Moses Mulindwa
Recently, I participated in the 8th Annual NTV Economic summit focused on the theme opportunities to financing the tenfold growth. Various speakers deliberated on the strategies employed by the Government to increase Uganda’s Gross Domestic Product (GDP) from the current USD 53.3 billion to USD 500 billion by 2040.
Although this is a commendable and ambitious goal with practical suggestions such as leveraging the country’s comparative advantage in trade and developing a skilled workforce, one crucial factor that could impede the achievement of the 2040 target, which was not sufficiently addressed in the discussions, is the economic disruption caused by our elections.
Uganda has been holding elections every five years since 1996, and they have consistently shown to create turbulence in our economic trajectory due to the political uncertainties that surround them.
For instance, during the peak of the 2021 general elections, the stock market turnover in Uganda experienced a continuous decline in January, February, and March 2021, at rates of 97.8 percent, 64 percent, and 46 percent respectively. During this quarter when the general elections took place, the Uganda Securities Exchange noted a downturn, with a turnover of Shs3.4 billion compared to 7.8 billion recorded in the final quarter of 2020. According to the Macroeconomic & Fiscal Performance Report for the financial year 2020/2021 from the Ministry of Finance, foreign direct investment inflows into Uganda decreased by 12.4 pecent during FY 2020/21 compared to FY 2019/20.
While various factors, including the Covid-19 pandemic, could have influenced these statistics, the political instability associated with our elections contributes to reduced investor confidence and undermines the potential for sustainable economic growth.
Similar patterns were noted in 2016 during the election year with macroeconomic reports showing a slowdown in business activities. In 2011, Uganda's economy experienced a drop in GDP growth from more than 6 percent the year before to 4.1 percent.
Furthermore, the tourism sector, which is one of the leading sources of revenue and foreign exchange for the country, suffers significantly from the instability during election times due to numerous travel advisories that discourage tourists from considering Uganda as a travel destination during elections.
It is not surprising that the country often faces a swift depreciation of the Uganda Shilling, along with inflationary pressures, heightened government expenditures, and fiscal challenges during or following each election cycle, each of which constitutes economic disturbances. In 2011, Uganda experienced an average inflation rate of 18.8 percent, a significant increase from 4.1 percent in 2010. During this period, the exchange rate depreciated by 6.2 percent against the US dollar, and the trade deficit rose from 9.6 percent to 10.8 percent of GDP. These disruptions impede our progress toward the USD 500 target.Every time potential investors encounter alarming news stories stemming from the electoral process, they are dissuaded from making long-term investments in essential sectors.
Think about the thoughts that occupied the investors' minds as they observed the developments on the 18th and 19th of November 2020 in Kampala and other major towns. It was certainly not the most favourable reflection to make.
With the 2026 general election approaching, the country may once again face a period of political and economic instability.
All stakeholders need to consider avenues to reverse this trend. The government is urged to prioritize reforms that promote electoral transparency, decrease political tensions, bolster stable investor confidence in Uganda’s economy, and ensure political stability.
Such reforms need to include reevaluating the role of the military in elections and addressing other triggers for violence, riots, and human rights violations. Regrettably, with less than two years to the next elections, parliament has not allocated time on the order paper for a discussion on electoral reforms that could improve our election processes and protect against disruptions. If stable elections are not achieved, Uganda will continue facing economic disturbances.
Moses Mulindwa, senior programme associate-
Uganda National NGO Forum. [email protected]
