What Is Africa’s Problem

8. The Interim Balance Sheet

EIGHT The Interim Balance Sheet When we took power four years ago, the Ugandan economy had suffered a cumulative decline in GDP of 10.5percent between 1971and 1985.The real picture, however, is that GDP per capita had declined by 41 percent because while production had been going down, the population had been increasing all along. This decline, together with internal instability and external shocks, precipitated an economic crisis. Tackling this crisis was no easy task, given that the country's infrastructure had become dilapidated by years of neglect. External debt servicing was also taking a significant percentage of our foreign exchange earnings. Economy However, I am pleased to report that since we have been in power, not only have we reversed the economic decline, but the economy continues to register remarkable improvements. The average annual growth rate of GDP between 1986 and 1989 was 5.4 percent per annum, compared to 2.5 percent per annum between 1980 and 1985. For the first three years of the NRM administration, that is from 1986to 1988,the annual average growth rate was even higher, at 6.9 percent per annum. After registering a mild recovery of 2.4 percent in 1986, the economy entered a new era of faster growth: GDP grewby 6.5percent in 1987and 7.2percent in 1988, and is projected to have grown by 6.1percent in 1989. This decline in the high rate of growth was caused by the fall in coffee prices. Address on the fourth anniversary of the NRM administration, beginning the five-year extension period, January26,1990. 49 50 The Interim Balance Sheet Over the past four years, strong recovery has been registered in the strategic sectors of agriculture, industry, construction, tourism, transport , and communications. As a result, the food situation in the country has improved greatly. Domestically manufactured commodities are no longer in short supply and the transport and other sectors of our infrastructure have all improved remarkably. The investment tempo has improved significantly. It is important to note that with the population currently estimated to be growing each year at a rate of about 2.8percent, the per capita income growth rate will be rising at a significantly slower pace than the expansion in GDP. It should also be understood that the income we earn is either consumed or saved (either voluntarily or in the form of taxation) and that the saved portion is invested to generate future income . If the savings and, therefore, investment expenditure is growing faster than GDP,then disposable income will go down. This is what has been happening over the past four years. Significant resources have been invested in infrastructure such as roads, water supply , importation of commercial vehicles, and the rehabilitation of our electricity supply. The impact of such investment is not immediately felt by the general public as an increase in their welfare—at least not in the immediate future. Indeed, the impact of the rehabilitation of these infrastructure projects has no direct effect on personal incomes, which the general public uses as an indicator of economic growth. This is very crucial for the wananchi to understand. In this context, therefore, the severe effects of the years before the advent of the NRM administration must be taken into account. For example , the per capita output of food crops and livestock products isestimated to have fallen by 14percent between 1983and 1985, and the recovery we achieved from 1986 to 1988 has not yet fully offset this decline. All in all, it will take us time to recover fully the per capita incomes our people enjoyed in the 19605. Export-led Growth As we enter the second phase of our revolution, we shall shift our economic policy orientation from focusing on short-term rehabilitation The Interim Balance Sheet 51 measures to long-term measures aimed at restructuring the economy. This will enable us to achieve our fundamental objective of creating an integrated, self-sustaining,and independent national economy in a secure environment. Our strategy to achieve export-led growth means that projects aimed at promoting and diversifying exports will be given first priority. This will enable us to earn enough foreign exchange to acquire some badly needed foreign technology. I call upon Ugandans, especially those in the private sector, to participate vigorously in this venture. The government is currently pursuing a policy of fixing foreign exchange rates at levels that will make it possible for...