Society, Politics & Law

# Uganda and the World Bank

Updated Thursday, 3rd August 2006

Trushna P. Patel concludes an investigation into the World Bank by looking closely at how the body influenced Uganda's development.

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When Ugandan President Yoweri Kaguta Museveni took office in 1986, the country's economy, infrastructure and health and education systems were in ruin after years of devastation by civil war, corruption and gross mismanagement. Since then, Uganda has made a remarkable recovery in its transition to peace and restoring growth.

Initially Museveni's government pursued economic policies divergent with IMF and World Bank advice, such as attempting to freeze and then raise the value of the Ugandan shnds to shift to a multi-party system which they considered to be detrimental to national unity.

For the NRM "its politics were not negotiable. Economics was quite another matter, or very quickly became so once the NRM's initial economic policies went seriously awry" , as a 2000 World Bank report observed. Thus while Uganda's political system has emerged as a contentious "Movement system" formed wholly by the NRM, its economic policies reflect, to a large degree, the advice and influence of the World Bank and other donors.

Furthermore this partnership for economic reform is widely viewed as a success, so much so that in a recent report evaluating Uganda's recovery Paul Collier and Ritva Reinikka assert that "Uganda exemplifies successful African economic liberalization" and represents "the main model of successful post conflict recovery in Africa".

Uganda has consistently shown itself to be one of the region's most robust economies with growth in real gross domestic product averaging 5-7% over the past decade and inflation brought under control (Collier and Reinikka, 2001). It has also witnessed what appears to be a dramatic reduction in poverty, almost halving its poverty rate to 35% in 20016. National income accounts do not tell the whole story as they have little information on major sources of income like non-export agriculture or informal activities and also say little about how income is distributed.

Figures for consumption are much better for understanding poverty and in Uganda a large-scale household survey programme began in 1992 - the integrated household survey. One of the key findings regarding poverty of the survey was that for 1992-1997/8 growth in average per capita consumption matched the growth in national income accounts. Not only were households at all points of the income distribution better off in 1998 that in 1992, but consumption and living standards grew more at the lower points of the income distribution than at the middle. This implies that inequality, as well as poverty, was reduced. Furthermore, although poverty reduction was not uniform across regions, as Appleton discovered "poverty fell the most in the central region and least in the eastern region  poverty did fall in every region between 1992-1997/98" .

There has, however, been some debate as to whether the benefits of growth actually translated into measurable improvements in the living standards of the majority of people. The Uganda Participatory Poverty Assessment Project (UPPAP) found that "Through the analysis of long-term trends in poverty, many local people felt that poverty was worsening in their communities  Local people reported more movement into poverty that out of it".

This could imply that people's perceptions of their own poverty may change with time or a change in their situation, for example, as they are able to consume more. Their propensity to consume might also increase and so increase their sense of deprivation, or people may become more aware of their deprivation. The Uganda Participatory Poverty Assessment Project may be reflecting this changing sense of deprivation as well as experienced poverty.

The World Bank has been heavily involved in supporting Uganda's reconstruction with a total commitment of over $1 billion today. Uganda was the first country to be eligible for and receive debt relief in the World Bank and IMF Heavily Indebted Poor Country (HIPC) Initiative in 1998 and was the first to reach its completion point for enhanced HIPC debt relief in 2000. There has, however, been some controversy surrounding this debt relief as at the time the government had been organising private financing to purchase a presidential aircraft. In the end the relief was granted and the Ugandan Government has agreed to reduce its defence and non-wage expenditures to offset the payments for the aircraft. In 2001 Uganda became the first country to receive a Poverty Reduction Support Credit of US$150 million to support the implementation of its PRSP11 and most recently in July 2002 the World Bank approved a second Poverty Reduction Support Credit for Uganda. Uganda has made significant progress in implementing its Poverty Reduction Strategy Paper with considerable support from the World Bank.

However, this is not to say that there have not been failures or that there is no room for improvement. Poverty, despite recent progress, remains acute. The early years of Bank supported structural adjustment programmes failed to achieve adequate improvements in the social sector, particularly in health and education, and despite recent progress there is a continued need for improving service delivery. Even Uganda's robust growth is threatened unless the Government continues to promote export growth and diversification and attract higher investment.

Corruption, as in much of the developing world, remains an obstacle to poverty reduction and development, eating away at scarce resources.

The political system, particularly the restrictions on political parties, remains a thorny issue with proponents claiming that the "movement system" is a local solution to participatory and democratic government while opponents deride it as being a thinly veiled "one-party state" that denies people their right to change government and thus lacks a vital check against the abuse of state power.

Finally, although Uganda is now free of large-scale internal conflict, Uganda is far from being at genuine peace. Ugandan troops continue to be involved in conflicts in neighbouring countries while rebel groups continue conflict in northern areas. These concerns need to be acknowledged and addressed lest they jeopardise all that Uganda has achieved thus far. Uganda's progress has been remarkable and should serve as a positive model for other developing countries in Africa, particularly those emerging from conflict. However, the international community should be equally diligent in confronting and redressing its faults and shortcomings.