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Investment for the future

Not surprisingly, as Uganda's GDP declined during the late 1970s - early 1980s, total investment declined along with it (see Table 6.5, last column). Actually, the decline in investment preceded the decline in GDP by several years, as foreign ethnic groups, particularly the East African Indians, ceased to maintain their assets in Uganda. Fearing nationalization in general, and expropriation in particular, private entrepreneurs avoided making any investment. From a normal value of approximately 14 per cent, investment as a percentage of GDP fell to half that value in 1975, and to even less than that for the succeeding six years. It was only in 1982 that investment increased again, but only to two-thirds of its former value. By 1987, gross investment had reached approximately 12 per cent of GDP, at which value it has more or less remained. Although only 50 per cent of GDP invested by its neighbour Kenya, Uganda's rate of investment is still equal to that of most of the African economies at the same level of GDP per capita. Given the great stress under which the economy has existed for the last generation, Uganda's current ability to invest in capital goods must be considered satisfactory.

Table 6.3 Uganda: share of GDP by sector 1971-1991

Sources:
1971-1991: World Bank, World Tables 1991, 1993

Table 6.4 Uganda: central government expenditures, total and percentages by Ministry 1977-1990

Sources:
1977-986: World Bank, World Tables, 1991, 1993
1987-1990: Government of Uganda, Ministry of Finance, Financial Statement of Revenue and Expenditure, 1988/9 through 1991/2

The division of gross investment between that carried out in the public sector and that in the private sector is not known. It appears that the bulk of investment is made within the public sector, although, again, the distribution between government establishments and para-statals is not known. In the government's budget, relatively large amounts are allocated to restoring the infrastructure: roads, bridges, ports and airports, and communications all require extensive rehabilitation.

Where foreign debt, and its servicing, is concerned, Uganda is probably in a worse position than the other three countries in our sample. It may be that Uganda's outstanding level of debt, vis-à-vis its economic potential, is relatively low; but, although Uganda's total foreign debt had not exceeded 45 per cent of GNP before 1986 (see Table 6.7), in subsequent years it has risen to equal one-year's GDP (compare total external debt in Table 6.6 with GDP in US dollars in Table 6.1), higher than both Ghana's and Kenya's. A re-negotiation of the interest rates on Uganda's foreign obligations did lead to a fall between 1985 and 1986 of Uganda's servicing charges. The figures in the last two columns of Table 6.7 show that debt servicing both as a percentage of GDP and as a percentage of total export earnings fell by more than half between those two years. So far as the latter ratio is concerned, Uganda's servicing charges as a fraction of the total availability of foreign exchange through exports may now be lower than those of our other three countries.

Uganda's position is worse than the other three countries, however, in respect to its obligations to the IMF and the World Bank. The figures in Table 6.7, columns 3 and 4 reveal that, in 1986 at least, more than half of the total debt outstanding is owed to the IMF and the World Bank. Uganda must repay these obligations faithfully if it is to continue having a 'seal of approval'.

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