If the 15.6 million Ugandans who lived in in 1986 agreed to share the country’s Gross Domestic Product (GDP) equally, each would have received Ushs936,000 (US$260) throughout the year compared to today where more than 40 million Ugandans can each take Shs3.5 million if the Ushs159 trillion ($44 billion) were to be shared equally. This is according to Ministry of Finance Permanent Secretary and Secretary to the Treasury, Ramathan Ggoobi, who lists GDP growth, growth of export earnings and domestic revenue collection as some of the indicators that the country is on a positive trajectory.
The former Economics lecturer at the Makerere University Business School, in an article written in the NRM Legacy Magazine to commemorate the 36th Liberation Day in January, states that Uganda’s economy has grown by a factor of 9 since 1986.
“By the time the NRM government took power in 1986, the small enclave economy that the post-independence Uganda had started to build had been ruined by Idi Amin and other governments that led Uganda during the first half of the 1980s,” he states adding that the period before 1986 was characterized by rampant shortages of nearly all consumer goods causing runaway inflation. “Back then the economy was in a free-fall,” Ggoobi explains, adding: “Inflation had reached 240% in January 1986, GDP growth had declined to 0.3%, itself driven by subsistence agriculture.”
Ggoobi compares the country’s total output produced (GDP) in 1986 to that of today stating: “Total GDP (the value of total output produced in a year) was less than $3.9 billion (about Ushs14 trillion in today’s currency) in 1986. If the 15.6 million Ugandans had agreed in 1986 to share this GDP equally, each would have received a mere Ushs936,000 (US$260) throughout the year. Indeed back then, per capita income growth was negative and life expectancy for Ugandans had reduced to just 48 years.
Since then the economy has expanded nearly nine times to Ushs148 trillion (US$ 40.5 billion) in June 2021 and is projected to grow at 3.8% this financial year (2021/22) and expand to Ushs159 trillion (US$ 44 billion) by June 2022. GDP per capita has also grown to US$ 954 (Ushs3.5 million), implying that on average a Ugandan is nearly 4 times richer than we were in 1986.”
Listing Uganda’s leading exports as gold which brings in $1,257m, coffee, earning $438m, fish and its products bringing in $227m, oil re-exports earning $132m for Uganda, maize bringing in $94m, tea at $78m, beans at $68m, tobacco at $67m, cotton bringing in $58m and others which he says fetched a total of $1,088m, Ggoobi explains that Uganda’s export earnings have also grown tenfold from where they stood at US$502 million (Ushs1.86 trillion) in 1986 to US$6,659 million (Ush24.6 trillion) today.
He also states that domestic revenue collection has increased exponentially from Ushs5 billion in FY1985/86 to Ushs 19.7 trillion in FY2020/2021 and it is projected to rise further to Ushs 22 trillion at the end of this FY2021/22.
“Poverty (measured as a percentage of population below national poverty line of one US dollar a day) has reduced from over 56% in 1992 to 19.7% in 2012, although it slightly increased to 21.4% in 2016,” states the Economics guru adding that data yet to be released will show the extent poverty, subsistence and unemployment have changed during the Covid-19 pandemic.
According to Ggoobi an increase in electricity generation capacity from 150 megawatts in 1986 to 1,254 megawatts now has led to a steady rise in industrial activity and value-addition as a percentage of GDP to 27% from 9.6% in 1986. “In particular manufacturing value added has increased to nearly 16% of GDP in 2020 from 6% in 1986,” he writes, adding:
“The number of factories in the country has as a result grown from just 80 in 1986 to 4,920 in January 2020. Relatedly, the percentage of the population with access to electricity increased from 5.6% in 1991 to 42% in 2019. Consequently Uganda’s middle class is fast-growing. Additionally, remittances from Ugandans working abroad have increased from US$119 million (Ushs 440 billion) in 1999 when tracking remittances was started to over US$1.4 billion (Ushs 5.2 trillion).”
Unfinished business
It is, however not all bloom for the country according to Ggoobi, who indicates that the major challenge ahead is devising ways of making the economy work for all Ugandans. “More than a third of Ugandans are still working entirely for own consumption (subsistence economy),” he states, quoting the National Household Survey of 2020 which revealed that although the proportion of households in subsistence economy
had reduced to 39%, the actual number of homesteads outside the monetized economy had increased to 3.5 million from 3.3 million in 2017.
Way forward
“President [Yoweri Kaguta Museveni] declared the 2021–2026 term’a kisanja for socio-economic transformation.’ He guided us to focus resources and efforts to creating wealth, jobs and incomes for Ugandans, particularly those 39% Ugandans still in subsistence economy,” Ggoobi writes, explaining that the Ministry of Finance have designed the Budget Strategy for FY 2022/23 to kick-start this transformative agenda.
The FY2022/23 national budget has been themed on: “Full monetization of the economy through commercial agriculture, industrialisation, market access and digital transformation’ and its overall goal is to incentivize and facilitate Ugandans who are still in subsistence to start engaging in income-generating activities in the four main sectors of the economy: commercial agriculture, industry, services and comport technology (ICT).
“The target is to start with raising agricultural productivity (yield per acre), output and quality to supply both domestic and export markets; and also reduce the levels of post-harvest losses. This will raise household incomes and the population’s purchasing power. We are embarking on this agenda at a time when the economy and the global environment in which we have to operate have been hugely impacted by the Covid-19 pandemic,” says Ggoobi.
Uganda lost nearly 3 percentage points of GDP growth in 2020 and 2021 due to Covid-19 despite what Ggoobi terms as “the unbelievable resilience
shown by the economy.”
Statistics indicate that Uganda’s economy grew by 3% in 2019/2020 and 3.4% in 2020/21, remaining one among a few economies in the world
that registered positive growth in 2020. Ggoobi estimates that GDP is projected to grow at 3.8% this FY2021/22.
The post Covid19 recovery plan
Going forward, the government is aiming at ending the pandemic, supporting business and economic recovery, and addressing the longstanding structural issues relating to large subsistence and informal economy and rural-urban and regional economic divide.
“To end the Covid-19 impact on business activity and livelihoods we are investing in wide-spread vaccination to ensure the economy stays open,” Ggoobi states, adding: “To support business and economic recovery, we have designed a stimulus package intended to boost aggregate demand and support businesses to restart.”
He lists components of the stimulus package to include:
a) Package for micro-businesses below an annual turnover of Ushs 10 million. He explains that a total of Ushs260 billion has been deployed through EMYOOGA and Ushs77bn through SACCOs, targeting the financially excluded vulnerable groups and active poor. These are being served through the Microfinance Support Centre (MSC).
b) Package for small businesses: A Small Business Recovery Fund of Ushs 200 billion has been created, accessible by formal small businesses employing between 5 and 49 people, with an annual turnover of between Ushs10 million and Ushs100 million, and that were operational before Covid-19. The operators in the nighttime economy are likely to benefit from this fund.
c) Package for medium and large scale businesses. The Uganda Development Bank (UDB) has been capitalized to lend to firms operating in manufacturing, commercial agriculture, agro-industry, tourism, education, health, and infrastructure (including ICT). In 2022 calendar year alone UDB plans to disburse over Ushs 612 billion to these businesses.
d) In addition, the Uganda Development Corporation (UDC) has also been
capitalized with nearly Ushs 200 billion to co-invest with companies operating in strategic businesses in agroindustry, manufacturing, and mineral commercialization. This is an indirect way of bailing out such companies that have been hard-hit by the pandemic.
e) Package for households in subsistence: Beginning with the FY 2022/23 the Parish Development Model (PDM) will be implemented to support the 39% of Ugandan households still in subsistence to join the monetized economy. The implementation of the PDM will kickstart the full monetization of economy. Most of these funds have been raised from budget repurposing and reprioritization as opposed to additional borrowing or increased taxes. I believe that this pronounced shift in spending away from consumption and toward productive sectors will contribute to faster and more inclusive growth.
“We are also going to implement a number of budget-neutral policies that could boost recovery. In this respect, we have continued with the prioritization of human capital development, public infrastructure
investment, as well as security and stability as foundations,” Ggoobi asserts, adding: “We are supporting reopening of schools as well as the health sector to continue with its fight against the Covid-19 pandemic as well as other ailments and normal services. The reopening of the education sector is going to boost economic recovery given the sector’s wider multiplier effect.”
He also says that government is implementing a recovery-mindful tax policy. Our new tax policy is intended to put more focus on enforcement of compliance as opposed to introducing new taxes or increasing existing taxes. This will incentivize businesses to allocate capital to its most productive use via a more level-playing field.
“Additionally, we have started implementing public sector reforms to achieve efficiency and effectiveness. These range from rationalisation of government agencies to automation of government processes such as e-procurement, e-education, and e-health,” Ggoobi writes, expressing optimism about Uganda’s economic recovery. “We have a clear plan and path to full recovery. I am confident that we are going emerge out of this pandemic stronger and with the reforms we have embarked on we are going prosper within the medium term.”
