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Tackling Inequality in Uganda

Lawrence Bategeka | 18 February 2013

Tackling inequality in Uganda entails a comprehensive development framework that puts people’s participation in the economic growth process at the centre. People must be viewed as agents of economic growth and transformation and not passive recipients of social services and/or handouts from either development partners or their own government.

During the past two decades Uganda witnessed remarkable increases in income inequality. The gini coefficient increased from about 0.32 in 1990 to 0.48 in 2012. The increase in income inequality stood in total contrast to the high rates of GDP growth, which averaged about 7.5 percent per annum over the past two decades. Macroeconomic stability coupled with liberalization and/or market based economics were promoted as the right policies that would make Uganda realize the desired high rates of GDP growth. The role of the state in the economy was rolled back through privatization. In line with the Millennium Development Goals (MDGs) paradigm, Uganda’s public sector spending (and especially support from the country’s development partners) targeted the social sectors.

As it turned out, sectors that drove Uganda’s economic growth were services (especially banking, telecommunications, transport, and wholesale trade) and construction, which employ a relatively small proportion of the population (less than 15 percent). For example between 2005 and 2009 the services sector grew at an average rate of 8.8 percent compared to 1.3 percent for agriculture. This indicates that agriculture, from which about 70 percent of the population ekes a living, grew dismally and at rates lower than the population growth rate. The low growth of agriculture compared to the relatively high growth rates of services and construction explains the increase in income inequality as measured by the gini coefficient.

Targeting social sectors such as education and health has not helped Uganda to address the income inequality challenge. On the contrary, income inequality has widened. High growth of the productive sectors especially agriculture is necessary for addressing income inequality. The idea is not to abandon the MDGs but rather to change the approach of achieving the MDGs by first focusing on increasing household incomes, especially of the people residing in rural areas. In 2010 Uganda prepared the National Development Plan (NDP), which in terms of purpose and intent of development, prioritizes public sector focus on the economic sectors to support private sector development and participation of poor households in the economic growth process. Unfortunately, many of Uganda’s Development Partners have not taken up the NDP as an overarching framework they must use to prepare their assistance strategies for Uganda. Most of Uganda’s development partners falsely claim that they have aligned their assistance to Uganda to the NDP because out of the NDP they pick only those issues that are in line with the MDG agenda of spending on social sectors.

Tackling inequality in Uganda entails a comprehensive development framework that puts people’s participation in the economic growth process at the centre. People must be viewed as agents of economic growth and transformation and not passive recipients of social services and/or handouts from either development partners or their own government. The approach would entail a changed role of the state from one that sits back expecting the blind market forces to optimize economic growth and address inequality to one that ensures participation of everybody in the economic growth process.

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