1 January 2009
opinion
Kampala — PRESIDENT Yoweri Museveni in the State of the Nation Address on New Year's Day, assured Ugandans there is going to be better service delivery in 2009. He acknowledged there were challenges in 2008 but reaffirmed that the economy is doing well. Below is his speech in full.
I congratulate you all upon the completion of the year 2008. I empathise with all who have had problems of one kind or another; especially those who have lost their loved ones. I congratulate you on every achievement you have had in 2008, individual or corporate, that leads our nation towards prosperity.
The National Resistance Movement Government has continued to serve under the theme of Prosperity for all; and, despite some challenges, there have been marked achievements in all sectors.
Economic performance and prospects
I want to congratulate Ugandans for successfully completing the year 2008, despite the recent adverse developments in the global economy.
The Uganda economy grew by 8.7% in real terms in the Financial Year 2007/08, which is slightly lower than the estimate I reported to you in June by 0.2% of GDP, following further validation of economic data by the Uganda Bureau of Statistics. This excellent economic performance was because of continued growth in the industry and services sectors which now account for 24% and 49% of our GDP, respectively.
In the Industry sector, the construction boom that started a few years ago is set to continue in the coming year; and investment in production of cement has increased substantially. In the services sector, tourism continues to do well, as arrivals at the airport which are an indicator of tourist visits, increased from 360, 000 arrivals in 2006/07 to 440,000 in Financial Year 2007/08. The boom in the tourism sector is also reflected in the increasing number of hotels, restaurants and other related facilities.
While growth in the agricultural sector is lower than in other sectors, I am convinced that the Bonna Bagaggawale programme that is aimed at increasing production and incomes of the vast majority of Ugandans will re-invigorate growth in this vital sector of the economy.
I will return later on to the details of how the NRM Government is decisively dealing with the matter of agricultural production, productivity, the addition of value to agricultural production and increasing access to markets to achieve the overall objective of increasing household incomes of Ugandans.
The strength of the Ugandan economy today is also partly reflected in performance of the external sector. The value of exports of merchandise goods and services increased from $2b in Financial Year 2006/07 to $2.4b in 2007/08. The value of merchandise exports in 2007/08 amounted to US$ 1.8 billion while export of services amounted to US$ 540million.
Following our revision in the method of calculation of FDI and remittances, the latter amounted to $476m in 2007/08 compared to $ 430m in 2006/07.
FDI increased to $946m in 2007/08, from $695 in 2006/07. Coffee exports increased from $229m in 2006/07 to $348m in 2007/08. Partly as a result of this good export performance, the level of Uganda's international reserves increased to $2.7b in June 2008.
Domestic Prices
The regional and adverse global developments in calendar year 2008 have tested the strength of our economy. Once again it has been proved that the economic management policy framework put in place by the NRM Government is sound.
As an example, our economy quickly and fully recovered from the temporary disruption of our trade flows through Kenya at the beginning of last year, on account of the political upheavals there.
The temporary disruption of Uganda's flow of trade through Kenya caused shortages of fuel and other merchandise during 2008.
The shortage of these commodities led to increased transport costs and a rise in prices of consumer goods. Although normal trade flow between Mombasa and Kampala was quickly restored and has since stabilised, the prices of consumer goods and inputs used in manufacturing have remained high. This is due to the rising prices in the economies of our trading partners and the effect of high oil prices on the international market earlier on in the year.
Even though prices of fuel are high today and some petroleum products, such as petrol, are in short supply, this has arisen out of bottlenecks pertaining to the oil pipeline and new axle road requirements, which place a limit on how much fuel trucks can carry.
I am sure that these issues will be resolved shortly and that Ugandans will benefit from lower international prices of oil. The international oil prices have declined from US$ 147 to US$ 40 per barrel.
With uninterrupted oil supplies from Mombasa, the price of petroleum will go down again unless something happens with the international prices. Another factor that led to increased domestic prices was the high regional demand for our farm produce which, as I have stated before, should not be viewed as a problem but an opportunity for Ugandan farmers to produce more and get more farm incomes. In this regard, the Government is focusing on improving agricultural production and productivity through fertiliser provision, provision of high yielding seeds, proper enterprise selection and improving farming methods. Government has also repackaged the NAADS programme to ensure that farmers get access to farm inputs.
In addition, Government is expanding the delivery mechanisms for rural finance through the establishment of Savings and Credit Cooperative Societies (SACCOs) to help farmers to access credit in order to increase production and to add value to farm produce through agro-processing. As I have emphasised before, therefore, the best way to deal with food prices is to produce more and increase supply on the market.
There have been calls by some individuals, including Members of Parliament, for the Government to control the prices of some commodities, particularly food and fuel, in response to the high prices. I share the concern of Ugandans; but we must act in an orderly and not in a panicky way; otherwise we may cause confusion which may not be good for business. When we assumed power in 1986, we found severe shortages of almost everything.
The NRM Government then knew that the only way forward was to rehabilitate the economy and increase production. We also liberalised the economy completely to eliminate bureaucratic red tape that constrained economic activity.
Production increased and the shortages of the 1970s and 1980s were eliminated. We have since lived in a situation of plenty where the producers have the right incentives to produce. I want to assure Ugandans that the current situation is only a temporary phenomenon and therefore, we should not dismantle our excellent economic policy framework to deal with temporary shocks. However, we will constantly review our policy tools to ensure increased productivity in the country.
The greater regional demand should be answered by greater agricultural and industrial production and not by attempting to 'imprison' producers with fixed prices. Prices cannot be fixed by the government; but by the market. Those who try that always fail.
Impact of the Global Financial Crisis
Ugandans are aware that the on-going global financial crisis has spread in other countries. This has sparked off an economic slowdown in the world economy.
This global crisis may somehow affect our economy given that we are a small economy that is peripherally integrated in the wider global economy, through reduced demand for our exports, a decline in remittances from Ugandans working abroad and sending money home, reduced private foreign direct investments and other financial flows. However, as our historical performance has proven, we are a resilient economy. Therefore, Ugandans should not be worried that our economy will be badly hurt. Our economy remains strong and the Government's economic policy framework is sound.
As I have said before, the impact of the Global crisis on the Ugandan economy will be minimal. Part of the problem of the global economy is saturated consumption in the developed countries. In Africa, however, the problem is under-consumption of goods and services. It is now that Africans are beginning to increase consumption of goods and services.
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