Introduction: A Journey through Uganda’s Turbulent Times
    (pp. 1-6)

    In 1973, when I returned from a seven-year tour of study in the United States to take up a teaching job at Makerere University (Kampala, Uganda), General Idi Amin was the president of Uganda and political parties were banned. There was no opportunity for anyone, including a young academic returning from study abroad, to participate in shaping the country’s political economy. The economy was starting to fail, and fear was spreading among the population because of the constant disappearance of people, especially those considered by the ruling regime to be intellectuals and hence a threat to its survival. In 1975,...

  6. 2 A New Paradigm for Governance
    (pp. 7-11)

    The possibility of hope that the National Resistance Movement (NRM or the Movement) brought to the people of Uganda was perhaps most effectively communicated to them in the Movement’s Ten-Point Program. The coming of the Ten-Point Program to Uganda was like the falling of rain in a parched and thirsty desert.

    A once proud and majestic people were in state of despair as a result of their brutalization at the hands of Amin’s and Obote’s henchmen. Their souls had been deeply desecrated and wounded; they had been exploited thoroughly and mercilessly by the Amin and Obote regimes, and had been...

  7. 3 The Transformation of Politics: Beyond the Ruling Party
    (pp. 12-17)

    After the establishment of the NRM administration in 1986 under the no-party arrangement, many of the so-called historical political parties that had been involved in Ugandan politics since independence—for example, the Uganda People’s Congress, the Democratic Party, and Kabaka Yekka (also known as the Conservative Party)—began a systematic campaign for the return to a multiparty electoral system. However, the agitation of these parties for institutional reforms had little effect, especially given that they did not seem to attract much support among most Ugandans. This is evidenced by the fact that during several elections, candidates who ran for public...

  8. 4 A Historical Overview of the Ugandan State and Economy, 1950–2010
    (pp. 18-25)

    Like so many other people of the world, Ugandans long for the day when the great majority of them will be able to enjoy a decent standard of life. With a human development index of 0.456 in 2012, Uganda was ranked number 161 and therefore remains among the countries with the lowest quality of life in the whole world.¹ Despite enormous efforts by the National Resistance Movement government to improve the national standard of living, poverty remains a serious problem for most citizens, especially those who live in the rural areas and the urban periphery. In 2012 the data from...

  9. 5 Ideological Uncertainty and Economic Reform
    (pp. 26-34)

    When African countries won independence in the 1950s and 1960s, they theoretically gained the power to determine for themselves the nature of their political and economic systems. Three choices were evident to them:

    choosecapitalism, as practiced in the European countries that had colonized them

    opt forsocialism, which was promoted by the Soviet Union and China and was being widely heralded by some academics of the time as the most appropriate system for achieving rapid economic growth and development in economies that were emerging from many years of oppression

    design their own systems based on each country’s specific circumstances....

  10. 6 Reforming Foreign Exchange Management
    (pp. 35-44)

    When the National Resistance Movement came to power in 1986, it inherited a proliferation of government controls on private economic activities. As noted in the previous chapter, one of these drastic controls was the prohibition of the population to hold foreign exchange. The Foreign Exchange Control Act of 1964, which made it illegal for anyone entering Uganda to hold any foreign currency for more than forty-eight hours, required that on entry into Uganda, every individual was to complete a foreign currency declaration form indicating every foreign currency being brought into the country by that person. The completion of the form...

  11. 7 Transforming the Bank of Uganda
    (pp. 45-54)

    The first major reorganization of government following the National Resistance Movement’s assumption of power in January 1986 came in November 1986. A new minister of finance, Crispus Kiyonga, was announced along with a new governor of the central bank, Suleiman Kiggundu. The governor was an academic economist whereas the new finance minister was a physician. As previously mentioned Kiyonga contacted me while I was teaching in the United States to ask me if I would return to Uganda and join the central bank, either as the director of research or the director of exchange control. Although he did not say...

  12. 8 Reform of the Export Sector: Coffee
    (pp. 55-61)

    In 1986 when the National Resistance Movement captured the apparatus of government, coffee was by far the most important export product of Uganda. Coffee had enjoyed this supremacy since the 1950s when it overtook cotton as the most important “cash crop” and export. By 1986 all other export commodities, such as tea and cotton, had faded, and only coffee, which accounted for as much as 95 percent of the country’s export earnings, remained as a viable commodity within the Ugandan economy. In addition to being the most important source of the country’s export earnings, coffee also emerged as a major...

  13. 9 Financial Sector Reform: Negotiating with the Bretton Woods Institutions
    (pp. 62-66)

    In 1987 the Bank of Uganda hosted the biggest delegation from the International Monetary Fund that I had ever seen. I counted nineteen foreign delegates who filled the board room of the central bank, leaving our staff only a few seats. Governor Kiggundu welcomed them, and they said that they had come as a taskforce specifically assigned to do an initial investigation of Uganda’s financial sector. Although I had worked as a university professor in the United States and was quite comfortable sitting in a room full of highly skilled academics, I felt intimidated by the sheer number of these...

  14. 10 The Struggle for Uganda Commercial Bank
    (pp. 67-75)

    Two weeks after returning from negotiations in Washington, I said good-bye to the central bank and took over the management of the Uganda Commercial Bank. A few days later, I received a telephone call from a senior Bank official who was visiting Uganda:

    “Congratulations,” he said.

    “On what?” I asked him.

    “On assuming the most important job in Uganda!”

    “Is it more important than being president of Uganda?” I asked him.

    “No,” he replied. “But it is the only [job] bigger than yours.”

    And with that, he hung up and left me wondering about the purpose and meaning of his...

  15. 11 The Issue of Rural Banking and Microfinance Institutions
    (pp. 76-82)

    When I became minister of finance in 2005, the first instruction I received from President Museveni was to prepare a cabinet paper on microfinance. I quickly established that I had an uphill task since the Ministry of Finance had previously submitted two papers to the cabinet on the subject and both had been rejected. So I reviewed what the ministry had submitted and decided that there appeared to be little or no clear strategy behind the previous proposals. Indeed, the general strategy appeared to be to wait for the private sector banks to eventually open branches in the rural areas...

  16. 12 Pension Reform and Social Security
    (pp. 83-97)

    By the beginning of the twenty-first century, most Ugandans probably had forgotten the collapse of the insurance and pensions sector that occurred during the 1970s and 1980s. With the exception of those who were directly affected, it was unlikely that the general public was aware that savings and insurance schemes going back to the colonial days in the 1950s had been rendered totally worthless by the galloping inflation during those decades. The inflation added insult to the injury caused by the collapse of both the public and private companies that had established the retirement programs.

    In 1987 the minister of...

  17. 13 The Rural Development Strategy
    (pp. 98-105)

    The economic vision of the NRM government for Uganda has been that every household in Uganda should have the means to earn the minimum income that enables it to afford basic human needs such as food, shelter, clothing, health care, and education. In this vision every adult household member is employed, and all household members are able to access essential social services. No household should be marginalized or exist in a state below the minimum poverty line. Every household should have the assets necessary to generate adequate income and savings.

    To realize this vision, government has pursued an economic development...

  18. 14 Reform and Revitalization of Productivity in the Agricultural Sector
    (pp. 106-121)

    As the previous chapter on rural development shows, perhaps no issue touched those of us in the NRM government more than the poverty of our people in the rural areas. We always believed that our legitimacy as a government was intimately tied to improving the welfare of the masses engaged in rural agriculture. Yet nowhere else were views so sharply divided when it came to the search for the correct policy, and perhaps nowhere else were the government’s efforts as futile as in agriculture.

    We knew it was necessary to improve production, productivity, and agricultural incomes and to establish sound...

  19. 15 Improving Africa’s Agricultural Infrastructure
    (pp. 122-126)

    There are enormous opportunities for the world community to help Africa build its agricultural infrastructure. Africa needs to construct new roads and maintain existing ones. It needs new hydroelectric power plants, fertilizer plants, more and better agricultural extension services, and improved telecommunications and financial services.

    Fortunately, Africa’s capacity to pay for the development of this infrastructure is growing. Most African countries have huge endowments of natural resources (for example, petroleum), which can be exploited and sold in the global marketplace and the proceeds used to finance infrastructure development and improvements. In addition to the existence of these natural resource endowments,...

  20. 16 The Introduction of Tea Production in Southwestern Uganda: A Case Study in Community Development
    (pp. 127-134)

    Tea cultivation was introduced by the British colonial administration in the 1920s, and it continued to increase until 1972 when Uganda produced 24,000 metric tons and was ranked among Africa’s largest producers of tea. During the 1970s the tea plantations were largely abandoned, which led production to decline to a mere 1,500 tons in 1980. During the Obote II administration, production started to recover, rising to about 6,000 tons by 1985. When the NRM came to power in 1986, it invited back some of the former owners of tea estates and even coinvested with them to rehabilitate the tea plantations...

  21. 17 Oil: Blessing or Curse?
    (pp. 135-146)

    Despite Uganda’s progress in many areas, its people continue to face widespread unemployment and income insecurity. As the old challenges of personal insecurity and inflation have been largely contained, unemployment, particularly among the youth, has become a major social and economic threat. This comes on top of an already heavy burden of income insecurity, which exists at all levels of Ugandan society and is a major source of widespread corruption as workers in both the public and private sectors attempt to gain income security by any means possible.

    These are the challenges that threaten to erase the NRM’s past achievements....

  22. 18 Private Enterprise in Uganda: Challenges and Opportunities
    (pp. 147-164)

    When the NRM came to power in 1986, Uganda’s shops were essentially empty. There were hardly any goods or services available. The most basic goods and services—salt, sugar, blankets, cooking oil, soap, medicines, and bus service—were either not available at all or were so scarce that only the richest people could afford them. How did this situation improve?

    After the monetary reform of May 1987—which removed two zeros from the currency and cut 30 percent from money given in exchange for the old currency—the World Bank issued the first balance of payments credit. The subsequent allocation...

  23. 19 Observations and Comments on Aid
    (pp. 165-173)

    Based on my experience in Uganda, I would like to summarize my views on aid under the following “six Cs”:

    compassion for the poor and the needy

    complexity in aid delivery

    competing ideologies and interests among donors

    communication and coordination between donors and recipients

    concreteness, convergence, and transparency

    capacity building.

    The world provides ample evidence of concern and compassion for the poor and the needy. The global community has continued to recognize the need to improve the quality of life for the poor and to provide humanitarian assistance to people who are affected by both natural and artificial (man-made) calamities,...

  24. 20 Fast-Tracking East African Integration
    (pp. 174-179)

    In 2004 the presidents of Kenya, Uganda, and Tanzania met in an allday session in Nairobi, Kenya, without any other members of their respective governments, and resolved to set up a committee to advise them on how the political federation of East Africa could be speeded up. The East African Treaty of 2001 already provided for a four-step progression toward political federation: customs union, common market, monetary union, and finally, political federation. Except for the customs union, which was allowed five years for its full implementation, the rest of the phases did not have a specific time line. So when...

  25. 21 Job Creation and Housing Demand in Uganda: An Innovative Synergy
    (pp. 180-185)

    There have been few answers to the pressing problem of job creation in Uganda. Virtually everyone agrees that this is probably the single most serious economic problem for Uganda today. The traditional sectors of employment in the country have been agriculture, trade, transport, banking, industry, public service, and other service sectors. Yet a cursory look at these sectors today does not suggest that they can generate enough jobs to absorb the youth who are graduating from our schools.

    About 250,000 youth graduated annually from secondary schools and post-secondary institutions in the first decade of the twenty-first century. That number of...

  26. 22 Summary: Uganda’s Past and Future
    (pp. 186-198)

    Uganda enjoyed uninterrupted economic growth averaging about 6 percent a year over the twenty-year period from 1988 to 2008. In contrast, during the preceding twenty years, Uganda suffered from persistent economic decline and chaos. From 1972 to 1980, the GDP declined by 9 percent, while from 1980 to 1985, it grew an average of 1.4 percent a year. The contrast in growth between these successive periods in Uganda’s history offers an excellent opportunity to learn how a country can transform its economy.

    Although the achievement of economic growth is usually attributed to macroeconomic variables such as price stability, investment, direct...

  27. Appendix A The Parish Model Operational Plan
    (pp. 199-200)
  28. Appendix B An Innovative Approach to Job Creation: Estimates as a Basis for Discussion
    (pp. 201-204)
  29. Index
    (pp. 205-214)
  30. Back Matter
    (pp. 215-215)