NRM Government

A new political group that wanted to change the politics of Uganda started an armed struggle on February 6 1981. This group formed the National Resistance Movement, which was supported by the peasants and lead by the intelligentsia. The armed wing of the Movement the National Resistance Army (NRA) fought a protracted guerilla struggle and overthrew reactionary and oppressive elements of the UNLA in January 1986. It established a broad-based Movement government under Mr. Yoweri Kaguta Museveni.

The activities of political parties were suspended and are still proscribed under the new Constitution, which was promulgated in 1995. Presidential elections were held in 1996 under universal adult suffrage.
The economy has made tremendous progress and most parts of the country are experiencing peace and stability and the rule of the law prevails in most parts of the country. The country held a referendum on the system of government in June 2000 and voted to keep the Movement system of government.

The second presidential elections were held on March 12 2001. The incumbent Yoweri Kaguta won 69.3% of the votes. The runner up Colonel (retired) Doctor Kiiza Besigye (27%) petitioned the outcome and process of the election in the Supreme Court and lost by a split decision of (3-2).


1.0 Democracy and Good Governance

1.1 Constitutionalism and Rule of Law

1.2 Military and Security Forces

1.3 Rehabilitation of War and Conflict Ravaged Areas

1.4 Decentralization of Power

1.5 Empowering Special Interest Groups

1.6 The Fight against Corruption

1.7 Patriotism and the Promotion of National Interest and Common Good

1.8 Efficient and Effective Service Delivery

2.1 Performance of the Economy

2.2 Financial Services

2.3 Industrialization, Science and Innovation

2.4 Investment, Job Creation and Labour Relations

2.5 Trade and Market Development

2.6 Tackling Informal Sector Impediments

2.7 Tourism and Wildlife

2.8 Agriculture

2.9 Mining, Oil and Gas

2.10 Land

2.11 Environment


3.1 Energy

3.2 Transport

3.3 Information and Communication Technology

4.1 Education

4.2 Sports

4.3 Health

4.4 Water and Sanitation

4.5 Housing

The economy inherited by the National Resistance Movement (NRM) in January 1986 was a shambles. The new Government set about introducing far-reaching reforms already the next year, in the form of an Economic Recovery Programme (ERP), a standard IMF/World Bank Structural Adjustment Programme (SAP) with financial assistance from the International Monetary Fund (IMF), the World Bank and bilateral donors. The reforms were the paper examines the impact of these reforms on agriculture in Uganda. It is organized in four sections. The first section recounts the background to the economic crisis and the state of the economy at the time of the NRM takeover. The second section gives an overview of the ERP and its economy-wide impact, while the third section focuses specifically on the agricultural sector. The last section contains the recommendations and conclusion.

1.1. Background to the crisis

At the time of independence, in 1962, Uganda’s was one of the most promising economies in sub-Saharan Africa, with a sound agricultural base, developing industries, and a significant mining sector. Agriculture was an important foreign exchange earner through the export of coffee, cotton and tea while at the same time providing basic self-sufficiency in food. The manufacturing sector produced inputs for the agricultural sector and consumer goods, and was becoming a significant source of foreign exchange through the export of textiles. The country’s current account balance was in surplus and domestic savings averaged 15 per cent of the gross domestic product (GDP) (World Bank, 1993). A good transportation system was in place, including a road network, railways, and port and air services.

By the time YoweriKaguta Museveni and his National Resistance Movement (NRM) assumed power, in 1986, Uganda had become one of the poorest countries in the world. Economic progress had started declining in the late 1960s due to political turmoil and economic restrictions on the Baganda (Loxley, 1989). This eventually led to a coup d’état in 1971 by Idi Amin to effect the removal of the Government of Milton Obote.

1.1.1. The economy under Idi Amin

The Idi Amin years from 1971-79 marked a major turning point in Uganda’s economic policies, unfortunately for the worse, often verging on the arbitrary and including pervasive state intervention, typified most blatantly by the declaration of an “Economic War” in August 1972 against the Asian minority. During the self-proclaimed three months of the “Economic War” 50,000 Asians were expelled and their productive and personal assets confiscated (Jamal, 1976; Loxley, 1989). The expulsion meant a huge loss in skilled personnel, mostly in the private sector. Increased military and other expenditures between 1970 and 1980 led to fiscal deficits that averaged USh14.4 million per annum (table 1A). The deficits were financed through domestic borrowing, causing the money supply to increase from USh16.7 million in 1970 to USh185 million in 1980 (table 1B). Inflation was a predictable outcome, rising from 3 per cent for 1960-70 to an average of ten times as much in the next decade. The raging inflation cut the real price of the principal export crop, Robusta coffee, by almost half between 1970 and 1980. This, combined with deterioration in the infrastructure, led to a decline in exports, with an 8.5 per cent decline between 1970 and 1980 compared to a 5 per cent growth in the previous decade. The decline in export revenue was compounded by cutbacks in bilateral aid as a sanction against the notorious acts of the Amin regime. Imports declined by almost 10 per cent annually between 1970 and 1980, compared to a growth of 6 per cent between 1960 and 1970. Given Uganda’s reliance on imports, the cutback in imports finally reflected in a declining economic growth – 1.6 per cent between 1970 and 1980 compared to 5.2 per cent between 1960 and 1970. The decline in export revenue also impacted on the balance of payments and external debt.

Table 1. Selected economic indicators, 1960-80

A. 1960-70 and 1970-80



Real GDP growth (%)



Inflation (%)



Budget deficit (million USh)


Growth in exports (%)



Growth in imports (%)



B. 1970 and 1980



Broad money supply (million USh)



Current account balance (million US$)



External debt (million US$)



External debt servicing as a % of exports



Gross international reserves (million US$)



Real producer price of coffee (1972=100)



Nominal exchange rate (USh per US$1)



Sources: World Bank: World Development Report, 1982; World Bank: World Tables, 1993; IMF: International Financial Statistics, 1993; Loxley, 1989.

The current account balance which stood at a surplus of US$20 million in 1970, showed a deficit of US$18 million in 1980, while external debt rose from US$128 million to US$669 million in the same period, debt servicing rising from 3.4 per cent of exports in 1970 to 11.9 per cent in 1980. International reserves declined from US$57 million in 1970 to US$17 million in 1980. Despite the shortfalls in foreign exchange and the deteriorating economic conditions, the monetary authorities maintained a fixed exchange rate at around USh0.0714 to US$1. The overvalued shilling gave rise to a lucrative underground market in foreign exchange and higher cost of living. Subsistence agriculture, petty trading and illegal economic activities became the regular survival strategies (Jamal, 1988 and 1991).

1.2. Economic situation, 1979-84

The Amin Government was overthrown in April 1979 by a combined force of the Tanzanian army and a Ugandan rebel group, The United National Liberation Front. In December 1980, Milton Obote assumed power for the second time, with the economy in deep crisis and the infrastructure damaged from the war. The Obote administration turned to international financial institutions and bilateral donors for assistance, which led to the introduction of an economic reform package in mid-1981, typical IMF/World Bank Structural Adjustment Programme (SAP), with considerable donor support. The centrepiece of the SAP was a massive devaluation of the Ugandan shilling, from 7.80 to US$1, to 78.00. In July 1982, a further devaluation followed to USh 100.00, after which a flexible exchange rate regime came into force. A two-window system began operation in August 1982, with key transactions including exports of coffee, tea, tobacco and cotton, imports of petroleum, aid-financed projects, official loan and grant inflows, and the servicing of debts and arrears being carried out through Window I at the official exchange rate, with other transactions falling under Window II through an auction system.

The goals of the package were: stimulating economic growth; controlling inflation; stimulating exports and improving overall balance of payments; reducing the deficit; and restricting credit, especially credit to the government, by establishing credit ceilings. Under the dual exchange rate system, the Ugandan shilling was devalued significantly to over USh270/US$1 in 1984 (World Bank, 1985). The exchange rate for the two windows moved closer to each other and the Window II rate moved closer to the underground market rate, representing a shift in purchasing power from rent seekers in underground market activities to exporters. The producer prices of major exports were raised as an incentive to increase exports, Robusta coffee, for example, from USh35 per kilo in 1981 to USh130.8 in 1984 (see table 2). The increase in producer prices contributed to a 21 per cent increase in coffee exports, a 191 per cent increase in cotton exports, and a 23 per cent increase in export revenue between 1980 and 1984. Monetary GDP increased by 7.4 per cent in 1982 and 5.4 per cent in 1983. The overall budget deficit declined from 2.8 per cent of the GDP in 1981 to 0.6 per cent in 1983. Inflation declined from 111 per cent to 25 per cent (table 2).

Table 2. Selected economic indicators, 1980-84






Real GDP growth (%)






Inflation (%)





Growth in broad money supply (%)






Budget deficit (million USh)






Current account balance (million US$)






Exports (million US$)






Imports (million US$)






Total external debt (million US$)




1 011.6

1 065.0

Debt servicing as a % of exports






Coffee producer price (USh per kilo)





Coffee exports (‘000 tons)






Cotton exports (‘000 tons)






Index of food production per capita (1987=100)






Sources: World Bank: World Tables, 1993; World Bank: Uganda: Agriculture, 1993; IMF: International Financial Statistics Yearbook, 1993; Loxley, 1989.

Despite its apparent success the programme collapsed in mid-1984 as a result of inherent weaknesses, plunging the economy into crisis again. First, the foreign exchange auction was dominated by large traders who had access to bank credits for local cover. Second, importers took advantage of the depreciation of the Ugandan shilling by making huge profits on the lag between paying for imports and selling them on the local market at higher prices. Third, the programme had an adverse impact on the living standards of the urban working class, since wages were not adjusted upward. The growing dissatisfaction over eroding living standards forced the government to introduce a six fold salary increase in 1984 on top of a major increase in producer prices of export crops. The fiscal deficit ballooned to 119 per cent of GDP and the broad money supply to 113 per cent (table 2). Such increases constituted violations of the conditionality of the programme and, coupled with a mismanagement in the auction system, caused the IMF to cancel the programme.

Fourth, there were some inconsistencies in the programme. The high rate of depreciation of the Ugandan shilling and the tight domestic credit ceilings resulted in many factories being denied the local cover to finance imports. Fifth, import rationing for key sectors of the economy was abolished, leading to a surge in the imports of luxury goods and goods which could have been produced locally at a time when the capacity utilization of local industries averaged under 20 per cent (IDRC, 1986; Loxley, 1989). The general observation was that whereas local industries were being deprived of imported raw materials, spare parts and machinery, merchants were profiting from imports of consumer goods and exporting their capital gains. Sixth, hardly any measures were taken to reform the food crops sector. The index of food production per capita which had improved from 105.2 in 1980 to 116.4 in 1983, fell back to its 1980 level in 1984 (see table 2). Seventh, the programme relied heavily on expensive short-term IMF credits, resulting in total external debt increasing from US$695.4 million in 1980 to US$1.065 billion in 1984, pushing up debt servicing as a percentage of exports to 40.6 per cent in 1984 from 13 per cent in 1980 (table 2). Eighth, Uganda lacked the technocrats, managers and skilled personnel to run the programme. The economic crisis, together with a strong political opposition, led to the removal of the second Obote Government in a military coup in 1984. The military coup led to further repression and economic chaos.

1.3. NRM economic policy pre-ERP

Eighteen months after the collapse of the IMF programme and the subsequent military coup, the National Resistance Army (NRA), which had been involved in a civil war, took over control of the Ugandan capital, and its political wing, the National Resistance Movement (NRM) established a government over a platform of national unity and broad-based economic reform (National Resistance Movement, 1985). The magnitude of the economic problem facing the NRM was staggering. Production was low, the transportation system was in disarray, the social infrastructure had collapsed, inflation was over 150 per cent, foreign exchange was limited, the budget was out of control, corruption and black marketeering were widespread, and skilled personnel had migrated. The immediate task was to establish short-term objectives, as a prelude to more long-term measures. These interim measures were prepared in mid-1986 with the help of personnel from the two main political parties, the Democratic Party (DP) and the Uganda People’s Congress (UPC). These included a dual exchange rate, with its official rate at USh1,400 to US$1 and a market rate at USh5,000; significant increases in producer prices and interest rates; privatization of some parastatals; and the curtailing of government spending. Such measures fell short of policies needed to achieve long-term goals. There were no measures to increase revenue, address foreign exchange needs, or rehabilitate the infrastructure. Neither were there measures to redress the decline in the major sectors or the high rate of inflation. The interim measures in fact destabilized the budget. First, the increase in the producer price of coffee, from USh470 per kilo in December 1985 to USh850 in May 1986 (World Bank, 1993A, page 175) increased the expenditure side of the budget without a corresponding increase on the revenue side. Second, the conversion of proceeds from exports at the overvalued official exchange rate reduced the revenue side of the budget.

The NRM Government, sensing the need for new initiatives, invited a joint international/Uganda team of experts, under the sponsorship of the International Development and Research Centre (IDRC) in Canada, to recommend the best course of action. Differences emerged. NRM policy-makers saw infrastructure-induced bottlenecks and lack of incentive goods as the major obstacles to economic recovery. They opposed devaluation on the grounds that it would trigger a devaluation-price increases-devaluation spiral and hinder recovery by raising the cost of imported inputs. These arguments prevailed and found expression in the unification of the exchange rate at the lower level of USh1,400 in spite of massive inflation. A majority of the team of experts opposed this remedy. The consequences of the course followed were economically devastating. The budget remained in serious deficit, export duties eroded, producer prices and export revenue fell in real terms, the balance of payments worsened, reserves were depleted and arrears accumulated. Underground market activities flourished, inflation rose to over 200 per cent, and the underground exchange rate rocketed to several times the official rate (Loxley, 1989).

The NRM Government turned to the IMF and the World Bank in early 1987 for financial assistance. Critics questioned this, arguing that the attaching conditionalities would undermine the NRM’s long-term economic strategy. However, the contextual situation afforded no viable alternatives. Foreign exchange was indeed the main constraint facing the government and this was not going to be forthcoming from bilateral donors without the approval of the multilateral financial institutions. Borrowing from the world financial market was precluded by Uganda’s creditworthiness.

2. The economic recovery programme

2.1. Economic policy under the ERP

The NRM Government agreed on a new policy package with the IMF and the World Bank in early 1987, formalized in an Economic Recovery Programme (ERP) introduced in May 1987. Funding for the programme has come from the fund and the bank supplemented by bilateral donors. The aim of the ERP was to restore fiscal discipline, monetary stability, and rehabilitate the economic, social and institutional infrastructure. The key components were: tight monetary policy; contractionary fiscal policy; foreign exchange reforms; price liberalization; export promotion; financial sector reforms; better climate for private investment and savings; attracting foreign exchange inflows; and restructuring productive capacity to restore growth. Specific measures implemented included: the introduction of a new currency at a conversion rate of 1 to 100 (Loxley, 1989, page 83); a devaluation of the Ugandan shilling from USh1,400 to USh6,000 (Loxley, 1989, page 83); legalization of foreign exchange bureaux; the introduction of a retention account for export earnings (in 1989); the introduction of a Dutch auction system for donor funds (in 1989); replaced in 1993 by an inter-bank foreign exchange method/floating exchange rate; a drastic reduction in subsidies to inefficient parastatals; a reform of the tax system to reduce the dependence on coffee duty; for example, a sales tax was introduced on beer, cigarettes and soft drinks (Loxley, 1989, page 85) a 30 per cent across-the-board conversion tax rate imposed on currency holdings, time and savings deposits, treasury bills and government stock held by the public; one-half of the receipts from the conversion tax was used to retire public debt and the other half put in a special development fund to finance priority infrastructure expenses (Loxley, 1989, page 83); a 100 per cent rise in the salaries of civil servants in May 1987, and a further 50 per cent rise in July 1987; special allowances to university professors and doctors; subsidies on school fees; an increase in the average price of coffee from USh850 per kg in May 1986 to USh2,400 in June 1987 and USh6,000 in July 1988 (World Bank, 1993A); a reduction in interest rates to encourage investment; measures to rehabilitate infrastructure and productive capacity; policy initiatives to reduce inflation and encourage private investment; efforts to reform agricultural production and marketing; and attempts to determine the extent of poverty and income equality in Uganda, and the introduction of poverty alleviation measures.

2.2. Impact of the ERP

Remarkable improvements have been forthcoming since the ERP, enough to qualify Uganda as one of the few success stories in sub-Saharan Africa – perhaps even the front runner, at the expense of Ghana. GDP grew at an average of 6.5 per cent between 1987 and 1996, translating to 3.4 per cent in per capita terms (see table 3). Agriculture, which makes up about 50 per cent of the GDP, grew at 5.1 per cent, industry at 10.8 per cent, and services at 6.3 per cent. Several factors including investment recovery, monetary policy and fiscal discipline influenced economic growth. Gross domestic investment averaged 12.3 per cent of GDP between 1987 and 1994, compared to 7.8 per cent between 1983 and 1987 (table 3). Fixed private and public investment contributed significantly to this, the former increasing 30 times between 1987 and 1994 and the latter by over 100 times.

2.2.1. Monetary policy

A tight monetary policy resulted in a decline in monetary growth (broad money supply) from 212 per cent in 1988 to about 21 per cent in 1996 (table 3). The decline in monetary growth, together with growth in agriculture, especially food crop production, contributed to a reduction in inflation, from 200 per cent in 1987 to about 7.1 per cent in 1996 (table 3). The relatively higher monetary growth of 60 per cent in 1992 was partially responsible for the upswing in inflation in 1992 (54.4 per cent). With low inflation, lending rates were reduced from 22 to 50 per cent in 1987-89 to 21 per cent in 1996. The lower lending rates reduced the cost of borrowed capital, thus encouraging domestic investment. A major shortcoming in the monetary policy, however, was the lack of reforms in the financial industry to make it more efficient, viable and profitable. For example, in 1994, half of the 15 commercial banks made losses, and non-performing assets were in excess of 50 per cent of total loans (World Bank, 1996).

2.2.2. Public finance

Total revenue in the public sector increased from USh5, 811 million in 1987 to USh623 billion in 1996. Total expenditure, on the other hand, increased from USh11, 042 million to USh1, 061 billion, so that the fiscal deficit increased from 4.1 per cent of GDP in 1987 to 14.2 per cent in 1993 (see table 3). The increase in fixed public investment between 1987 and 1994 contributed to the increase in total expenditure and the fiscal deficit. The huge deficit had a minimal impact on inflation because the Government relied on domestic revenue and external aid to finance its expenditures rather than domestic borrowing. (The deficit was, reduced to 7.9 per cent of GDP in 1996.)

2.2.3. External trade and balance of payments

Despite the trade liberalization measures, the export incentives, and the depreciation of the Ugandan shilling, export revenue fell from US$406 million in 1987 to US$169 million in 1993, (but increased to US$555 in 1996). The decline in export revenue was the result of low world market prices for coffee which caused Uganda’s terms of trade to deteriorate by 110 per cent between 1987 and 1994 (table 3). Import levels fluctuated, increasing from US$600 million in 1987 to US$676 million in 1990, decreasing to US$451 million in 1992, and increasing to US$117 million in 1996. The decline in export revenue, coupled with the increase in imports in some years led to a trade deficit which ranged from US$194 million in 1987 to US$625 million in 1996, and a current account deficit of around US$105 million. These figures indicate that the ERP did very little to improve the external balance position of Uganda.

2.2.4. External debt

As a result of the ERP, the total external debt of Uganda rose from US$916 million in 1987 to US$3,443 million in 1996, causing the debt service ratio (debt servicing as a ratio of exports) to increase from 44 per cent in 1987 to 121 per cent in 1993 (table 3). The enormous debt burden prompted the Government to embark on a debt reduction strategy in 1992, which resulted in reducing the ratio to 19 per cent in 1996. The situation remains tenuous, especially when rescheduled payments come due.

Table 3. Selected key economic indicators, 1987-96

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Growth indicators (% p.a.)
GDP 6.7 7.0 6.3 5.5 5.1 4.5 6.3 10.0 8.4 5.0
Per capita GDP 3.8 4.1 3.4 2.6 2.2 0.9 3.0 6.8 5.2 2.1
Agriculture 4.7 5.4 6.3 5.4 2.8 4.7 9.5 7.8 3.8 1.2
Industry 13.3 18.8 4.1 6.6 10.1 11.2 7.5 12.9 11.5 12.5
Services 3.8 7.2 6.6 6.7 7.8 7.9 7.7 6.9 5.9 3.1
Monetary policy indicators
Broad money supply (bil. USh) 8.6 26.8 60.2 94.4 138.6 222.3 301.8 402.6 504.4 609.0
Growth in money supply (%) 212.0 125.0 57.0 47.0 60.0 36.0 33.0 25.0 21.0
Inflation (%) 199.8 196.3 61.4 33.2 27.7 54.5 5.1 10.0 6.6 7.1
Lending rate (Agric.) (%) 22-25 32-35 25-40 36.0 35.0 37.3 24.6 19.8 19.5 20.8
Lending rate (Commerce) (%) 30.0 40.0 50.0 45.0 40.0 44.0 27.0 21.0 20.0 21.0
Public finance
Total revenue (mil. USh) 5 811 22 548 47 854 94 525 136 808 185 995 281 428 363 881 531 194 622 790
Total expenditure (mil. USh) 11 042 44 300 91 596 174 928 269 168 581 495 718 342 816 772 916 624 1 060 685
Overall deficit (mil. USh) 5 231 21 752 43 742 80 403 132 360 395 500 436 914 452 891 385 430 437 895
Deficit as a % of GDP (%) 4.1 5.5 4.9 5.8 7.2 14.2 11.1 10.2 8.1 7.9
Fixed private (mil. USh) 8 434 25 530 71 303 108 637 162 013 230 002 252 299 250 008 na na
Fixed public (mil. Ush) 3 107 14 700 23 526 57 474 105 064 195 983 296 467 320 354 na na
Gross domestic (mil. USh) 11 540 40 230 94 829 166 111 267 077 425 985 548 766 570 362 na na
Gross domestic (% of GDP) (%) 9.1 10.2 10.5 12.0 14.5 15.3 13.9 12.8 na na
External trade
Exports (mil. US$) 406 324 304 246 200 172.1 169.2 253.9 577.3 555.3
Imports (mil. US$) 600 682 712 676 658 450.6 522.4 671.9 1 085.5 1 179.8
Trade balance (mil. US$) -194 -378 -408 -430 -458 -278.5 -353.1 -418.0 -508.2 -624.5
Current a/c bal. (mil. US$) -101 -203 -230 -276 -239 -131.6 -141.7 -88.9 -164.3 -114.0
Terms of trade (1991=100) 144.1 144.1 152.4 116.9 104.2 93.8 93.3 84.3 na na
External debt
Total ext. Debt (mil. US$) 1 916 1 946 2 231 2 638 2 832 2 647.5 2 637.2 2 999.3 3 387.1 3 443.3
Debt servicing as a % of exports (%) 43.8 64.0 67.7 63.6 69.5 53.0 121.3 66.0 27.2 18.7
Exchange rate (USh/US$) 164 414 569 698 935 1 237 1 217 1 004 977.5 1054.3
Sources: World Bank: World Debt Tables, 1994-95; World Bank: World Tables, 1993; World Bank: Uganda: Agriculture, 1993; World Bank: Challenge of Growth and Poverty Reduction, 1996; IMF: International Financial Statistics Yearbook, 1998; Statistics Department, Ministry of Finance and Economic Planning: Key Economic Indicators, 1996; Ministry of Planning and Economic Development: Background to the Budget, 1997-98.

2.2.5. Poverty and income distribution

An analysis of two household surveys, 1989-90 and 1992-93, did not reveal any changes in absolute poverty between 1989 and 1993 (World Bank, 1996, page 88). Small changes were, however, observed in relative poverty. Using a poverty line at two-thirds of the mean household consumption expenditure (USh5,008 per month in 1989-90, equivalent to US$8; and USh36,000 per month in 1992-93, equivalent to US$29) (World Bank, 1993b, page xii), 39 per cent of the population were defined as poor in 1989-90 and 44 per cent in 1992-93 (World Bank, 1996, page 88).  However, when data from seven districts which were not surveyed in 1989-90 were included in the 1992-93 survey, 40 per cent of the population were counted as poor in 1992-93. Hence, virtually no change was recorded in absolute poverty. At the poverty line of one-third of the mean household consumption expenditure per month (USh2,504 per month in 1989-90, equivalent to US$4; and USh18,000 in 1992-93, equivalent to US$14.5), hard core poverty declined from 11.6 per cent in 1989-90 to 9.4 per cent in 1992-93. The national poverty gap – i.e. the sum of the differences between the expenditures of households below the poverty line and the poverty line – remained the same using two-thirds of the mean household consumption expenditure, but declined when one-third of the mean household consumption expenditure was used (World Bank, 1996, page 89). Regarding income distribution, estimates of the Gini coefficient indicated that inequality rose slightly between 1989-90 and 1992-93 – from 0.38 to 0.41, mostly because of urban areas, where the Gini coefficient increased from 0.37 to 0.44; in the rural areas the Gini declined from 0.36 to 0.35 (World Bank, 1996, page 89).

2.3. Uniqueness of the Uganda programme

Though very similar in many respects to various IMF/World Bank structural adjustment programmes, Uganda’s programme has some superior features, which contributed to the positive changes described above. First, the Government built an initial consensus for the programme by organizing a national forum of all stakeholders – trade unions, commercial farmers, manufacturers, importers and exporters, intellectuals, and parliamentarians. Annual negotiations on the budget and economic policies furthered the consensus.

Second, the terms of the initial financial assistance were much softer than elsewhere. The loans were long term, repayable between five to ten years, and the interest rate was only one-half per cent (Loxley, 1989). Most of the balance-of-payments support was on concessional terms. Furthermore, the Government had a strategy for debt relief which reduced the debt burden. The granting of debt relief to Uganda under the Heavily Indebted Poor Countries (HIPC) initiative also helped to reduce the debt burden.

Third, in its quest to revitalize the industrial base and rehabilitate the economic, social and institutional infrastructure, the Government took steps to ensure the allocation of foreign exchange according to need. Enterprises that produced consumer goods and construction were preferred. A foreign-financed revolving credit fund was established to provide local cover to ensure credit for industries. The Government increased its fixed investment expenditures to rehabilitate rural infrastructure, roads, health services, and education.

Fourth, measures were taken to improve tax administration and collection. The tax base was widened to enhance tax revenue. Subsidies to inefficient parastatals were cut drastically and unproductive appointments in the civil service reduced, with a gain in terms of higher salaries for the remaining employees. Financement of expenditures with domestic revenue and foreign aid, rather than domestic borrowing, kept inflation under control.

Fifth, the introduction or retention of subsidies on school fees, the reduction in the rates of sales tax, excise tax, and custom duty on a wide range of necessities, and the abolition of taxes on intermediate and capital goods, contributed to the rehabilitation of the economic and social infrastructure.

Sixth, and most importantly, the Government recognized the need to incorporate agricultural development and poverty eradication in the objectives of the Economic Recovery Programme. This said, much still remains to be done in these areas to translate the positive gains of the ERP into an improvement in the standard of living of the average Ugandan. The remaining sections of the paper are devoted to this question.

3. Agriculture under structuraladjustment in Uganda

With the agricultural sector contributing over 50 per cent to the GDP and providing a source of income for over three-quarters of the population, sustainable agricultural development is imperative in Uganda’s quest for economic development. Furthermore, with a majority of the poor residing in rural areas and depending on the agricultural sector for their livelihood, a comprehensive agricultural strategy is called for to address the problem of food security and poverty alleviation. This section evaluates the impact of the agricultural reforms under the ERP on the agricultural sector. It looks at the structure of agriculture in Uganda, the various policy measures introduced under the ERP and the impact on agricultural performance.

3.1. Agriculture in Uganda

The agricultural sector plays a pivotal role in Uganda’s economy, accounting for 50 per cent of the GDP, over 90 per cent of exports, and 80 per cent of employment (World Bank, 1993A, page 1). The sector also provides the foundation for a number of agro-based industries. The fact that three-fifths of the poor in Uganda still reside in the rural areas (World Bank, 1993B, page 6) provides the rationale for an agriculture-centred development strategy for Uganda.

3.1.1. Structure of agriculture

Five main subsectors can be identified: food crops, cash crops, fishing, livestock and forestry. The food crops subsector basically carries the agricultural sector contributing 71 per cent of the agricultural GDP. The rest of the subsectors contribute as follows: livestock 17 per cent; cash crops (exports) 5 per cent; fisheries 4 per cent; and forestry 3 per cent (MAAIF, 1998, page 3). Total cultivable land amounts to 16.7 million hectares, of which 32 per cent is actually cultivated (MAAIF, 1998, page 7), one-third of it under perennial crops and the rest under annuals. Among the perennials, bananas dominate, followed by coffee, sugar cane and tea. Food crops (cereals, root crops, pulses, and oilseed) also dominate the annuals, followed by cotton and tobacco. Agricultural output comes almost exclusively from smallholders, most (80 per cent) with less than 2 hectares of land (World Bank, 1993A, page 1).

  • Five distinct farming systems/areas exist defined by the rainfall pattern and soil characteristics (World Bank, 1993A, page 13):
  • the high rainfall area around Lake Victoria where bananas, robusta coffee, and food crops are grown;
  • eastern Uganda, with two distinct rainy seasons separated by a four-month dry period, where the main crops include millet, cassava and cotton;
  • the northern region, where the rainfall pattern restricts cultivation to one season, with the main crops being cotton, maize and millet;
  • the mountainous areas, where the altitude permits the cultivation of temperate fruits, vegetables and some traditional food crops;
  • north-eastern Uganda, where the rainfall of 80 mm per year is suitable for pastoralism and sorghum and millet.

Primary agricultural commodities, mainly coffee, cotton and tea are the traditional export crops accounting for three-quarters of total exports. Non-traditional exports (15 per cent of the total) include cereals, fish, hides/skins, cut flowers, fruits, and vegetables; non-factor services account for the remaining 10 per cent.

3.1.2. Agriculture before ERP

Various structural constraints hampered agriculture before the ERP: low productivity; inadequate transportation infrastructure and shortage of vehicles; lack of agricultural research and inefficient extension services; lack of credit; non-incentive pricing policies; inefficient markets for capital and agricultural inputs; shortages of foreign exchange for the importation of agricultural inputs; government monopoly over food and export markets. Annual agricultural growth averaged 1.2 per cent between 1965 and 1980 and 2.3 per cent between 1980 and 1985 (table 4).

Table 4. Selected agricultural indicators 1970-85

Growth rates (%)



[1.2 (1965-80)]


Food crops


Cash crops












Share of agriculture in GDP (%)





Share of agriculture in exports (%)





Area planted to food crops (‘000 hec.)

3 805

4 460

2 946

3 357

Food production (‘000 tons)

14 076

16 294

10 490

12 643

Output (‘000 tons) Food per capita (kg)

1 439

1 466




























Soya beans























Sources: World Bank: Uganda: Agriculture, 1993; World Bank: Uganda: Growing out of poverty, 1993; World Bank: Uganda: The challenge of growth and poverty reduction, 1996; Ministry of Planning and Economic Development: Background on the Budget 1997-98, 1997; Ministry of Planning and Economic Development: Economics of Crop and Livestock Production, 1997; Ministry of Finance and Economic Planning: Key Economic Indicators, 1996; Rhonda PAGEB, Tumusiime: The impact of agricultural parastatal reform on agricultural development and food security in Uganda, 1998.

Growth between 1980 and 1985 was spearheaded by cash crops, with 12.77 per cent, compared to 2.74 per cent for food crops, 5 per cent for fishing, 1.77 for livestock, and -1.02 for forestry (see table 4). Even though food crop production improved between 1980 and 1985, the output in 1985 was lower than in 1975. Food production declined from over 16.3 million tons in 1975 to 12.6 million tons in 1985, representing a drop in per capita terms from 1,466 kg to 884. A decrease in the total area planted to food crops (from 446 million hectares in 1975 to 336 million in 1985), resulted in an across-the-board reduction in pulses/oil crops and cereal outputs, and to the overall decline in food production. The 2.28 per cent growth in agricultural output between 1980 and 1985 could not match the population growth of 2.6 per cent. Shortfalls in food requirements were met through imports.

Coffee, the main export, contributed 50-95 per cent of export revenue prior to the ERP. Production of coffee is based mainly on family labour and a simple manufacturing process. Two other important export crops are tea and cotton. Tea is grown mostly on large estates because of its more rigorous processing requirements. Cotton is an annual crop and as such competes with most food crops. It requires capital-intensive ginning and marketing but processing constraints are minimal and cultivation can take place on a smallholder basis. Production of all three export crops declined between 1970 and 1985 (table 4).

Before the ERP, marketing of the traditional export crops was under the complete control of parastatals – Coffee Marketing Board for coffee, Lint Marketing Board (LMB) for cotton and Uganda Tea Authority (UTA) for tea. Producer prices for these traditional exports were determined by the Government and almost all exports were sold after minimal processing. The marketing and pricing of major food crops was under the control of the Produce Marketing Board (PMB). However, the controls were generally ineffective because the prices did not even cover production costs, forcing the farmers to sell outside the formal channels. When competitive prices could not be obtained in the informal channels farmers simply diversified into commodities that were more competitive. Government agencies had a virtual monopoly on the marketing of agricultural inputs. They provided different levels of price subsidies for inputs based on the exchange rate margins between the official and underground market rates.

Crop yields were low – for example, in 1991 coffee was at 0.6 tons per hectare compared to a potential of 1.5 tons; maize, 1.5 tons compared to 2.0 tons; cassava, 9 tons compared to 12 tons; sweet potatoes, 5 tons compared to 20 tons (table 5). The low yields were mainly due to the lack of modernization of production techniques and an inefficient extension service unable to educate farmers on even those techniques which were known. Lack of credit for the purchase of modern implements by farmers and the lack of foreign exchange curtailed the importation of modern implements contributing to the stagnation in production techniques and productivity.



Table 5. Yields of selected crops, 1991 v. potential (tons/ha)


Yield in 1991

Potential yield

Coffee (robusta)


















Sweet potatoes






Source: World Bank: Growing out of poverty, 1993, p. 70.

3.2. Agricultural policies under the ERP

An essential part of the ERP was the implementation of agricultural reforms to reverse the negative trends in agricultural production. The process and procedures for the agricultural reforms were associated with the Agricultural Sector Policy Agenda which was implemented in 1991. The agenda had six major objectives for the agricultural sector: intensifying agricultural production and processing; increasing agricultural producer prices; restructuring the finance of production cooperatives; liberalizing agricultural trade; reorganizing agricultural marketing institutions; and improving agricultural research and advisory services. The agenda was implemented by the Agricultural Policy Committee (APC) with financial support from the International Development Agency (IDA) and technical support from the Agricultural Secretariat, IDA missions, and Working Group Task Forces assigned to address specific issues. Increases in agricultural prices were a significant part of the ERP. These increases are shown in table 6. For example, between 1990 and 1993 the real price of robusta coffee was increased from USh90 per kg to USh196; arabica coffee from USh263 to USh504 and maize from USh23 to USh126. Reforms aimed at specific subsectors are discussed below. Such reforms were carried out in the context of improving infrastructure and liberalization of exchange markets.

Table-6- Real prices of selected agricultural commodities,selected years between 1990 and 1997 (USh per kg)

























Matoke (USh/bunch)










Sweet potatoes





Coffee (R)





Coffee (A)





Cotton (AR)





Tea (GL)





Note: Deflated with CPI September 1989 = 100.

Sources: Ministry of Planning and Economic Development, Agricultural Policy Secretariat: Economics of Crop and Livestock Production, 1997; and Agricultural Policy Committee Report, Kampala, 1997, p. 37.

3.2.1. Coffee

Two new institutions were created within the Coffee Marketing Board (CMB) to separate its regulatory and the trading functions, Uganda Coffee Development Authority (UCDA) looking after the former and Coffee Marketing Board Limited the latter. The CMB’s monopoly in the marketing and export of coffee was abolished. In 1991, producer price controls, as well as processing and export margins, were rescinded, thus allowing producer prices and other margins to be determined by the market forces. A floor price, however, remained for exports. In 1992, coffee proceeds were allowed to be exchanged at the bureau exchange rate, thus removing export taxes. However, in the wake of the coffee boom in 1994 the export tax was re-imposed. Exporters were no longer required to surrender their proceeds to the Bank of Uganda. The export floor price was abolished in 1995.

3.2.2. Cotton

The Government liberalized the domestic and export markets for cotton, as well as its processing and pricing. A Cotton Sub-sector Development Programme (CSDP) was launched to restructure the ginneries and transfer them to competent operators who would provide a ready market and prompt payment to farmers. A Cotton Development Organization (CDO) was established (1994) to oversee the regulatory and promotional functions within the industry.

3.2.3. Tea

Most of the tea estates owned by the Government and the Custodian Board were rehabilitated. Some were privatized and some returned to the previous owners. The Uganda Tea Growers Corporation (UTGC) maintained ownership of its tea factories. A programme was initiated with the European Union to restructure the UTGC tea factories. The UTGC itself was also restructured to function more efficiently as a service organization owned by out-growers.

3.2.4. Tobacco

There was a divestiture of the industry to British American Tobacco (BAT) in 1984. In 1986 and 1987, production, processing and marketing of the crop were vertically integrated. Inputs and extension services were provided as a package to farmers on credit. Ready markets and prompt payment were assured. The tobacco industry was opened to other competitors besides BAT.

3.2.5. Non-traditional exports

Trade in non-traditional exports was liberalized. Market and price distortions were removed. An Export Policy Analysis and Development Unit (EPADU) was established together with an Export Refinance and Export Credit Guarantee Scheme, under which the Bank of Uganda provided financial assistance to exporters through commercial banks. An Export Diversification Programme was also established to boost non-traditional exports with funding from the United States Agency for International Development (USAID).

3.2.6. Livestock and fisheries

The dairy corporation plant and milk collection centres were rehabilitated. The processing and marketing of milk was opened to private sector entrepreneurs. In an attempt to increase productivity in the dairy industry, a heifers scheme for rural women was initiated as well as an improved pasture development project. A livestock services project (LSP) was implemented to improve the provision of veterinary and animal health services to small livestock farmers. Veterinary services were privatized under the LSP. Fish processing, marketing and trade were liberalized. This led to a significant increase in the number of processing and exporting industries.

3.2.7. Food crops

The domestic and export markets for food crops and basic agricultural inputs were liberalized. The liberalization measures resulted in the entry of private traders in rural markets who began to provide outlets for non-traditional export crops and supplies of input.

3.3. Impact of ERP

Even though agriculture still remains the mainstay of the Uganda economy, its contribution has declined from 61 per cent in 1985 to an average of 51 per cent between 1990 and 1996 (table 6), a natural outcome of the rehabilitation of the rest of the economy. Commensurately, agriculture’s share in exports declined from 98 per cent (1985) to 79 per cent (1990-96) (table 6). The relative-level declines nevertheless occurred in the context of absolute-level growth, with an average 3.8 per cent between 1990 and 1995 (table 6). Almost all the agricultural subsector contributed to this – food crops, 3.2 per cent; cash crops, 12.1 per cent; livestock, 3.5 per cent; fishing 5 per cent; forestry, 4.4 per cent (table 6). Such growth should be seen in the context of the past two decades, particularly that. The growth was from a low base and agricultural output reached the levels of the late 1970s only in 1991-92. Up until 1994, food crops were the main engine of growth in the agricultural sector. However, Uganda could not maintain a consistent improvement in food production, with food production fluctuating between 13.5 and 16.7 million tons between 1990 and 1996 (see table 6). The area planted to food crops, however, increased consistently from 4.3 million hectares to 4.9 million hectares (table 6). Any increase in food production therefore was mainly due to acreage expansion rather than improved crop yields; with yields of maize, groundnuts, cassava and sweet potatoes actually declining between 1994 and 1997 (table 7). Even for coffee, cotton and beans, which showed some moderate improvements in yields, the level attained still rests well below the potential possible.

There were significant improvements in the output of the tradable crops. Coffee increased from 2.2 million bags in 1994-95 to over 4 million bags in 1995-96; cotton from 10,000 bales in 1991 to 120,000 bales in 1996-97; tea from 4,800 tons in 1990 to 13,000 tons in 1995; and tobacco from 940 tons in 1987 to 6,851 tons in 1995 (MAAIF, 1998, pages 21-24). In 1995, non-traditional exports at US$66.4 million contributed 12 per cent of total export earnings. In the livestock subsector, cattle numbers increased from 4.5 million in 1989-90 to 5.23 million in 1995-96. Dairy milk collection and processing increased from 50,000 litres in 1990 to 1.2 million litres in 1995 (MAAIF, page 26).

Table 7. Selected agricultural indicators, 1990-96

1990 1991 1992 1993 1994 1995 1996
Growth in the agricultural sector (%) 2.92 2.40 2.80 4.90 6.40 3.60 0.70
Share of agriculture in GDP (%) 54.3 52.0 54.0 48.8 52.5 48.0 45.0
Share of agriculture in exports (%) 91.0 82.0 56.0 75.0 89.0 81.0 80.0
Percentage growth of agricultural components (monetary) (%)
Food crops 2.46 1.04 4.25 6.65 8.15 4.05 -4.0
Cash crops -4.15 25.01 0.90 0.50 17.10 17.10 28.2
Livestock 3.86 3.77 1.98 3.89 2.57 2.41 6.34
Fishing 14.84 3.99 3.90 4.20 -3.20 6.30 4.80
Forestry 3.97 3.98 4.60 4.65 4.65 4.45 4.45
Area planted to food crops (‘000 ha) 4 271 4 421 4 554 4 668 4 819 4 879 4 950
Food production (‘000 tons) 15 517 14 968 15 357 16 304 13 452 16 697 15 409
Per capita (kg) 959 901 898 930 749 907 817
Sources: World Bank: Uganda: Agriculture, 1993; World Bank: Uganda: Growing out of poverty, 1993; World Bank: Uganda: The challenge of growth and poverty reduction, 1996; Ministry of Planning and Economic Development: Background on the Budget 1997-98, 1997; Ministry of Planning and Economic Development: Economics of Crop and Livestock Production, 1997; Ministry of Finance and Economic Planning: Key Economic Indicators, 1996.


Table 8. Yields of selected crops, 1994 and 1997 v. potential yields (tons/ha)

Crop Yield 1994 Yield 1997 Potential
Coffee (robusta) 1.05 1.1 1.5
Cotton 0.64 0.7 0.8
Maize 1.5 1.35 2.0
Beans 0.875 1.2 1.2
Groundnuts 0.8 0.74 2.0
Cassava 6.25 5.85 12.0
Sweet potatoes 4.5 4.4 20.0
Simsim 0.4 0.44 0.8
Sources: Ministry of Planning and Economic Development, Agricultural Policy Secretariat: Economics of Crop and Livestock Production, 1997; Agricultural Policy Committee Report, Kampala, 1997, p. 44.

4. Recommendations and conclusion

4.1. Recommendations

Current economic indicators in Uganda clearly show some positive gains from the ERP. However, a lot has to be done to strengthen the productive base of the economy and ensure the sustainability of the gains from the ERP. With agriculture still being the mainstay of the economy, any policy to strengthen the productive base of the economy should focus on a comprehensive agricultural policy and its linkage to an agro-based industrial sector. Typical of the World Bank’s Structural Adjustment Programmes, much of the reforms in the agricultural sector were geared towards the tradable agricultural commodities subsector with major emphasis on institutional restructuring and the reorganization of market structures through liberalization. Very little attention was given to productivity improvement. The liberalization efforts led to significant increases in product prices as an incentive to increased agricultural production. However, price incentive is only one of many essentials to improve agricultural productivity. The latter requires a holistic package, including a reform of land tenure and land policy to ensure that farmers have access to land, that the land is protected, and that farmers are not forced out of their land. An increase of the cropped area by the promotion of labour-saving technology, such as ox ploughs and small tractors, should also be a part of such a package. Increasing productivity will require the adoption of high-yielding, disease- and drought-resistant varieties. A prior requirement will be agricultural research into such varieties and their applicability by extension services. Availability of credit to farmers will be an important part of the package. The subsidy removal and price liberalization policies under the ERP resulted in price increases in many agricultural inputs beyond the reach of farmers preventing them from adopting high-yielding technologies. Credit could be tied to the adoption of the technological package and offered in the form of inputs and equipment.

For the livestock subsector, the general recommendations for agriculture as a whole apply, but with efficient pasture management and disease control receiving the pride of place – as livestock–specific recommendations. Involvement of the private sector in dairy and meat processing could ensure incentive prices for the livestock farmers. Finally, the fishing subsector could benefit from more cold storage and processing facilities.

For the traditional exports subsector, the following specific recommendations arise: replacing ageing coffee trees with new high-yielding and disease-resistant varieties; improving seed production and distribution for the cotton industry; encouraging private sector involvement in coffee processing and cotton ginning.

A key parameter for increased agricultural production in all the subsectors will be improvement in the marketing infrastructure. This would require: repairing and maintaining the existing feeder road network; rehabilitating physical structures to guard against weather conditions during storage; making marketing credit available to intermediaries to sustain competitive prices to the farmers and encouraging private sector involvement in the provision of appropriate storage facilities to minimize and/or eliminate post-harvest losses and quality deterioration; encouraging private sector involvement in agro-processing facilities to extend the shelf life of perishable agricultural commodities; establishing commodity exchange markets to help farmers sell their goods in advance to be delivered at some future periods, and guaranteeing farmers a ready market at a specified price; developing internal price stablization policies for farmers; and enhancing the role of women in the production and marketing of food crops.

For commodities that have regional but no world market prospects like maize, beans and dairy products, the Government should pursue bilateral regional trade agreements within the East African Common Market (EACM), the Preferential Trade Area (PTA) and the Common Market for Eastern and Southern Africa (COMESA). Much potential remains for spices, cashew nuts, pineapples, fish and livestock products as a way of reducing the dependence on traditional exports.

The Government should also provide institutional support for organizations or associations that provide information and statistics that are important for the development of an efficient production and marketing system.

4.2. Conclusion

Given the severity of the economic and social problems facing the NRM Government, no choice remained to it but to launch the ERP as a prerequisite for obtaining financial support from multilateral and bilateral donors. The implementation of the ERP saw a major turnaround in the economy. Positive economic growth has been recorded, inflation has been tamed, the fiscal deficit has been reduced as a result of high tax revenues and rationalization of development expenditures, and current account deficits have declined along with improvements in the overall balance of payments and international reserves. However, gains have yet to percolate down to the average person. With agriculture still the dominant sector in the economy, sustainability of the initial improvements should be closely tied with and dependent on agricultural growth. Most smallholders have not benefited from the ERP in the short term. Devaluations and liberalization of the foreign exchange markets have turned the terms of trade against food crops drastically increasing the cost of inputs and labour without much institutional support for credit. On the positive side, however, liberalization has improved the availability of inputs. The need for a more comprehensive policy that places equal emphasis on both the tradables and food crops, and provides strong linkages between agriculture and agro industries cannot be overemphasized. An agricultural programme that addresses the structural constraints in the agricultural sector will certainly provide a strong base for long-term economic growth and prosperity.


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