Today, President Yoweri Kaguta Museveni, starts his fourth year of his fifth term as a democratically elected president, following a 60.62% win in the 18th February 2016 poll.
Mr Museveni and his ruling National Resistance Movement (NRM) campaigned on the promise to maintain, what they said was “steady progress” and said they would take “Uganda to modernity through jobs creation and inclusive development.”
The theme for the 2016 manifesto was built on earlier campaign promises- the 1996 manifesto was about “Tackling the tasks ahead” while in 2001 it was about “Consolidating the achievements.” In 2006 NRM promised “Prosperity for all” and in 2011, the key campaign promise was: “Prosperity for all: Better Service Delivery and Job-Creation.”
The 2016 NRM manifesto was aligned to the country’s larger Vision 2040 dream of taking “Uganda to a competitive middle income country from a predominantly low-income society.”
President Museveni campaigned and won based on this promises to strengthen security, good governance and democracy, consolidating growth, employment and macro-economic stability; agriculture, industry, tourism and human capital development. He also said, he would focus on health, infrastructure development for competitiveness, trade, sustainable harnessing of natural resources, public and private sector institutional development, and international and regional cooperation.
How much steady progress thus far?
However, a few months into his presidency, a Uganda National Household Survey (UNHS) by the Uganda Bureau of Statistics would challenge the “steady progress” claim.
Despite having increased Uganda’s budgetary resources by 136.3% from UGX11.6 trillion in 2012/13 to UGX26.4 trillion in 2016/17, the number of poor people in Uganda had instead increased by 51% from 6.7 million in 2012/13 to 10.1 million people in 2016/17!
Clearly, his challenge was well laid out.
Then in October 2018, Finance Minister, Matia Kasaija confirmed the inevitable, that Uganda wouldn’t achieve the much sung-about middle income status- for reasons he declined to divulge in full.
But nonetheless, middle income or no middle income, it hasn’t been all gloom. There’s been lots of hits and misses in nearly an equal measure.
The good
GDP GROWTH RATE: Uganda rebounded from a bad 2016 when GDP grew by a mere 2.5% and in 2017 made it to 5% and 2018, according to IMF figures, GDP growth rate was 6.2%. IMF predicts that Uganda will in 2019 grow at 6.3% and main 6+ growth till 2021 and beyond.
INTEREST RATES & PRIVATE SECTOR CREDIT: Private sector credit growth is the engine of every private sector-led economy and as such interest rates are a crucial lever.
Between May 2016 and today, Bank of Uganda has collapsed the Central Bank Rate (CBR)- a key determinant of interest rates, by 37.5%- from 16% in May 2016 to an all-time low of 9% in February 2018 and has since been ping-ponging it between 9% and 10%.
The Central Bank has also shaved interest rates on the 91-day and 364-day Treasury bill rates by 34.2 and 28.8 percentage points respectively from 14.8% to 9.72% and 16.2% to 11.5%.
As a result average lending rates have fallen by 21.5 percentage points across the period from 24.5% in May 2016 to 19.22% in March 2019, according to available figures from Bank of Uganda.
Falling interest rates, it appears have stimulated lending- during these three years, private sector credit grew 35.26% from UGX11.75 trillion to UGX15.27 trillion.
Forex denominated lending rates have also eased by 20 percentage points from 9.56% in May 2016 to 7.65% in March 2019.
INFLATION & EXCHANGE RATES: According to a report from BoU, during the period, both headline and core inflation have reduced from 5.2% and 6.8% in May 2016 to 3.5% and 4.8% respectively as of April 2019.
The Ugandan shilling however depreciated by 11.4% from UGX3,364.5 per dollar to currently UGX3,737.
PRIVATE SECTOR CONFIDENCE IN THE ECONOMY: It is therefore not surprising that business confidence index (Business Tendency Indicators as measured by BoU) which had in 2015, reached its lowest ever (53.1), kept rising, from 55.2% in 2016 and closed 2018 at 57.1.
In April 2019 it stood at 58.6%.
This is supported by the Stanbic Bank’s Purchasing Manager’s Index (PMI) which reported that although the PMI index for March 2019 dipped to 51.7, down from 54.4 in February, there a twenty-six month successive monthly improvement in business conditions, since the index was launched in June 2016.
The survey, sponsored by Stanbic Bank and produced by IHS Markit, covers the agriculture, industry, construction, wholesale & retail and service sectors. The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™) which provides an early indication of operating conditions in Uganda.
The PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
GENERATION & ACCESS TO ELECTRICITY: Electricity is one of the biggest drivers of economic growth as well as improved standards of living. Early this year, Uganda switched on, the much awaited 183.2 MW Isimba Dam increasing Uganda’s installed power generation capacity from 1, 014 megawatts (MW) to 1, 197MW.
As a result of increased generation capacity over the years, Umeme, the nation’s power distributor has been able to increase the number of customers connected to the grid by 35.8% from 950,000 customers in 2016 to 1,292,000. With Karuma Dam’s expected 600MW coming onto the grid soon, government has announced plans to connect 300,000 customers every year so as to increase access to electricity to 60% by 2027.
EXPORTS & IMPORTS: During the 3 years Uganda’s export earnings grew by 24.7% from USD2.9 trillion to USD3.6 billion. However, import expenditures grew even wider- at 35% from USD 4.5 billion to USD6.1 billion widening the trade imbalance by 53.9 percent to USD2.457 billion- the highest in 7 years, since 2011.
What needs to be fixed?
On a sombre note though all the above was achieved against heavy public borrowing. Over the 3 years, the public debt has expanded by 71.4% from UGX29.9 trillion as at June 2016 to UGX41.5 trillion as at June 2018. UGX29.9 trillion. In a recent report by the Auditor General, Mr John Muwanga said that if the government is to service the loans as projected in the next financial year 2019/2020, it would require more than 65 per cent of the total revenue collections which is over and above the sustainability levels of 40 per cent, according to The Observer newspaper.
“Although Uganda’s debt to GDP ratio of 41 per cent is still below the International Monetary Fund (IMF) risky threshold of 50 per cent and compares well with other East African countries, it is unfavorable when debt payment is compared to national revenue collected which is the highest in the region at 54 percent”, said the AG in his summary report.
Increased debt repayments have serious implications especially as they begin competing with the other national priorities. According to the Budget Framework Paper, whereas the budget has increased by 4.9 percent from UGX32.7 trillion shillings to UGX34.3 trillion shillings, a lion’s share of the resources in the envelop are for debt repayment, interest payment and non-resource funds for domestic debt refinancing with interest payment allocated UGX2.9 trillion which the second largest share standing at 11.4 percent of the entire budget.
Despite massive efforts that appear to have been put into fighting corruption, it still remains a big vice that is affecting the entire country.
Corruption, according to the Business executives surveyed for the World Economic Forum (WEF) Executive Opinions Survey 2017-18 still remains the biggest hindrance for doing business in Uganda with a score of 14.7% after taxes at 16.4%.
Similarly, the March 2016 Public Procurement and Disposal of Public Assets (PPDA) 3rd Integrity Survey Report, showed that the Corruption Perception Index in public procurement was at all-time high of 71.8% and that bidder confidence stood at an all-time low of 22%; below the 30% baseline established in 2013/14 and obviously way below the 50% target for 2014/15.
Because of such high corruption rates, according to the Transparency International Corruption Perceptions Index (CPI), between 2010 and 2016, Uganda’s global rankings have degenerated from 127th position in 2010 to 151st in 2016.
The need to fix corruption can’t be overstressed more than this.
The problems to be fixed are many, but the other major issue that the NRM government needs to pay attention to is budget discipline. For starters ministry of finance needs to start aligning its resource allocation to national priorities and then government needs to proceed to ensure and enforce performance.
For example the Annual Budget for FY2016/17 is was rated at 58.8% in compliance to the National Development Plan (NDPII) compared to 68.2% in FY 2015/16. According to the parliament report on the 2018/19 budget, alignment to NDP II was just 42%.
This simply means that we are funding the wrong priorities- something that must be fixed if we are to get out of poverty, the way the NRM government has promised us to.