After a long spell of almost four months of drought and unbearable hyperinflation levels, the price of fuel has eventually gone down. Another piece of good news is that even the rains have started pouring steadily to ensure enough water for the crops and save us from the famine that have rocked other parts of the region like Ethiopia, Sudan, Somalia etc.
This must be the best gift Ugandans have got this month. Our economy is so sensitive and fragile that the mere change in the rain season and prices of fuel simply alternates the cost prices of almost everything in the country. In fact, fuel seems to be the most decisive controller of the Ugandan economy to the extent of almost overriding the importance of the monetary and fiscal policies. Once you cut down the taxes on fuel, you will have the instant effect of driving down the prices of almost all products. In fact, once you have steady rain and low fuel prices, you will simply run the economy in autopilot.
When the Ugandan inflation went up to almost 9%, way above the projected 6% in June this year, the main argument revolved around finding a way of scaling down the fuel prices. There are widespread arguments to compel government to cut down on the taxes on fuel but the President rejected the suggestion by reasoning that once they cut down the taxes on fuel, government will run bankrupt. But now that the fuel prices have gone down and it’s raining cats and dogs, it’s time for the economists to get to work, adjusting all the necessary instruments that can make the economy work for everybody. But can that happen without a substantive Governor of Bank of Uganda? Quite frankly, there is a very big reason why that office was created.
By not appointing the Governor of the Central Bank, President Museveni seems to be insinuating that the economy can operate in autopilot. The former holder of that docket, the Late Tumusiime Mutebile passed on almost a year ago. The importance of that portfolio can be gauged by the arrogance that he exhibited when he told a Parliamentary committee that ONLY God could sack him! By exuding such arrogance, Mutebile was telling all and sundry that he was the only one who knew how to effectively run the country`s economy. He knew he was indispensable enough to say anything and get away with it because nobody could perform as well as he used to.
In other words, the late Mutebile knew that it was very difficult for the Ugandan economy to move as smoothly as it was back then without his input. He knew that the economy would limp once he vacates office. And just a few months after passing on, the economy has indeed been in complete shambles. This is partly because the people he left behind to control the economy have resorted to a populist approach on how to run the economy. This, by restricting the flow of liquidity. They want the President to hear Ugandans mourning how ‘money is scarce’ to show that they are working. They did this by hiking the taxes, increasing the interest rates, not paying contractors and civil servants on time etc.
Since government is known to be the biggest player in the economy, any restriction into its economic activities translates into an immediate recession. President Museveni revealed a secret to this effect when he told BBC’s Allan Kasuja that the Secretary to the Treasury had squeezed money out of circulation to fight inflation.
We have actually discovered that Mr. Ramathan Ggoobi, who was recently appointed the Secretary to the National Treasury is the man who designed the Parish Development Model. Since he is the man holding that docket, he seems to think that impoverishing people is the best way to make them appreciate the role of the PDM money.
His secret mantra is, ‘’make the money very scarce so that the starved people of Uganda can run to the Parish for the PDM money’’ This initiative was designed to improve the living conditions of Ugandans by putting money at their disposal at every parish in the country. But this PDM has been hit by bureaucracy and endemic corruption. For instance, useless ventures like Mindset Change have been introduced as precondition for the money to be released. And therefore, over UGX5Bn have been invested into the Mindset Change initiative.
Their argument is that our people don’t understand their poverty and how to get out of it to the extent that you have to first teach them (tackle their minds) on how to do, what to do and when to do it! Oh dear! This mindset change thing is one of the most bogus aspects, yet they call it one of the cardinal pillars of the PDM. The truth is that most Ugandans know how poor they are and how they can change their misfortunes. The only thing they lack are the resources to get them going. If you want a farmer to improve on their output, you need to simply give them incentives like high quality-yielding seeds, high breed animals, and tools like hoes, tractors, irrigation machines, and veterinary services that can ensure high output.
This was contained in the Plan for Modernization of Agriculture that had good services like extension workers to liaise with the farmers to ensure value for money outputs at every season. Another good initiative has been The Operation Wealth Creation which has registered some impact because it never went into the bureaucratic tendencies of mindset change, sijuyi what, blah-blah. These OWC fellows simply went to the farmers and distributed coffee seedlings and made projections of how much could be harvested at every acre of land. They went ahead and distributed high breed animals like cows, goats, sheep, chicks etc. There are cases where some people got chicks together with the feeds that would enhance the quality of the poultry. This has had a very big contribution to the high volume of poultry products like eggs and chicken that we even ventured into exporting them.
Today, Uganda can boast of being one of the biggest producers of eggs and chicken in the region, mostly because of the efforts of the OWC.
I have read a lot of literature about how people can be lifted from poverty and found the story of Mohammed Yunus, who went to Jakarta in Indonesia and found very poor women weaving baskets and mats. He asked them how much they needed to make the difference they needed and they shocked him when they told him of money so little as less than $5! He couldn’t believe it. He gave each one of them, what they had asked for and within less than a year, they were reporting a turnover of almost 100% return on investment on each dollar invested. This economist Mohamed Yunus actually managed to win the noble peace prize for helping very many poor Indonesians fight and overcome poverty using small loans that cannot be given by conventional banks.
You may not want to emulate Mohammed Yunus. But you can learn a lot from him. There are very many people with businesses that simply need a small push.
You simply need to talk to them and they will shock you with how small a lift they need to get moving. The Ugandan economy is not in a bad shape – as bad as that of Zimbabwe for instance. We don’t suffer from terrible droughts that can deprive us of good food harvests. What we need are economic technocrats with good brains that can draft and implement good economic policies that can change the outlook of the economy. This therefore means that the President needs to appoint a new Bank of Uganda Governor who has the structure of our economy in mind.
He needs to understand the sensitive areas like the balancing of the interest rates, taxes on fuel, the necessity of releasing money to pay contractors, treasury bills and pay civil servants on time to allow the flowing of enough liquidity in the economy.
The problem, which is actually a good problem, is that since it’s now raining again and the fuel prices have gone down, you can as well let the economy run in autopilot mode because everything will pre-supposedly get back to normal on its own. Disclaimer; the author is NOT necessarily an expert or student of development economics but he is driven by the desire to witness social economic transformation by using sheer common sense.
- Fred Daka Kamwada is a seasoned journalist, blogger and political analyst for over a decade in Uganda
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