The twin architects of Uganda’s quarter-century economic revival – Yoweri Museveni, President, and Emmanuel Tumusiime-Mutebile, Bank of Uganda governor – are increasingly at loggerheads as erratic policy undermines the discipline on which the country’s return from war and turmoil has depended. “There will be no inflation. Inflation is indiscipline,” Mr Museveni declared in 1992 as Uganda embarked on two decades of growth averaging 6.9 per cent a year. The country’s relative economic success after years of conflict won it plaudits from donors and so much aid that it sometimes struggled to spend the cash.
Yet today as inflation has ramped up – Uganda has the highest rates in East Africa, with food crop inflation reaching 44 per cent in the year to May – donors, economists and the thousands of citizens protesting the cost of living wonder whether discipline remains.
Mr Tumusiime-Mutebile is credited with having persuaded Mr Museveni to abandon Marxism and its price and currency controls, and in the process reduce annual inflation from 240 per cent to single-digits. In a rare critique of the increasingly autocratic president who took power in 1986, the central bank governor told the Financial Times that, despite being “very courageous”, Mr Museveni’s continued embrace of “elements of Marxism” was undermining the economy. He cited several factors that were causing problems between him and the former guerrilla leader, including a planned $2.2bn hydropower plant, a policy to spur population growth, a swath of questionable tax exemptions and woeful agricultural performance.
“He gave me some promises which he has not kept – like a way to redress the reserves. I’m still fighting with him,” he said of the government’s controversial decision to turn to the Central Bank to help finance $720m for fighter jets. This sent reserves down from six months’ worth of imports to four. Donors including the World Bank, UK and Ireland have reduced or withheld direct support, which makes up 26 per cent of this year’s budget, down from a high of 50 per cent, and the Netherlands will cut it altogether next year, citing a failure to fight corruption, threats to fiscal credibility and a waning commitment to poverty reduction.
Despite a rapid drop in the poverty rate – from 56 per cent in 1992 to 24.5 per cent today – there are more poor Ugandans now than when Mr Museveni took power, because of policies aimed at increasing the labour force and market. “The extremely high population…growth is one of the major things I oppose him about,” said Mr Tumusiime-Mutebile, who was also dismayed by an unexplained collapse in fuel reserves and a lack of progress in modernising agriculture. “Our output is heaven-made, but it should be man-made,” he said.
Uganda is set to become a significant oil producer in the coming years but has fallen foul of its one-time champion, the International Monetary Fund. Mr Tumusiime-Mutebile found it “very, very humiliating” that it failed an IMF programme review for the first time this year.
“They passed a supplementary budget which was not consistent with the programme that we had just agreed, right before the election,” Thomas Richardson, IMF representative in Uganda, said of the last-minute $250m allotment, much of it for the presidency, before February’s election returned Mr Museveni to power with 68 per cent of the vote.
European Union observers noted widespread distribution of money and gifts by the ruling party during the polls. Despite his concerns, the central bank governor said Mr Museveni had shown courage in choosing not to introduce export controls, adding that there was “no alternative” to Mr Museveni in “this economy”.