Policy Instruments to Enable Inclusive Growth

Transcription

1 Policy Instruments to Enable Inclusive Growth Questions, Challenges and Lessons from Uganda Presentation made at ODI Conference Godfrey Bahiigwa PMA Secretariat February 12, 2009

2 Structure of Presentation Questions about Growth and Equity y( (G&E) Background information on Uganda Challenges of achieving G&E Impact and implications of the GFC Searching for policy options for G&E

3 Questions on G&E Issues of G&E existed pre global financial crisis. So why mix the three complex subjects? Can/shouldG&Ebe pursued concurrently in developing countries? In pursuit of growth, is it possible to target interventions without exclusion? How far do you go to involve the poor in setting the development agenda? What lessons do we learn from the history of transformed societies?

4 Background information on Uganda GDP growth averaged 6.5 percent in the 1990s GDP growth slowed down in early 2000s peak of benefits of policy reforms High population growth at 3.4% pa, 50% of population below 15 years Uganda s population is largely rural (85%) dependent on agriculture for employment Agriculture s share in GDP has declined to g 21%, but 71 % of labor force in agriculture

5 Uganda s Development/Planning Framework k The Poverty Eradication Action Plan (PEAP) was first formulated in 1997 The PEAP preceded the WB/IMF PRSPs PRSPs came into play in 1999 PEAP revised and its summary accepted in March 2000 as Uganda s PRSP PEAP revised again in 2004, technically ended in June 2008, extended for FY 2008/09 A new 5 year National Development Plan (NDP) is under formulation, to be ready for FY 2009/10

6 Poverty and Inequality Trends in Uganda National Rural Urban Central Western Eastern Northern Gini coefficients National

7 Current Development Targets Sustaining GDP growth at 7 8 percent annual growth rate Attaining 5 6 percent annual growth rate for agricultural lsector Maintaining low inflation rate in single digits (5% target)

8 Challenges Related to G&E Identifying policies that will bring about broad based economic growth Strategies to address regional disparities in poverty incidence (especiallynorthernuganda) Capacity to implement development strategies in a decentralized system of government Limited financial capacity to address critical development priorities Achieving consensus with development partners on priority areas and implementation modalities

9 Impact of the Global Financial Crisis High inflation rate (14%) due to high oil prices that increase transaction costs Depreciation of the Uganda shilling (15%) sincefebr February 2008 => imported inputs expensive => manufacturing affected Reduced revenue collection by Uganda Revenue Authority due to reduced private sector activity Reduced inflows (ODA, FDI, remittances)

10 Implications of the Global Financial Crisis Reduced investments by both the private and public sectors => slower economic growth GDP growth rate for FY 2008/09 has been revised from 9% to 5% Job losses from companies scaling down or closing (GTV closed last week in 22 African countries including Uganda) Reduced ability by government to invest in areas that can reduce regional disparities Increased vulnerability for households dependent on remittances from abroad

11 Contentious issues in moving forward (1) Shift in development paradigm: emerged from political leadership Poverty reduction vs wealth creation Poverty reduction is passive Wealth creation is pro active Political leadership has chosen wealth creation (Prosperityfor All) Mainstream government (civil servants) and donors stuck to poverty reduction

12 Contentious issues in moving forward (2) Rural development agenda: Rural development most contentious PMA has been in place since 2000 it is a rural development strategy PMA is pro reform, clear roles of the state A new rural development strategy (RDS) introduced in 2005 RDS is more interventionist ti i t( (co operatives, microfinance, farmer support) Prosperity p y for All (PFA) introduced during 2006 Presidential campaigns has elements of both the PMA and RDS Net tresult: development partners unhappy with policy shifts; funding could be affected; unholy alliances could emerge

13 Contentious issues in moving forward (3) How far do you go in trying to get poor people involved/included in the development agenda? The NAADS example in Uganda is quite interesting Farmers select three commodities at sub county level every financial year for support A mapping of these commodity choices across the country revealed results that contradict the logic behind agricultural production zones None of the commodities od has made a breakthrough in terms of agro processing or exports. Donors happy to continue supporting NAADS with this model

14 NAADS Enterprises (July 2008)

15 Agricultural Production Zones