IMF tips Uganda on economic growth benefits sharing

By John Odyek

New ways should be found to ensure that the high economic growth benefits Uganda has enjoyed over the last 20 years is shared by mainly the poor instead of a few people who are better off, the IMF has said.

“We see a lot of growth in Sub Sahara Africa but it is not as inclusive as it should be,” Abebe Selassie, deputy director of the IMF's African Department has said.

He was making a presentation on the IMF’s latest publication of the Regional Economic Outlook for Sub Saharan Africa under the theme ‘Sub-Sahara Africa: Fostering Durable and Inclusive Growth’. The function took place at Statistics House, Kampala.

Selassie said growth in Sub Saharan Africa is expected to accelerate to 5.5% in 2014, up from 4.9% last year. He said inflation which had been a major problem in the region has also reduced.

“Economic activity in the region continues to be underpinned by large investments in infrastructure, mining and maturing investments.” He warned that although there was high growth in the region, this was not accompanied by increases in government revenue.

He cautioned that in some countries fiscal deficits (when government expenditure exceeds revenues) were rising because of increases in recurrent expenditures but increases in expenditures could be desirable if the spending was on capital projects or investments.

Selassie explained that economic growth was in three stages; the first being starting it, followed by sustaining it and thirdly was focusing on its quality. He said Uganda had maintained a steady growth of over about 4% over the last two decades.

He said good growth should be accompanied by more improvements in human development indicators.

He said Uganda’s growth has been accompanied by reductions in poverty levels but more should be done to reduce poverty because growth alone was a necessary but not a sufficient condition to improve poverty outcomes.

Selassie said that household enterprises in the service and agricultural sectors will continue to be the main source of jobs for Ugandans over the next few years. He added that improving productivity in the agricultural sector where the majority of Ugandans work will deepen the gains in economic growth and reduce poverty further.

Keith Muhakanizi, permanent secretary ministry of finance said the cycle of general elections lead to increases in public expenditures and distorts national budgets.

Muhakanizi said during elections tax collections go down but recurrent expenditures on wages and election activities rise. He accused donors of putting pressure on the economic managers of the country. He did not explain the nature of the pressures. “This morning the donors were pushing me,” he quipped.

He called for better ways to manage the economic implications of elections cycles because pressure to win elections by politician creates of a lot of expenses in that direction making democracy expensive and dangerous for Africa.

Martin Okumu, acting secretary general Uganda National Chamber of Commerce and Industry said economists should not forget that economic stability was critical for economic growth. Okumu said that the agricultural sector in Uganda should be linked with industries so that there could be value addition locally to fetch better prices from exports.

Andrew Mwenda, managing director, Independent Publications Ltd said growth had declined in Africa after the colonialists because there were few skilled people. He said growth of industries Asia resulted from heavy state support in enterprises.

Mwenda said the enterprises have succeeded despite the high levels of corruption that were witnessed. He wondered why industrialization in Africa has not succeeded despite state interventions.