Kampala- When the National Resistance Movement (NRM) took over power in 1986, they came with an ideology that was inclined towards Marxism. In other words, the ideology emphasised collectivism where government had a role in doing business by owning and managing business entities.
Birth of neoliberalism
However, that changed and NRM had to abandon Marxism for neoliberalism.
Neoliberalism is a policy model of social studies and economics that transfers control of economic factors to the private sector from the public sector or government.
The country, then, started embracing capitalist ideology and the economy became more private sector driven.
As the NRM government settled in, a group known as the International Development Research Centre of Canada (IDRC) was brought in to plan for Uganda’s economic recovery. This was at the invitation of President Museveni.
Economic reforms
According to a book, Uganda’s Economic Reforms, in a section written by current Bank of Uganda (BoU) governor, Emmanuel Tumusiime-Mutebile, “He (President Museveni) knew a number of academics associated with the IDRC who had worked in Tanzania and had reputations as liberal economists.”
The majority of the team recommended that government lifts controls on the economy. However, some members of the team who felt otherwise presented a minority report that was largely adopted.
Dr Suleiman Kiggundu, who was appointed BoU governor in 1986 was from the minority group too. All the central bank did at the time was to implement the ousted regime currency controls with the hope that it would curb inflation.
However, this did not work. Between May 1986 and May 1987, inflation rose from 120 per cent to 240 per cent.
IMF/World Bank agreement
In 1987, the International Monetary Fund (IMF) and World Bank signed an agreement with Uganda government that, in part, recommended currency reforms, devaluation of the Uganda Shilling, and other changes such as letting go of controls in the coffee and cotton sectors.
The first move was for the currency to be devalued and two zeroes were knocked off. BoU undertook this role as Uganda paced through to become a liberal economy.
Public expenditure struggles
However, still, BoU could not control inflation on its own because of public expenditure in the presence of low exports and limited government revenues.
The IMF and World Bank had also recommended some structural adjustments in the then fragile economy.
“There was considerable uncertainty and disagreement within government about how to respond to the economic problems. Central planning rhetoric continued. The ministry of Finance was not entirely committed to macroeconomic stabilisation and structural adjustment,” Mr Mutebile writes in the book.
Even more troubling, the ministry of Planning and Economic Development (MPED) did not have control over public expenditure.
Kibanda market
The economy continued to be in disarray and still for BoU, the exchange rate was firmly in the hands of the “kibanda market” (some form of black market) that they had no control over.
A crisis meeting was held in 1989, that brought together academics, politicians, and civil servants.
Their role was to chat a way forward for the country on stabilising the economy, structural adjustment and the parallel exchange rate – kibanda market.
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