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AfricaMay 1 2006

Prudent powermonger

Does Ugandan president Yoweri Museveni’s ballot victory in a contested election forebode a creeping reversal of Uganda’s progress or is he still the best man for the job? James Eedes reports.
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Early in April, the Ugandan Supreme Court rejected an opposition challenge to President Yoweri Museveni’s re-election in the February 23 presidential ballot. The opposition Freedom for Democratic Change had challenged the outcome of the ballot, in which Mr Museveni defeated its candidate Kizza Besigye by 59% to 37%. The court ruling closed the chapter on the election saga but added to fears that Mr Museveni’s ominously dictatorial grip on power portends a gloomy future for the country.

Uganda’s alarming slide towards autocracy has gathered pace in the past two years as Mr Museveni’s loyalists manoeuvred to amend the constitution to permit him to stand for a third term. Despite local and international condemnation, with a number of European donors cutting aid to the country, the constitution was changed last year. Mr Museveni’s anti-democratic sensibilities have long been established and he has persistently resisted multi-party politics, always under the cover of avoiding ethnic tensions, which have historically been the cause of hostilities in the country. He has been in power since 1986.

Hampered opposition

Despite changes to electoral laws that allowed opposition party campaigning for the first time during this year’s election, Mr Besigye’s campaign was hampered by dubious charges of treason and rape levelled against him by government prosecutors. The army wanted to try him for terrorism and weapons charges, which have since been dismissed. EU election observers noted the use of state assets to support Mr Museveni’s bid.

Mr Museveni’s critics highlight a worrying pattern of political meddling. He intervened in a recent privatisation deal to sell a sugar company; and investors in a new hotel development in Kampala are alleged to have received free land and generous tax incentives.

Despite the criticisms, Uganda’s economy remains strong. Gross domestic product growth could be higher than 5% this year and inflation remains manageable. Last month, the Uganda Investment Authority (UIA) announced a 47% increase in the number of investment proposals licensed in 2005, adding that 2006 had begun positively with investment deals signed for several hotels, a power project and a cement factory.

Focused fiscal policies

In line with the current budget and the Medium-Term Economic Framework, the government’s fiscal policies are focused on addressing domestic arrears and ensuring adequate fiscal space for critical infrastructure spending. Monetary policies will target non-food inflation of 5% or less and maintain ample international reserves in the context of a flexible exchange rate regime.

Macroeconomic stability has been a cornerstone of Uganda’s reform efforts. Fiscal restraint, coupled with prudent monetary management, have supported the country’s robust growth and helped to contain inflation to single-digit levels during most of the past decade. In recent years, these policies have contributed to a very comfortable level of international reserves.

The implementation of Uganda’s Poverty Eradication Action Plan has improved living conditions, although per capita income gains have been modest because of the high population growth rate. Uganda has also completed most of the structural reforms it initially planned and has begun to tackle the next layer of reforms, which addresses the business environment. Much of this success is attributed to Mr Museveni.

However, Uganda faces a number of challenges in the medium term. According to the IMF, economic growth needs to increase to at least 7% to provide for a substantial reduction in poverty and to achieve the Millennium Development Goals. This will require continued policies aimed at macroeconomic and debt sustainability, new electric power generation capacity and second-generation reforms to promote private sector activity.

In January, the IMF completed the final review of Uganda’s economic performance under the three-year Poverty Reduction and Growth Facility. It is a glowing account of success. “Prudent monetary and fiscal policies, complemented by large external inflows, have contributed to higher growth and broad price stability, setting the stage for increased investments in health, education and physical infrastructure, and improved living standards for Uganda’s fast-growing population,” it noted.

In letters of intent to the IMF, Uganda’s policy makers have committed to a medium-term structural agenda that aims to foster private sector growth and will include anti-corruption policies, infrastructure development and trade enhancement. Specific reforms will include increasing electric power generation, removing regional transport and trading obstacles, deepening financial sector services and improving government services to businesses.

Economic prudence

So, despite his illiberal sensibilities, Mr Museveni is still preaching economic prudence. Proof that he has not yet taken his eye off the ball was the recent announcement of a timetable for the Bujagali Dam power project, with generating capacity to come on stream in 2010.

The hydro-electricity project is expected to generate 250 megawatts, crucial to meeting Uganda’s growing energy demand. To his credit, Mr Museveni recognised the urgency of the project and secured funding assistance from the World Bank and IPS, a firm belonging to the Aga Khan Group.

For now, Mr Museveni’s apparent addiction to power poses little risk to investors; in fact, he may be still be the best person to serve their interests. Africa’s history of dictators who are unwilling to give up power is bleak, though, and Mr Museveni must be watched warily.

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