Uganda’s economic stride should be at household

The UN Human Development Report, 2005 showed that Uganda had frog-limped into the medium developed nation for the first time.

Uganda reporedly made progress on the Human Development Index by improving from 146th in 2004 to 144th in 2005 and was as reported the best performer in the region. This means that Uganda will not benefit from the previous IMF support that has been in the range of US$300M per financial year. However, some of the IMF support programs given to help poor countries to maintain their performance track will remain.

These will include support to benchmark macro-economic indicators such as controlling inflation and bridging the fiscal deficit. Some people have argued that this shift in classification is not positive since it reduces on our financial benefits. I would like to make the folloing submissions.

It is extremely gratifying that Uganda has made this stride from the poorest countries category into that of the intermediate countries, in terms of human development. If correct, this shows that Uganda has made recognized progress in terms of people’s welfare. The only snag is that people do not recognize this progress.

The problem remains the translation of macro-economic growth to socio-economic development. Socio-economic development refers to a process where economic growth translates into major changes in social structures, popular attitudes, household income, reduction of inequality and household poverty. Socio-economic development therefore, means improved livelihoods. It should be noted that since early 1990s, the population living in poverty has been reducing from 56% in 1990 to 34% in 2000 and 38% in 2003. However, the absolute numbers of people living under poverty have been increasing.

This is clearly indicated by the recent Chronic Poverty Report which showed that seven million people currently are living under chronic poverty. Also the fact that the population living under poverty continued oscillating (34% in 2000 and 38% now) points to the level of vulnerability even among those that may not be currently poor. The vast majority of Ugandans are in the rural and agricultural sector. These people will naturally not understand and internalize economic jargons like “trends in inflation”, “ fiscal deficit,” “GDP per capita”, “Stock exchange markets”, “exchange rate fluctuations” etc; if they are not able to have meals, school fees, health care or clothes for their children. The romanticized progress Uganda has made in terms of development therefore remains irrelevant to them.

This therefore calls for interventionist approaches. Growth needs to be pro-poor. This requires growth to take place within areas where the poor are engaged i.e. in the rural and agricultural sector. Growth can only be pro-poor when the incomes of the poor increase at a rate that is faster than the rest of the non-poor population.

What is essential therefore is that development must be seen in a context that is greater than meeting the macro-economic indicators such as GDP and other Millennium Development Goals, which are based on national averages.

It therefore requires that the progress of Uganda from poor to intermediate nations is reflected in household indicators already alluded to. Uganda’s new categorization means halting of the IMF budget support. I have always argued in support of the position that for any country to develop, it must move towards financial prudence and resource independence. The country must consume what it affords rather than consumption without means of revenue generation. No country, community or household can perpetually live on the savings of others. As the proverbial adage assets “There is no free lunch”.

Any country’s economic policy and programs must be premised on the country’s resource envelop particularly internal revenue generation. This is the only way to ensure independent decision-making on both economic strategy formulation as well as implementation modalities for effective service delivery. It is in this vein that I have always supported the principle of broadening internal resource base as well as budget ceilings. The latter means, that the money originally planned for Government sectors should essentially be known in advance. This helps both planning, monitoring and evaluation of Government programs. Moreover, It is not prudent to allow financial inflows into the country at anytime. This is essentially for two reasons:

The haphazard financial inflows will negatively affect the economy since such resources will not have been earned through planned exports. In International economic language, this is what is referred to as the balance of payment instability.

The unplanned resource inflows increase the country’s dependency. Development should never be based on hand outs but on capacity development based on internal resource mobilization and management.

It is therefore gratifying that as an intermediate country today (if correctly categorized), Uganda will now have the realization of depending largely on her own economic resources.

This realization is consistent with the current budget estimates for the financial year 2005-2006 where internal revenue is targeted at about 60%. This is the only way to ensure internal synergy, capacity and zeal to leap forward. In the language of poverty eradication, I would like to re-iterate that “development is always initiated from within and only propelled from outside.”

This is the gist of self motivation, well focused objective setting, national esteem and independent decision making. It also increases accountability since hard- earned resources are always jealously guarded than easily acquired handouts which are prone to abuse.

The writer is a Poverty Eradication specialist in the Africa Region and Currently Specialist Technical Consultant for the African Peer Review Mechanism (APRM) under NEPAD.