Selected Issues and Statistical Appendix

This Selected Issues paper and Statistical Appendix analyzes poverty and social development in Uganda. The paper reviews recent poverty and inequality trends, examines how poor people are coping with risk and vulnerability, analyzes the relationship between economic growth, structural reform and poverty, and describes the government policies in these areas. The paper also provides a brief overview of major institutional developments in Uganda’s financial sector since 1993 with regard to the legal, accounting, and general regulatory framework in which financial institutions operate.


This Selected Issues paper and Statistical Appendix analyzes poverty and social development in Uganda. The paper reviews recent poverty and inequality trends, examines how poor people are coping with risk and vulnerability, analyzes the relationship between economic growth, structural reform and poverty, and describes the government policies in these areas. The paper also provides a brief overview of major institutional developments in Uganda’s financial sector since 1993 with regard to the legal, accounting, and general regulatory framework in which financial institutions operate.

I. Poverty and Social Development in Uganda1

A. Introduction

1. It is now widely recognized that poverty and income distribution affect the sustainability of economic adjustment and the rate and quality of economic growth. African countries, in general, are characterized by large segments of the population living in poverty. Nonetheless, evidence suggests that poverty can be significantly reduced through sound macroeconomic policies and structural reform, and the implementation of measures to increase household income and improve government services to the poor (see, among others International Monetary Fund (1998a); and Calamitsis, Basu, and Ghura (1999)).

2. In Uganda, the poverty debate has been taken a step further; it is now widely recognized that there are many dimensions to poverty, as clearly highlighted in recent surveys, namely, the Integrated Household Surveys (IHS) and the Uganda Poverty Participatory Assessment Project (UPPAP)(Box 1). Using this broader definition of poverty, the chapter reviews recent poverty and inequality trends in Uganda, examines how poor people are coping with risk and vulnerability, analyzes the relationship between economic growth, structural reform and poverty, and describes the government policies in these areas.

Redefining Poverty in Uganda

Poverty analysis in Uganda is breaking new ground. Traditionally, poverty indicators of income, consumption, education levels, and health status are derived from household surveys. In Uganda, the government is using a broader set of indicators to define poverty, which include previously unconsidered dimensions, such as risk, vulnerability, physical and social isolation, powerlessness, and insecurity. These new indicators have emerged from direct consultation with the poor, undertaken by the government in the 1998/99 (July–June) Uganda Poverty Participatory Assessment Project (UPPAP). This assessment revealed to policymakers that the poor have the capacity to analyze poverty and appraise government policy to a greater extent than had been previously acknowledged. In addition, the project enabled poor people to voice their realities and express their priorities, which often differed from those assumed by policymakers. To better diagnose the problem of poverty, the government combined the data from the 1992/93 Integrated Household Survey (MS) and four annual monitoring surveys conducted since then with the UPPAP (see Government of Uganda (1999a) and (1999b)). The next step is to use this integrated approach to assess the impacts of macroeconomic policy changes.

B. Recent Poverty and Inequality Trends

3. GDP in real terms expanded at an annual rate of over 6 percent during the last decade. Macroeconomic stability has been restored, and Uganda has moved from a period of recovery to growth with real income levels returning to those of the early 1970s (Appleton, Emwanu, Kagugube, and Muwonge, 1999). Although overall real GDP growth slowed in the two years since the last poverty monitoring survey, agriculture grew at 5 percent, with both cash and food crop sectors performing well. Regarding inequality, the Gini coefficients2 show that urban income inequality improved from 0.43 in 1992/93 (July–June) to 0.37 in 1996/97, whereas overall and rural income inequality remained almost unchanged between 1992/93 and 1995/96, and declined in 1996/97.

4. Data on private consumption from the five recent IHS show rising living standards in accordance with the macroeconomic data on growth (Appleton, Emwanu, Kagugube, and Muwonge, 1999). According to a poverty line approach,3 the proportion of Ugandans in poverty fell from 55.5 percent in 1992/93 to 44.0 percent in 1996/97 (Table 1). Although impressive, these statistics need to be put in context. First, the significant and substantial reduction in poverty needs to be understood in terms of the low base from which Uganda’s recovery started. As a post-conflict society, Uganda remains one of the poorest countries in the world in spite of substantial growth. Second, the distribution of welfare gains has varied by region, sector, and social/economic group, with income inequalities remaining high.

Table 1.

Poverty in Uganda, 1992/93–1996/97 1/

article image
Source: Appleton, Emwanu, Kagugube, and Muwonge (1999).

Fiscal year begins in July.

5. Regional variances. All regions had lower poverty in 1996 than in 1992. However, household data show that regional disparities were exacerbated, with poverty declining more rapidly in the central region, originally the richest region, than in any of the other three regions. Poverty remains most severe in the northern region. Regional disparities have been determined by insecurity (the north and parts of the west), climate (leading to drought in some regions), agriculture (central and western regions benefiting from the coffee boom), and access to markets through rural roads (the north being particularly isolated). The UPPAP highlighted the fact that, despite relatively high income levels in the western region, other indicators, such as diet, clothing, and affordability of health care, remain poor.

6. Sectoral variances. Poverty reduction remains uneven across economic sectors, with those engaged in cash crop farming, manufacturing, public utilities, and transport/communications experiencing the largest improvements in living standards. In Uganda, the poor are concentrated in rural areas and are mainly subsistence farmers producing nontraded food crops. Up to 1995/96, half of the fall in poverty was attributed to coffee-growing households that benefited from liberalization of the coffee market, increased access to markets, and the increase in world coffee prices in 1993/94. However, food crop farmers, farmers in marginal areas, and those in conflict-affected areas have benefited less. For example, over the 1992/93–1996/97 period, real income growth in the cash crop sector averaged 13.8 percent a year, whereas the average growth in the food crop sector was only 2 percent a year. This difference is also reflected in the incidence of poverty, which fell by 27 percent for people engaged in cash crop production but was largely unchanged for those in food crop production (Appleton, Emwanu, Kagugube, and Muwonge, 1999). This is a concern since most poor households (and 44 percent of all households) are engaged in food crop production, and a majority of the workers are women.

7. Urban living standards have risen, with strong performance in nonagricultural sectors and growth in major towns. Although household survey data also show growth in rural areas, poverty reduction was more rapid in urban areas, and poverty remains more extensive and intensive in the rural areas.

8. Variances among social/economic groups. The IHS shows that in 1996/97 absolute poverty fell across all income cadres, but when the data are disaggregated a more complex picture emerges. The poorest 10 percent of Ugandans became poorer in some years (Table 2). Poverty also increased in households with nonworking heads, indicating weaknesses in, or the absence of, policies targeted to the unemployed. According to household and participatory data, emerging vulnerable groups include some female—particularly widow—headed households, child/orphan-headed households, some pastoralists, the disabled, those living with AIDS, displaced people, and refugees (Box 2). During the period of growth, women have probably gained proportionally less than men (Government of Uganda, 1999b).

Table 2.

Inequality in Uganda, 1992/93–1996/97 1/

article image
Source: Appleton, Emwanu, Kagugube, and Muwonge (1999).

Fiscal year begins in July.

Nature of Poverty in Uganda1

A sample of priorities, as expressed by poor communities in recent surveys, are the following:

  • Improving security—persistent insecurity leads to helplessness, powerlessness, and marginalization.

  • Improving access to clean water—use of contaminated water has a negative impact on health and decreases women’s productivity and children’s education, owing to increased time spent collecting water.

  • Eliminating corruption, which undermines effective service-delivery.

  • Overcoming lack of access to, and information on, markets; these problems can be exacerbated by existing economic inequalities.

  • Improving inadequate road and transport systems.

  • Addressing the lack of control over fertility, which leads to large family size.

  • Addressing the lack of food and poor nutrition.

Who are the poor? According to the survey, the poor are more likely to be

  • widows, orphans, those living with HIV/AIDS, disabled, and refugees;

  • living in rural areas than urban areas;

  • living in the north;

  • dependent on smallholder farming and production of food crops;

  • vulnerable to risks—the most common being bad harvest, drought, illness and death in family; and

  • socially and politically excluded, leading to disempowerment.

The most salient characteristics of poor households are the following:

  • Head of household is not employed.

  • Many dependents make limited financial contributions.

  • Social network of support is less developed or eroded.

  • Households lack access to land and inputs for primary production.

  • Households cannot afford basic services.

  • Households dependent on remittances.

The following traits characterize poor communities:

  • lack of adequate basic services within the community;

  • lack of productive assets and livelihood opportunities;

  • lack of social unity;

  • Physical isolation; and

  • Location in conflict or insecure areas.

1/ This box integrates IHS and UPPAP data.

C. Trends in Welfare Indicators

9. The rapid economic growth and the consequent fall in the incidence of poverty, as indicated by the household surveys, are impressive. Most welfare indicators show a slight improvement during the 1990s (Table 3), with the exception of life expectancy at birth.

Table 3.

Nonmonetary Poverty Indicators

article image
Source: Government of Uganda (1999b).

10. Yet despite this growth and the increased expenditure on health and education, welfare indicators remain low. Uganda ranks lower on the 1998 Human Development Index (HDI) than all of its neighbors. Life expectancy dropped dramatically from 44.9 years in the 1995 HDI to 40.5 years in the 1998 HDI (owing mainly to the prevalence of HIV/AIDS); the number of orphaned children increased (those with both parents dead increased from 12 percent in the late 1980s/early 1990s to 13 percent in 1995); 38 percent of children under 4 years of age are stunted; there has been a deterioration in short-run nutrition (wasting) among the poorest quintiles; under-5 mortality (156 deaths for every 1,000 live births in the 1991–95 period) is roughly 75 percent higher than the average for low-income countries; and the maternal mortality rate is one of the highest in the world (Goetz and Jenkins, 1998).

11. Cost of health services, distance to health facilities, and quality of health care are reported in the 1999 UPPAP as barriers for poor people’s access to health care. While private sector facilities are increasing, there are few new government health facilities, access is unevenly distributed across the country, and many informal charges are demanded (Ablo and Reinikka, 1998). Further, National Household Survey data on utilization rates show that 51 percent of Ugandans do not seek medical attention when they are ill (Government of Uganda, 1999b). Women and children are usually the most adversely affected by the cost of health treatment, and immunization rates have worsened, owing to initial difficulties encountered in the decentralization process. Just under 10 percent of the population is estimated to be infected with HIV/AIDS. In many urban areas, infection appears to have peaked, but in rural areas rates are still on the increase (Government of Uganda, 1999b). In the health sector, long-term institutional decline and a demoralized staff are major problems (World Bank, 1997).

12. Illiteracy rates in Uganda remain high: 38 percent for the overall population and 50 percent for women (World Bank, 1997). Private costs of primary education were as high as 13 percent of total expenditure for the bottom quintile prior to the introduction of the Universal Primary Education (UPE) program (World Bank, 1997). Ablo and Reinikka (1998) report that between 1991 and 1995, parents’ contributions continued to increase in real terms despite higher government spending (less than 30 percent of intended nonsalary public spending reached the schools).4 In 1997, the government introduced the UPE program, and net primary school enrollments have rapidly increased. However, concern over the declining quality and high costs of education is increasing.

D. Risk, Vulnerability, and Coping Mechanisms

13. Recent data from Uganda indicate that levels of poverty can increase sharply in the presence of shocks to income-earning capacity. When individuals, households, and communities experience shock, assets are sold, making them more vulnerable and putting them at higher risk to future shocks. For example, in Uganda, many people reported selling assets to pay for health treatment. Vulnerability is therefore closely linked to assets ownership and reflects the process whereby people move in and out of poverty in response to shocks. In Uganda, such shocks include changes in climate (e.g., droughts); economic shocks (e.g., increased unemployment in some sectors); social shocks (e.g., increased crime, domestic violence—leaving women vulnerable and disempowered—HIV/AIDS, and poor health in general); or, political (conflict) factors.

14. Women are a particularly vulnerable group. They carry out 70–80 per cent of the agricultural work in Uganda, but it is often the men who control the income from the sale of crops. A common complaint from the UPPAP was that men spent cash income on alcohol at the expense of household necessities (Government of Uganda, 1999b). A few reports indicate that increased coffee production may not have been the result of new planting or improved techniques, but of intensified use of domestic labor, usually that of women working on old coffee trees (Goetz and Jenkins, 1998). These reports have two possible implications: first, family food security may be reduced where women are forced to spend less time growing food crops (where they control the cash); and second, by working longer hours in growing coffee, women’s ability to respond to new opportunities, where they have control, may be more limited.

15. Where men’s participation has increased, the selling of food crops has resulted in more food security. But it has also resulted in more food insecurity where women’s labor has been withdrawn and their control over such crops taken over by men. For example, maize has shifted from a food crop to a cash crop, as men have taken control of production (and cash income) from women (Government of Uganda, 1999b). The UPPAP reported that some communities are experiencing a “hungry season,” with yields falling because of supply-side constraints, crop diseases, declining soil fertility, and lack of extension services. During this time, households may again sell their assets.

16. The UPPAP reports that poor people throughout Uganda view the basic security of life and livelihood as a precondition to any progress, with different kinds of persistent insecurity (theft, cattle raiding, banditry, insurgency, and rebel activity) as the most important factor keeping people in extreme poverty. The government states that insecurity is now the most fundamental poverty issue in Uganda, and, in order to reduce vulnerability, security needs to be provided—through secure livelihoods for individuals and prevention of conflict at the national level (Government of Uganda, 1999b). The UPPAP further reports that poor people’s vulnerability is also affected by corruption, which undermines the effective delivery of services; lack of access to clean water; lack of access to information on prices and alternative markets; inadequate roads and transportation systems; and lack of control over fertility, which leads to large family size.

17. In general, when coping with shock, households will often depend upon social capital (defined here as trust, reciprocity, and networks of support). The impact of a shock on households and communities can be both positive and negative. In some communities, a time of crisis may strengthen social cohesion and may even generate new relations that improve overall social capital, as poor communities find resourceful ways of overcoming their problems. However, in Uganda, the increasing prevalence of HIV/AIDS has weakened already strained networks of support by demanding more limited resources and time for care, and has contributed to worsening the conditions of the poor. Low incomes, limited access to social services, eroded networks of support and insecurity all contribute toward feelings of vulnerability and exclusion from the development process on the part of poor people.

E. Macroeconomic Policies, Growth, Structural Reform, and Poverty

18. Adjustment programs use a range of macroeconomic policies to correct domestic and external imbalances and to create conditions for growth in a stable macroeconomic environment. Structural reforms complement macroeconomic policies, improving the quality of macroeconomic adjustment and making it more durable. Consequently, poverty is likely to be reduced during adjustment programs in several ways. First, confidence in domestic policies stimulates capital inflows (including the return of flight capital), thereby increasing investment and growth. Second, low inflation benefits the poor by reducing the erosion of the real value of their assets. Although subsistence agriculture buffers the poor from market forces, market prices matter because the poor still must buy some of the goods they consume. Third, maintaining a competitive exchange rate has a positive impact on the income of households producing tradable goods. Fourth, while generating a positive supply response, improvements in price incentives induce the better-off rural households to employ more poor workers and/or purchase their products (World Bank, 1993).

19. In the case of Uganda, the fall in poverty in the 1990s is explained mainly by broad-based growth, which increased the incomes of most sectors of the society (Appleton, Emwanu, Kagugube, and Muwonge, 1999). Several factors contributed to sustaining high real growth in the economy. First, following the end of the civil war in 1986, fast growth was facilitated by the return of peace and security in many agricultural regions. Second, the liberalization of prices and trade in the domestic market further enhanced growth by boosting domestic agriculture. Third, the liberalization of the foreign exchange, payments, and trade system led to the diversification of Uganda’s exports and to higher competitiveness of nontraditional agricultural products in external markets. Fourth, monetary restraint led to price stability, contributing to the restoration of confidence and external competitiveness. In addition, price stability ensured positive real interest rates, which, in turn, provided incentives for higher savings rates and an efficient allocation of resources by the financial system (Sharer, De Zoysa, and McDonald, 1995).

20. The uneven reduction of poverty across economic sectors and segments of the society is partly explained by the sectoral growth pattern,5 which has reflected the strategy to promote private sector exports and to enhance economic efficiency through the implementation of structural reforms. The promotion of private sector exports has relied on the maintenance of a competitive exchange rate, which required in the early stages a real depreciation. This adjustment tended to reduce the real incomes of some of the poorest Ugandans—those engaged in food crop production, which is generally nontraded and the activity in which most people work (Table 4)—and favored those involved in cash crop farming, manufacturing, and trade.

Table 4.

Occupational Distribution of the Labor Force in Uganda

(In percent of total)

article image
Source: Appleton, Emwanu, Kagugube, and Muwonge (1999).

21. Economic efficiency has been promoted by the implementation of structural reforms, such as liberalization of the coffee market, civil service reform, and the restructuring and privatization of state enterprises. The liberalization of the coffee market contributed to reducing poverty among cash crop farmers, but the reform of the civil service and public enterprises reduced the real incomes of the retrenched staff. To mitigate these negative effects, the government has relied on promoting high, broad-based economic growth through policies to increase the incomes of, and opportunities for, the poor, improve basic social services, and increase participation in local and national decision making through decentralization and institutional reform.

F. Government Response

National policies for poverty reduction

22. The government’s top priority is the alleviation of poverty, and its policies toward this end are laid out in the 1997 Poverty Eradication Action Plan (PEAP). The plan integrates poverty issues into the national development strategy instead of presenting a separate plan for the poor. The PEAP is designed to ensure that growth is sustained and that its benefits are more widely spread, thereby creating new opportunities for the poor. This plan was formulated through a wide process of consultation with donors and civil society groups. As a result, the level of national ownership is high, and poverty reduction is now a widely accepted priority for the government.

23. To highlight the poverty focus of the public expenditure program, and the dedication of the debt relief obtained under the Initiative for Heavily Indebted Poor Countries (HIPC Initiative) and other donor resources toward that end, the government established the Poverty Action Fund (PAF) in 1997. The PAF elevated the profile of the government’s poverty-reduction program and demonstrated further its commitment to secure the funds for implementation. The PAF is a means of bringing greater transparency to Uganda’s poverty-reduction programs and to the use of donor funds. Expenditure programs cover rural feeder roads, agricultural extension, primary education, primary health care, and water and sanitation. A total of U Sh 83 billion was mobilized and spent on programs in the PAF in year 1998/99. U Sh 45 billion came from the cash-flow savings resulting from the multilateral debt relief granted under the HIPC Initiative, and U Sh 38 billion was additional donor budget support.

24. Through the PAF, the government has made the information on its poverty program publicly available to enhance accountability and transparency. All PAF resources are published in the media. Lower levels of government (districts, schools, and health care centers) are supposed to display PAF allocations in public places. To enhance transparency, meetings comprising civil society groups, local and central government, and media are convened every quarter to provide independent assessments of PAF expenditures. Through this process, civil society has for the first time entered into a dialogue with government over budget decisions.

25. In the health and education services, public expenditures have risen substantially, more than doubling in real per capita terms over the period during which Uganda has had Enhanced Structural Adjustment Facility (ESAF) arrangements with the Fund (Table 5 and Figure 1). Measured in constant 1990/91 Uganda shillings, per capita expenditures on education rose from U Sh 1,475 in 1988/89—the year before the start of Uganda’s first ESAF arrangement—to U Sh 3,694 in 1997/98. Meanwhile, per capita expenditures on health rose from U Sh 515 in 1988/89 to U Sh 1,215 in 1997/98.

Table 5.

Uganda: Health and Education Expenditure Indicators, 1988/89–1997/98 1/

article image
Sources: Ugandan authorities; and Fund staff estimates.

Fiscal year begins in July.

Figure 1:
Figure 1:

Uganda. Real, Per Capita Health and Education Expenditures, 1988/89–1997/98 1/

(In Uganda shillings)

Citation: IMF Staff Country Reports 1999, 116; 10.5089/9781451838633.002.A001

1/ Fiscal year July–June.

26. The evolution of social spending can be analyzed in terms of the changes in real per capita expenditures on health and education, which can be attributed to four factors: (1) changes in the health and education shares of total expenditures; (2) changes in the ratio of total public expenditures to GDP; (3) real per capita GDP growth; and (4) changes in relative prices—that is, changes in the prices of health and education goods and services relative to the changes in the prices of all goods and services.6 From 1988/89 to 1997/98, these factors evolved as follows: the share in total expenditures increased from 10.0 percent to 16.6 percent for education, and from 2.6 percent to 4.3 percent for health; the ratio of total expenditure to GDP rose from 10.7 percent to 17.5 percent of GDP; real GDP per capita rose by 29.3 percent; and, relative to the overall GDP deflator, the health sector deflator rose by 45 percent, while the education sector deflator increased by 39 percent. Thus, all the factors identified above, except relative prices, moved in a way that would cause real per capita social expenditures to rise.

27. A decomposition of the changes in real per capita social expenditures into components shows that the overall increase in the level of social spending has resulted equally from two factors, namely, an improvement in the composition of expenditures toward social outlays and a broad increase in government expenditures as a share of GDP (Table 6). These results indicate that the increase in real per capita spending is eminently the result of policy choices. The positive effect of the increase in GDP per capita, however, is outweighed by the negative effect of the increase in the relative prices of the health and education sectors.

Table 6.

Uganda: Changes in Per Capita Health and Education Expenditure, 1988/89–1996/97

(In constant 1991 Uganda shillings)

article image
Source: Derived from data provided by the Uganda authorities.

Fiscal year June–July. Change in each fiscal year is measured as the change over the preceding fiscal year.

28. However, an increase in real per capita public resources devoted to health and education expenditures does not necessarily translate into improvements in the impact of social spending.7 The latter depends on the effectiveness and efficiency of spending, including the share of resources devoted to primary education and basic health care. In this context, there is some evidence that, at least in the period 1990–95, public funding for social spending in Uganda did not reach the intended beneficiaries, and, hence, health and education outcomes did not increase as much as the increase in spending would have suggested (Ablo and Reinikka, 1998). However, since then the government has implemented the UPE Program, the PEAP, the PAF, and several initiatives to improve the effectiveness of its spending, including through decentralization and enhanced expenditure monitoring.

Promoting broad-based growth

Increasing incomes of the poor

29. The PEAP seeks to increase incomes of the poor. Because the poor are mostly concentrated in rural areas, the government seeks to facilitate the production of traded crops among subsistence farmers, ensure adequate access to land and rural credit, and enable durable empowerment of women—particularly those working in agriculture (Box 3). In addition, the economic program seeks to reduce inequality among regions.

Policies to Promote the Empowerment of Women

The government is concerned about the empowerment of women, recognizing that women remain excluded from many development opportunities. Uganda is a regional leader on affirmative action to promote women’s political participation (World Bank, 1997). In national and local elections, seats have been reserved for women, and the number of women in parliament has risen. The government has also incorporated gender equality into national legal frameworks. Through the Universal Primary Education (UPE) Program, the government aims to reduce female illiteracy.

Household surveys show that women-headed households are not necessarily the poorest. But the status of women is not just a function of headship of a household, and many women remain poor in male-headed households. Female-headed households may be better off in the respect that they have control over assets and decision making, but some may be worse off where they have less access to assets. The picture is diverse, and patterns of disadvantage for women and girls persist irrespective of the gender of the household head (Blackden and Bhanu, 1999). Therefore, for policymakers, the gender of a household head is not an effective criteria for poverty targeting.

Structural inequalities—economic, social, and political—mean that women continue to be disadvantaged in many ways, including with regard to control of resources (e.g., men control the income from the sale of cash crops); access to assets (e.g., labor, financial service, and land1); enrollment rates for girls; access to health care; control over fertility; and legal and customary status.

1/ Land is usually inherited by males, and the law does not provide for ownership rights for widows, abandoned wives, or women in common-law unions

30. Expecting that subsistence farmers producing nontraded food crops will start producing for the market, the poverty plan focuses on constructing and improving main and rural feeder roads, and modernizing agricultural methods. Furthermore, because the poorest people do not own land, the Land Act, enacted in 1998, aims to provide security of tenure to the majority of smallholders by converting usufruct rights to ownership or by regularizing tenancy rights.8 Moreover, to ensure adequate provision of rural credit and financial services, the government is implementing measures to strengthen the financial sector, and a number of microfinance institutions are supporting local savings and credit associations or nongovernmental organizations undertaking credit activities. In this regard, the government is finalizing a policy framework for the development of micro- and rural financing, and drafting legislation on microfinancing. In addition, to reduce inequality among regions, the government is establishing in 1999/2000 an equalization grant to be distributed among the five poorest districts.

Increasing access to, and quality of, social services

31. The government seeks to improve the services provided to the poor by increasing public social expenditures, and promoting decentralization and good governance (see subsection below). The public social expenditure program is the key instrument used by the government to reduce poverty. Since 1995/96, government expenditures in the areas of education and health, and roads and agriculture have increased more rapidly than total expenditures or GDP (Table 7). This trend in social expenditures was boosted by the creation of the PAF.

Table 7.

Social Expenditures, 1995/96–1998/99 1/

article image

Fiscal year begins in July. Total expenditures include externally financed development expenditures; components do not.

Including nonwage outlays and also the Universal Primary Education component of domestic development expenditures.

32. The economic program will continue to enhance the poor’s access to education, clean water, and health care, including reproductive health services. The UPE remains the government’s priority in the education sector; in 1999/2000, the authorities expect that the net primary education enrollment rate and the primary school completion rate will reach 97 percent and 50 percent, respectively. Regarding water and sanitation, the government will complete several piped water supply systems in rural areas and finish ongoing construction of boreholes, protected springs, shallow wells, and gravity flow schemes. As a result, the number of people with access to safe drinking water—as a proportion of total population in rural areas—is expected to increase from 45 percent in 1998/99 to 50 percent in 1999/2000. Finally, the government is increasing primary health care resources to districts to reverse the decline in primary health care indicators, and local governments are expected to ensure adequate provisions in their budgets for hiring competent staff in health centers. The government is also committed to continuing education on the subjects of HIV and AIDS, a policy that has already been successful, as evidenced by the decrease in incidence of HIV/AIDS cases in recent years (Table 8).

Table 8.

HIV Infection Rates in Antenatal Clinic Attendees, 1991–97

article image
Source: Government of Uganda (1999b).

Decentralization and governance

33. Decentralization is expected to improve the services provided to the poor by increasing transparency and accountability in the use of public funds, and the capacity of local communities to mobilize, plan, and manage their resources. Overall, decentralization has encouraged increased participation at the district level and a lower level of democracy is evolving. There are reports that key institutions, such as the police and civil service, are becoming more effective (United Kingdom Department for International Development, 1999). However, financial decentralization, which followed political and administrative decentralization, has encountered several problems, such as the inadequacy of locally generated revenues, the inexperience of local officials, an undeveloped system of public accounting, and a poorly informed citizenry. Because of these problems, financial decentralization has been implemented gradually. Districts receive both unconditional and conditional grants from the center. Conditional grants tend to lead to a pattern of local expenditures that has a strong focus on poverty, but is inflexible in response to the specific problems and preferences of the different communities. Therefore, as decentralization progresses and budgeting procedures are strengthened, conditional grants are expected to be phased out, enabling local governments to tailor antipoverty expenditures to district priorities (Government of Uganda, 1999b).

34. The poor will benefit from the protection of human rights, administration of law and justice, transparency and accountability in delivery of services, and the promotion of good governance. A recent trend in Uganda had been the creation of a more open political environment at the national and district levels. This new environment increased transparency and, as a result, encouraged the participation of those who were previously excluded from the development process. For example, civil society involvement in civil, political, and women’s rights is increasing; the media and parliament feel more free to comment on government policies; and civil society participation in assessing services delivery at the community level in relation to the PAF and the PEAP has been actively encouraged. Freedom of the press and of associations has increased the public debate and critique of government policies (Goetz and Jenkins, 1998).

35. Several steps have been taken during the 1990s to improve public awareness of human and civil rights,9 but consciousness is still absent among the illiterate and the poor. There are few human rights nongovernmental organizations in rural Uganda, and there are no membership organizations or pressure groups in urban centers. Regarding the administration of law and justice, progress has been limited. Different levels of the judiciary system suffer from operational constraints, such as lack of staff, and a lack of access for the poor to legal advice and defense. In addition, many outdated laws need to be reformed to make them consistent with the Constitution (Government of Uganda, 1999b).

36. On the issue of transparency, the government is aware that corruption is undermining the effective delivery of services and, in December 1998, publicly announced its anticorruption action plan. Notable progress has been achieved in meeting the objectives of the short-term action plan (December 1998–June 1999), and progress is expected to continue in the medium term. Corruption is now discussed widely at the national level, where the impact of corruption on services delivery and the proportion of government expenditure reaching communities are debated. Furthermore, to increase transparency, the government recently strengthened the Office of the Inspectorate General and set up regional offices to enable the Inspectorate to identify the misuse of public funds. The findings of the Inspectorate’s report in 1998 identified petty corruption, particularly in police, judiciary, and health services, as the main sources of misuse (Goetz and Jenkins, 1998). These findings were also reflected in the UPPAP, which identified corruption at the central level as a major factor affecting poverty; activities of the police and health workers were singled out as being the least transparent.

G. Conclusion

37. Uganda’s economic growth is impressive, and, during the 1990s, poverty has declined. The cornerstone of the government’s poverty eradication strategy has been the maintenance of sound macroeconomic policies, complemented by structural reforms and a public expenditure program that is increasingly focused on poverty reduction. But this rapid growth should be put in context. First, Uganda is a post-conflict country, and its recovery started from a low base. Second, while economic growth is an important contributor to poverty reduction, growth alone will not ensure that all social groups will benefit. There are increasing concerns about how growth can now be sustained, where it will come from, who will benefit, and how it will be distributed. The extent to which the poor may derive income from future growing sectors and whether they enter such sectors remain unclear. Third, despite rapid growth and increased expenditure on health and education, welfare indicators remain low. Fourth, persistent insecurity and vulnerability continue to undermine rehabilitation and development.

38. Therefore, to help ensure that all segments of society are able to participate in Uganda’s growth, the government has designed policies to increase incomes of the poor and to improve the services provided to them. In particular, expecting that subsistence farmers will start to produce traded crops, the poverty plan focuses on rural roads and the modernization of agricultural methods. Furthermore, the government is promoting good governance and decentralization, and is increasing the provision of basic social services, such as education, clean water, and health care. In recent years, the government has also focused on creating a more open political environment at the national and district levels, encouraging greater transparency and accountability.


  • Ablo, E.Y., and Ritva Reinikka, 1998, “Do Budgets Really Matter? Evidence from Public Spending on Education and Health in Uganda,World Bank Policy Research Working Paper No. 1926 (Washington: World Bank)

    • Search Google Scholar
    • Export Citation
  • Appleton, Simon, Tom Emwanu, Johnson Kagugube, and James Muwonge, 1999, “Changes in Poverty and Inequality,Assessing an African Success: Firms, Farms and Government in Uganda’s Recovery, ed. By Paul Collier and Ritva Reinikka (Washington: World Bank; forthcoming).

    • Search Google Scholar
    • Export Citation
  • Blackden, C. Mark, and Chitra Bhanu, 1999, Gender, Growth, and Poverty Reduction: Special Program of Assistance for Africa, 1998 Status Report on Poverty in Sub-Saharan Africa, World Bank Technical Paper No. 428 (Washington: World Bank).

    • Search Google Scholar
    • Export Citation
  • Calamitsis, Evangelos A., Anupam Basu and Dhaneshwar Ghura, 1999, “Adjustment and Growth in Sub-Saharan Africa,IMF Working Paper 99/51 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Goetz, Anne Marie, and Rhys Jenkins, 1998, “Creating a Framework for Reducing Poverty: Institutional and Process Issues in National Poverty Policy,Uganda Country Report (unpublished; Brighton, England: Institute for Development Studies).

    • Search Google Scholar
    • Export Citation
  • Government of Uganda, 1999a, Background to the Budget 1999/2000 (Kampala, Uganda: Ministry of Finance, Planning and Economic Development).

    • Search Google Scholar
    • Export Citation
  • Government of Uganda, 1999b, Uganda Poverty Status Report (Kampala, Uganda: Ministry of Finance, Planning and Economic Development).

  • International Monetary Fund, 1998a, External Evaluation of the ESAF: Report by a Group of Independent Experts (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • International Monetary Fund, 1998b, Uganda—Selected Issues and Statistical Appendix, IMF Staff Country Report No. 98 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • Sharer, Robert, Hema R. De Zoysa, and Calvin McDonald, 1995, Uganda: Adjustment with Growth, 1987–94, IMF Occasional Paper No. 121 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation
  • United Kingdom Department for International Development, 1999, Uganda Country Strategy Paper (London: United Kingdom Department for International Development).

    • Search Google Scholar
    • Export Citation
  • World Bank, 1997, Uganda Strategy (Washington: World Bank)

  • World Bank, 1993, Adjustment in Africa: Reforms, Results, and the Road Ahead (Oxford: Oxford University Press for the World Bank).


This chapter was prepared by Alejandro Lopez-Mejia, Mwanza Nkusu, Caroline Robb, and Edgardo Ruggiero. It draws heavily on studies prepared by World Bank staff and the Ugandan authorities.


The Gini coefficient is a measure of inequality derived from the Lorenz curve. The closer the Gini coefficient is to zero, the more equal are incomes; the closer it is to one, the more unequal are incomes.


The poverty line approach uses data on household consumption to estimate the proportion of people who are unable to meet the cost of basic needs. This approach does not capture important dimensions of poverty, such as access to education, civil liberties, freedom from discrimination, and people’s ability to live long and healthy lives.


A survey of 19 districts, covering 250 government-aided primary schools and close to 100 health clinics, was carried out in 1996, covering the period 1991–95.


In the short term, the uneven reduction of poverty has also been determined by climatic factors because they influence growth in the agricultural sector—and most people work in the agricultural sector. Consequently, the rural sector and the poorer segments of the society were the most affected by El Nino in 1996/97 and 1997/98. Still, with the improvement of weather conditions in 1998/99, the poor benefited most because economic recovery was primarily due to food crops.


This background paper uses the methodology presented in Section V of International Monetary Fund (1998b) to decompose the changes in per capita social spending. It also updates the earlier findings. As in the earlier background paper, data on health and education spending include only current spending.


Furthermore, a note of caution must be sounded about the reliability and comparability of the data series. For example, there are doubts about the sector deflators used for health and education. The data on education and health outlays are partly based on cash releases from the budget, and it is not always possible to track how they are spent, especially at the district level. Moreover, information is not available on the education and health components of externally funded development expenditures.


However, the financial cost of implementing the Land Act appears to be unaffordable at present; the cost is close to the amount spent on health services (Government of Uganda, 1999a)


Such as the creation of the Commission of Inquiry into Violations of Human Rights (1986–94), the consolidation of an independent mass communications media, the creation of the Uganda Human Rights Commission (1996), the ratification of the new Constitution, the holding of regular elections, and the enaction of the Children’s Statute (1996), which promotes the protection of children’s rights.