Earlier this week Bank of Uganda governor Emmanuel Tumusiime Mutebile passed on in Nairobi hospital bringing a life well lived in the service to this nation to a close but served only as a comma in the legacy he leaves us.
When the history of the last three decades is written
Mutebile will have pride of place for his central role in the resuscitation of
the economy.
"But in the last week I noticed that his legacy is not fully
appreciated or is in danger of going unacknowledged, shocking as that may sound
to some of us...
According to the first NRM budget speech read in August
1986, then finance minister Professor Ponsiano Mulema reported that the
country’s revenue collections amounted to sh402.5billion shillings. At the time
the official exchange rate for the dollar was sh1,400, so we collected about
$287.5m.
In the coming budget 2022/23 government has set URA the target
to collect sh23trillion in local revenue. In dollar terms using sh3600 as the
dollar rate this comes to about $6.4b.
If you think about it URA today would have collected the
1986 total projected revenue in half a month!
Just numbers yes, but to put them in to further context, in
1986 the population of Uganda was 14 million, today its thrice that much at
about 45 million.
So if revenue collections had kept up with population growth
URA’s work would have been so much easier, as they would be required to collect
$862.5m or about sh3.1trillion or about an eighth of what is now expected of
them.
The numbers suggest that revenue collections have grown 57
fold since 1986 or at annual compounded growth rate of about 12 percent.
Revenue collection is a useful measure to judge the growth
of the economy. There has to be economic activity to tax to collect revenue,
more taxes suggests more economic activity.
Of course a caveat has to be placed on these numbers.
For one, in real terms that 1986 figure is higher in today’s
dollars but even if it is four times as much the progress made cannot be
denied. Secondly, the economy in 1986 was mostly subsistence, we lived more
from hand to mouth then than we do now, and revenue collections even measure
against the low GDP then of $4b were woefully low. Revenue to GDP ratio was
about eight percent compared to todays 12 percent, which is also way below the
sub-saharan average or where we are supposed to be.
"The NRM when they came into power thought they could do it alone, taking a leaf from their struggle they thought they could rely on internal resources to turn around the economy. As they found out – not quickly enough, they had little to play with and almost no economy to work with...
After fidgeting about for about five years up to 1991, the
reality could not be ignored and the adoption of a more market oriented economy
happened.
Up to that point in lieu of revenues from the production
they thought they could print money at a will to support the economy. When
official inflation hit 240 percent reason prevailed.
The majority of Ugandans have no clue what 240 percent
inflation looks like. It means that prices were doubling every three months.
Imagine you take you child to school in January and school fees is one million,
when you return for second term its sh2m and in third term you would have to
shell out sh4m. Unbelievable today, but this is living memory we are talking
about.
For me, this is where the legacy of Mutebile kicks in.
Mutebile and his allies, who were given all kind of names --
imperialist lackeys and World Bank running boys, argued strongly that to turn
the economy around the government needed to proactively bringing inflation
under control and secondly we needed to liberalise the economy to unleash the
individual potential of Ugandans and the private sector. Government did not
have the means (see above) to go this road alone. They also promised that if
they could do these two things the aid taps would be opened and the recovery of
the economy would have a better than even chance of succeeding. The rest as
they say is history.
This is basic economics, not noble laureate winning stuff,
so it is even more amazing that it took the uncompromising character of
Mutebile (maybe something to do with him being a Mukiga) to carry this cause on
his broad shoulders, debate all naysayers or barrel through any obstacles to
ensure government stayed the path. And the people who he was debating were not
ignoramuses like from a previous era, but studied men and women with exposure,
having lived in foreign economies that work.
Ironically opposition to a liberalized economy has grown
louder as we take for granted the economic growth of the last three decades.
"I hear people calling him a free market fundamentalist, but that was not my experience with him. He knew that there cannot be development, the improvement in people’s standard of living, without growth. That the government seems able to generate growth year on year even in their sleep, is a legacy the Mutebile helped happen. If we have not seen a more equitable sharing of this growth just shows that the journey still has some way to go....
I think of him as a pragmatist. And we need more of him
today as we did in 1986. People who recognize that being a free-market or
central planning advocate can deliver development, but a combination of both is
the key.
We know that the market is the most effective tool of
creating wealth or economic growth, but the worst at distributing that wealth.
If left to its own devices the market gives more to those who have and to those
with little even the little they have is taken away from them.
Mutebile’s contribution is that he held his conviction that
a market economy is what we needed and managed to generate consensus around
this from the most reluctant of contemporaries in the face of ugly, often
uninformed opinion that will not let him rest even in death.
Rest in Peace Emmanuel Tumusiime Mutebile!
