(This article was published in the New Vision in 2011)
Last week Spanish Prime minster Mariano
Rajoy in a text to his finance minister urging him to hold out for a better
deal in negotiations for a bailout of Spanish banks said. “We are the number
four power in Europe. Spain is not Uganda.”
When the text was released the Uganda
social media chattering classes went into overdrive, so much so that the furor
became a story on the BBC.
Spain is a much richer country than Uganda
based on per capita figures alone -- $31,000 for Spain and $1,250 for Uganda
adjusted for living standards ion the respective nations. But their economy is
in a much sorrier state.
Their economy is contracting, they are suffering the
after effects of property bubble burst and their banks are hobbled with so much
bad debt that their collapse could threaten the future of the Euro zone. The
bailout of the banks could cost upwards of $100b according to conservative
estimates.
Finance minister Maria Kiwanuka read her
second budget on Thursday and it was very hard to see the glass as half full.
"The economic growth halved to 3.2 percent from the previous year, revenue collections came in short of budget and more than 10 million people are living in abject poverty, more if you do away with the subhuman requirements – living on less than a dollar a day, abject poverty calculations entail...
Our situation compared to Spain is not
unlike the situation US billionaire Donald Trump found himself in the 1990s
when pointing out that the beggar on the street was much better off than he
was. Whereas the beggar had nothing to his name Trump was indebted to the tune
of billions of dollars. The pan handler is probably still where he is while
Trump is now stronger than ever.
Faced with the challenge of making
investments that will spur more and more growth – good economics, and on the
other hand dribbling in the hard decisions over time versus all at once – good
politics, you had the sense Kiwanuka was struggling.
With our ratio of revenues to GDP largely
unchanged for the last decade and donors tightening their purse strings, while
our expenditure demands continue to grow with a rising population, something
has to give. And that most likely will be a tightening of our own belts in
the short term or until investments like the power dams and roads push up
productivity and hopefully improve our lives in the process.
Our needs are huge. In the budget the
minister pushed up the works ministry’s budget almost twice in order to
steer more and more of the budget towards road construction and rehabilitation.
We upped the education budget almost by a fifth. These two are key to future
growth of nations.
"Analysts who started watching China three decades ago reported that they were investing a lot on building ports, road, rail and other communication networks. They poured in prodigious amounts in to their education systems especially science and technology. They have been doing this consistently for more than 30 years and are not letting up now as the second largest economy in the world. The challenge with infrastructure and more so health and education is that the returns on investment my take decades to show....
Political pressures often prevent countries from making the long term sustained investment required to attain
take off.
The noises from government suggest the they
are prepared to take the tough political decisions to lay the foundation for
takeoff. We have done it before and we can do it again.
In the 1980s the Ugandan economy was a pale
shadow of its current self: Revenues were anemic, the public sectors were
hemorrhaging even the little we collected and in addition stifling the private
sector through monopoly corporations. In order to turn it around government
privatized the companies, liberalized the markets and focused on stabilising the
economy. All politically unpopular decisions at the time, but we bit the bullet
and as an economy we are better from the experience.
Back to the #SpainisnotUganda protest.
Spain has the advantage of having access
to the bigger markets of Europe and so access to credit, expertise and all it
would take to turn it around are all within reach. But Spain is going to have
to take many politically unpopular decisions, expect a series of fallen governments
as they try to dig themselves out of their current economic woes.
As for Uganda expect more belt tightening
in coming years as we try to make the long term choices needed to move us to
the next level.
