9 October 2008
document
Kampala — YESTERDAY Uganda commemorated its 46th Independence Anniversary since the British handed over control in 1962. Here is President Yoweri Museveni address to the nation on the day.
ON this occasion of celebrating the 46th Independence, I would like to point out that initially we lost a lot of time. You remember, just four years after Independence, we had the 1966 crisis and we started having problems. In 1971, Idi Amin came in and the situation worsened. In 1979 we got rid of Amin but the situation did not improve. We had another round of fighting until 1986.
Therefore, Uganda, like many other African countries, lost time; we did not modernise and transform the society. However, since 1986, although we still had challenges like terrorism in Northern Uganda, the problem in Eastern Congo, we, nevertheless, have started moving.
The National Resistance Movement (NRM) Government pledged that we would achieve Prosperity for All through peace and security, socio-economic transformation, democratic governance and regional integration as stated in the NRM Party Manifesto during the 2006 elections. The NRM Government's mission is to enhance the pace of socio-economic development through implementing far-reaching changes in the livelihoods of the people of Uganda by transforming the economy and households through increasing national output and household level production, productivity and incomes as well as achieving the structural transformation from a peasant economy to a commercialised rural middle class economy.
Economy
Despite some regional and international development challenges, such as the current financial crisis that started in the United States, the Ugandan economy remains strong. Our economy grew by 9.8% in financial year 2007/08, compared to 7.9% in 2006/07. This high growth was registered in manufacturing, wholesale and retail trade, transport and communications, and financial services. Exports of goods increased by 65%, from $1.3b in 2006/07 to $2.2b in 2007/08. Coffee exports, mainly to the region, increased by 53%, from $228m in 2006/07 to $348m in 2007/08.
Tourism continues to do well as reflected in the arrivals at the airport, which increased by 22%, from 359,189 in 2006/07 to 439,889 in 2007/08. The boom in the tourism sector is also reflected in the increasing number of hotels, restaurants and other related facilities.
The strength of our economy is also partly reflected in the level of our international reserves, which increased to $2.7b in June 2008. In order to remind those who do not know how far we have come, in 1985/86 our reserves were less than $20m, equivalent to only two weeks of imports at the time. In other words, our reserves in 1986 when we took power could not sustain our import requirements for more than two weeks if we had no other sources. The economy depended almost entirely on donor aid. I am pleased to say that the situation is now completely different, with the impressive performance of our exports. Our reserves today are equivalent to about seven months of imports of goods and services.
Food Prices
In spite of these positive developments, there are some challenges that emanate from the recent developments in the world economy, as well as regional challenges and opportunities. Ugandans are facing rising fuel and food prices as a result of rising oil prices on the international market and high regional demand for our food produce. While oil prices remain high, there are signs that they may be coming down a little bit. This should be reflected in a decline in fuel prices. The major causes of high food prices is the high demand for our farm produce and the high transport costs as a result of high fuel prices and not well-maintained roads. Regarding the high regional demand for food, I urge Ugandans to take advantage of this and produce more for the market.
However, Ugandans must be careful not to sell everything they have and remain with not enough food for their families; and also keep some for planting, particularly cereals. Our economy has been affected by high prices in other countries, such as Kenya, from which we import some of our household goods. Since we import some of our consumer items, the high prices in the countries from which we import are also reflected in higher prices of our domestic goods.
The situation of the rising food prices has two edges to it: it is the urban population, who do not farm, who are negatively affected. However, for the rural population, who are farmers, like myself, the rising food prices are in their favour.
I would, therefore, urge the urban population to make use of their land in the countryside to do some farming in order to supplement their incomes. This situation is in our favour. You should take advantage of these high food prices as a means to get out of poverty.
Investment
Private sector investment as a percentage of GDP has increased from 12% in 1995/96 to an estimated 21% in 2007/08. Total investment, including public investments such as roads and electricity, has increased from 18% of GDP in 1995/96 to an estimated 27% in 2007/08. The robust growth in private investment is also reflected in the expansion of private sector credit, which is estimated to have increased by 48% during the financial year 2007/08. Although still inadequate for the rural areas, the Government policy of promoting competition has resulted in a rapid expansion of financial services in urban areas and has reduced interest rates slightly. Besides the increased coverage of financial services, Ugandans now have the options of benefiting from a range of financial products and services.
Financial Sector
Ugandans are aware of the current financial crisis that started with problems in the US housing market. I want to assure Ugandans and investors that there is no need for panic because our financial systems are strong and sound. Our financial sector has been effectively regulated and banks have been following prudent lending procedures. This is not to say that there will be no effect at all. However, the immediate spill-over effects are likely to be minimal in the short-run.
Given that Uganda's economy is fairly integrated into the global economy, in the medium to long-term we may be affected if the world economy goes into recession. This would reduce the demand for our exports, particularly to the European and American markets.
The advantage we have here is that our export destinations have been diversified, with a large proportion going to regional markets. A potential reduction in foreign aid is not likely to affect us much because our domestic revenues now fund a bigger portion of our expenditures and grants from donors have been reduced to only 28%.
Therefore, most of our priority programmes will be implemented as planned. You should, therefore, not worry about the financial crisis of our development partners who were giving us aid. That is history. A total of 72% of our budget is financed by our own savings. We are now in a position to advise our development partners who are facing a crisis, because some of the reasons for this crisis are well-known. Their situation will not have a significant effect on our economy.
With respect to high interest rates, the Government has identified the major constraints to reducing interest rates and is working to address them.
These measures include reducing the cost of doing business by improving the infrastructure, including improving power supply, railways, roads and internet backbone. They also include putting in place a Credit Reference Bureau, which is being implemented by the Bank of Uganda, where information of borrowers will be collected and kept in a databank to help banks determine the level of risk of borrowers.
High default rates among bank borrowers make the few that pay also pay for those who defaulted. Hence, there are high interest rates for the few that pay.
Exchange Rates
The Ugandan shilling has depreciated more recently vis-a-vis the dollar, but this follows a long period of the strengthening of the shilling, which has hurt some exports such as fish.
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