ANB-BIA SUPPLEMENT

ISSUE/EDITION Nr 322 - 15/04/1997

Uganda

True economic recovery?

by Vincent Paul Mayanja, Uganda, February 1997

THEME = DEBT

INTRODUCTION

Uganda has earned international praise for its economic recovery, but at the same time, it has failed to address the plight of millions of Ugandans steeped in poverty

Uganda is the success story of the World Bank and the International Monetary Fund (IMF). Its rise from ruins to become a showcase of positive economic recovery has attracted international attention. But this rise carries a price - an enormous foreign debt and little benefit to the ordinary men and women who make up the bulk of Uganda's population.

Basic projects - low success rate

The latest draft evaluation report compiled recently by the Commonwealth Fund for Technical Co-operation, indicates a low success rate for basic projects. According to the report, only 40% of all the aid projects in Uganda have been found to be successful, while the same percentage of projects are believed to have been a clear disaster. The remaining 20% remain in a "grey area" where it is impossible to identify success or failure.
All this has as its backdrop, increased aid to Uganda (which one day will have to be paid back) on the one hand, and on the other, a general tightening of world wide aid to Third World countries. According to information released in the report, Uganda has emerged as the 16th largest recipient of overseas development assistance world wide, and the 6th largest in the Sub-Saharan Africa region, where the value of aid has fallen by 2% in real terms.
Between 1990 and 1994, net disbursement of aid to Uganda rose from US $552 million to US $800 million. However, it should be noted that the report recommends that high and continuing levels of aid, should depend on the efficiency, effectiveness and especially the sustainability of the aid provided.

Constraints to economic growth

The World Bank which annually accounts for approximately 40% of all aid coming to Uganda, which is now in the grip of sporadic armed rebellions in various areas, concludes that there exists major constraints to economic growth in Uganda.
The World Bank list the constraints as poor infrastructure and a weak financial sector, distortions in wages to civil servants, a shortage in local human resources that has witnessed an enormous 150 million US dollars paid annually to maintain foreign expatriates who live a stylish life.
The report observes, however, that although this sum far exceeds Uganda's entire defence budget in the current fiscal year, the present level of technical assistance is not only "wholly inadequate" to the country's needs, but will in the foreseeable future, annually be double the current level, rising to over 300 million US dollars.
The report indicates that an American expatriate in the service of the government, is the most highly paid, consuming about 200,000 dollars annually, while his counterpart from the European Community requires 110,000 dollars a year. The technical assistance bill seems to be another burden with yet other annual debt servicing obligations, which are already 268 million US dollars in arrears.
Government officials admit that the debt burden will remain a problem for Uganda's economy for some time, and the Central Bank concedes that a significant component of the budget is directed towards the repayment of the external debt which they said: "Burdens the "resource envelope" in the budget".
The Commonwealth report added that the aid project situation is exacerbated by the lack of coordination among government departments receiving assistance and the donors. All this "leads to confusion and duplication of efforts, resulting in projects which are not in touch with the country's real needs and rarely long-lasting".
The report states that it seems Uganda has great difficulty in coping with the size and complexity of the programmes which the World Bank and other donors are funding, and that there will be a deterioration in performance "if there is no improvement in the way projects are carried out locally".
It suggests that while Ugandans and their favourite donors may have cause to gloat about the continued aid flow to the country, despite the tightening of aid budgets from the West, both sides must now start wondering why all the billions of dollars in aid money, have achieved such a miserable success score on the ground.
Uganda's legislators are also wondering why the government continues to borrow at such a high rate of interest from international agencies, a trend they say which "negatively affects lending by commercial banks to ordinary and small investors".
Uganda's "powers-that-be", maintain that all is well and that the economy has been growing at an average rate of about 5.6% for the last five years, with last year's growth put at 7% and projections indicating further growth this year. But what is the true picture?

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PeaceLink 1997 - Reproduction authorised, with usual acknowledgement