Why you should worry that Uganda’s economy is growing

Economic growth, which is literally expansion of the economy, should be the desire and adoration of anybody regardless of their background and affiliation. However, as is the case with cancerous cells in the human body, not all growth is healthy. The cause and implications of such growth do matter. Movement of any organism from one point to another introduces lots of vulnerabilities, which can be disastrous.

Just imagine what would happen if a plane reached the end of the runway without acquiring enough speed to take off! The Ugandan economy is moving too slow and is heavy laden with debt and people’s needs.

The nature and rate of growth of the Ugandan economy raises a number of issues that should worry anybody who bothers to care. The growth rate has reduced when it should be rising to generate enough commodities and government revenues to service debt and meet the basic requirements of a growing population.
One of the reasons why we should be worried is the fact that neither the explanations for the slow growth nor the proposed solutions seem to be valid and viable. For example, to believe that infrastructure projects alone will drive growth in the short-and long-run is an anomaly.

While infrastructure translates into a bigger economy, it only does so to the extent of usage of local raw materials as the rest of the growth is cancelled out by an equivalent outflow of foreign exchange. The anticipated long-term contribution is even more challenging as it is dependent on the infrastructure facilitating growth of other sectors. With hardly any money left to invest in those sectors, the infrastructure becomes either the egg or the chicken, which creates or actually points to another problem – weak institutions and bad policies.

The presence of expired drugs at the time when there are significant drug shortages in the country and the unravelling weaknesses in security agencies, which were infiltrated by criminal gangs, highlight major flaws across most government institutions that are supposed to implement the development agenda.

One can with certainty say the failure to implement government projects is a result of inherent deep-seated weaknesses within government structures and systems. It is, therefore, worrisome that an organism with such a weak system, akin to a vehicle in dangerous mechanical condition, can be allowed to move from one point to another. Economic growth based on such a system can only result in dangerous outcomes as I will explain shortly.

The growing components of the economy (ie corruption, criminality, patronage and politicking), have become so cancerous that they are literally shutting down the vital organs of the economic system. For example, while a smaller government budget of Shs26.4 trillion for 2016/17 provided Shs18.4 trillion to public institutions for service delivery, a bigger budget of Shs29.3 trillion for 2018/19 is providing a smaller amount of Shs12.7 trillion for the same purpose.

This is a serious problem of an economic vehicle with significant leakages of a vital resource – money for service delivery. Just note that the economic loss to the ‘cancerous cells’ is not only the money, but also the distortion across the entire system that makes the whole economy risky for business. One major global rating agency gave Uganda a triple B rating, which literary means non-investment grade. It is only a matter of time before we see more credible investors packing bags for the exit. Sadly, we just cannot do what needs to be done, much as we know it.

Dr Muhumuza is a development policy analyst committed to inclusive growth. [email protected]