Moving beyond the paradox of macroeconomic stability in Uganda?

Abstract

This article explores macroeconomic policies in Uganda in the wake of the global financial crisis and following the publication of the 2010 National Development Plan. Despite apparent changes in rhetoric regarding macroeconomic policies by the Ugandan authorities, the paper demonstrates how the commitment to conservative monetary and fiscal policies prevails. The article analyses how the persistently conservative macroeconomic policy stance has exacerbated the lack of economic transformation in the Ugandan economy. The resultant outcome has been a failure to absorb the fast-growing Ugandan labour force into productive and gainful employment. The case is therefore made for an alternative macroeconomic framework that puts public investment at its centre and which complements macroeconomic policies with suitable sector-specific and industrial policies.

Keywords:

• Uganda
• employment
• monetary policy
• fiscal policy
• macroeconomic framework

Notes on contributors

Dr Elisa Van Waeyenberge BA (KUL Belgium), M.Sc. (London) Ph.D. (London), is a Lecturer in Development Economics at SOAS, University of London. Her research interests focus on the political economy of aid, the role of international financial institutions in low-income countries and alternative macroeconomic policies in the South. Recent research has focused on the relationship between economic policies and employment outcomes in sub-Saharan Africa, in part for the ILO.

Dr Hannah Bargawi BA (Econ Manchester), M.Sc. (London) Ph.D. (London), is a Researcher in the Department of Development Studies at SOAS, University of London. Dr Bargawi has been involved in academic and policy-focused research on sub-Saharan Africa with a particular focus on East Africa. Dr Bargawi's current research focuses on the changing position, role and pay of both men and women in the labour market in Europe, considering whether or not recent austerity policies have had particularly gendered impacts and what an alternative, gender-equitable macroeconomic framework might look like. This is joint research project with Brussels, think tank, FEPS.

Notes

1. Even so, IMF programmed targets for Uganda have been outperformed nearly every year since 2005 (IMF various).

2. See Gibbon, Havnevik, and Hermele (1993) for an initial evaluation of the poor agricultural supply response to the various liberalisation measures implied by the Structural Adjustment Programmes in African countries, including Uganda. See also Belshaw, Lawrence, and Hubbard (1999) on the poor agricultural supply response of Uganda's main tradables (coffee, cotton, tea) during the first decade of structural adjustment in Uganda. Dijsktra and van Dongen (2001) take issue with these accounts but, while pointing to positive agricultural supply responses in Uganda during the 1990s, concede that these were mainly related to excess capacity being taken into production for the traditional crops rather than reflecting increases in investment or significant structural transformations of Ugandan agriculture.

3. See Kappel, Lay, and Steiner (2005) for an account of the evolution of inequality in Uganda over the period 1992–2002.

4. See Barya (2010) on how the fast expansion of casual employment and the increased casualisation of formal employment can be linked to extensive privatisation in Uganda.

5. Dijsktra and van Donge (2001), while offering a generally sympathetic assessment of the implications of structural adjustment for the Ugandan economy, had argued that its ‘fruits’ would be unsustainable if not leading to increases in investment levels.

6. But this came with an explicit reprimand by the Committee (Parliament of Uganda 2010, 14): ‘The committee now wishes to caution the line Minister to learn how to respect institutional arrangements so as to avoid retrospective approval in future’.

7. See Joughin and Kjær (2010) for a critical overview of agricultural policy trajectories in Uganda over the last decade. The authors argue that the Prosperity for All programme that was initiated in 2006 to subsume the Plan for Modernisation of Agriculture (initiated in 2001) embodied an apparently greater emphasis on government intervention (at least for the provision of micro-finance and a range of other agricultural inputs) than its predecessor which had been designed on the basis of a liberal vision of private sector-led agricultural development. The authors, however, proceed to argue that this alleged new emphasis captured predominantly an attempt by the incumbent regime to consolidate its power in the context of the introduction of multiparty elections.

8. This is reminiscent of an earlier assessment of the PEAP (Uganda's Poverty Reduction Strategy) process. Canagarajah and van Diesen (2011, 138–139) observed:

To many stakeholders outside the MFPED, the third PEAP thus reads as if its ambitious priorities are largely constrained by existing overall and sector-specific expenditure- allocation ceilings set out in the Medium Term and Long-Term Expenditure Framework. The highly consultative process of preparing the PEAP generated many ideas and much progressive thinking about poverty reduction, some of which may have been inconsistent with traditional budget priorities as envisaged by MFPED officials. However, the ultimate dominance of MFPED in priorities setting for the PEAP may have meant that these new ideas were not drawn upon to the extent that was possible.

9. The authors add that liquidity concerns do not strictly apply in the case of domestic debt, ‘which can always be paid off by printing money, a sovereign right which households or firms do not have’.