The Ministry of Finance, Planning and Economic Development released the Poverty Status Report (PSR) 2014 last November, which raised important issues that were not exhaustively discussed. Development Research and Training has prepared a Rejoinder to generate further discussion.
Facts about Poverty in Uganda
- Income poverty has declined from 24.5% in 2009/10 to 19.7% in 2012/13.
- Income inequality has also reduced by 7.3% over the same period.
- Multidimensional poverty has declined from 63.9% in 2001/10 to 53.8% in 2012/13.
- Poverty remains highest in Northern Uganda.
- Vulnerability (the risk that a family will slip back into poverty) is extremely high at 43.3% of the entire population.
- Subjective poverty (people’s perceptions of whether or not they are poor) also remains high at 70.2%.
Issues pointed out in the Rejoinder
- There is still a challenge in the way poverty is computed particularly the treatment of the changes in the non-food component over the year.
- The large number of Ugandans at risk of slipping into poverty (vulnerable ones) means that Uganda has been successful in reducing poverty, but not in preventing it.
- As a country we have not effectively and strategically invested in sectors that prevent poverty and limit future vulnerability such as Agriculture, high quality education and health services.
The phenomenon of increasing risk for those who escape poverty: Four out of every 10 Ugandans live just above the national poverty line but remain at risk of falling back if they lost an important member of the family or experienced another shock. To put it differently, not many Ugandans are getting sustainably rich to stay out of poverty. The reasons for this include, among others:
- Insufficient creation of employment opportunities in the economy largely as a result of binding constraints such as high costs of energy (which government is beginning to address) and capital. Also fake goods have affected investors. Furthermore local content laws are not enforced; there is low labour productivity which translates into preference for non-Ugandan workers. Also Government is not buying enough of domestically produced goods and by and large Ugandans still prefer imported goods to locally produced ones.
- Compared to our regional neighbours, Uganda’s economy is over-liberalized, particularly the banking sector. Interest rates on loans are too high ranging between 24% p.a. and 32% p.a. while interest on deposits is as low as 2.5%p.a. (the difference ought to be around 7 points, not over 20). The agriculture sector, the backbone of the economy suffers the most and many of the drivers of vulnerability cited in the PSR are agriculture related. Yet calls for an agriculture bank always fall on deaf ears.
- Uganda has failed to institute a minimum wage, having last reviewed it in 1984. Many employed Ugandans are being exploited, creating the phenomenon of ‘working poor’.
Investing in sectors that prevent poverty and reduce vulnerability
Clearly Uganda has been successful in reducing poverty but less so in preventing it. Here, the Biblical saying is apt: “You reap what you sow. If you sow sparingly, you reap sparingly…” We have been sowing sparingly when it comes to agriculture and nutrition among children or are not getting value for money when it comes to quality education and healthcare. As a result our kids in school are not really learning as many can’t read, write or count and fewer have acquired problem-solving skills. Many, especially girls drop out of school too early while those who continue don’t acquire employable skills. For them regional integration is a new threat that smarter neighbours will take all the opportunities it creates.
Conclusion: Uganda has made considerable progress in reducing poverty. However, it is still in the ‘red zone’ where the ‘insecure non-poor’ and the poor comprise a whopping 63% of the population. The PSR and this Rejoinder provide an important opportunity to discuss how best to get out of this situation.
DRT acknowledges the input by officials of the Ministry of Finance, Planning and Economic Development, Uganda Bureau of Statistics, UNICEF and Development Initiatives and financial support by Department for International Development (DFID) under the ‘Better resource delivery though better information’ programme.