Is Uganda’s future being mortgaged on unrealistic long-term expectations?


William Shakespeare ridiculed the alleged reason people tend to offer in line with their own advantages.

In King John his play, I quote from William Shakespeare, ‘well, I will say there is no sin but to be rich and being rich, my virtue then shall be to say that there is no vice’.

Let me try to demonstrate how Mwenda’s facts are in line with his advantages and need to be interrogated and scrutinized to find out if what he is saying is factual.

He contends that Uganda’s value of exports in 2015 is $5.4 billion and yet figures from Uganda Bureau of Standards, URA and Bank of Uganda, places Uganda’s exports for the first 11 months of 2015 at $2.41 billion.

Mwenda argues that growth has been impressive and yet the economy is characterized by an erratic currency, high cost of borrowing, high inflation and high cost of doing business.

For instance, the cost of tarmacking 1km section of a road in Uganda is approx. $1,000,000. In Kenya the same distance costs $300,000 and in Rwanda, it costs $330,000; May be 1km is longer in Uganda and shorter in Rwanda and Kenya.

Outwardly, Uganda’s economy appears to be doing well. Growth has averaged 6.2 percent per year since 2005, and debt decreased dramatically between 2004 and 2008, with assistance from two debt relief initiatives organized by the IMF and World Bank.

Since 2008, however, a surge of government borrowing against unrealized oil revenues has turned our country- Uganda into one of the most heavily indebted countries in the East African region.

Even before the drop in oil prices in recent years, there were concerns that the government was mortgaging our future on unrealistic long-term expectations.

With the sudden slump in oil prices, those expectations could soon come face-to-face with a suddenly very harsh reality.

The bulk of our government borrowing against future oil revenues has focused on grand infrastructure schemes built and funded by the Chinese.

In 2014 alone, the government signed deals with China to build two hydro power dams worth $2.2 billion, a standard gauge railway that could cost up to $8 billion, and a $600 million fertilizer plant.

Additional projects include a $2 billion oil field being developed by the state-owned China National Offshore Oil Corporation (CNOOC) and a $350 million road between Uganda’s capital, Kampala, and Entebbe International Airport.

The possibility has even been raised that a Chinese bank may bail out our parliamentarians in danger of going to jail for failure to honor their debts.

The government contends that loans from China are preferable to those from the World Bank and IMF because they offer lower interest rates and greater flexibility but don’t require prompt or advance payment.

Opposition groups counter that these grand infrastructure projects are nothing more than schemes to divert funds for personal and political gain.

Critics point out that the NRM government has promoted its allies to leadership positions in institutions responsible for these projects, such as the National Roads Authority and the Finance, Transport and Energy ministries.

Such arrangements provide ample opportunity to siphon funds from these projects, and their rapidly rising budgets lend additional credibility to accusations of corruption.

Costs for the Ugandan section of the East African Standard Gauge Railway are especially out of control. The project had an initial price tag of $4.5 billion for the Ugandan side of the railway, compared to $3.8 billion for the Kenyan side.

Estimated costs in Uganda subsequently shot up, first to $8 billion and then to a staggering $11 billion, prompting parliament to appoint a select committee to investigate.

Such abuses have prompted opposition groups to label Chinese loans as odious debts, which they claim are being contracted by members of the Museveni government for personal gain and are, therefore, not binding on the country. The Chinese would no doubt disagree.

The current levels of government mismanagement and corruption are recent developments.  Between the 1986 end of the civil war and the 2006 discovery of oil, Uganda made substantial economic progress under Museveni.

Courting the good will of the Western donors who financed a large portion of its budget, the government introduced economic reforms that put the country on a path of steady growth and led to a substantial reduction in poverty.

At the same time, it made gains in the major areas of governance crucial for sustaining economic expansion and moving to higher levels of development.

The World Bank found improvements in measures of voice and accountability; political stability and absence of violence; government effectiveness; regulatory quality; control of corruption; and rule of law.

Since 2006, Uganda has seen either a deterioration or very limited progress in four of these six measures.  After making fairly steady progress in voice and accountability during the late 1990s and early 2000s, Uganda began retrogressing in 2007.

By 2013, the country had the lowest score of the new East African countries, which include Kenya, Tanzania, and Rwanda.

Similar backsliding has occurred in scores for regulatory quality and control of corruption.  Most disappointing is Uganda’s recent performance in rule of law.

After having led the new East African countries in this measure before 2007, Uganda has since made no significant gains – even as Rwanda has made tremendous strides.

What happens if Uganda is unable to service its Chinese debt?  Things could get ugly very rapidly in Uganda.  Facts are distorted by demagogues.  Those who speak against ‘unfreedom’ are arrested and locked up.  Infant and maternal mortality claims our dear ones daily.

Not all hope is lost.  The 2016 presidential elections will provide denizens with an opportunity to vote against or for an alternative policy arrangement.  We must resist ‘après moi la deluge’ (After me, the floods) in the form of shoot to kill.

If we allow fear to control us then our future and that of their children will continue to be mortgaged on unrealistic long – term expectations.

Walter Ochanda, the author is an International Development Specialist




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