Uganda: Growing Out of Poverty

With a per capita income of under US$170, Uganda today is one of the poorest countries in the world; indeed, it is a living testament of the havoc caused by the political turmoil and economic decline brought about by more than a decade of despotic rule.

Based on an analysis of the 1989/90 Household Budget Survey, the poverty assessment for Uganda drew two poverty lines. The first was set at a level that represented the expenditures necessary for a daily intake of 2,200 calories plus some reasonable non-food expenditures, and Ugandans falling below this line were characterized as the "poor". The second line was set at a level of expenditures representing the bare minimum for adequate food intake, and those falling below this line were considered to be the "poorest" or the core poor. As defined by the first line, about 55 percent of Ugandans can be considered to be poor.

Ninety-two percent of the poor live in the countryside, although only 89 percent of the population is classified as rural. The discrepancy between rural and urban levels of poverty is even greater using the lower or "core" poverty line. Not only is poverty more widespread in rural areas, it is also more severe. Rural people also spend about half as much as urban dwellers. Accordingly, poverty-related indicators, such as household size, dependency ratio, and illiteracy, are higher for rural Uganda. In particular, poorer households tend to have older and less educated household heads, and are more likely to be headed by a woman.

Life expectancy for men and women is one of the lowest in the world, and this is unlikely to improve in the near future. AIDS has emerged as a significant cause of death and illness among young children; thus, the already high infant and child mortality rates can be expected to rise. Among children under five, who account for over half of hospital deaths, the main killers are malaria, pneumonia, diarrhea, and malnutrition. Malaria has been found to be the principal killer among adults admitted to hospitals, while diarrhea, pneumonia, and anemia are almost as common as AIDS as reported primary causes of death.

Incentive and Regulatory Framework

During the past five years, the government has implemented a far-reaching economic reform agenda, which has transformed Uganda into one of the most liberal economies in Sub-Saharan Africa. With the liberalization of the exchange and trade regime, the abolition of the Industrial Licensing Act, the promulgation of a new investment code, and the gradual liberalization of agricultural pricing and marketing, the government has put in place some of the essential pre-conditions for sustainable growth. As a result, aggregate real per capita GDP, which had declined steadily between 1983 and 1986, increased significantly between 1987 and 1991 and, on average, the welfare of the rural and urban poor appears to have improved in real terms by between 14 and 16 percent respectively during the past five years.

In 1988, the government began adjusting the official exchange rate with a view to reducing the gap between the official and the foreign exchange bureau rate. When the difference reached about 15 percent, the government introduced a foreign exchange auction in January 1992.

The government has also overhauled the system of marketing, pricing, and taxing coffee so that the actual producer price is determined by market forces, coffee exporting has been opened to competition, and virtually all taxes on exports have been abolished. The government has also eliminated the export monopoly of the Uganda Tea Authority and the Produce Marketing Board. These changes have gone a long way towards altering relative prices in favor of cash crops and have had a beneficial impact on those poor farmers who produce these crops.

Public Expenditures

While Uganda still spends far less on economic and social services than do most countries in the world and in Sub-Saharan Africa, the adjustment program has nonetheless changed public expenditure priorities in favor of the social sectors in general and on education and health care in particular. The government plans to increase these allocations steadily, within resource constraints.

Safety Nets

Targeting the poor is far too expensive an option, given the extremely small revenue base and weak administrative capacity that presently prevail. Instead, resources should be concentrated on providing basic services in rural areas, such as primary education, primary and preventive health care, rural feeder roads, safe and easily accessible water, agricultural extension, and marketing assistance. Communities can help to provide some of these services themselves, with assistance from the government and NGOs.

Poverty Strategy

Despite the progress achieved to date, there is little cause for complacency. If the government is to make a serious dent in poverty over the next decade, it will have to implement the two-pronged strategy proposed by the 1990 World Development Report by adopting policies that will accelerate economic growth and policies that will invest in human capital, thereby ensuring that the poor are able to participate equitably in that growth.

Experience from other countries has shown that macroeconomic stability, a high rate of investment backed by domestic savings, and high rates of literacy and numeracy are vital for rapid economic growth. Uganda continues to do poorly in each of these three areas. At the heart of its growth strategy will have to be increasing yields in the agricultural sector by raising the productivity of the farmer. That implies ensuring that farmers have security of land tenure, investing in research and extension, controlling plant and animal diseases, and developing rural feeder roads.

Although old-fashioned import substitution is out of favor, there is substantial scope in Uganda for replacing imports, provided that this is done efficiently and as part of an outward-oriented development strategy.

For Uganda's social indicators to improve, spending on the social sectors will need to increase and to be better allocated. In recognition of this, during the past two years, the government has been restructuring its expenditures in favor of the social sectors and rural infrastructure. Because Uganda's total fertility rate is among the highest in the world, it is imperative that the government should develop a national family planning program because, in addition to aggravating poverty, the growing population has had an adverse effect on the environment. Also, given the critical role played by women in Uganda's economy, the government needs to promote, through literacy and education, the legal rights of women so that they can benefit from their own labor and have greater access to and control of productive resources.

Statistical Systems

There is an urgent need to strengthen the database and to develop a poverty monitoring system that can provide policymakers at regular intervals with information on the impact that economic and social policies are having on the lives of the poor.