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Archive for the tag “Structural Adjustment Programme”

Looking into the inflation of 1987 as the Sugar prices are rising in today’s Uganda!

We have had a wonderful collaboration with IMF since 1987. We have managed to control inflation. By controlling inflation, we have succeeded in preserving the people’s earnings” – Yoweri Kaguta Museveni (State House, 2017).

Well, there been many who has set similarities with the inflation and price shocks of the year 1987. The Republic of Uganda has been through their mess before. The government of Uganda and the National Resistance Movement/Army (NRM/A) had just taken power in 1986. This was a year after the coup d‘etat, which brought the NRA into power. President Yoweri Kaguta Museveni in collaboration with International Monetary Fund (IMF), which had agreements and Structural Adjustment Program (SAP), which promoted deregulation and less state control of the economy. This was also put forward to settle inflation and the deficit that the state had.

So, because some has put similarities between 1987 and 2017, as the prices has gone from about 3,000 Uganda Shillings (UGX) in 2016 and 7,000 Uganda Shillings (UGX) in 2017. There is clearly that there was problems in 1987, but whole another level. The Sugar Industry wasn’t established, the economy of Uganda needed export of coffee and this was the sole benefit of foreign currency into the economy.

Inflation in Uganda is running as high as 200 percent, and low prices to farmers serve as a disincentive to agricultural production in a country of rich soil and mild equatorial climate” (…) “At the center of the debate is the issue of devaluation. In its first year in office, the Government revalued the currency from 5,000 to 1,400 shillings to the dollar, saying that the move would make imports cheaper. But exports have become increasingly expensive. Devaluation Debated. Some hard-line nationalists in Government insist that the cost of devaluation would be devastating. The cost of such imports as sugar, cooking oil and soap would increase significantly, they say, making the average Ugandan even worse off than he is now” (Rule, 1987).

In 1987 the Uganda shilling was demonetizated during the currency reform and a currency conversion tax at a rate of 30% was imposed to further reduce excessive liquidity in the economy. There was an immediate drop in average inflation from 360.7% in May to about 200% cent in June. However, with the possible fears of complex and drastic currency reform, the premium shot up, representing essentially a portfolio shift to foreign currency, and possible capital flight, and suppressed inflation. The intended aim of the conversion tax, apart from reducing excessive liquidity, was to lend money raised through this tax to the government. This was to finance the budget deficit over a short period, rather than financing it through printing more money. Nonetheless, inflation shot up again within three months mainly due to renewed monetary financing of increased government expenditure, domestic credit expansion by commercial banks to meet coffee financing requirements and financing of the newly launched rural farmers scheme” (Barungi, P: 10-11, 1997)

Prices for sugar and vegetable oil (both imported goods) increased rapidly in the early part of the year, falling between May and August — replicating the pattern of the premium between the parallel and the official exchange rate. The subsequent fall in sugar prices and stability of cooking oil prices were due to greater official imports. Inflationary pressures on food prices have been aggravated by supply shortages on account of severe transportation problems” (World Bank; P: 36, 1988).

In October 1986, Mulema was replaced by Dr. Crispus Kiyonga, who has a medical background Kiyonga has a difficult task. The government’s finances are shaky at best. In an attempt to enable Ugandan citizens to purchase imported consumer goods, the government fixes their prices below world prices. This, of course, puts considerable pressure on the government’s finances: for example, in July 1986 the government imported $4.8 million worth of sugar to sell at subsidized prices” (Warnock & Conway, 1999).

Perspective from Kakensa: “Today sugar costs 7000/- per kilo. When Museveni came to power in 1986 each kilo was at 4/-(four shillings). Immediately he came to power he said Ugandan shilling had lost value, in 1987 all money was changed, not only changed but two zeros were cut off to give it value on addition to the 30% levied on each shilling. This means on every 100 shillings, you got 70cents. Those who had 100,000/- got 700/-” (Kakensa Media, 12.05.2017).

We can see there was certain aspects, but the sugar industry now is different. The Sugar factories are now real and the business are now in full affect. While, in 1987 the state needed coffee exports to get funding and foreign currency. The sugar was imported and was put on fixed prices. The inflation back then was because of the crashing economy after the bush-war and the effects of it. The Sugar prices now are rising for different reasons. These reasons are the yields of sugar-cane, the hoarding of sugar and the export of surplus sugar. Also, the production of ethanol and bio-fuel. That was not the situation and context in the past.

Still, history is repeating itself, since the NRM, let the prices run as crazy in the past. The price has gone up a 100% in a years time. Which, means the prices who doubled from 3000 to 7000 Uganda Shillings. This is not a stable and the ones who get hurt is the consumer and Ugandan citizens. Peace.

Reference:

Barungi, Barbara Mbire – ‘EXCHANGE RATE POLICY AND INFLATION: THE CASE OF UGANDA’ (March 1997).

Rule, Sheila – ‘UGANDA, AT PEACE, IS FACING ECONOMIC BATTLES’ (28.01.2017) link:http://www.nytimes.com/1987/01/28/world/uganda-at-peace-is-facing-economic-battles.html

State House Uganda – ‘President commends Uganda – IMF collaboration since 1987’ (27.01.2017) link: http://statehouse.go.ug/media/news/2017/01/27/president-commends-uganda-%E2%80%93-imf-collaboration-1987

Warnock, Frank & Conway, Patrick – ‘Post-Conflict Recovery in Uganda’ (1999)

World Bank – ‘Report No. 7439-UG: Uganda – Towards Stabilization and Economic Recovery’ (29.09.1988)

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Opinion: We can now see that the Movement has lost touch with Kampala as the Hon. Kamya decree gets into action!

kampala-25102016

The proof is there now in the streets of Kampala, that the Police are following the decree of Honourable Beti Kamya from 19th October 2016 and taking down the street vendors around Old Kampala and areas around.

“It was an afternoon of bullets, injuries and arrests as law enforcement officers proceeded to implement orders by Kampala minister Beti Kamya to get the vendors off the streets  Amidst the show down, a number of arrests were made and many left in tears as they saw their means of livelihood taken away from them” (NBS TV Uganda, 25.10.2016).

That they are shooting at innocent civilians because of the words of a State Minister who hasn’t confined her actions through proper process in Kampala Capital City Authority or by any  other leadership. The rules of law are apparently not important because the Honourable can just write a decree and the whole ballad of Police Brutality comes stepping on the doors, citizens, people and ordinary vendors who have been trading in the districts for years on end.

“Police and KCCA officers in running battles with street vendors as they try to enforce gov’t directive to get vendors off the streets, in Kampala” (NTV Uganda, 25.10.2016).

So a Government Decree or Directive doesn’t need any more procedure or decision making in the Parliament, not in the City Council of anywhere else. So the Carte Blanche for Central Government is now that loyalists of the Regime can do as they please. Which is a dangerous sport; if Hon. Beti Kamya find’s it illegal to catch grasshoppers because she hates the taste. Then the electric fetchers are illegal to put-up and the ones that before traded on that can lose all their livelihoods. Just like the men and woman today who we’re torn-out of their trading area and have to from now-on if it persist get enough cash to facilitate inside some market-hall or shops that takes rent. That means the former vendors has to gain capital to rent or buy plots to set-up shop. Something the state doesn’t facilitate. Not even through the SACCO’s which delivers empty 30 years promises that are viable as many of the UPE schools in the northern districts of Uganda or even just up-country; barely walls and books, just a teacher or two who hasn’t gotten a pay-check in months. That is the lovable system and their respect of their citizens.

The Movement have lost all touch with the grassroots and the citizens… when they are even barring the streets for their own benefits as the major banks fails to pay off debts made by the Presidential Election Campaign. The fall of Crane Bank, who is now under management of Bank of Uganda, the Cairo Bank is also on the steps to become controlled by the Central Bank as well. That shows the fragile monetary policies and the weakness of the fiscal policies in general by the Movement, as the self-centred organization it is.

We can also question the financial situation in the Republic of Uganda as the World Bank has suspended their agreed loans for infrastructure projects of Uganda National Roads Authority (UNRA). So, the same Government who has issues with Multi-National Organization is now targeting street vendors for their trade. That Hon. Kamya has made ordinary citizens criminals for activity that has happen for decades and never been sanctioned.

The Issue I have is that this hawkers, street vendors as they have been there for so long. Not like the government and KCCA has ever done anything for them, but they at least has created to the economy. I am sure by my recon that many sells the Airtime that these big-tax paying cell-phone corporations and the communication industry like MTN, Airtel, Uganda Telecom and all of them needs to keep the citizens occupied with talking and texting each other.

So the needs of public aren’t necessary in the present time and the needy that do what it takes to survive aren’t good enough for the protection of the Police or the KCCA. The Government who has a fragile economy attacks those with the weakest economy and are the entrepreneurs that the Government have been bragging about. The Entrepreneurial Spirit as they we’re entitled to this in February and the Government men we’re all smiles.

This doesn’t matter now, the boda-boda’s, the newspaper sellers and the others who sell used clothes to live even. These people all of sudden doesn’t count by the Hon. Kamya decree they are useless and illegal. Not with an act or a new law, but a directive that set the standard. This behaviour is now the common grounds.

The Hawkers and Street Vendors might create noise and be hassle now and then. They might be distracting and even creating garbage, but nothing that the KCCA has been having issues with before. These sanctions are coming decades after the free market and liberty that came with the Structural Adjustment Programme (SAP) ushered in by the current President Museveni in the 1980s.

The President has eaten a long while on these sellers and their trade, but now it is not enough. He needs are now for the foreign investors and bigger investments that capitalize more cash-flow from the banks and donor-community that he needs.

So the acts from the KCCA shows the systematic issues that are in Uganda now, together with the wish of splitting Kasese District, because the Ugandan Government has forgotten why they are there. They are not there for the MPs or the Government Officials, but they are there for the people and the citizens. The shooting of the families and street vendors, scaring them of their corners and everything… because a non-voted and non-discussed decree from Hon. Kamya that put this into order.

This is not news in some regards, but the reality is that the Movement has clearly forgotten why they exist and why they are there. Not for the sake of being there and earning monies of the budget or the tax-payers money. They are there for the common-man and to provide for them. Instead they are doing the same like they are doing to the Opposition, using live-bullets and arresting them for being there.

The Decree or Directive is only to show force and strength, the mentality is that sooner the Government has to live by the acts of aggression against civilians something that now will be with them. Not only against political opposition and supporters, but trading civilians who has done legitimate trade in Central Business District and now all of sudden been sanctioned by the regime. They been reasons for the giant companies and importers getting more units sold and the little tax-base that Uganda Revenue Authority has.

So this combined is a strange effort to consolidate the trading of Kampala and make sure the government earns their tax. That the Government and the Movement didn’t’ think about it… or question it boggles me, but the selfish principals of Hon. Kamya is evident as she wants to better than the ones before. An also show the Lord Mayor Lukwago that her words are law while his are worthless, like the acts today show. Peace.      

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