FROM THE PRESS GALLERY: What has made our economy stupid?

If it weren’t already apparent that there is only one thing on the mind of many Ugandans at the moment, the anger in Parliament last week over the harrowing state of our nation, made it exceptionally clear: “It’s the economy, stupid”.

James Carville, Bill Clinton’s political strategist in the 1992 election made this statement: “It’s the economy, stupid”. I am sure he made this statement at a time when some Americans were trying to question Clinton’s moral character. Carville was asking the American people to focus on the bigger picture— pointing out the fact that, when the economy is in good health, the people are happy and there is sanity in the country.

Back home, maybe Carville was right. Maybe often we don’t pay attention when things are going wrong. Maybe our leaders, particularly those in the 8th Parliament slept along the way. In the end, our economy has turned the corner in the opposite direction.

Opposition, media guilty?
You can blame the global factors as the Finance Minister Maria Kiwanuka did last week in Parliament. The truth is that we are facing a monster in this double-digit inflation and collapse of the Shilling against the dollar that has pushed traders to the edge. But who is to blame for this economic despair? How did it come to this?

Well, President Museveni has blamed the opposition and some newspapers for scaring away tourists who bring in dollars. “The fracas caused by Dr Besigye in May 2011 and the irresponsible media reports by some of the local newspapers, certainly, scared away some of the tourists that were intending to come here,” he said in reference to the walk-to-work protests and coverage.

But even then, the President believes the shilling is still strong. He also said his cattle business will not be affected by the depreciation of the Shilling apart from the cattle drugs that might go up but as long as people consume beef, he will not be affected. “The shilling will never collapse because the economy is well managed...,” said President Museveni in a July 6, letter.

But some economic analysts blame the current crisis on the widespread corruption on the government; others pointed a finger at former Finance Minister Syda Bbumba for being ‘gullible’ yet others maintain that the 8th Parliament failed Ugandans.

Whatever the case, our leaders have argued that this isn’t the right time for pointing fingers. They say it’s time to look for solutions to the crisis facing our economy. However, our leaders should know that to get to the underside of the current crisis, in this column, we have no choice but to point fingers at the trouble-causers so that we don’t repeat the same mistakes.

The government’s efforts to bring the economy under control succeeded in reducing the country’s staggering inflation from over 300 per cent in 1986 to about 72 per cent in 1988. Then the government contributed to rising inflation by increasing the money supply to purchase coffee and other farm produce and to cover increased security costs in early 1989, a year in which inflation was estimated at more than 100 per cent. The government then responded by tightening controls on credit and mounting a stout fight against graft.

In his third year in office, President Museveni moved to curb the runaway inflation at the time by dealing with corruption using a top-bottom approach. For example, a 1988 audit accused government ministries and other departments of stealing nearly 20 per cent of the national budget. This infamous audit cited the Office of the President, the Ministry of Defence, and the Ministry of Education. Education officials, in particular, were accused of paying salaries for ghost teachers and paying labour and material costs for nonexistent building projects and keeping phantom pupils on the register.

In order to set a public example in 1989, President Museveni dismissed several high-level officials, including Cabinet ministers, who were accused of embezzling public funds. Don’t ask me about the destiny of ministers and other officials who fiddled the billions of Chogm cash. But the truth is that the higher level of corruption may lead to higher inflation.

For instance, bribe takers spend their “takes (munyago)” on real estate properties, luxuries, and on consumer goods and services that they couldn’t otherwise afford using their legitimate income from employment, exerting pressure on the demand. Others transfer their “takes” in hard currencies to foreign banks. This leaves our Shilling weaker and in the process, the economy becomes stupid.

Even though the economic dynamics have since changed, our leaders continue to pour free money in the economy as seen in the events that preceded the February general elections.

In the middle of the campaigns, Parliament approved Shs602 billion for emergency government spending and days later we were told that another Shs1.7 trillion was removed from Bank of Uganda to buy fighter jets and other military hardware—all this contributed to the crisis we see today.

In the wake of last week’s traders’ sit-down strike and the boorish government response to the crisis that blamed the misery on the global factors, it’s apparent that our leaders are looking for the silver lining in every dark cloud, but the economy is terrible and on the way to getting worse if we don’t act now. In spite the rhetoric on how the economy is now recovering, our economy is facing a squeeze and it’s getting worse, due to financial mismanagement.

It doesn’t have to get worse of course, but the ‘stupidity’ that messed up the economy in the first place has not yet been replaced with economic sanity. For instance, while the government is discouraging imports, in the 2011/12 budget, the funding to agriculture docket, the engine for overall economic growth has been cut from 4.9 per cent last year to 4 per cent— forgetting that the reason why we have shortage of dollars coming into the country is because the agricultural output is seriously declining, so are the export earnings.