An Interview with Gerald Sendaula

Mr. Gerald Sendaula, served as Uganda’s Minister of Finance, Planning and Economic Development  in 1998 – 2005, during a time of strong improvements in social and physical infrastructure, supported by robust economic growth. He was interviewed by the World Bank in February 2007.

What would you see as IDA’s unique contribution to Uganda’s economic and institutional reforms that began in 1987?

Looking back to the period up to 1986, a number of things had happened to the economy. The infrastructure was destroyed and a number of things needed to be attended to. The new National Resistance Movement Government came in strongly with programs, which included currency reforms, because inflation was extremely high. The inflation at the beginning of 1986 was between 200 percent and 250 percent.

The Government, therefore, set off with currency reforms and these worked effectively. We were able to draw the surplus cash and revalue the Uganda Shilling. In the process, negotiations were going on with bodies like the World Bank, European Union and other financial institutions and donor governments, to assist Uganda get its economy and administration back on its feet.

We then moved on the economic front, where we started the reforms of our economy. This involved tightening our belts because a number of things had to happen. We negotiated with the World Bank and together with the Government of Uganda, decided on various far-reaching reforms. Some of the reforms we implemented were so basic and obvious, but yet they were vital if we were going to achieve any development.

First of all, we had to acknowledge that Government, which is supposed to be a policy maker, could not at the same time be a trader. In other words, we could not be a judge in our own case, so we had to reform that. The reforms also included reducing and restructuring the civil service so that it was manageable, and privatizing public enterprises. For all these reforms to be implemented, we had the World Bank on our side with IDA resources. This paid off very well because it was then possible for government to reduce the amount of budgetary funds that were going into supporting non-profit making public enterprises.

We also had to reform the marketing of our agricultural produce. Initially the government had a Produce Marketing Board and a Coffee Marketing Board. The reforms made it possible for the private sector to get directly involved in the marketing of agricultural produce and this, in turn, enabled the country to continue producing the economy’s main agricultural commodities like coffee. If there had been no agricultural sector reforms, the prices paid to farmers would have been greatly reduced whenever global prices for commodities fell, and that would have pushed the farmers completely out of the coffee industry. By enabling the private sector to take the lead on coffee marketing, it made a lot of difference.

What I considered to be extremely critical during this whole period is that most of the political leadership and the general population owned these reforms. There were, however, those who felt that Government should have continued to be the marketers of agricultural produce but the majority of people owned the entire process of the reforms. As a result of the reforms, we made savings from the resources we got from IDA, and we were able to inject these resources into the social sectors of our economy.

At the same time, IDA assisted us tremendously to be able to do the necessary technical and policy work. When we downsized the civil service and privatized public companies, we had to compensate the workers who were retrenched. All these needed to be paid, and at the same time, most of the privatized public enterprises were running at losses and their creditors also needed to be paid. For all this to happen, we had also to hire the necessary expertise, and all this required a lot of money. The IDA funds and interventions were, therefore, extremely important in this exercise.

The question to ask then is: did we see results? Yes, the results are obvious: inflation was controlled. The minute you control inflation, you are allowing business to operate and people can afford basic household items. You need to have consistency in your prices and that can only be achieved when you have controlled inflation. This enabled the economy to grow. The people also felt that they were now the owners of the economy because it had been liberalized and the private sector had taken over government businesses. It was now possible for individuals to sell their produce directly and as a result of such reforms, the economy started to perform and the overall infrastructure started to improve.

What would you see as IDA’s greatest impact in the key sectors of the economy such as: Education, Health, Water, Agriculture and Private Sector Development?

As a result of successfully implemented reforms, it was then possible for Government to save resources that were going into activities that the Government wasn’t meant to be involved in. Those resources then went into the social services sector, covering education, health and provision of basics like clean water, and ensuring there is more money available for research into agriculture etc. When the World Bank and other donors realized we were very serious in implementing the reforms, IDA came in very strongly to add to what was available, and as a result we were able to get more resources into education and health.

As a result of the reforms, what happened to education? I would say in 1996 coming into 1997, we started to implement programs for the provision of universal education at primary level. We started with a few pupils but the enrollment numbers greatly increased when we got more IDA resources. Previously, the enrolment was about 50 percent or less, of all school-going children, but this increased to about 90 percent, making it possible for millions of children to go to school.

With the support of IDA resources, we were also able to take health services from the bigger hospitals, which were at the major urban centers, to the lowest rural areas. As we speak today, we have in every constituency what we call a Health Center IV, which is fully equipped with an operating theatre and a resident doctor. This health facility is able to attend to a massive number of outpatients. The government hopes to extend this kind of service to the sub-county level. I don’t know whether there are many countries where it has been possible but in Uganda it has been made possible through support from IDA resources, including funds from other donors.

The same goes for water, which had very low coverage at one time, and posed very serious problems. With poor water availability, you have a problem of preventable diseases like diarrhea. A lot of IDA resources were put into the water sector and as a result we have achieved 60-65 percent clean water coverage in Uganda. We, therefore, should be able to meet the Millennium Development Goal for water 2015.

A lot of IDA resources were also put into agricultural research. That is what the ordinary man and woman at grassroots requires from the state in as far as agriculture is concerned. I share this view with most of the political leadership in the country and the general population that research is essential in agriculture. You have got to get fast maturing seeds, you need disease-resistant seeds, you need fast growing seeds, and you need to be able to access that information, which the individual farmer cannot afford to research because it is extremely expensive.

A lot of IDA resources have been put in crop research, making it possible to have maize grown in the different geographical zones of our country. It is now possible to have high-yielding, drought-resistant maize that can mature within three to four months. This research has extended to the growing of high yielding beans and into perennial crops. In agriculture, we once experienced the deadly coffee wilt disease that attacked Robusta coffee trees, but research led us into adoption of disease-resistant Clonal coffee. This increased our coffee exports to four million bags at one time. At the same time, we utilized agricultural research to get high-yielding, big-size banana plants, which is all proof that if more resources are put into research, we get better results.

Using IDA resources, in 1997 we were able to introduce the Poverty Eradication Action Plan (PEAP). Under the PEAP, we were able to ring-fence some resources, which would be directed to poverty reduction activities. As a result of good performance, Uganda was the first country to get the debt relief under the Highly Indebted Poor Countries (HIPC) initiative. This enabled us to channel the saved resources into the social sectors which aren’t getting enough funds.

We were able to create a fund where we would ring-fence these resources. It was called the Poverty Action Fund (PAF), which also played a very important role because when revenues dropped, PAF funds could not be used to meet deficits in other sectors. PAF resources only went to critical poverty reduction activities and could not be diverted.

Turning to the private sector, there has also been steady growth. With the provision of security and economic stability, the private sector developed confidence and people started to invest in areas like construction where there was a housing boom. The people also appreciated the value of their currency, as a result of the currency reforms, which restored confidence in the financial markets.

Finally, the growth of the economy, which has been at an average rate of between six and seven percent over the last decade, has also been achieved due to support from IDA and other donors.

What would you see as key challenges that still need to be addressed by both the Government of Uganda and IDA in order to sustain Uganda’s development agenda?

The population growth rate. Some years ago, the population was growing at a rate of about 2.5 percent while the economy was growing at a rate of 6 percent. Even if you allow for a margin of error, you can see that there is a reasonable gap between the growth of the economy and the growth of the population. But looking at the current trend of population growth at a rate of about 3.5 per cent, and its impact on the key social sectors such as education and health, you cannot achieve the desired economic growth. We really need to strongly come out and be very committed to a policy on population growth. I feel this needs to be addressed in good faith.
 
The next challenge is our public administration management. I appreciate the idea of bringing services nearer to the people through creation of new administrative units but when you look back at independence and see what is happening today, we have created too many unnecessary administrative units, giving rise to a lot of duplication and wastage of resources. This puts a lot of demands on the national coffers and reduces the volume of what Government can deliver to the poorest populations.

So I’m looking at a number of things that have happened in this public administration. I would have accepted a proposal to have a new district or additional districts, if they can be self-supported and prove that they can be economically viable, or if we create them because the geographical location makes it difficult for them to benefit from the neighboring current districts.

As a result of the reforms I earlier mentioned, we also created so many regulatory bodies and commissions, which are also eating into the national coffers. For example, in the case of utilities, you would need at least one regulator to regulate them and not sectoral regulators for each utility. Duplication and multiplicity of commissions all requires resources which strain the public administration expenditure.

The other challenge is that whereas there has been general improvement, we need to strengthen the accountability side. We already have the necessary laws in place so what we need now is to address the accountability of resources provided for different activities. The biggest area of leakage of resources is in procurement. While I was minister of finance, I felt that we strengthened procurement by removing tender boards and creating procurement boards at different levels. But stronger procurement arrangements are still needed. Then, of course, overall accountability of resources as they are passed on to the many districts units created, makes it difficult for Government to oversee how these resources are utilized. Chances of overlooking some areas are great, so what is important here is that the people need to be aware and alert at all times, so that they demand for accountability and greater transparency.

Finally, on the part of IDA and other donors, there needs to be greater predictability. Sometimes because of political differences here and there, some one says we are now going to put a stop on these resources and that becomes very unfair. In Uganda, we have a Medium Term Expenditure Framework (MTEF) which works wonderfully. With the MTEF, you are able to predict that this is what you are going to do in financial year 2007 to 2008. You are doing it in a cycle of three years. Now if there is a slip off either by IDA or any other donor, then all the programs are interrupted.

So for me I’m happy with IDA resources. I’m happy that there should be more funds under IDA because they have helped us very, very much to get our country back on its feet. We have now Uganda to talk about, we aren’t shy to say we com e from Uganda, which was not the case before 1986, before the country was liberated by the National Resistance Movement.