david opiokello : overview of economic achievements in uganda farewell speech by mr david opiokello, acting deputy governor of the bank of uganda, in honour of mr peter allum, imf senior resident representative in uganda, kampala, 5 july 2006. * * * mr. peter allum, the outgoing imf senior resident representative in uganda distinguished guests staff of the bank of uganda ladies and gentlemen on behalf of the governor, the board, management and staff of the bank of uganda, it is my pleasure to welcome you all to this function. this occasion was organised to pay special tribute to mr peter allum as he prepares to return to washington. as you may be aware the bank of uganda has had the privilege of working very closely with him over the last three years or so. before making specific remarks about mr. allum ’ s contribution towards uganda ’ s recent economic developments, let me first reflect and remind ourselves of some of the important economic achievements made in the past several years. as you all know, with the support of development partners, uganda undertook a major economic reform program aimed at creating sustainable economic stability, growth, and prosperity for all through poverty eradication in the late 80s and nineties. in these first round of reforms, which occurred between 1987 and 1999, the country underwent numerous adjustment measures. these measures included : • the restoration of monetary and fiscal discipline intended to establish macroeconomic stability ; • deregulation of prices designed to induce efficient allocation of resources ; • a gradual liberalisation process of the uganda ’ s foreign exchange markets intended to promote uganda ’ s competitiveness. further reforms were undertaken to transform public and private enterprise activities, and the domestic financial system, in order to meet national objectives of improved productive efficiency and increased resource mobilisation. the combination of the above measures effectively set the foundation for further successes that have been recorded. these successes included : • growth in the size of the economy from about us $ 3 billion in the early 1990s to over us $ 9 billion now ; • increased real domestic investment. increases in the private sector foreign exchange inflows into the ugandan economy have supported the expansion in domestic investment. for instance, private transfers grew from us $ 256. 5 million in the fiscal year 2000 / 1 to us $ 650. 44 million in 2005 / 6, while foreign direct investment ( fdi ) increased from us $ 133. 4 million to us $ 263. 83 million over the same period ; • sustained price stability.

of business and technical skills, the high costs of inputs, and often volatile market conditions. the ability of these businesses to make profits consistently and thereby service loans is precarious. the problems are most acute in small holder agriculture where qualitative changes in agricultural practices are a prerequisite for farmers being able to utilise credit productively. land reform is also needed to support the transformation of agriculture in many parts of uganda. page 6 of 8 the argument that micro - loans alone can transform the fortunes of household enterprises, whether in agriculture or other sectors, is not supported by empirical evidence, either in uganda or elsewhere in africa. in addition, attitudes towards borrowing are poor throughout society ; loans meant to fund business expenses are sometimes diverted for personal expenses or speculative purposes and the culture of loan repayment is weak. until a much stronger private business sector can develop in uganda, characterised by good, modern business management, and a clear separation of business and personal interests on the part of business owners ; it will be very difficult for banks and other financial institutions to further raise the level of intermediation in uganda. to conclude, i believe that it is necessary to be realistic about what can be expected from the financial sector. the shallowness of the financial system in uganda reflects the structure of our economy much more than the deficiencies of the financial sector itself or of the institutional and regulatory environment in which it operates. page 7 of 8 in many respects – technology, productivity, levels of professionalism, the application of modern business practises – the financial sector is one of the most advanced sectors of our economy. most of the other sectors of the economy are not as advanced as the financial sector, and some lag far behind it. it is the structural problems afflicting the real sectors of our economy which provide the largest obstacle to greater use of financial services, and especially credit, in uganda. thank you for listening. page 8 of 8