By the Governor of the Bank of Uganda, at the First Economic Dialogue on the Vision 2040, Kampala, 26 August 2013.
Need for a realistic time scale The World Bank defines middle income countries in terms of Gross National Income (GNI) per capita, with a lower bound of $1,036 for lower middle income countries. Uganda’s GNI per capita was $510 in 2011. To attain the minimum threshold of $1,036 for lower middle income status, Uganda must double its GNI per capita in real terms. With real GDP growth of 7 percent and population growth of 3.2 percent, per capita incomes will grow at 3.7 percent per year. At this rate of per capita income growth, it will take 19 years for Uganda to double its real income per capita. It is, therefore, clearly not possible for Uganda to double its real income by 2017. A more realistic target would be to reach middle income status by the early 2030s. To achieve middle income status, Government needs to adopt a long term approach to economy strategy, focusing on the policies which can generate sustainable high rates of growth for the next 20 years. Uganda has established a good track record of macroeconomic management over the last two decades. It is imperative that macroeconomic stability is maintained over the long term, which means that demands for public spending must be accommodated within the available budget resource envelope so that public debt remains sustainable and does not crowd out private sector borrowing from the banking system. But macroeconomic stability is a necessary but not sufficient condition for sustainable growth over the long term. It must be combined with structural reforms which strengthen the supply side of the economy, enabling the economy to generate growth in productivity. There are three crucial areas pertinent to the supply side of the economy where Uganda needs to do much better if it is to achieve middle income status and transform the structure of its economy. These are: i) the modernization of agriculture; ii) accelerate the demographic transition and iii) raise private sector investment rates.