neoliberal

The other side of assistance: The neoliberal agenda in Uganda

Uganda has been hailed as an economic success story and the “development darling” of Africa by many international donors. Despite successes in certain sectors and the adoption of an official Poverty Eradication Action Plan (PEAP) sponsored by the World Bank (WB), the poorest of the poor in Uganda have not necessarily experienced ‘poverty eradication’. Sustained growth in the country has averaged 7.8% since 2000, and official World Bank statistics say that as a result of this economic growth, poverty declined from 56% in 1992 to 31% in 2006 (WB, Country Brief, 2008). Positive statistics are so often used by the international financial institutions (IFIs) to inflate their current projects and to play up the successes of neoliberal reforms to serve their own gain. The focus on economic growth and its ‘success’ in Uganda has resulted in ignoring massive human rights violations being committed by the Ugandan government on its own people (with development overtaking peacebuilding) and the impact that conditional aid has actually had on the poorest of the poor. Loan debts will be paid by the poor and not the human rights abusing government who borrowed it through structural adjustment programs that guarantee the international community will continue to have a hand in Uganda for decades to come.

            Uganda has been embroiled in conflict with regional parties and the cult-like rebel group the Lord’s Resistance Army for decades. The 1960s were years of euphoria as Africa experienced its so-called “decade of independence” from colonial rule. A series of successive dictatorships (including Idi Amin and Milton Obote) and their quest for power prompted periods of political instability and insecurity, causing the economy to go into a tailspin. Structural adjustment reforms were first implemented under Obote, who prioritized the external logic of the global markets over the long-term developmental needs of the national economy (Kiiza et al., 2003; 5). Comprehensive pro-market economic reforms were implemented in the late 1980s under Museveni, reducing the onerous taxes and economic restrictions that were in effect (Selassie, 2004; 5).

Uganda experienced declines in industrial production and agricultural output by the mid 1980s as a result of economic mismanagement and the pursuit of interventionist policies that were ill-suited to the level of existing state capacity, skill and political instability (Pitcher, 2004;383). Museveni took over the country in 1985 after a successful coup, and immediately launched an economic recovery program which included a comprehensive package of currency devaluation, control over inflation and spending and a reduction of state intervention in the economy. The Ugandan government haggled over the conditions attached to the loans, reluctant to push ahead with reforms they felt were not designed by them but the IMF. By 1992, the Ugandan government began “owning” its reforms, controlling inflation to achieve higher growth rates and to attract private sector investment[1]. By 1998 the government had mostly privatized its assets, crafting an intense ideological message that emphasized the gains of privatization to improve the perception of the policies among the public. The government even went so far as to hire a drama group and public relations firm to do this (Pitcher, 2004; 385).

The Usefulness of Debt Relief

            Since the 1960s, the WB has made more than $4.8 billion in loans and credits and about $600 million in grants to the government of Uganda (WB, Country Brief, 2008). This aid was often conditional on the implementation of certain structural adjustment programs by the Ugandan government, which involve two main components: macroeconomic reforms and institutional reforms. Macroeconomic reforms include the removal of trade restrictions, the devaluation of local currency, reduced subsidies and public sector wage freezes. The institutional reforms involve the privatization of public enterprises, the trimming of the civil service, and the promotion of export through incentives. Uganda qualified under the WB’s Highly Indebted Poor Countries (HIPC) initiative in 1997, making it eligible to try and reduce its debt to a sustainable level. The conditions of the HIPC involved implementing structural adjustment for three years non-stop, at which point debt would be reduced by 67%. The debt payments remained unsustainable, making Uganda then eligible to enter stage two of the HIPC, where it faced another 3 years of structural adjustment. At the end of this adjustment, the debt was then to be reduced by 80%. Uganda at this point was still overwhelmed with debt, making it eligible for the Enhanced HIPC initiative offered by the WB in February of 2000 (WB, Country Briefing, 2008).

After facing criticism from many parties the World Bank revamped its initiatives to be more reflexive of the poverty faced by the supported populations and to include poverty reduction strategies in their plans. The Enhanced HIPC initiative insisted that eligible countries develop a Poverty Reduction Strategy Paper (PRSP), a plan showing exactly what the country planned to do with its savings with the poorest of the poor allegedly in mind. The PRSP is mandated to be country-driven, results oriented, comprehensive, partnership oriented and based on the long term perspective of poverty reduction. The PRSP prescribes four broad goals and transformations involved in eradicating poverty: creating an enabling environment for sustainable economic growth and transformation, promoting good governance and security, directly increasing the ability of the poor to raise their incomes, and directly increasing the quality of life of the poor (Nyamugasira and Rowden, 2002). Uganda also received the supplement to the HIPC initiative, the Multilateral Debt Relief Initiative (MDRI) in 2006, aimed at providing 100% debt relief by the WB, the IMF, and the International Development Association (IDA) to help Uganda attain its Millennium Development Goals (MDGs). In reality this 100% debt relief, meant only for loans contracted prior to 2005, left Uganda with an estimated debt service payment of over a million dollar a month that is only steadily climbing with time (WB, Estimated Debt Service Payments, 2008).

The PRSP is flawed, and there seems to be little institutional learning from evaluations of previous SAPs in new policy designs. The PRSP supports major privatization and deregulatory reforms in health, education, water and sanitation sectors, arguably the most important sectors to poverty reduction. New loans extended by the WB and IMF neglected the impact of privatization of water on people’s access to clean water. Privatization led to increased prices of water for individuals, reducing their access, and undermining the health-related poverty-reduction goals of the PRSP. The trade sector was also conflicting as the WB and the IMF lending policies contradicted external processes and institutions such as the World Trade Organization (WTO). For example, IMF and WB loans insisted that Uganda must privatize key utilities and markets stipulating that regulation “will eventually follow”. WTO rules, which Uganda is subject to, do not permit Uganda to develop the adequate regulation prescribed by the IMF and WB (Nyamugasira and Rowden, 2002).

            Structural adjustment resulted in the IFIs having a permanent hand in the running of the country. The extent of the IMF and WB’s involvement in Uganda went so far as pushing the Ugandan government to refuse program funding from the Global Fund for HIV/AIDs, Malaria and Tuberculosis (Ambrose, 2004). The rationale for refusing funding for a major health epidemic (when at least 6% of the population is still infected by HIV/AIDs, and malaria rates are as high as 396 cases per 100,000 people; Reuters, 2008), is that raising government expenditures on healthcare is thought (by the IMF) to distort internal markets, possibly leading to inflation (Ambrose, 2004). Health care and education declines[2], while the inflation rate has remained below 8% since 1994 (dropping from inflation rates of several hundred percent in the late 1980s). So why has the quest for actual poverty reduction been sidelined for economic growth and the “trickle down” effect usually attributed to this growth? Were the IFIs serious in their claim to want to reduce the poverty in the world, or were fancy schemes made to try to silence the international resistance and continue on with “business as usual”?

A Neoliberal Success Story?

            The government revels in the chance to flaunt certain aspects of its record, such as the increase in primary education enrollment rates from 62.3% in 2000 to 91.4% in 2007, the reduction in the prevalence of HIV/AIDs from 19% (in 1992) to around 6.4% (in 2000; which has since remained stagnant or possibly increased[3]), and the robust growth rate averaging at close to 7% over the 1990s (WB, Country Brief, 2008). In fact, the Structural Adjustment Participatory Review International Network (SAPRIN) which studied the effect of Structural Adjustment Programs (SAPs) implemented in Uganda through PRSP and PRGF (a line of credit to write the PRSP) reforms found otherwise. This study shows that access to affordable quality of services did not improve, and in fact, had actually worsened under SAPs (Nyamugasira and Rowden, 2002).

Privatization reforms mandated by the SAPs exacerbated inequality and failed to contribute to macroeconomic efficiency since the sale of state assets under privatization was marred by corruption. No property-owning middle class was created, as had been anticipated and large shares of former state properties were now in the hands of foreigners. Workers that were laid off during the privatization process suffered from inadequate compensation and retraining, resulting in greater job insecurity and income inequality (Nyamugasira and Rowden, 2002). In spite of improvement in coverage of health care facilities and an increased number of doctors and nurses (which still remains incredibly low and concentrated in organizations caring for ‘popular’ issues such as HIV/AIDs and Malaria to the detriment of general health initiatives; Garrett, 2007;26-8), less than 50% of children aged 1-2 years has been immunized. The current HIV program remains completely unsustainable since more than 94% of costs are covered by floating international donors (Nakkazi, 2005).

Concerns about the public involvement in PRSP policy writing contradicted the PRSP mandate to be country-driven. Ugandan NGOs complain that they were invited to provide input on the development of poverty-reduction goals, but not to discuss the nature of the policies necessary to achieve these goals or to be present during the writing of policies. The actual policies attached to loans were determined by IMF and WB representatives in consultation with small technical teams within the Ministry of Finance and the Central Bank of Uganda. NGOs felt they hadn’t been heard although the IMF had promised that all macroeconomic policies would be “subject to public consultation” (Nyamugasira and Rowden, 2002).

 The proportion of Ugandans living below the $1 per day benchmark for extreme poverty has remained mostly constant (Nakkazi, 2005), even though the WB says poverty has declined (WB, Country Brief, 2008). A high level of population growth (3.2%) means that even though poverty may have declined statistically, the number of people living in extreme poverty has remained relatively unchanged (Nakkazi, 2005).  The provision of teachers and educational facilities has not kept pace with the nearly doubling of students (62.3% enrollment in primary education in 2000 to 91.4% in 2007; WB, Country Brief, 2008), resulting in a decline in the quality of education. Poor completion rates in education are attributed to the introduction of fees for certain services implemented under the SAPs (Nakkazi, 2005).

Privatization, implemented through SAPS, was used by Ugandan government officials to build constituencies of supporters for state policies and to dispense patronage (Pitcher, 2004; 381). Economic elites and political insiders with connections to the state have controlled the entire privatization process, gaining massive advantages for themselves. Yoweri Museveni, the President of Uganda, and his National Resistance Movement (NRM) used the economic restructuring as a chance to distance themselves from past regimes, removing political elites who were entrenched in state enterprises through civil sector layoffs prescribed by the SAPs. In 1996 about 7,000 Asians returned to Uganda injecting over $500 million into the economy. Museveni agreed to return the assets taken from the Asians under the Amin regime in the late 1970s, also favoring them for several large privatization deals to gain personal advantage (Pitcher, 2004; 387).

The Situation in Northern Uganda

The focus on the economic situation by the government, international donors and aid agencies ignores the continuing conflict in the north of the country where close to a million people have been displaced by violence. This continued violence costs the Ugandan economy a minimum of $100 million per year in lost production alone and is preventing sustainable growth. The conflict was entirely ignored by the World Bank Country Brief who referred to the “situation in Northern Uganda” only in passing (Yanacopulos, 2004; 7-9). Museveni and the government of Uganda are guilty of genocide and crimes against humanity with their campaign of murder, torture, threats, bombing and burning down villages which interned of an entire section of the population (mostly Acholi) into displacement camps for “their own protection”. These camps lack even the basic necessities and are constantly terrorized by the Lord’s Resistance Army (LRA) who has abducted more than 25,000 children to be used as soldiers, workers and sex slaves from these camps. More than a quarter of all children in the northern area do not attend school at all because of violence (McCormack, 2006). The WB and IMF are guilty of complicity to these crimes by supporting Museveni and by not recognizing this interned population, and instead hiding the reasons for displacement. Aid comes in to conveniently labeled internally displaced persons (IDPs), instead of condemning the government for its massive human rights violations (Branch, 2008).

Conclusions

            As a land-locked resource scarce country what possibilities does Uganda have for poverty reduction in combination with sustained economic growth in the future? Paul Collier stresses that land-locked resource scarce countries such as Uganda should look to specialize in regional trade, giving priorities to policies on rural development (Selassie, 2008; 6). Conflicts in neighboring Sudan, Rwanda, and the Democratic Republic of Congo (DRC) have so far not caused significant negative spillovers to economic growth in Uganda; but they have had the effect of limiting regional trade suggested by Collier. Regional alliances also threaten to disrupt trade. Compared to sustainable economic “success” stories (mostly in Asia), Uganda has a per capita income on average 2 ½ times less (Selassie, 2008; 9) at only $370 per year (WB, Country Brief, 2008), limiting its chances for success. The growth rates in the Asian countries have also been significantly higher than Uganda’s, and the level of industrialization in Uganda (up from 12% in 1990/1 to 24% in 2005/6) is still much lower than countries like Chile and China (at around 35%). Urbanization also presents a problem to sustained success in Uganda. Urbanization in Uganda is low at around 12% of the population, not increasing much over the past 20 years despite industrialization (compared to around 40% urbanization in successful Asian economies). The underdeveloped financial sector shows financial liabilities to GDP at around a third of the level observed in successful Asian economies, and private sector credit (the ratio of private sector credit to GDP) stands at one-eighth the level of the Asian economies (Selassie, 2008; 9). These numbers suggest that while Uganda has had reasonable success for an African country, it is hardly to be touted as a “success” quite yet.

            While Uganda has been reasonably successful in sustaining a relatively high level of growth, especially compared to other African nations, it has completely failed in its quest for poverty reduction. The poorest of the poor are little better off than they were decades ago, and although loan forgiveness has been granted; loan repayments remain unsustainable. The government of Uganda is reliant on international donors for about 40% of its budget (Nakkazi, 2005), making sustainability questionable. The lack of concern by the IFIs for human rights abuses by aid-receiving governments is appalling, as the government of Uganda has gained considerable strength from these monies and ensured for themselves and their followers, positions of power and wealth. The debts owed by these loans will be paid on the backs of the poor, and not those who borrowed it or decided how it should be spent. The IFIs’ attempt at ‘poverty reduction’ is laughable, since clearly this is not their main priority. These institutions should be condemned for their lack of concern for their people, and their continual disregard for studies that contradict their desired image. Human rights abuses in Uganda will continue as long as the international community looks the other way and continues to support the government, making long-term poverty reduction and sustainable growth unrealistic.

           

 

 

 

 

 

Works Cited:

1)      Ambrose, Soren. April, 2004. Resisting market fundamentalism! Ending the reign of extremist neo-liberalism. Economic Justice News Online. Vol. 7, No. 2. http://www.50years.org/cms/ejn/story/61.

2)      Branch, Adam. June 8, 2008. Uganda’s interned victims living in wretched squalor. Enough. The Center for American Progress. http://www.enoughproject.org/node/1050.

3)      Garrett, Laurie. January/February 2007. Do no harm. The global health challenge. Foreign Affairs. Vol. 86, No. 1; 14-38.

4)      International Monetary Fund (IMF). October 31, 2008. Uganda: Financial position in the Fund. Finance Department.

5)      Kiiza, Julius; Mubazi, John; Kibikyo, D.L. and Kigongo, Aloysius. February 27 2003. Understanding economic and institutional reforms in Uganda. Global Development Network. 

6)      McCormack, Pete. 2006. Uganda Rising. Canadian Independent Firm and Video Fund. Mindset Media. (Film).

7)      Nakkaz, Esther. 2005. Millennium Development Goals in Uganda. OneWorld Uganda Guide. 

8)      Nyamugasira, Warren and Rowden, Rick. April 2002. New strategies, old loan conditions: Do the new IMF and WB loans support countries’ poverty reduction strategies? The case of Uganda. African Action. 

9)      Pitcher, Anne. July 2004. Conditions, commitments, and the politics of restructuring in Africa. Comparative Politics. Vol. 36, No. 4, p. 379-398.

10)  Selassie, Abede Aemro. September 2008. Beyond macroeconomic stability: The quest for industrialization in Uganda. IMF Working Paper. 

11)  World Bank. September 2008. Country Brief. Development Results. http://go.worldbank.org/8XKQR04V10.

12)  World Bank. September 30, 2008. Uganda: Estimated Debt Service Payments Summary. http://go.worldbank.org/UOAA1W6AH2.

13)  Yanacopulos, Helen. March 17-20, 2004. A think piece in dilemmas in conflict and development: The Uganda Case. International Studies Association Conference. Montreal, Canada

[1] Private investment as a percentage of GDP went from 5.4% in 1986-7 to 13% in 1998-9 (Pitcher, 2004; 383)

[2] Health and education spending accounted for only 2% of WB lending. The other lending went to energy/road development (57%), the agricultural sector (13%), the financial sector (10%), the private and public sector (shared 10%), local governance structures (10%), and social protection (8% ; WB, Country Brief, 2008).

[3] A recent country report on the MDGs warns that there are anecdotal indications of an apparent increase in HIV prevalence and incidence during the last few years despite claims of reducing the rate. American donor presence pushed leaders in 2005 to promote the ABC approach to sex (Abstinence, Be faithful, and Condom use). This placed a greater emphasis on abstinence and restricted the distribution of condoms and has been attributed to the increase in prevalence of HIV/AIDs in recent years (Nakkazi, 2005).



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