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In 1986 when the National Resistance Movement captured the apparatus of government, coffee was by far the most important export product of Uganda. Coffee had enjoyed this supremacy since the 1950s when it overtook cotton as the most important“cash crop”and export. By 1986 all other export commodities, such as tea and cotton, had faded, and only coffee, which accounted for as much as 95 percent of the country’s export earnings, remained as a viable commodity within the Ugandan economy. In addition to being the most important source of the country’s export earnings, coffee also emerged as a major contributor to government revenue through export taxes. Given its great economic significance, coffee was synonymous with foreign exchange and enjoyed the same aura and importance as foreign exchange itself. The management of coffee exportation and the initial receipt of foreign exchange from coffee exports were in the hands of the Coffee Marketing Board (CMB). In the eyes of the general public, the manager of the Coffee Marketing Board was at par with if not slightly more important than the governor of the Bank of Uganda. Together with the secretary of the Coffee Marketing Board, the CMB manager had direct access to foreign exchange since money earned from selling coffee abroad was deposited directly into the bank account of the CMB. This practice gave the manager and members of the board initial access to the hard currency before it was eventually sold to the central bank. As a consequence of this prior access to the export proceeds, the CMB was able to determine how much foreign exchange to transfer to the central bank and when to do so. 8 Reform of the Export Sector: Coffee 55 08-2589-3 CH 8:Cels 2262-5 3/20/14 8:47 PM Page 55 The CMB had offices in a number of major cities around the world, the most prominent of which were London and New York. The CMB’s international offices and the residences of its foreign officers were as good, if not better, than those of the embassies of Uganda in those same cities. In London, for example, the CMB office appeared to have the means to arrange logistics and provide other services to visiting dignitaries more easily than the embassy. The managers of the board were often on the delegation of the president when he visited foreign capitals.And when the IMF and World Bank missions came to Kampala, one of the first offices they visited was that of the CMB. But how well did the CMB manage the coffee business? Actually, not very well. Nevertheless, the truth did not emerge until early 1987 when farmers began to destroy their coffee trees and replace them with cassava plants and other crops. It turned out that while a lot of people in Uganda were benefiting from the foreign exchange earned from the export of coffee, the farmers who actually produced the coffee were not beneficiaries at all. Instead of paying farmers with the funds received from selling the coffee in foreign markets, the CMB gave them so-called IOU chits, which were only a promise to pay in some distant future. In addition to the fact that the IOUs were not interest bearing, the farmers were not assured by the CMB that these IOUs would be honored when presented for payment. Nevertheless, farmers held on to the IOUs. But when the CMB took too long to honor its promises and pay them, many farmers opted to get out of the coffee business and invest their resources in other agricultural pursuits. Many of them chose to plant cassava and other crops, which could easily be sold in local markets for cash. Alarmed by the pending demise of what was the only remaining source of foreign exchange earnings, the government decided to take immediate action to remedy the situation. It ordered the Bank of Uganda to intervene and pay farmers the money owed them by the CMB. The central bank sent officials to the fields to begin the process of honoring the CMB’s promises to the farmers , as well as to pay cash to farmers who had coffee to sell. In fact, the governor of the central bank personally supervised this process as a way of assuring farmers that the government was serious about resolving their problems and making certain that coffee remained a viable export crop in Uganda. The central bank was now performing a job that was supposed...

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