E'Irr - RES~~~~~~KtRIC K:TEDl. AF58 FILE COPY Repor N AF- iIE

Volume 18

This report was prepared for use within the Bank and its affiliated organizations.I They do not accept responsibility for i ,s acuray or completeness. The report -ay

not be published nor mciy it be quoted as representing their views.

INTERNATIONAL BT A FROR RECONSTRUCTION AND DEVETLOPMENT

LNTIERNATIOAT TDEVEOT PMPMT A SSOCIAT!ON.

PROSPECTS FOR ECONOMIC DEVELOPMENT IN EAST AFRICA

(in four volumes)

VOLUME IV - UGANDA

(in seven parts)

PART ONE: PROSPECTS FOR ECONOMIC DEVELOPMENT IN UGANDA

August 31, 1967

Africa Department

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EOUIVALENTS

Currcncy

1 Uganda Shilling = U. S. $0. 14U.S. $1 = U. Sh 7. 14E 1 = U.S. $Z.80

; 1- = UT. Sh 20. 00

Wveight

Throughout this report, unless otherwise stated,tons refers to long tons of 2240 lbs.

CORRIGENDA

PROSPECTS FOR ECONOMIEC DEVELOMIENT IN EAST AFRICA(Report No. AF-58b dated August 31, 1967)

Vnl1im.e TV _ pnrt Onne Fone1 ' fnr Eonnnmic Develonment in Jganda

BASIC DATA

Pe-Vr cer.t of GDP at; m.arkLe'prices

Is - urr- revi-u kL .. sa- yar:~ __o ," _ _rea.. '> LIA11 v - UUVt:nrIlulent LUt-Itl Ld j -1 UULU u

as follows:

1966 196o-65

Government current revenue (fiscal years) 14.9 13.9

Page 50 - Appendix 3 - Paragrapn 8

The second equation should read as follows: Ir4 = -6.307 + *l.Oym

Septca Depar t2en1September 21, 1967

COMPOSITION OF THE MISSION

This report is based on the findings of a Mission to East Africawhich did its field work in October, November and December 1966 and consistedof the following:

John C. de JTilde, Chief of Mission (IBRD)

Colin M. F. Bruce, Deputy Chief of Missionand Chief Economist - Kenya (IBRD)

Kudlapur G. V. Krishna, Economist - Kenya (IBRD)C. G. Akhurst, Agricultural Adviser - Kenya (FAO)Maurice Fenn. Agr:icultural Economist - Kenya (FAO)

Per Tveite, Deputy Chief of Missionand Chief Econnmomist - Tanzania (Consultant)

Bruno E. Scheltema, Economist - Tanzania (IBRD)Archie Forbes, Agricultural Adviser - Tanzania (FAO)Jacques Kahane, Agricultural Economist - Tanzania (IBRD)

ntt.+.o ̂ma Dcz ept Chi Pf ,of M;i ssi on

and Chief Economist - Uganda (IBRD)Nicholas Carter, -conomlst = Uganda (IBTB)David 1rT. M. Haynes, Agricultural Adviser - Uganda (IBRD)MoTntagu_e_ Yu,delman,. Agricultural -Economist gna(oslat

H. David Davis, Acdviser on Tourism (IBRD)Bernard h. D1JCCaux., Av-iser on ILnUUsLtry (CoUU11DULUta1n)Jack Derrick, Adviser on Industry (Consultant)EdwTard V K. . Tayc, xAdv-isr on Transport (ITBP3/.)

Aristides J. Macri.s, Adviser on Agricultural Trainingand EUducation (T=nDD

David McLellan, Adviser on General Education (Consultant)L,yeL.L El. ILL Ltchie, AdUViLs Un LnUdustria.L FLi[an1uce (1F )

Gavin Wyatt, Adviser on Power (IBRD)

Tihe Mlission'Us linuings el9aue lor Wie mosu paru GO Gwe LiuuaGion asof the end of 1966, although. in some respects note has been taken of developments-up to the rmiulje oI 1967.

VOLUIMHJ• IV

PROSPECTS FOR ECONOMIC DEVELOPMIEN T IN UGANDA

TABLE OF CONTENTS

Page No.

BASIC DATA

SUlRIARY AND CON1CLUSIONS

I. Introduction . ..................................................... 1

II. Economic Development During the First Five-Year Plan, 1961-66 3Economic Growl;h .............. . . . 3Investment ancd Saving ..... ............... .... 5Bal-ance of Payments ....................................... 6Recent Government Action ................................... 7

III. Economic Prospects for 1966-71 .................................... 8A. The Second Five-Year Plan .. 8

Development Strategy .. 8Planning Procedure .. 8Plan Targets ............................................... 9

B. Feasibilitv of Prodliction Targets ............. _* . ... 10Agriculture ........................................ 11TnHiistrv- ------Other Sectors ......................... 15

0G Tnvestment. Rxnpnniturp ----------------- 15

Commodity-Prcc.ucing Sectors .16Infrastructure and Powerr 18Social Sectors ... 19

D. Nationnl qSavincg. 91.|M_- , - -_ . ..............................................

Government Savings .22Savings of the Parastatal Se c t o r .... 26Private Sector Savings .27Domestic Savi ngs Ga 28

E. External Finance .28

Imports .31Invisi-b1es and Curren+ Account 4 Bla la n c c.Foreign Capital Requireents .32C-4- Shrlng and rrQ nF' T e n d i ng- 41.

U LI±LL la5

~-LA.±'..J -U' ' -- E4. ~.L..JJ..............

APPENDICES1. rroUJets S iUtldUb leUI fo.XUr J -t l ar ±iiiJii ig.u

2. Staff Requirements . . . 433. A Simple Resource Gap MIodel of Uganda ........... 44. Social Sectors ...................................................... 53

TABLE OF CONTENTS (Continued)

STATISTICAL APPENDIX

MAP

ANNEXES (under separate cover)

IV-A AgricultureIV-B IndustryIV-C TourismIV-D TransportIV-E Electric PowerIV-F Education

UGANDA

BASIC DATA

Area: 91,l34 sq. miles (land area 75,000 sq. miles)

Population (1966): 7.74 million

Rate of growth: 2.7% p.a.Population density (per sq. mile of land area): 103

Political status: Independent since October 9, 1962Member of Commonwealth

Gross National Product (1966): 1312 million ($874 million) _/

GNP per capita (1966): 40 ($113)

Gross Domestic Product at current factor cost(1966): 1300 million ($840 millicn)Of which

Monetary product: 1223 millionNon-monetarv nroduct: E77 million

Annual rate of groith (constant 1960 nricps-)- 1966 19600-65Total GDP 602 3.9Mon etary 6=.6 h 5Non-monetary 5.1 2.3

Percent of total GDP (1966) 100A cr''- c'ill ftn~ 58Industry 11Transport andA cor,om,mrce 17

Other sectors 14

Percent of GDP at market prices: 1966 1960-65

Gross fixed capital formation 9.7 9.5Gross domestic savings c11.0 12Balance of payments resource surplus 1.4 2.9Net "actor incom, paymemnts 172/ 1.2

Government current revenue (fiscal years) 13.0 16.9

Resource surplus as % of savings 12.3 23.2

2/ Uganda's national income accounts are currently being revised, f312million represents IBnD estimate of probable revlsed figure, comparablefigure on previous basis is 1240 million.

2/ Estimate.

Basic Data (Continued)

Money and credit

Relationship to large monetary or customs are,a I: oEat A-J°rican co,mmarket and of Sterling area

'ate of change p.a.1.4 --±2.41 47±26 __

B0ank- nio'e incrultoL(ue30 97)jeL.) 4r. Uj1_0 ue ,_ ±1 ULJ I XUd U±LJ-V \UULJ± Jt J, ±7-l/ .'

Commercial bankc deposits (Dec. 31, 1966) 33.7 +21%-- -, ~ ~ ~ ~ ~ ~ ~ ~ ~ I-L c rq

Lie -mrLa 16, 9 +22%

Time and Saving 16.8 +19%Commercial bankl credits 29,3 +21%

Cost of living index + 3.2%;'

1965/66 Rate of change p.a.Public sector operations (I million) 1960/61-1965/66

Government current revenue 41.1 +13.3%Government current expenditures 4 59 +l5o3%Government savings -4.8Government capital expenditures 6.4 + 7.3%Public sector saving -2.6Public sector investment 10.7

December 31 AverageExternal public debt (US$ million) 1966 i960-65

Total debt outstanding 213.4 136.6Uganda debt 121.8 74eoOne-third of EACSO debt 79,3 62.6

Total annual debt service 10.3 6.8Uganda debt 5.9 2.9One-third of EACSO debt 4h.4 3,9

Debt service ratio, percent 4.0

Rate of change p.a.Balance of payments (IC million) 1966 1960-65

hIerchandise exports 72.9 + 3.0Ilerchandise imports 67.1 + 8a2IWet invisibles 1/ -7,4 + 4.8

Of which net factor income payments -5.5 +49 oBalance on current account -2,6

Average1966 1960-65

Commodity concentration of exports 6TH 659(coffee and cotton)

I /Rst.mate.

Basic Data (Continued)

June 30 Avera2e1967 1960-65

Gross foreign exchange reservesT. milion 9 0 29.3

1Pionths' imports 1.6 6.5

:E_ posibion (US$ million) Jan. 311967 196I/65

Quota 32 25Drywivr,iinb -c

&-xternal financial assistar,ce (TTUSk mi-in)

_ vrR 1960n-1965 1965r

Commitrrcnts Disbursements Commitments DisburseDments

Total 12.636 10.405 14.112 6.0o9hS)oft assistance I. 14 1.0u09 1. U(U 3

Hard assistance 11.122 9.396 12.236 2.44;

HIajor donorsGermany .952 - 5.712 -

U.l. 9.48h 8.709 8.h00 h.320AID .300 .296 - 1.7774IBRD 1.400 1.00 --

VOLUME IV

PROSPECTS FOR ECONOMIC DEVELOPMENT IN UGANDA

SUMMARY AND CONCLUSIONS

'I TT n I o. no,.~rmr1 ~ ~r,Tc.av f', v'l ir "nrrvirll ir in -rmr'c~r+ ,r nyov'Ci.Tr-

4.. * TJ .gand' s economy has go.S. faijr -rap4d -in reen y .e--s -41960 and 1965, real per capita incomes in the monetary sector rose by an annualavrae oP 2pn ce . v A+ ;r ; nnnvrc c- .n Q oh-; of Pl ,r +hI n Ae,-l ++AP .O++ -CI4 V w- a , V1 C . .51 .1 - -- - d -0J' a - --5 ''5vJv

export boom, starting in 1963, and subsequent expansion of public and privatespending. Th p.uJe ex U.ort I boom in uUI wasLO maDdeosibLLe b,y increased outJpu, 4.V.J-

able prices and the successful marketing of the two main export crops, coffeeandu cotton.

2. DomesticsJU[a-UL Vings, E,11oUg1J rabither hLLgih, Wuret not. fu Il ly a-vailabUl ior

the financing of local investment. Substantial private savings were either trans-ferred abroad or went into hoarding and prUperty speUulation. Sa-vings in th[epublic sector were insufficient to cope with the fast growing capital expencituresof the Government. Tnus, financial imbalanLces developed both internally anci ex-ternally. Internally, budget deficits emerged despite rapidly increasing revenue.Externally, a favorable current balance, strengthened by officiai capital inflow,was more than offset by heavy private capital outflows. The result was a sub-startial loss of reserves wnich, by the end of the First Five-Year Plan, reacheda dangerously low level.

3. The situation was aggravated by the administration's limited capacityto deal with the problem of economic development. This was due-t o a ra-piddeparture of exnatriate civ-A servants, caused mainly L,T the generous retire-me~nt terms off-ered. This ressuLted. in a severe shortage of experienced staff inkey positions of government and parastatal agencies. At the same time, theweakened administration was facing a more ambitious task since the demand forgovernment services was constantly increasing and greater emphasis was given tospreading economic development throughout the country.

I. In 1966, the Government took drastic steps to restore financial balance.It introduced a realistic budget for 1966/67 which should generate a reasonabledomestic contribution to the financing of development expenditure. Moreover, byreducing the internal prices for coffee and cotton to a level in line with worldprices, the Government has succeeded in closing the biggest financial gap in thepublic sector. There are no indications, however, that serious attempts have beenmade to tackle the second major problem, the urgently needed improvement instaffing and organization. Failure to deal with this problem is likely to inhibitoverall economic growth in the longer run and may cause distorticnsin investmentthrough wide differences in the performance of various sectors of the economy.

5. The period of accelerated economic growth which began in 1963 is likelyto continue throughout the present decade. In contrast to the export-orient.edboom of recent years, however, the impetus for future growth will come primarilyfrom production for domestic markets. The biggest gain in output will again comefrom an expansion of agricultural production although, in relative terms, growthwill be appreciably higher in the industry and service sectors. Compared with thefirst half of the 1960's economic growth in real terms will be higher over the

- ii -

next few years. However, the acceleration of the physical growth rate - from 3.9percent to an estimated h.6 percent - will be more than offset by a marked de-terioration in the terms of trade. Therefore, real incomes, as represented by themonetary product adjusted for changes in terms of trade, will probably increaseby 3.9 percent a year during 1966-71 compared to )l.. percent a year in 1960-65.As population growth is expected to be slightly higher than before, real percapita income in the monetary sector would rise by an annual average ot only 1.2percent as against 2.4 percent during 1960-65.

6. In order to reach these output goals and to lay the foundations forsustained growth after 1971, substantial efforts will have to be made to eliminatethe two crucial bottlenecks mentioned above. Public savings will have to beraised further through increased taxation and strict control of current spending.Provided the necessary political decisions are made, it may well be technicallypossible for the Government to raise the level of public savings from practicallyzero during the First Plan to nearly half the level of public investment duringthe Second Plan, even if the latter almost doubles during this period.

7. The serious bottleneck in staff and organization will require new andimaginative approaches, not only on the part of Uganda, but also by the majoraid-giving countries and agencies. The Government is aware of the seriousnessof the problem but has not yet been able to work out appropriate solutions. Forthe interim, the Government and aid donors should collaborate closely in remedyingthe most serious deficiencies and in providing incentives for greater continuityof service for such foreign personnel as will continue to be needed. For thelonger run, a systematic policy of educating and training Africans is urgentlyneeded.

8. Effective steps are required to curtail coffee production. Uganda hasrecently been very successful in selling coffee on non-quota markets. However.with the expected tightening of the coffee agreement, opportunities for such saleswill1 be limited and stocks are likelyv to qccnumil att if no action is taken torestrict further expansion of production. On the other hand, cotton productionneeds further encourage.ment, possibly by reducing the present, export, tax, To

diversify the existing output pattern, livestock production in particular shouldbe stimulated. Greater emrphasis is needed on dlsease control measures whichwould have an immediate effect on production by reducing mortality rates and

A -11~+-p iv ~1, 4 -~o,.C7~i~i ~ + ~fV +Inli vr,wudcreate the !ong-run conditions in wihhigh-grande cattle ecann+rieProduction of crops other than coffee and cotton could be significantly increasedby-v the estCabli4shmentl of' an orga,izatJon cappable of mul+iply-ing -d di-;-+ibutingthe seed of existing improved varieties and by the building of additional storagefLaci-.litles. Thle M1,1ission recor,ued that- Wh-4 -1ere le no Iurther inresei te±w~±±uiC5. iiiC I±~±U1 .LC...,inenCIs t aD uid i UjJ. C Li 5. ULu UIII ±L1%.LJ _CD.DC ±~11 tJJ

number of group farms until past experience has been evaluated and systems whichmake best use of both machinery and hard labor devised. The num,,ber of tractorsavailable for hire to individual farmers should be adequate for several years ifannual utilization is improved by better planning and managernentl.

9. In the industrial sector, strenuous efforts are required to formulateadditional projects in order to avoid a drastic decline of investment towards theend of the Plan period. iMore attention must be paid to the development of indi-vidual African enterprise, supplementing European and Asian enterprise which haveso far dominated industrial development. The capacity of the parastatal Uganda

- iii -

Development Corporation to make an effective contribution to the promotion ofindustry may be impaired umless its staff is strengthened and its autonomy issafeguarded against an increasing tendency of the Government to interfere ininvestment decisions and internal operations. Some incentives for industrialdevelopment need reconsideration. The structure of the customs tariff shouldbe reviewed to determine wihat changes are necessary in the interest of industrialdevelopment within the framework of the Common Market. The possibility oL re-placing the present investment allowance by a type of concession that wou:ld giveless incentive to the adoption of labor-saving equipment should be studied.

10. With respect to power development, the Uganda Government will soon haveto decide whether or not to proceed with a large new and costly hydro powerproject. The Mission strongly endorses the Government's proposal to explore withKenya, prior to any such decision, the possibilities of cooperating in the devel-opment of available power potential in such a way as to minimize costs for bothcountries. The Mission hopes that this exploration can be undertaken pronrptlyvin view of the implications which cooperation might have for investment decisionsthat must soon be made in both countries-

11. TTganI's transport system is basically adequate in extent and conditionto meet present and foreseeable transport requirements. The trunk system has few,cInCsa today. +/^TI- orel.q nf' t.rasnn ?+. rl nmnnfA J+.Qz immn r-vanarn+. czhoni'ri qonnonl.ltr

follow and keep up with economic development but should not be relied upon tostimulatn+ J+. On +Ie n+o,h hnd,A -lnves+m n seconary, -rads -nd inm

local roads may well have considerable impact on the structure and growth ofprodu^tion. T- Tmn,,r-4 of r- ma--intenace shou"d a" so 1,4-, rece

4 -h 4 .4-.

Probably the most urgent need is to establish an adequately staffed transportplaUi- UIIL Unit LL cJpb ofassesin tiJe roaUd, I LLL, a±ir and vaturi transpor-t

requirements of the country, and of establishing investment priorities based on

1I2e educational program of Ithe Fi-v-LYear Plan sIhUoU Ub UdlIrUcLtU prl-

marily to meeting the country's manpower needs. A recent manpower survey showedthat the most serious shortages were of teachers and of middle-level manpower,such as technicians, accountants and skilled office workers. The Mission there-fore endorses the program's er.phasis on sueondary education. wtlh a broauer cur-riculum. The Universityts program should be revised with a view to slowing thevery rapid rate of expansioin UUntelplated Uv-er the next few years. In primaryeducation, improvement of quality should first be given attention rather thanfurther expansion.

13. Uganda faces a deterioration of her current external accounts over thenext five years. Severe market limitations on the country's two main exportcommodities indicate that the decline in export growth, which became apparentduring 1965 and 1966, will continue. The gains from a slow rise in export volumewill be largely wiped out by falling prices. On the other hand, imports willincrease further as national income rises and the investment program gainsmomentum. This, together with an increasing deficit on invisibles account,means that Uganda will need considerable financial support from abroad to main-tain the desired rate of economic growth. The Mission estimates that the countrywill require approximately 1L5 million of official aid during the present five-year period. Of this, only 119 million is likely to become available under

- iv -

existing loan commitments, leaving another 126 million to be financed. To obtainthe necessary additional aid, a strenuous effort will need to be made to prepareprojects eligible for external financing. The Mission's review of project possi-bilities indicates that, with such an effort, schemes involving an aggregateexpenditure of approximately 1C34 million during the Plan period might be madeready for implementation and qualify for foreign financing. However, the neces-sary additional aid, totalling T26 million would constitute an average of three-quarters of these nroiect costs; and since the foreign exchange component of theseprojects is unlikely to average more than 40 percent, this disbursement targetnould be achieved only if foreign aid were extended to cover a portion of r localinvestment costs and, perhaps, of associated increases in recurrent expenditures.

14. Uganda's capacity to service external debt is rather limited. Althoughher present debt burden is not very high, the conuntry will need concessional termson future aid commitments in view of the large amounts of foreign capital required,the loT per capita income and the limitations to her exports. T Mli issomewhat concerned about recent tendencies, in both the public and private sectors,try on c ontactor IJinan A±s+ v_ i U 1 nv- o V 4 rr4 s ay wL.AJa Lfl4 ± JA _C S . ub in aposition to service the high burden of suppliers' credits, experience in otherdeveloping countries shows that such conditions can create a serious debt problemfor the country as a whole within a relatively short time. Vigorous efforts are

therefore ~ ~ ~~~U- neddb-bt elpet n donors -to hold Athe amount of contractorfinance to'J± a minc~c~imum.) Ufl I ~UJ4AL~11UC CII~.L U~J11LIi C UiJ IIU±U UIJ~~ CIIIUUIIU UI UULILdI UI

finance to a minimum.

VOLUME IV

PROSPECTS FOR ECONOMIC DEVELOPMENT IN UGANDA

I. INTRODUCTION

1. Lying on the equator in the heart of Africa, Uganda has an area of some91,000 square miles, nearly a fifth of which is covered by lakes and rivers. Muchof the country lies on a plateau whose altitude (4,000 ft. above sea level)ensures an equitable climate with mean temperatures rangine from 50° to 900 F.(100-32.50 Cent.). The land is, for the most part, fertile and well watered,with qnniial rainfl1ls avprapinp )iO-,O incbhes Thprp are two rninv seasons in thesouth which merge into a single one in the north.

2. Uganda's population is currently estimated at 7.7 million (103 persquare mile of Ihndi or 85 per square mile in total) and is growing at nbout2.7 percent a year. The density of population varies from over 1,000 per squaremilea in some uran anrl hevily fnmarl nrep.s t.o lepC +.thn 2% per -t- qnn mile inthe north and west. Only in parts of Kigezi, Busoga, Bukedi and Bugisu is thereenough pressure on land to result in intensive cualtivation. The River Nile andthe northern edge of Lake Kyoga form an approximate line of demarcation between

98 percent of the population, the rest being primarily Asians. As the result ofstr4ic alaw against the alienat.ion of. 'and when Uganda was a prJtecratv 141,number of European settlers is insignificant.

3. Although a wide range of crops can be grown, there are few opportunities.LVr UtdvtLLop±igL, ne-w 1dLAeVaUd Ucommo1dULUti. In1 U1tV Uroad crescenLutI arounIUadAke

Victoria, where plantains are the staple food and coffee the main export crop,there is conRsiderable scupe for increasing production of animal products forimport substitution and export. There is also great potential for increasedmeat production in the north and west. In the centrai areas, wnere tnere isample land available, there is some possibility of increasing production ofcotton, groundnuts and other annual crops. Uganda has few proven mineralresources, although large areas have yet to be surveyed. The Nile, falling1,700 feet from its source in Lake victoria to the Sudan border offers sucstan-tial potential for electric power which is a factor of some importance forindustrial development. While the country is landlocked, the importance ofthis obstacle to economic development is mitigated by close economic ties withKenya and the railway link with tne port of Mœombasa.

4. The British first established their control over Buganda, a kingdomwhich was situated immediately to the north and west of Lake Victoria and whichwas unique in having already developed a sedentary society based on the culti-vation of plantains. After conclusion of a protectorate agreement with theKabaka (king) of Buganda in 1894, the British used this country as a base toextend their control over the rest of Uganda.

5. Real progress toward self-government began only after World War II.With the prospect of independence the Baganda (people of Buganda) became fearfulof losing the special position they had always held and accordingly resist.edall constitutional proposals which in their view did not fully protect them. As

independence without their cooperation was clearly impractical, a compromise wasagreed upon which granted considerable autonomy to Buganda, and to a lesser degreeto the kingdoms of Ankole, Toro, and Bunyoro. The power of the central governmentover Buganda under this relationship was restricted primarily to defense and foreignaffairs. The rest of Uganda was run as a single state with all but local servicesvested in the central government. On this basis Uganda achieved independence inOctober 1062.

6. In practice it proved difficult to maintain the precarious balance ofpower andi division of responsibilitv which were inherent in the 1962 constitution.Wpfhile the Kabaka who was at the same time President of Uganda sought to preserve andstrengthen the sp.ecial statuts of RBganrdq other interests oressed for the formationof an unified, one-party state. Increasing tensions and rivalries came to a headin 1966. On February 22, 1966 the Prime Minister, TDr- nbhnte. qnnouinced a derisionto assume "full responsibility for the Government in the interests of national uni-t-.t He took over the powersc the President. subseq1uen+,nty nhobtinep Parliament'sapproval for the abrogation of the Independence Constitution and its replacement byan interim uni+ary one iiurn- w-Mich he ecnmne Ex cuI+ie Pr.es ident. Si 1 atr- in

May 1966, after brief fighting in Buganda, the Kabaka fled and was deposed, with hisgovernment passing diirectlyr u,nder cont-rol1n of the central -rgov--er-nmet I - Tn Tu 1 CA7Parliament was asked to approve a new constitution abolishing all four kingdoms andconverting Uganda rinton+ a repbich1 .conrolled byr a strong 1--veo Buganda hasceased to exist as such and has been divided into four districts. The GovernmentevidAentl hopes to use the new constitution and th en powers + assumed- as

a means of restoring and consolidating the unity of the country and thus creating4- L, e con ' oM mns c) u- Ta N gAnl nee's _Jn ;orde to ex4lJ ef-Pecve-; 1- Yuu.t U Dli U V uj;e l0 UPLSL y 1 UJ i 11 U6P1Od a .l_ll 1 VJ G1 bV C LUIL U GA A. OC U L V 0±l ' 1101

undoubted potential for development.

7. The Uganda economy is basically a peasant economy. More than 90 percento0 thie peop'le are dUependLentO on Lhie land or their liveU lV ihood. Ave income i .40

($113) per capita per annum. 1/ Agriculture and related activities account directlyfor iroure than half the gross domestic product, while much of the remainder is de-rived from sectors, such as transport and commerce, upon which agriculture depends.Trhe most popular food crops are matoke (plantain) in the higher rainfall areas andcassava, millet, sorghum and groundnuts in the north. Both rmatoke and groundnutsalso provide some cash income, particularly in years when other crops yield littleincome. The principal export crops are coffee and cotton which form the backbone ofUganda's export trade, but tea, sugar, tobacco and groundnuts are also exported.In the tsetse-free areas there are an estimated 3.6 million cattle and the livestockindustry may, in the long run, provide the most important potential for nonindus-trial growth. The large lake and river system supports a growing fishing industry.

8. Uganda has a good transport system. Power for most of Uganda's needs issupplied by the dam at Owen Falls on the Nile, and in the vicinity of this power

1/ This figure is not strictly compatible with past data for Uganda or with in-formation from the other East African countries. It represents a forthcomingmajor revision to the National Income Accounts which has been deemed neces-sary by the discovery of considerable underestimation in the agricultural,manufacturing and distribution sectors.

-3-

plant an industrial area is rapidly growing at Jinja which primarily produceE con-sumer goods. Other consumer goods industries are located around Kampala, while thearea near Tororo produces cement, asbestos and phosphatic fertilizers. The majormining industry is copper, which is mined in the foothills of the Ruwenzori NWoun-tains and railed to Jinja to be smelted before being exported. Uganda also has anumber of good hotels to accommodate the tourist trade, for which the main attrac-tions are the excellent game parks.

II. ECONOMIC DEVELOPMENT DURING THE FIRST FIVE-YEAR PLAN, 1961-66

Economic Growth

9. During the first half of the 1°60's, Uganda's economy grew by an arnualaverage of roughly h percent (see Table 1). In the monetary sector - representingabout three-quarters of total output - the average growth rate of GDP at constantfactor cost amounted to h.5 percent. Including the non-monetary sector, whichprobably has grown by some 2-1/2 percent, total production in real terms increasedby 3.9 percent a year. This trend was roughly in line with the rate of growth as-sumed to be possible by the Bank's 1960/61 Survey IMIission 1/ and the target growthrate adopted by the First Five-Year Development Plan (1961762-1965/66). Bothsources expected that an average growth rate of about 3-1/2 percent could be achievedand that growth could be accelerated to about 5 percent by the end of the five-yearperiod.

10. Economic growth was rather uneven in individual years, fluctuating from -2percent to +10 percent. This is hardly surprising considering the large element ofuncertainty inherent in an economy which depends heavily on two export crops withvolatile yields and prices. After an initial slump in the early 196 0's main-ly dueto a disastrous cotton crop caused by bad weather, a strong recovery followed in1963 when cotton nroduction s"inn back to normal and coffee nroduct.ion was I)novpaverage. In 1964 and 1965, output kept growing, although at declining rates. In-crPAsd notfton prndlnntion, which annarpd to reaGh a nlate2u in 19(J, and 16, s

due primarily to the expansion of acreage in the north where, in the absence of al-ternative cash crops. an increasing number of farmers took up cotton cultivation.Coffee, in general an attractive crop, also expanded substantially as new plantingsof the late 1950's came into hearing. As other crops showed simil2r incrpqstes;total agricultural output was about one-sixth higher in 1S65 than in 1960. ;3timu-lnft^l hv +.hp Pynnnsion of thp two mnior sLponrt. rrpnsq econnnmi nrct.ivitv in o-h'.hersectors picked up, too. The rates of growth in industry and services have general-ly bheen highp- +.han in agriculture, althouih in absolute ternm these se-t.orq arenot as important as agriculture which still represents more than half of GDP.

1/ The Bank's Survey Mission prepared the ground for Uganda's first Five-YearDevelopment Plan, which wffas issued by the Governim.ent in 1963. The an -targetswere later revised upwards, but as it turned out, the original targets weremore rea-l lstc. -i

Table 1: BASIC ECONOMIC INDICATORS. 1960-1965

ChangeUnit 1960 1965 Units Annual % Average

Gross Domestic Product

At factor cost a/, total I million 209.2 253.8 +44.6 +3.9

Monetary product i54.5 192.4 +37.9 +4.5Agriculture b/ 72.1 87.7 +15.6 +4.0Industry c/ " 20.8 26.7 + 5.9 +5.1Transport 5.8 6.7 + 0.9 +2.9Commerce 26.4 37.6 +11.2 +7.3Other sectors 29.4 33.7 + L.3 +2.8

Non-monetary product 5 SL.7 61.4 + 6.7 +2.3

Real monetary income d/ " 148.3 188.0 +39.7 +4.9Population Million 6.68 7.55 + 0.87 +2.5Real monetary incomeper capita 1 22.2 24.9 + 2.7 +2.4

Investment and Saving e/ 1961-1965(I million)

Gross Domestic Investment fl 112Government 30Other 82

Gross Domestic Saving v/ 1q/Government h/ - 14OtJhPr166

Gross National Saving 135

Gross Monetary Product i /88

a/ 1964 prices.L)/ IncludesA- ---- ------- oetr,aihn adhlig

c/ Manufacturing, mining, construction and power.U/ Msn eaary GPa constdarUU.tfactlor cost adjusdteu fLuo uchtanges 1in utermii o tUradue.

e/ In current prices.±,' Frixed capital uo rma'±lorl in the monetary sector.g/ Residual between investment and external resource gap. Savings thus reflect

the compound errors of national income and balance oI payments statistics.h/ Including marketing boards.i/ Gross domestic product of the monetary sectors at current market prices.

Source: Uganda Statistical Department and Mission estimates.

11. The increase in real output was accompanied by an improvement of Uganda'sterms of trade, caused chiefly by the substantial rise in international coffee andcopper prices. Thus, despite a decline in prices for cotton towards the ernd of the:period, and increasing.i-mpcort prices, the purchasing power of domestic productiongrew-faster than real output. Over the five-year period 1960-65, real income inthe monetarv sector (expressed in terms of GDP at constant factor cost adjusted forchanges in terms of trade 1/) rose by an annual average of about 5 percent. With anonulation Prowth averaging some 2-1/2 percent a year. real per capita income in themonetary sector thus increased by about 2-1/2 percent a year.

Investment and Saving

12. The export boom after 1962 was followed by an increase of investment ac-tivity both in the nubic a- nd nrivrate s_rs. With the riseof incomes anrd procfits.private investment picked up, although there was some delay in urban areas where itproved difficult to restore confidence after the deterioration in investment climateimmediately bef'ore and after independence. Similarly, the ambitious five-year de-velopment progra lanched by the Gover-nmentduri A ng 1906 h-A A A t^ff nil,+ start In

v ±M, |A- Xj vtheJvx.v 1,_2 h6ad ..a v if .c -fact, government investment, declined in 1961 and 1962 largely because the decline inproduction ad-versel"y af fec_t e d governumnent revenues and the-2 capacitj fth ii serv-ice to plan and execute development schemes was restricted in the face of :i.ncreasingAepartures ofl expatriate ci.vil servants. Since 1963g 4the level ofP pubic ives4en

has recovered rapidly, particularly as Ugandans have gained experience in managing4their --- _4 - 4-44 -eeomn -rgam -n trinn prgar. -Iave- born fru4lt. T -In4l _96 and lS6Vl~,L ti LJJif P1U .LUGIM III, dilLU UlL d-Lit1 1 6C11 0 J iJ,J iid ±±V -, UUJIL 31 U..L 1. .111 _L7-_JL4 dLid-

real government investment was appreciably higher than in 1960-61, although thecomposii.LULon Iiadu sormewhat shLtL tU Uowaruds soc-ia.L projecus suci as schd oo'l UUJi.UJLi8,d,community development, etc. at the expense of investment in basic infrastructure.To some extent, however, developiient progress was hampered by the emergence of spe-cial problems such as those! created by the influx of refugees from southern Sudanand n R-anda and the repercusE;sions of the truables in the Congo.

13. The increase of investmentu, however, was not supported by a correspondingeffort in national savings. This was particularly the case in the public sectorwhere savings fell drasticalily since 1963 despite a rapid growth in governnment rev-enue. Instead of using growing revenues to accumulate surpluses, the Governmentincreased even faster its spending for wages and saiaries, for subsidies and othercurrent items thus leaving little room for financing investment from domest;icsources. In 1964 and 1965, savings at various government levels and in the twomarketing boards were actually negative, and capital formation in the governmentsector had to be financed largely through short-term borrowing and by drawing downof existing reserves which, by the end of the First Five-Year Plan, were practical-ly exhausted. Private savings, although high and growing rapidly, were not fullyavailable for the financing of new long-term investment. A large part of such sav-ings, particularly from the urban areas, was transferred abroad or went into hoard-ings and property speculation. Although the introduction of exchange controls inJune 1965 reduced the outflow of private capital, Uganda's capacity to secure

1/ Monetary GDP at constant 1964 factor cost..less merchandiso exports at con-stant 1964 prices, plus the current value of merchandise exports deflat;ed bythe import price index.

- 6 -

long-term foreign official capital on a project basis remained severely limited, afactor which aggravated the difficulties of sound investment financing.

1l. The situation came to a climax in spring 1066. when Dolitical disturbancescaused a further deterioration in the private investment climate. The inflow offoreign Drivate capital, which previously had at least partly offset the outflow ofprivate funds starting in the late 1S50's, came to a virtual halt, while capitalflight. Darticularlv to Kenya and Tanzania. assumed alarming Dronortions. At thesame time the pinch of inadequate savings in the public sector began to be felt ongovernment snpnding as nrevious reserves wpre exhausted and short-term finanGe be-came increasingly difficult to obtain. This shortage of funds held back public ex-nPnditumres for both riirrpnt nPeeds andc cpnit,21 formntion. and forced thp GTovernmPnt.to curtail its development program at the very time when the capacity of governmentalgencies to execut this nrogram was gYrow,i ng

Balance of Pay,.ments

15 T1-~c. ~he aborve mentn+.ei t-E-rends in ouii+ipt9 investm.re4n+. a srrl zniings Twre re-flected in the balance of payments (see Table 2). From 1960 to 1965, merchandiseex-orts cdnScrasd sharply) -r by V2 mili nn no W7 ncy'nn+ +the g,-,rowt+h being l,arl-yattributable to expansion in volume of 25 percent and also to improved export priceswhich rose by 17 percent. But the increase of export earnings was almost matched bythe increase in imports of 120 million which resulted from growing incomes, a high

m-----,-4-,-a ,4-.ensi.y - -A '-a a mod--erate lev,el- of J-port di Q-Sinc- ir,lportsma1 aLlaw H1

LJ~~11..L L ,y i. .LIP .i±IS 0-JL a i'AI3.a .CV15. Vf -JAij L Li LA U. LiUC .C LL-I.,y s.)1JIip L<z.

tend to follow export earnings with a time-lag, the balance of -trade improved strong-wy _1 -in'o _X 7nJU -LIU L4 _ 4 _ 4- - .C)AC -1 - -1_-_-1v ±_ LL - 1\ V er-Ly in 1,,_3 cxnu -L;u4 and udetxLobed CLgCLl _li WIlol vuv w.en exporus leve Uea . 1l Mev t-1theless, the traditional trade surplus was maintained throughout the period. On theother hand, current invisible transactions showed continLuous deficits which in-creased slightly due to growing factor income payments.

Table 2: CUI'MULATIVE BALAINCE OF PAYMENTS, 1961-1965

(In E million)

I'Serchandise ex,:ports 293Merchandise imports 236B"allance of trade 5~7Balance of services - 1Current transfers, net - 0

Factor income payments, net - 16BDalance on currentL account 2

Long-term official capital, net 15

Decrease of reserves 18Residua it1[e1s a// -

a/ Short-term capital movements, errors & omissions.

Source: EACSO

-7-

16. The balance on current account was positive during most years. This to-gether with a considerable although declining net inflow of public long-term capital,produced a surplus of L40 million during 1961-65. However, this surplus was morethan offset by a large negative balance of f58 million in private long-term andshort-term capital movements and unexplained transactions (errors and omissions).The resulting gap in external payments of 118 million had to be financed from exist-ing reserves which declined rapidly reaching a dangerously low level at the e!nd ofthe First Five-Year Plan.

Recent Government Action

17. Faced with such serious financial conditions both internally and external-ly, the Government recently took determined action to improve the situation. In its1066/67 budget, it introduced new taxes expected to generate some E4 million addi-tional revenue. It also imposed strict controls on current expenditures bringing toa halt the rapid increase of government consumption and transfer payments. Horerecently the Government decided to reduce the producers' price for cotton to a levelin line with world prices - 1o cents per lb. compared with 60 cents per lb. :in thepreceding crop year - thus closing the largest financial gap in the public accounts.l/The ensuing increase in savings will permit the Government to finance part ofits investment from local sources. In due course this will have a dampening effecton import demand and help to restore domestic and world confidence in the financialresponsibility of Ugandan authorities. This in turn will relieve the pressure onthe balance of payments.

18. From the point of view of long-term development policyv however, th<esemeasures are only first steps which must be followed by further action to strengthenthe country's financial position. There is considerable scope for further irLcreas-ing public savings and for containing import dermand for nonessentials. Moreover,government and parastatal authorities are still suffering from structural weaknessesin manpower and organization, resulting in part from the rapid "Ugandanization" ofthe civil service after independence and aggravated by the continuous exnans-on ofgovernment services and the greater emphasis given to spreading economic developmentthroughout. the nniintrv. Tmn-rovemients in this fieldi arp urgntly reqiuiredr They willresult not only in better development planning and implementation but also il- higherstandards of project preparation which will attract more foreign caDital and thusenable a sounder management cf the balance of payments. But given Uganda's own re-source limitations, the countrv will need considerabl e external sunnort, in the formof technical assistance and capital aid in order to overcome its two most er-tcialhottIePnPc.ks - inspnfficient public s2vings and shortage of qualified manpower. 2,

1/ For a mo riet+.nailed dicussin of otton princ npliciaQ Qse Anne-A T_ gri;

culture), p. 27 et sec.

2/ The Government has been making attempts to improve the quality and organizationof the civil service. An Tnstitute of Public Adminstration has been establishedto give in-service training. The number of executive posts has been increasedand considerable efforts have been devoted to obtaining technical assistance a-broad. As of mid-1967 measures were being taken to reorganize and strengthen thelinist-ry of rcunuflmic Developmenu arnd Planning. Planning units had aiso been es-

tablished in a number of ministries, though great difficulties were being en-countered in staff ing them.

T TT ri/ CX.TT/?A i tn T 1-rr rflT m, ti /T1 C> , / 'iisiTT. NUOUMICU rOuSrmFuiT iFUlt loU6-7

A. The Second Five-Year Plan

1,. In mid-1966, the Government of Uganda inaugurated its Second Five-YearPlan covering the fiscal years 1966/67-1970/71L 1/ It constitutes the first phaseof a la-year perspective planning period, tne basic objectives oI wnicn are tomodernize the structure of the economy and to double the present per capita GDP.

Development Strategy

200 The new Plan follows the strategy of the preceding one in the effort toaccelerate economic growth and diversify the productive basis of the economy, thuslessening dependence on the two major existing export crops of coffee and cotton.This requires expansion in all sectors, although the relative importance of the sub-sistence sector will gradually diminish. However, the Plan's main thrust is inthree directions. an increase in agricultural output, both for domestic consumptionand exports; a rapid expansion of the industrial sector, still in an infant stage ofdevelopmiient; and an expansion and improvement of education and health services.

21. The Plan asserts that as most Ugandans are still living in rural areas,rapid growth can be achieved and benefits of economic development can be spreadevenly throughout the country only if the dominant sector of the econormly - agricul-ture - develops rapidly. In turn, a high growth target for agricultural outputcalls not only for a long-term policy of agricultural diversification, but also forfurther expansion of existing crops. Industrialization and urbanization are to pavethe way towards a modern economy although the present small size of the modern sec-tor limits the speed with whichn drastic structural changes can be achieved. The Planemphasizes the key role which foreign capital will have to play in this sector if thepresent high growth rate is to be maintained. In order to provide the technicalslcills necessary for accelerated development, the educational system must be improvedand expanded) and as education should be tailored to the needs and pattern of eco-nomic growth, there will have to be close coordination of it with manpower planning.Improved health conditions are expected to contribute to better living conditions,and indirectly to facilitate the planned gains in productivity.

22. The strategy of the Plan, while basically sound, is not easy to implermient.It will require a maior effort to augment public savings which in turn will have tobe matched by generous foreign capital aid. The success of the strategy also de-einds on inr,orovements in organization and human skills. This latter factor is par-ticularly important as it affects all aspects of economic planning and development.

Planning Procedure

23. Lack of experience and shortage of skilled manpower are reflected inUTanda's economic planning. Tn its present form, the Second Plan consists essen-tially of a rmiacro-economic framework projecting broad financial balances without

1/ Work for Progress, Uganda's Second Five-Year Plan, 1066-1971.

offering much operational guidance. Its chief parameters are based on a sl;atisticalmodel which indicates the targets for value added in each of the productive sectors.Investment requirements for these sectors were arrived at with the help of crudecapitnal-oit.nut ratios. For some sectors th nolanners were able to identifv a suf-ficient number of projects while in others, notably agriculture, the sum of identi-i-'ied nro_iPet, falls far behLow the macro-morde1 investment, target. Tn most cases.however, planning did not go beyond the stage of rough project identification andbroad policy recomTmendati+onrs. Projects and programs are listed in the Plan witholt.specific details of amounts or timing and there is an evident lack of consistency ofthe sectoral plans within sectors, between sectors and with the macro-economlc pro-eJections of the Plan. 1/ T'here was insufficient coordination with the Plans of

2)h. AtpJesent the M:inistry of Planning is trying to bring about consistencybetween the various sectoral plans and develop the project base for the Plan, butthe heavily overwLorked stEJ'f has ve ry li ttle time f or anr+hinn- more +han simpnlyr en-clorsing individual ministry projects. The whole problem is compounded by the factthat most of the mini+.striesv do not yet+ h.cro competent pa-nning- roups on thefir + Vn-m

Thus, they are not preparing the projects in an adequate fashion and for a long timeth~eT Mlnist,-y or' Economic Deve-lopm,ent adid not have tesEfto Ao it+ for theml. ThlereU IC ±.1Lf. UJ. Si -l.'J L'J~t.. -L V i SJIClL 1254 IlSV laVC LI )LOJ .L L'S SIS .V -5 -.' LiiCi. IC

are a few exceptions to this pattern, notably the Ministry of Animal Industry and theIIL".n ofL L thCJVIA IiU znd Edcat n. tLkh U general Vpture rJIai.Lns one oiJ' improvi-

sation, lack of coordination and extreme shortage of competent staff. However, theTA-Iin 4stfy of Economic 4CDevelopr.ent an' lannin4g is 4 bein ------ 4ed -- A st-f great-ii.LILC L.'.L -LUJ., -LLJIIII± LJJ VCUk iCI aiu I -.L 4in±I1 is UC- Li 6 I CSJ Ul ,dII.LLIt-U , -.L UC) C UO£L. 61t,.LCd U

ly increased and the Government is setting up planning units in the other rministries.

Plan Targets

25. The Second Five-Year Plan sets a more ambitious growth target than thei'irst one. It aims at an average annual growth rate for total output in tiie mone-tary sector of 7.2 percent, while growth in the non-monetary subsistence sector isexpected to be considerably less, at around 3 percent a year. Thus, the projectedaverage rate of growth of total GDP amounts to 6.3 percent a year.

26. Faster economic growth will require a larger investment effort. Conse-quently, the Plan assumes that the investment rate can be raised considerably abovethe level achieved in the preceding Plan period. The average ratio of gross fixedcapital formation to monetary GDP is expected to reach some 17-18 percent over thenext five years, starting from about 16 percent in 1966 and gradually increasing toabout 19 percent in 1971. 2/ This coompares with an average investment rate of 13percent during the first half of the 1960's and 15 percent in 1965. But even so,the investment rate is expected to increase more slowly than the overall growthrate. Thus, the Plan implies an improvement in the utilization of existing and newproduction facilities, that is to say, a lowering of the incremental capital-outputratio from about 3.3:1 in the past to around 2.4:l.

!1/ Examples of these problems cah'be found in agriculture, housing and cornmnnityuevelopmnier i*'.

L/Tis excludcetr s bo.h invesumemb a prduct of the Lon-111UnetUrY sUo-LsteIltesector .

- 10 -

27. The higher investment level will have to be supported by an increasingflow of domestic savinzs and foreign aid. The Plan assumes that a margin21 savingsrate of 23 percent could be achieved over the next five years while foreign capitalis exnpctepd to finanDr on the average more than one-third of total capital fornma-tion. However, no detailed financing program for the public sector was published.The official Plan document merely indicates r the a relative role of various sources offinance) leaving the formulation of concrete financing plans to the annual budgetsof goVrnrnnent. and parast2tal bodies.

B. Feasibility of Production Targets

The LM- ic,in +stimt p +n+. +t+otl G-DP a+ constant pri1e11 will j gr r byabu

4-1/2 percent a year between 1S66 and 1971. 1/ This is considerably less than thetarget gror-wth rate of A.3 ercent set by the Plan. The difference is par+ly ex=plaired by a lower Mtission estimate for GDP in 1971, and partly due to production in19 i rg level + han ws a nIcipa; ted i rl n 19 6, when t+h,e ;1lan was

prepared. In contrast to the development during 1960-65, the impetus for growthwil come -- pr ,a-ll- from product-ion for domestic markets rather -1hlan for eprs

-Li-- L P)I0 jJ .LIII0..L LJLJ _LL V11 PJl jILuuuI U _L U'3L -k L LAL4IUI L. LILL 1110. LI ' 0. u UL'.I UllC.i ii -U-.L

The largest gain in output will again come from an expansion of agricultural produc-tion. ButL in relativc ter lls rowth will be appreciably higher in indust r y and thLe

services sectors. The overall growth rate of monetary GDP is expected to be over 5percenlt, whi-Ie subsistence producio isL lilcely 4to expan smwafasuter. thanLl popiu-

lation, at 2.9 percent. 2/

29. Compared with the first half of the 1960's, economic growth in real termswviill probably- be sumewhat higheroverovr the next fe-w ytears. Huwever the accelerationof the physical growth rate - from 3.9 percent to 4.6 percent - will be more thanoffset by a marked deterioration of the terms of trade. nhe latter improved sharplybetween 1960 and 1964, but by 1971 are expected to fall back to their position ofthe early 1960's. Tnerefore real income, as represented by the monetary product ad-justed for changes in terms of trade, will presumably increase by only 3.9 percent(compared with 4.9 percent in 1960-65). As population growth is expected to beslightly higher than before (2.7 percent compared with 2.5 percent), real per capitaincome in the monetary sector is likely to rise by an average of only 1.2 percent asagainst 2.14 percent during 1960-65.

1/ This assumes average weather conditions over the whole period. If in the nextfive years agricultural output in one or two years falls significantly belowthat average due to extremely bad weather, this would make it difficult to reachthe production target for the Plan period as a whole. On the other hand, favor-able weather conditions could easily result in a higher product.

2/ Growth rate from 1965 level. As 1966 was an unusual year in the non-monetarysector, growth between 1966 and 1971 may only be at 2.6 percent per year inthat sector.

Iabie 3. r uuuulv IO un L SUJI run 1971

T966 1971 Average Annual Change,--L million--) ---- _percenz --------

Mission Mission Plan ActualActual -Estimate Estimate Target - 1960-6_

GDIP at factor cost, total a/ 299.8 374.9 4.6 6.3 3.9

I'Ionetary product 222.6 287.2 5.2 -7.2 4.5

Agriculture b/ 98.0 105.L4 1.5 5.2 4.0Industry c/ 32.8 52.6 9.9 10.8 5.1Transport 7.4 8.2 2.1 8.3 2.SCommerce 44.4 66.8 8.5 7.0 7.3Other sectors 40.0 54.2 6.3 8.6 2.8

Non-monetary product 77.2 87.7 2.6 3.2 2.3

Real monetary income d/ 215.8 260.8 3.9 . 149PoDulation (million) 7.7L 8.84 2.7 2.9 2.5Real monetary income per

canita (E) 27.9 29.5 1.2 2 2.)

a/ 1966 prices.

b/ Includes crop processing, forestry, fishing and hunting.

c/ Manufacturing, mining, construction and power.

d/ M4onetary GDP at constant factor cost adjusted for changes in terms of trade.

A -.,i -Il +,,, 1 /.4. '.. 144 V VV± '., ,.4

30. The ua-v,1 n,re -c-tor (incldingcrop proces-ing, c r--- fihinc and-.1W. 4

54 LWU.. Wt 144 is 14i_- -rJ ,..SW41WA4.1 '- L V - "-5 -..4isJJ J , -. WSS±

hunting) is still the most important part of the Uganda economy, accounting i'or morethan half of total CP. ,Ywve.-r,-- as a result of higher gro-th rates in the other

sectors, the Mission estimates that agriculture will provide only two-fifths of the- ~ -,..- _- +_-- -- 1 c,--r. -I -rrn +i,-n in , -n -f- rc rn n,' Pn .. a - fc ~. ' v-a,,-Jc.,,

1+-, ..,

Wincreoase -I LWi L 1L. iV in4 tota U; over the i. fv years. 4 g 9 share of ag^L4t..±.

production in total GDP will be somewhat lower by 1971 than at present. A largepart of agricuk- 'tVural outpu Iis still dir-+l cos,e-b h rdues u;+wit

crops sold for money growing at a faster rate the share of subsistence productionis gradually declining.

31. Ciash crop agricultre WILcL prv _U U idlelt 11n ieu f1 or Ulleco i gow tL

I/ For further details see Annex TV-A (Agricultiire)_

- 12 -

in the recent past, cannot be expected to contribute much to the expansion ofUganda's economy over the next five years. Although the volur,me of coffee outputcould rise at about 5-1/2 percent a year, there wlould be difficulties in selling allof the crop. The Mlission projects an overall growth in marketed agricultural pro-duction of 3.6 percent a year. 1/ However5 as export prices for the more importantproducts such as cotton and coffee are expected to decline, the value of agricultur-al crops sold in the markets will probably growl by hardly more than 1 percent a year.Thus very little of the increase in money incomes in Uganda over the present Planperiod will accrue to the cash crop sector, and in per capita terms there is likelyto be an absolute decline in spending power.

32. Coffee is the most important commodity produced in Uganda. Even with thedismal outlook for 1S71, this crop will account for over 35 percent of market agri-culture in that year, declining from a current share of almost 40 percent. As thereis a considerable time-lag between planting and maturing of coffee, the volumrle ofoutput during the next few years is largely determined by past plantings. The Mis-sion agrees with the increase in output the Plan expects over the five-year period,but feels that the Plan seriously overestimated the 1966 level of production. Thus,output in 1971 may be around 215,000 tons rather than the 260,000 tons projected inthe Plan. The Hission also estimates that the higher quality Arabica coffee willonly reach 15,000 tons rather than the 20,000 tons forecast. In view of the limitedmarket for coffee and the already predetermined output, the IMission recommends thatefforts should be directed toward upgrading the quality of output, principally viamore effective price differentials between properly cured coffee and the low qualityproduct that is currently characteristic of most of Uganda's coffee. There shouldalso be an exlpansion of Arabica coffee, but only as a replacement for Robusta, notas additional acreage.

33. Cotton, which is the most wvidespread cash crop in Uganda, provides lessreturn to labor than coffee. Thus there is evidence that in areas where both cropscan be grown, there has been a reduction in the share of the output of cotton. Insuch areas it is also unlikely that cotton growing will expand in the future sincethe comparative attractiveness of the two crops will not change significantly. How-ever, farther to the north the opportunity cost of growing cotton is low in view ofthe lack of alternatives. Despite lower prices and the competition of cotton andfood cro,ns for laior af. seasonal neaks there may still he an incentive to exnand out-put in that part of Uganda. The Mission considers, however, that the Plan target of575jooo bales lint production hb 1971 is overly op^,timistic and believes that outputwill not exceed 500,000 bales by 1971 as compared with a 196'/67 level of 410,000bales.

0 1- ---S in coffee and cotton, the Plan's estimates for tea seem tooY n high fo- rn

171. The Mission expects that production will grow from 24.6 million lbs. in 1966+A -o L. lTi i-1n lks. anc that th vau o hJ - -> T 1AA h -T TJ-r1 k-h, P).*m1; t 1 071UV) J * J IIVlJ ' .LKJJ1 Wk 0 . (a±±' U±±a I) U U V UC;l~ SIAt bL ±V iJ)LI 1 ±I1WWWJ 1^ -'± '1 1 V|[I t Wy

Sugar production, now at 115,000 tons is unlikely to rise above 180,000 tons byI1S71. Thi,s leeli 500n tons less than ~- the IPlan estir-,4ate the shrtal being*y/ I W. SI- O --V~ t -lY, 5--- -VYC -~00 - -ICU -LC ± W l 0 U -I , -a Z± 0±11±U C* 0 L

due to delays in the starting of new projects by the Government; further delays

1/ In this projection no value is attached to the large quantities of coffeew-hici IIIgI,tI"U UU UJgo- iLs ifJLUULU Utuio 1W IIU s noUtcurtaied.IU TiO prJJectULUI

is based on 1965 levels.

- 13 -

could cause output, in the extreme case, to be as low as 145,000 tons. With in-creased internal consumption and Kenya's continued need to import some sugar, Ugandais not likely to experience much di2ficulty in disposing of the expected output.The Plan target for tobacco production (24.6 million lbs.) is rather high. In viewof the uncertain market for fire-cured tobacco and the difficulty in producing thehigher quality flue-cured tobacco, the Mission feels that output in 1971 will notexceed 16.5 million lbs., of which 6.5 million will be flue-cured and 10 mrillion thelower quality fire-cured. Other cash crops mentioned in the Plan (e.g. rubber,sisal, citrus, cocoa, etc.) are unlikely to make any significant contributions tothe growth of agriculture during the Plan period.

35. The performance of the livestock sector over the next five years will besomewhat better than the average for agriculture. It is estimated that livestockproduction will grow at about 4 percent a year. This is considerably less than therate envisioned in the Plan which assumes that the national herd will increase from3.6 to 4 million head while at the same time the offtake will rise from a past rateof 16-17 percent to a rate of about 20 percent. In view of physical limitations andpast trends, such a target appears infeasible. It should be borne in mind that themeasures outlined in the Plan for increasing the number of cattle, such as improvedranching and disease control, are essentially long-term measures and will only be-gin to show results towards the end of the Plan. The Plan target of 105 million,gallons of milk in 1971 also appears to be an overestimate. However, in the longerrun this sector has great potential in Uganda, and it can be expected that increasedemphasis on livestock production will bring about an acceleration of agriculturalgrowth in the 1970's.

6. Subsistence agriculture can be expected to grow at about the same rate aspopulation. Assuming this latter rate to be 2.7 percent a year and allowing a smallmargin for increased productivity (primarily from the seed multiplication schemes),the Mission estimates that subsistence agriculture will grow from E7L mill-Lon in1965 to about 188 million in 1971. 1/

:[ndustry 2/

37. Almost one-third of the increase in monetary GDP is expected to be gener-ated hy the industrial sector (manufacturing. mining, construction and electriGpower). As the industrial base of the Uganda economy is still relatively small(ahnit 1 nperc-ent of monetntry (DP in 1 6)- the growth rate of industrial ralue ad-ded will be appreciably higher than that of any other sector, at about lOpercent aIrony, TY) lQ071 +ho !A iicl+_i-in1 -no+. n 7wrilrhi+_ ;c Qnv Ie+.or1 +.r) "nn7rgn 'hl-%l+. TlSq rnill4rnn

year. In 191, the indstrial netproduct is expected to reach aboutilio(in 1S66 prices) which wou:Ld be equivalent to roughly 18 percent of moneta:y GDP.

38. Manufacturing production, accounting for more than half of total indus-trial output, may grow byr abou r 8 er-cnt+ (10 p a y a) u l966= 71. The~~ _ _ _ k --_j F, - .. _,Y " V'U U \ -. V. .4 ,' '~ .4 I* '

establishment of manufacturing enterprises is a relatively recent development in

/ 1966 prices- Measured frcm 1965 to 1071 as 1966 was considerably above trend.

4 2 .J . VAFCr. ¼I 0 W. J-t14 fur+herT dV see ..LI.L (T-d-tr) J and Anex I VJ- (Elec tr.

Power).

Uganda. It has been sponsored to a iarge extent by the Uovernment-owned ugandaDevelopment Corporation (UDC) which was founded in 1952. After initial difficulties,most industrial undertakings have become profitable, and the rate of capacity utili-zation is relatively high, particularly in the larger establishments. The degreeof protection is moderate. W'ith some bulky goods such as building materials theremote geographical location of the country offers a natural protection. Some ofthe larger industries (sugar milling, cement, super phosphate) exploit local rawmaterials. The textile industry, which largely uses domestic raw cotton, is rela-tively efficient and at present dominates the East African market. The completionof the Gwen Falls hydroelectric scheme in 1954 has favored industrial development inJinja. For example, the steel works, which requires relatively cheap power for itselectric arc furnace, depends upon this site for its viability.

39. The high growth rate of manufacturing production which the Mission pro-jects for the next four to five years represents a continuation of recent trends.It is based on firm plans to expand capacity; on probable availability of raw ma-terials and other inputs; and on anticipated trends in effective demand. Due al-lowance was made for possible delays in overcoming technical and management problemswhich may affect levels of output. It must be emphasized, however, that keeping upthe present pace of expansion in the 1970's should be a much more difficult task.Although there is still considerable scope for expanding production in such fieldsas food processing, furniture and paper, or clay products, the opportunities forsetting up viable new industries are becoming increasingly scarce in view of thelimited size of the domestic market and the head start which Kenya has acquired inher industrial development.

40. Over the next few years, the Mdission foresees considerable productiongains in textiles and wearing apparel, food processing, metal industries and chemi-cals. Production of non-metallic minerals, wood, furniture and paper will also in-crease, and a number of smaller industries will continue to develop. Expansion ofcotton textile manufacturing which has been very rapid in the recent past is likelyto slow down in the future since Kenya and Tanzania are planning to become more self-sufficient. However, three new mills are being erected which will produce rayon andsynthetic fabrics for local consumption. Additional capacity is also under con-struction for garments and footwear. A new blanket mill and a sack-making mill areplanned for construction in the near future. The two main projects in food proces-sing are the new sugar mill at Kinyala and the meat packing and canning plant atSoroti. Neither factory is expected to work at full capacity by the end of thepresent Plan. The company producing steel from scrap at Jinja plans to increase itscapacity considerably through the installation of an additional furnace. Rollingmills are being installed to produce strip, tubes and wire. Production of superphosphate will be considerably increased by the erection of a new integrated plantat Tororo during 1967/68.

41. Output of mining products will grow slowly during the Plan perhaps by1-1/2 nprernnt a vyar. The snctor is nTmninnted by the connper mine at KXl1pmhe whichis presently working near full capacity and which has no further expansion plans.As a marginal producer the mine's prosperitydepends critically on the world pricefor copper. If prices come down from their present high level, as is likely tohappen wTit-hin a few yrs, +h firm's exploratln experndituresr may ha-ve. toirc be re-duced drastically with adverse effects on production in the 1970's.

- i5 -

4!2. Val-ue aued in the construction industr-y is assumed to grow, ri passuwith investment, rapidly in the early years of the Plan and then levelling off. Theoverall growth rate may be about 10 percent a year, with net output reaching a leevelof E8.2 million in 1971. Although such an expansion seems feasible, there io a pos-siliiity of some strain due to shortages of skilled labor in the later years of thePlan. The industry is essen-tially East African rather than Ugandan; thus if allthree countries increase investment as planned, an overall construction manpowershortage might result for the region as a whole. In Uganda this would probably bemanifested first in the supp:Ly of foremen and possibly at a later date in the sup-ply of skilled craftsmen.

43. Output of electric power is expected to rise by an average annual rate of6.5 percent over the Five-Year Plan period, reaching a level of E•.2 million in1971. At that time9 however, there is some doubt as to whether the Nytil textileplant at Jinja will continue to use electricity to generate steam in the face ofhigher power tariffs. If the textile plant decides to convert entirely to oil-firedsteam, the growth rate of power generation in Uganda will be somewhat lower than as-sumed by the M4ission.

Other Sectors

44. Value added in the transport sector is estimated to increase at an averagerate of about 2 percent a year. This is considerably lower than the rate of 8.5 per-cent set forth in the Plan because the Plan's projection was based on an ave:^age re-lationship to GDP that is substantially higher than the more appropriate marginalrelationship. The Mission does not feel that there are any physical barriers tothis rate of growth as Uganda has an adequate transportation infrastructure. In-comes generated in commerce are directly related to the monetary and industrialproduct. The IMission estimates that they will grow at a rate of about 8-1/2 percenta year. The remaining sectors comprise governrment, rents, and miscellaneous services.Their growth rate is expected to be 6 percent a year, with output rising from a cur-rent level of L40 million to £54 million in 1971. This is less than the 3 p(ercentrate implied in the Plan and is the result of several considerations. First, it canbe assuned that rental income will grow more slowly than projected in the Plan as aresult of serious impediments now existing to the expansion of housing. Second, ex-amination of past trends reveals that the rate of growth in the value of governmentservices was muclh lower than the rate implied in the Plan for 1966-71. Fina'Lly, themiscellaneous services sector can be expected to grow pari Dassu with monetary in-corne.

C. Investment Expenditure

45. The official target for gross fixed capital formation in the monetary sec-tor is 1230 million over the whole Deriod of the Second Five-Year Plan. The Missionestimates that the amount of money which can usefully be spent by government andparastta1 2Agencies 2nd which the private sector is likely to invest; will not e-ceed L200 million (see Table 4). Mloreover, as the costs of Plan projects were oftenunderestimated, the Mission"s recommendations r A non to an investment program whichin real terms is considerably smaller than the official Plan target. In this con-text it must be emphasized thrat the Mission's estimates should be taken as an

- 16 -

illustration of what could happen if resources were allocated economically, ratherthan as a forecast of future trends likely to materialize. If certain projectswhich the i4ission does not consider economically justifiable are taken up by theGovernment, the investment rate might well be higher than indicated above. On theother hand, some unforeseen delays in the execution of projects may have the oppo-site effect, causing a carryover of investrmient outlays from the present Plan periodto the next.

46. Shortfalls are likely to occur in the commodi-ty producing sectors and ininfrastructure. Thus, with one notable exception (tick control), the scale and scopeof agricultural projects recommended by the 1lvission is less than those included inthe official Plan. The difference is even more marked in the manufacturing sector,construction and particularly in power. Transportation investments are also expectedto be lower. On the other hand, investments in some of the social sectors couldeasily reach the targets set by the Plan.

47. Comparison with actual investments during the First Five-Year Plan isdifficult as no sector brealcdown is available for the past, and the definition offixed capital formation in the national accounts appears to differ somewhat from theone used in the Plan projections. The Mission estimates that on the basis of itsown projections total investment may increase by about two-thirds (f80 million).Since monetary GDI at market prices is expected to be about two-fifths higher, theaverage annual investment rate would increase from about 13 percent during 1961-66to roughly 15 percent in 1066-71. The average investment rate during the wholeperiod of the Second Plan would not be much higher than the rates actually achievedin the last year or two of the First Plan. However, investments are expected to in-crease rapidly in the near future, levelling off towards the end of the Plan period.Thus9 during 1967/68 and 1968/6S the investment rate may well be higher than in anyone year of the previous Plan.

48. The projected increase of capital formation implies a major accelerationof public developnment Spendinz. The 1-4ission assumes that Government investment willroughly double, reaching about f80 million during the present Plan period. Para-statal and private investments are exoected to grow by only 50 percent to some 1120million, although in absolute terms their increase will be about the same as thatof Government investment.

)i Tho T1< 'i cn o+. +hn+. in mr P±nPnf. in n9rri 0iil +.ii r. nn-1rl - ITO nOnilrl

reach some T28 million, of which 118 million would be financed through the Govern-ment budget, and U10 million by parastatal agenc es and the privae s o. Aboutone-fourth of Government spending would be on agricultural mechanization projectson group fCarms aInd for traocto-r hire Services, al'though, this represents already amuch smaller program than proposed by the Plan. Other important schemes would beprojectsu0 to C)'ii V U-rove t'oy expLani wet V-pd cessin cosi ±1. *

million, facilities for a new marketing board to stimulate production and provide

1/ For further details see Annex IV-A (Agriculture) and Annex IV-B (Industry).

- 17 -

Ta'Die 4 : GROSS FIKED CAPITLAL FORMAfTION

(In X million)

Second Five-Year PlanPlan Target fl/ Mission Estimate d/

Commodity Producing Sectors 78 66

Agriculture and Livestock a/ 27 28Ma-nf act.uring and l iL 7 LI.L1 6 l43 3)Construction 8 3

Infrastructure and Power 68 4

Roads ) 14A _ .Airportus ) Railways ) 0 13ie±ucosrluriuicauion )

Electric Power 23 5 e/Water Development 5

Social Sectors 55 49

Education 12Health ) 30 14Community Developient ) 3Housing 25 20

Other Sectors c/ 29 35

Possible additional investment 6

To-tal Investment 230 200

Total Investment duringFirst Five-Year Plan di 124

a/ Includes coffee and tobacco curing, tea factories, forestry, fishing andhunting.

b/ Including sugar manufacturing.

c/ Mainly private commerce and services, and Government administration.

d/ 1966 prices.

e/ Assuming close cooperation with Kenya power authorities. If such cooperationis not achieved, power investment could be as high as Ll1 million.

f/ 1964 prices.

- 18 -

better storage for staple foods and minor crops costing L1.0 million, outgrowerschemes for tea at Tf1.7 million and sugar at TO.5 million, and projects costing f0.9million to improve the quality of groundnuts for exports by grading.

50. The Mission does not consider that the investment in the livestock in-dustry proposed in the official Plan adequately reflects the importance of thissector. Livestock has a particularly important role to play in diversifying agri-culture. The Mission recommends that there should be greater emphasis on diseasecontrol measures, which will have an immediate effect by reducing mortality and inthe long term will create conditions in which high-grade cattle can thrive. Themajor project recommended by the Mission is for the control of ticks which are thevectors of East Coast Fever. The whole project, which is based on a pilot schemeduring the First Five-Year Plan, will involve investments of slightly more than 19million but only 1:5.h million could be disbursed before 1970-71. The Mission rec-ommends that reclamation of tsetse infested areas continue and that stock routesand quarantines be improved and estimates the cost of these programs at fL.5 mil-lion. Among the projects involving relatively small investments, the Mission placesparticular importance upon the seed multiplication scheme (LO.1 million) and the ex-tension of individually owned cattle ranches (1O.25 million). The extension of thedairy industry (Lo.6 million) will increase the supply of milk in rural areas. Con-struction of education and training facilities for the agricultural sector would re-quire 11.1 million.

51. Investment in manufacturing and mining is likely to be considerablv lessthan in the Plan primarily because several large projects will probably either notbe started during the period or will be held in abeyance. These include the nitro-genous fertilizer plant, the integrated steel works and the second sugar scheme.However, these projects will be replaced to some extent by others such as the ironore furnace in Jinja. Moreover, mining investment is expected to be substantiallyhigher than indicated in the Plan. Total investments in these sectors are esti-mated to reach close to 135 million compared with a Plan target of L43 million, al-thoiugh they may he somewhat higher if vimorolus efforts are made to formulate addi-tional projects in the near future. Investment activity will focus on projects inthe chemicl1 indus:tries totalling T5.i million. mainly for expansion of phosnhaticfertilizer capacity, in non-metallic minerals, 13.6 million, mainly for cement9 intextiles, f3 .2 million; in mpetal industries3. T3o2 million. mainly for the iron orefurnace; in food products, 12.9 million; and in sugar manufacturing, 12.5 million.Investm.ent in mining, expected to reach F15L: million, is largely to be undertakeby the Kilembe copper mine.

52. The Mission feels that the investment required in construction will beabout 3 million rather than the E8 million stated in the Plan. This difference isdue to the fact that the Mission is forecasting a lower investment level for 1971,a--d that the capital=routput -ain for the consrcinn nqindut-r may be lower thanthat implied by the Plan.

Infrastructure and Power 1/

53. The Mission estimates that public investment in transport and telecom-Ilill-dULULI UUUcoLU ldaounltu LU approx-Lima tely I 2 miJllion compaUid u L a P L I lan arg o0

1/ For further details see Annex IV-D (Transport) and Annex IV-E (Electric Power).

- 19 -

L40 million. Of the total about L14 million would be for road projects with mostbeing spent on improvements of existing trunk lines, but with more emphasis onsecondary roads than in the past. About Ll.5 million might be invested in airportfacilities. Present investment plans of EACSO indicate that some E17 million will'be spent in Uganda on railway and telecommunication projects.

54. Investment in power may well be much lower than that forecast by the Plan,provided Uganda and Kenya can reach a mutually satisfactory agreement for coopera-tive development of power resources which wvould result in postponement of the Buja-gali project in Uganda. In that event, power investment in Uganda would probablynot need to exceed E5 million compared to the 123 million proposed by the Plan. Ex-cept for Bujagali, present development programs of the Uganda Electricity Boardforesee only E1 million investment in power generation facilities of which 10.7 mil-lion will be spent for the installation of two more machines at Owen FDlls and 10.3million for smaller thermal and hydro-electric projects throughout the country.Capital outlays for the extension of distribution lines will amount to about fh mil-lion during the Plan period. Additional investment in power generation would not berequired if Uganda decides to satisfy her growing power demand by purchasing bulkpower from Kenya. Alternatively, the country would have to provide half the capitalcost (approximately IL million) towards the commencement of the next major hydro-electric station in Kenya or Uganda in 1970 and 1971. If cooperation with Kenya isnot achieved, the UEB will need to start its own 122 million project at Bujagali ata cost of about E8 million during the Plan period.

55. The water development program consists of a number of unrelated componentparts falling under the jurisdiction of several ministries. The Plission estimatesthat some L7 million could be spent on this program. This assumes that there willbe at least a beginning (12 million) on the large Kampala/Jinia water and sewerage"Master" plan by the end of the period. Another L3 million will probably be spentfor interim water and sewerage works in the Kampala/Jinia area. The rest of theprogram consists of urban water supply projects (E1 million), rural boreholes (Elmillion) and vallev tanks for cattle (E150 thousand). The African Develonpment Bankhas agreed to finance a technical study of water development possibilities outsideof Kampala and Jinja SwPedn has agreed tn finance afe,bility stuyv wl-ii' wouldcinclude design and cost,es-timate's for a rural borehole water program.

Social Sectors 1/

5,6. Investment in the social sectors could amount to roughly one-quarter of-total gross capital formationn Of this some E12 million might be spent on educationprojects. To meet the needs for higher level manpower the highest priorit, is givento the expansion of secnnary schools on wihich an estimated .7 5 million will bespent. The Hission supports the Government's allocation of E1 million to the Uni-versity though expansion hfere must be carefully waft.hpd t.o ensure that the output ofgraduates is not greater than the country can absorb. The cost of primary schoolbuilding falls most heavily on the local comm,.unities. With te e e-tf autmatic promotion, an investment of IJ.5 million by the central government should be

:L/ For further details seie Annex IV-F(Education) and Appendix 4 to this part ofTT_± u-e T7v

- 20 -

enough. The program for the consolidation of teacher-training colleges is under re-view and the Mission tentatively suggests an investment of 11 million. The remain-ing 11.1 million is for the development of technical and commercial education, main-ly a-t the sub-professional level. No investment in farm schools is recommended.

57. The Ministry of Health plans to invest a total of 11h.6 million over theFive-Year Plan period. Because it has a competent planning staff, the Hinistryshould have no difficulty spending this amount provided the necessary funds areavailable. The Hission feels that the health plan has been thought out carefullyand that it places a desirable emphasis on preventive medicine, wThich should eventu-ally lower sharply the rural mortality rate, The Plan can be divided into foursections, cura-tive, preventive, training and special works. The curative programwould entail investments of 18 million and includes the general expansion and up-grading of a number of toi.Nn hospitals around the country, but a large part of theprogramn, or 15.9 -million7 is devoted to the construction of 22 rural hospitals eachwjith a capacity of 100 beds. These hospitals, which will provide a much-needed ex-pansion of the country's curative health services, have already in part been fi-nanced and are now being constructed. The preventive program which would cost 15.9million and provides for the construction of some 600 rural medical units is de-signed to enable each gombolola (administrative division) eventually to have a pre-ventive center with diagnostic services, inoculation facilities, a lecture hall,and an ambulance. The training program is well thought out in relation to thefuture manpovwer needs of the health service, expenditures of 10h4 million are forbuildings and equipment for the training schools. Finallyv the investment contentof the special services iould amount to 10.3 million to cover subventions tomission hospitals and leper settlements, as well as capital expenditures on themalaria program.

58, Community development projects included in the Plan amount to '£2,5 million.Althonuph thp Viinistrv of Culture and Communitv Development indicated to the -Missionthat it could usefully spend 15.5 million, the Mission considers that some of them.c1t.s includledr in the larger nrnprogrm have S low economic 3nnr social nrioritvIt estimates that investment in the order of 13 million would be more appropriate.Of this, community centers and pro jects for N\Tqtionral TUgandaqn Ynoith nragniJ7tin(NUYc) wculd account for 11.0 million and 10,7 million respectively, sports for 1O06

yili - (ig voca ionl tra~in.ingq -for P.3 m nillionmf andi- soc'ial ,~ wefa~re for~r E-Oe2 ,mi 1 1i r,

59. The Plan target for housing investment is 125 million, Most of this isexpected to come from the private sector while the Government housing program (main-

w : 41m+hlyc n!, czrhlna c A,- j ; Q -,I, Tnl 1 9 m; 1 1;nn f8P t +ho .4,lho -J Ar n1 laTh 1 I +I-,kJL VWJL U> IXLL WJ ~L 1iLI LA JL LL;L 2Li Utd;~ / L g LAIi CiSii j'id i 4s|voWLs | UIILi

Mission sees no difficulties in the Government carrying out its housing program, i-tdoubt+s whether- T":1 million wJill be inveted by the, private sector- wT>i-hut da-stic

changes in current housing policies. Although it is very difficult to make fore-casts4 in 3 thi Jeld, monetLary investment Li n rura'l hILousing ma1ypehsamuto l-U U L n iii ULL _LI.U HLi U' LIVU Lli) LJ LU.UIL II UUIJ y hlly HUL iU.JjJ UJIII'UIL) ULU -L±LU

million, while under present circumstances urban housing investments are unlikelyLto exceedu m iI LLion. IoweverV L if sufficient landLu -wer-e miadue ava-Ilable for urbuanhousing projects and if private building of housing could be stimulated, urbanprog-rams could be augrmented so that total housing inves huernL, could reach a levelof 120 million, or even more.

60. Investment requirements in other sectors (commerce, services, tourism,l/

1/ A detailed analysis of investment requirements in the tourism sector is givenin Annex IV-C.

- 21 -

government administration) may be somewhat underestlnateu in the Plan. -le llissionexpects the commercial sector to grow faster than assumed by the planners; possiblythis in turn may entail higher investment requirements. Besides, some additionalprojects may be started towards the end of the Plan period which are presentLy notknown or not yet under consideration. Tuherefore, total investments, at about 1200million, are likely to be slightly larger than the sum of individual sector :zrogramswhich amount to f194 million.

D. National Savings

61. As in most countries, no independent estimate of total savings exists inUganda. There are some data on government savings and the operating surpluses ordeficits of parastatal agencies. But the much larger savings of the private sectorare not recorded statisticalLy. The Mlission, therefore, had to estimate total sav-ings as a residual reflecting the compound errors of national income and balance ofpayments data. Given this large element of uncertainty the following analysis hasto be considered with the necessary degree of caution. Nevertheless, there arestrong indications that the rate of domestic savings is rather high. During thefive-year period, 1961-65, gross domestic savings in the monetary sector may haveaveraged 17 percent of monetary GDP. Even after deducting the net outflow of factorincome payments, gross national savings were apparently higher than gross cai3italformation. However, despite this impressive savings performance, the country haddifficulties in financing its investments because a large part of local savings wastransferred abroad or went into hoardings and property speculation. The reasonsfor private capital leaving the country on a large scale are not easy to ascertain.There has, of course, always been a certain amount of private capital outflow, par-ticularly from the Asian business community which generates a large part of orivatesavings and which has strong personal links and business interests abroad. Thisbasic underlying trend was probably intensified by the political uncertainty whichovershadowed economic conditions in Uganda before and after independence, and morerecently, by a general feeling of concern among non-African businessmen about theirowIn future in East Africa. Occasionally, there may also have been a shortage ofinvestment opportunities which were more easily found in Kenya or overseas.

62. Another basic deficiency in Uganda's savings pattern is the uneven dis-tribution of savings between the private and public sectors. During the past mostsavings were generated by the private sector while public savings were inadequateto cope with the financial problems of the Government. In 1964/65 and 1965/66,total public savings were ev(en negative mainly because of large savings deficits inthe central government budge-t and the accounts of the marketing boards. Conse-quent1y, a high proportion of public investment had to be financed from existing re-serves and by short-term borrowing.

63. Thus, it appears that Ugandats problem is not so much one of increasingthe overall savings rate, but of achieving a better balance between private andpublic savings and of channeline a larger share of nrivate savings into orioritvsectors of the domestic economy. The Mission recommends, therefore, that govern-ment and parastatal bodies should make strong efforts to canftire a larger sh.rp oftotal national savings. This changed pattern may have little effect on the totallevel of savings. But it would help allocate a larger share of local resourzes todomestic investmvent financing. Possibly, it would also reduce the amount of private

- 22 -

capital transferred abroad although further measures may oe required to prevent acontinuation of large private capital outflow. In the following paragraphs concretesteps are discussed to increase public savings, and estimates are made of the re-sulting savings pattern in government, parastatal and private sectors.

Government Savings

6h. Government savings have been insignificant during the period of the FirstPlan. Starting from a negative figure in 1961/62 of minus 2-1i/2 million, theyreached a level of roughly plus 13 million a year in 1563/6h and 1964/65, beforedropping again sharply in 1965/66 to a negative balance of almost E5 million. Atthe beginning of the present Plan period, the Government took determined action toreestablish budgetary savings. It introduced new tax measures expected to generateLa million additional revenue, and imposed strict controls on current spending.Thus, it may be expected that during 1966/67 government savings will swing back toa positive figure and reach a level roughly comparable with that of 1963-65.

Table 5: GROSS NATIONAL SAVING AND INVESTMElbT a/

(In L million)

1966/67 - 1970/71Mission Estimate

Government and Parastatal Sector

Saving 58Investment 120

Saving Gap - 62

Private Sector

Saving 122Investment 80

Saving Surplus + 42

Total Monetary Economy

Saving 180Investm.ent 200

Saving Gap - 20

a! Monetary sector only.

- 23 -

65. However, additional budgetary savings will ha e to 'oe generated if thetarget for adequate public savings is to be met. The Mission believes that thecentral governme in particuiar may be a source for higher savings providedthe Government adopts vigorous measures. The present moderate rate of taxationcould be considerably increased and a continued strict control of government sala-ries, which appear to be out of line with average incomes, is urgently required.

66. In the field of taxation, a whole array of additional revenue scurcescould be tapped (see Table 6). For instance, the effective rate of income taxation

Table 6: CEMTRAL GOVERNMENT TAX REVENUE, 1966/67 AND 1970/71

(f million)

Present Additional1966/67 T d ax Laws T1axes

Tncome Tax 5.2 6.1 a/ 1.0Reduced personal allowances (0.3) d/Tmproved ol Iletion (0.7)Development Tax 1.5 - b/ 2.5 e/T mport. nDuties 1,.0 5 Excises and Consumption Taxes 7.9 9.6 c/ 3.2 f/Sal o.cz TX -; n A} /

Export Taxes 5.9 6.3 - h

All Taxes 34.5 37.0 16.7

a/ Assuming that tax revenue grows par passu with monetary GDP at current prices.

b/ Originally intended tc be abolished in 1967/68, but it is continued for anotheryear.

c/ Assuming a 5 percent annual increase in local consumption.

d/ From f216 to 1200 a year for single persons, and from 1600 to L4OO a year formarried persons.

e/ Assuming the present temporary tax is continued.

f/ Assuming that average duty/tax rates are raised by one-third.

g/ Net of Local Government's share in tax revenue.

h/ Additional revenue from higher coffee tax rates would probably be offset byrevenue losses from lowering cotton tax rates.

- 2) -

and the threshold (when people start to pay income tax), which at present are bothrather low, could be raised to a more realistic level by reducing the generousfamily allowances and narrowing the income brackets subject to increasing marginaltax rates. Moreover, as tax evasion is still widespread, improvement in tax admin-istration would have considerable revenue effects. The introduction of a simplesystem of advance payments on tax liabilities of companies and self-employed personsgeared to past tax payments could provide another, although temporary, revenuesource, Such a sten would complement the recently enacted PAYE-system for wage andsalary earners. Furthermore, the special "Contribution to Development" introduced inSeptermher 1966 and now extended, could be continued indefinitely. This tax leviesa rate of 5 percent on all income above Sh200 per month and thus constitutes ineffect a surcharge on the re-mlar income tax The exnort tax for coffee could alsobe increased not only for revenue purposes but also as a device to contain undesirableexpansion of production. On the other hand, with declining world market prices forcotton, it may become advisable to reduce or even abolish the cotton export tax.Therefore,, takircr all port duties toogeP.tr 1irtte score can bep seen for raising

the average rate of taxation.

67. The principal sources for additional revenue would, however, be indirecttaxes. Import duties, for instance, p resern+.l averagea a about 30 percent of the im-port value. They could be raised considerably - though only in agreement with Kenyaand Tanzania - and produce substantial additionaL revenues since possiilities forevasion are very small. Higher import duties would also serve to restrict demandfor nonessential consmer imports thus easing the balance of payments position.Revenue gains from import levies could be supplemented bv higher excises on locallyproduced goods such- as cigarettes or- sugcar. Fin ally, h--re is the iii o

introducing a general sales tax. The Government is already seriously consideringans for su atax a

68. Tn Tpa ble If an atte m-,p tl is ma dle to qu n i y t e r ve u f e t or the fis~~U. Jit Im a .LC _> Cti 0.UiC14.. 0 IjL.U Ut

4UIILS / Ui kV515 ,0,U) tU U/IC 1. 0,D

cal year 1970/71 of both the present tax laws and the changes in taxation suggestedabove. Iti showsIa that1 wiLull unch'langed Legislation tlUax revenue wI gro . by oly4 £.5

million over the next four years from a present level of f34-5 million to E37 nil-i.LOII L[ iu/ (U, I . I. IllO 5104- dI LI LI UUlLLera"ereIIU)L-i 01 bl e average 'ax2_li on i-n 17/L Ths would amount to a considerale U reuctio of the avraeIa

rate, as it implies elimination of the recently introduced development tax. If thistax were to bLe continued, arn additional f2-l/2 million revenue would be available bythe end of the Plan period. Another fl1 million could theoretically be raised byenacting all the other recommended tax changes. However, some of these measures maybe considered as alternatives rather than complementary steps; a general sales taxversus higher excises or consumption taxes; ithe continuation of the development taxversus increased income tax rates. Also, many changes in tax laws w4ill require con-sultations with Kenya and Tanzania, as the more important taxes are administeredcollectively for all three countries by the Common Services Organization. Finally,an ambitious tax program will necessitate strengthening and extending the presenttax administration which in turn requires time to be accomplished. Therefore, theMission considers it more reaListic to set a lower target for 1970/71 than the oneimplied by the above mentioned computation. But with determined Government efforts,it should be feasible to raise annual revenue through additional taxation by someE12 million over the next four years. L/ This would place the revenue target for

1/ Of the total, E2-1/2 million would come from a continuation of the developmenttax. Thus, revenue from new taxes would only amount to f9.5 million.

- 25 -

1970/71 at 1L45 million as corapared to the _37 million which could be expected if notax changes were introduced. The average rate of taxation would thus be raised frompresently 16 percent to about; 19 percent of monetary GD), an increase which would besteep but not unprecedented.

69. Government revenue from fees and other non-tax sources could also be in-creased. For instance, there is considerable scope for additional receipts throughraising the extremely low rents for government housing to an economic level. More-over, the possibility of charging modest contributions for the hitherto free healthservice could be explored. Total current revenue of the central government budgetmigrht thus reach a level of E67 million in 1970/71 compared with an estimate oft47.4 1/ million for 1966/67.

70. However, the lion's share of additional revenue will be used up by thenecessary growth in current government spending. Even with strict control overwagres and salaries, current outlays are bound to rise considerably, partly to over-com.e existing deficiencies in government services and partly to finance new serviceswh:Lch will be necessary as the country develops further.

71.. The number of staff required to improve and extend existing services tokeep them in line with the needs of a growing population is expected to increase byabout 3 percent a year. Requirements for additional staff to support the new serv-ices expected to come into operation over the next few years may be of the sameorder of magnitude. 2/ On the other hand, there is an urgent need to restrict fur-ther increases in wages and salaries. Real incomes of civil servants are very highin Uganda, particularly if compared with the country's average per capita income.Government employees receive salaries comparable to those paid in economically ad-vanced European countries, and higher than in many medium income countries with amore advanced economy than Uganda. They also enjoy considerable fringe benefitssuch as virtually free housing, free health services and nominal fees for the highereducation of their children. Moreover, the tax burden of government employess isvery moderate, as alLowances are generous and the marginal rate of the income taxfor civil servants with incomes up to E2,CCO rarely exceeds 12.5 percent. 'The Mis-sion considers such a generous income nolicv out of line with the harsh realities ofa :Low income country. It strongly suggests that real incomes of the better paidcivil servants be reduced in the near future. Politically, it may not be feasibleto reduce money salaries, but measures could be taken to make high salaried govern-ment officials pay a fair share of the tax burden and to cut down unjustified fringebenefits. Therefore, the Mission welcomes the Government's intention not to in-crease annual salaries above £600 during the next four to five years and to kceenyearly increments for wage earners and employees with low sa:Laries within a range ofL-3.5'nercent. Even so. average-wages and salaries are expected to rise bv about.4 percent a year, mainly because in line with recent trends the number of higher

I1/ Actual rece-ipts for 1066/67 aelikely to exceed the budgetar .. arg.et beause ofsome hidden reserves in -the tax estimates.

2/ A more detailed analysis of the needs for additional staff is given in Appendix

- 26 -

paid officials will increase faster than thiau of luwer paiu civil servanls due to

the strong demand for professional staff to carry out the development program. Thus,expenditures for wages and salaries can be expected to grow by an annual average oi10 percent, even if the Government tries hard to contain unreasonable spending.

72. Outlays for other government consumption (goods and services) are likelyto grow roughly at the same rate as wages and salaries. Interest payments will riserapidly, although in absolute terms they will still remain a small item in thegovernment's budget. Un the other hand, transfer payments could remaami fairlystable over the next few years mainly because of the Government's intention not toincrease its payments to local authorities. Altogether, it should be possible tocontain current expenditure to a level of E62 million by 1970/71 thus leaving a cur-rent surplus of some E5 million available for the financing of investment expendi-tures.

73. The Government's intention not to further increase transfers to localauthorities will force the latter to broaden their own tax base considerably. Inthe light of their past performance in this field, this should not be an impossibletask. Apart from improving the collection of the graduated income tax there isscope for new levies such as land and property taxes, and various fees. Accordingto present plans, the local governments may also receive a share from the envisagedsales tax which would have to be collected by local officials. On the other hand,current spending will increase at least as fast as that of the Central Governmentfor similar reasons, i.e. the need to improve and expand existing services. There-fore, the amount of savings generated by local budgets cannot be expected to growmuch during the next few years. It is estimated that they could reach a level ofL2 million by 1970/71 compared with roughly fl-1-1/2 million annually in recentyears.

Savings of the Parastatal Sector

74. The savings performance of Uganda's parastatal sector as a whole has beendisappointing in the recent past. This is particularly true for the two marketingboards whose operations opened up a major financing gap in the public sector. Overthe period of the First Five-Year Plan, the average annual operating deficits - ornegative savings - of the coffee and lint marketing boards were as high as f3.3 mil-lion 1/ with a peak of 17.6 million in 1964/65. The losses were financed from re-serves accumulated in the 1950's when the boards were able to make profits. At thebeginning of the present Plan period, however, these reserves were exhausted, andthe Government had no choice but to close the gap through a drastic reduction of theproducer's price for cotton. It is expected that in 1966/67 the transactions of theboards will be roughly in balance. The same assumption can be made for the follow-ing years as the Government has declared its firm intention to keep producers' pricesat a level which will prevent protracted losses in the future.

1/ This is after r1deducnting exnort tax payments to the Government from currentreceipts of the boards. If these payments are not taken into account, thebords' roperations wonldri show sirnl1 avPeragivng T2 million a year.

- 27 -

75. Public savings cOuld be further augmented through the establishment of asocial security system. Plans to introduce such a system are fairly advanced andcould be implemented within about one year. It would take the form of a NationalProvident Fund which would generate substantial savings during the initial years.Assuming that contributions to the scherne were fixed at a rate of 10 percent ofgross wages (to be equally shared between workers and employers), revenue from suchcontributions could reach 12-1/2 million by 1970/71. Expenditures would be insig-nificant during the first decade - benefit payments will not start on a full scalebefore claims have been earned by the members through contributions over a longperiod - and substantial cash surpluses could be generated. These surpluses wouldlargely be available for investment in long-term government bonds. The net contri-bution of the scheme to public savings would, however, be smaller than the cash sur-pluses as about one-fifth of the gross contributions represents the employer's sharefor government workers which will have to be paid from budgetary sources. Meverthe-less, the additional net savings that could be expected from this scheme might reachsome 12 million a year at the end of the present Plan period.

76. (iross ssvings of the Uganda Electricitv Board were rather small in theearly 1960's. But in the last few years they rose considerably, mainly as a resultof a mnor reali.st,ic tariff policy and of' betAte.r utilization of existing capacities.In 1966/67, the operating surplus (including depreciation allowance) of UEB mayreach f22 million, compared to an annul averae of' only T0n, million during 196(0-63

It is expected that the surpluses will increase further during the next few years toa leve1l of ahbout. ¾1 /1/2n million bIy 197n/71-

77. The Uganda DeveloFr entC orporation acquired a reputation in the past as anoutstanding government-owned development institution which has managed to operatewithout losses. Conducting business along strictly commercial lines, UDG's netearnings averaged Eo.6 million in recent years. They are expected to reach 20.7 mil-1; nn y, arn d,r-n rtI or n ho "-nnd P1 an nAr nA

78. Ther Ea+ Af4- nrica -n mnerv,ices Org-nizations_ the railTays, ports, arir

ways, posts and telecommunications - of which Uganda, Kenya and Tanzania are members,are expectluedu to generate -substantial- -- - - - - -- and inrasn -aig 1/ -1,AAc ar dvie

among the three shareholding countries in proportion to the investments these or-ganizati-Ons re mOaing T.T;+hin eOach country. Accrdingly, Ugand's share of scilh{D *- -F .. w ,- -.- - - - - .-.- s ,r;fJgvez- .1v_Jv_

savings is expected to reach 110.7 million over the five years of the Second Plan.

79. Total public savings by the Government and by parastatal organizations,could 4thus grow fLrom-i ab'outu '7-1 /2 million- 4n 1966,X67 4- som - 15ZIf-1 /2 million- by-UU LU UiL~ f1~ UI UJ /J L/C L IIL-L-L±L/Ji _L11 ±/-OC t Uk) UlC .IJ. -L III±±L.-LO1U y.

1970/71. For the period of the Second Five-Year Plan as a whole they may reachsome 58 ML,lln11.

Private Sector Savings

30. Statistical information on private sector savings is virtually nonexistent:in Uganda. Nevertheless, it is possible with the help of other indicators such asbalance of payments, investment and public savings, to estimate rough orders of

L/ A more detailed analysis of these savings is given in Volume I.

- 28 -

magnitude and trends. Based on such crude analysis, the Mission expects that privatesavings, which rose rapidly during recent years, will drop to a somewhat lower levelthan in 1964/65 and 1965/66, and remain more or less unchanged for the rest of thedecade. The reasoning behind this projection is twofold: first, it is assumed thata large part of such savings originates from the foreign trade sector which is like-ly to expand only slowly between nop; and 1971; secondly, an increasing amount ofprivate savings will be diverted to the public sector as and when the public savingsprogram outlined above is implemented. The Hission estimates that savings of theprivate sector may amount to approximately f25-30 million a year. At approximately11 percent, this would still be a considerable percentage of national income. Forthe period of the Second Plan, the absolute amount of private savings rnay be slight-ly less than in the preceding five years. The Government hopes that a marginal shareof these savings - approximately 12 million a year - can be tapped through bond is-sues and made available for budget financing. Although actual sales of a recentGovernment stock issue have been below this margin, such expectations do not appearto be unreasonable provided political and economic stability is maintained.

Domestic Savings Gan

81. Despite the recommended strong effort in raising nublir. sAvings, the Mis-sion does not expect that the overall savings rate - namely, the ratio between mone-tarv GDS and GDP - will be higher in the second half of the 1960's than it was dur-ing the first half. Because of the dim outlook for exports, the private sector willnot be able to compensate fully for the loss of snvinps to the nubilc sector, anditheir combined savings rate may actually turn out to be slightly lower than in re-cent ve_rs. Tn other words. the Mission exnpct,.-s that the marPinol savings rqte. ofthe Uganda economy over the next few years could be somewhat less than the averagesavings rate in the past.

02. C.onsidering the fact that the investment rate is expected to rise5 thecountry may end up with a negligible domestic savings surplus. Howev.er, in con-tra st to the situation during the First Plan when savings exceeded investment by awide margin, there will be a better balance between the public and private sector.Tbllc savingsS which were practically zero during the past, will make asubstantialcontribution towards investment financing. In the government sector, savings could-reach about on-e=th+ird of the amount of fixed ca'pital formation, and in the p-rasta=

tal sector the ratio between savings and investment may even be as much as four tofi ve. PriA.v ate usavinLgs Si til.ll be m.uch hisglheclr thian plrivtLVat investment althLo-0ugh-kthis does not preclude the possible need for some external financing of certain

J_ LIf _ .fA_J

E. External Finance

83. Uganda faces a deterioration of its current external accounts over thenext five years (see Table 7). Serious market limitations affecting the two mainexport commodities make liKely a continuation oI tne decline in export growth whichbecame apparent during the last two years; and the gains from a slow rise in exportvolume will be virtually wiped out by declining prices. On the other hand, importswill increase further as the investment program gains momentum and monetary incomeskeep growing. Tnis, taken with the expected increase in the negative balance on in-visibles account, means that Uganda will need considerable financial support from

- 29 -

ahroadi tn maintain her dsircrd rate of nconnomin growth.

wortsQ

ro) will grow, at about 1 percent a year, from a 1966 level of f73 million t;o78 A in 4 7 ;por T*----t vo lU4,U 4; - t.4 --- -i- a to aacrease at a rate whach s, s-

what less than the expected increase in GDP, because market opportunities for someexport crops are lim^ited andl internal demand for others is increaslng. Prices areexpected to fall almost as fast as the rise in volume. This can be attributed to anIUmber of0 fcLorLsUL'. First, Lthe JLUU 0rice of UUo n wl.ll contir,uae tuo fall. OJUUJ.I,

since the current world copper situation -s abnormal, copper prices in 1971 may beexpuu tu U uu o± ±l 1, Lld _ ±eL 11U Plt, t110t. r IIud ±±y, ULlt t: bU UJLIULIIM2U1 U01 cL II±ILUt1-

of textile factories elsewhere in East Africa over the next few years will mean thatthe price for cotton cloth inuw recei.-ved by Ug-anlda mlust decline if she ls to retainlher present market. The picture is not quite as gloomy for some of the smaller ex-ports such as hides, animal feedstuffs, tea, and iron reinforcing rods, but theycannot outweigh the expectecd losses in earnings from cotton, copper and text-iles.

85. Exports of coffee, which accounted for almost half of total export earn-irngs in recent years, rose by about one-third between 1960 and 1965. During thatperiod, prices also increased by roughly one-third, reaching an average of justunder L200 per ton in 1965 after touching E257 in 1964. In 1966, volume and pricesrose again, producing recorcl earnings of f34.8 million compared with E17.2 niillionin 1960. The Mission feels that with the future tightening of international coffeemarkets the sales for non-quota coffee, which were very high in 1966, will dropsharply. As Uganda's ICA quota will expand only slowly, total earnings from coffeeexports are expected to remain constant through 1971 when they will be about1f35.7 million. The very favorable conditions of last year have thus anticipated allthe growth that could have been expected over the 1965 level during the entire Five-Year Plan period.

86. The earnings from cotton the second major export crop in Uganda, roseslowly between 1960 and 1965 reaching a level of f17 million in the latter year.DuLring this time volume rose by an annual average of 3 percent while prices re-mained steady until 1965 and then dropped by about 9 percent in 1966 due to afundamental change in the nature of the international market. However, the main-tenance of internal prices at pre-1965 levels helped to keep output at high levels,making possible in 1966 exports of 68,700 tons, slightly more than in the previousyear (see Appendix Table 25). The Mission expects the price trend to continue andanticipates a 22 percent decline over the next five years. At the same time thevolume of lint exports is likely to increase only by about 12 percent to 76,800 tonsin 1971, assuming an adjustment of internal prices to a realistic level and fastgrowing internal demand for raw cotton. Thus, export earnings from this crop willfall from about fl5 million in 1966 to a little over 113 million in 1971.

87. The value of copper earnings has more than doubled since 1960, reaching alevel of E8 million a year in 1965. The increase was due mainly to higher prices,which rose from an average of E240 per ton in the early 1960's to some f460 in partof 1966. In the latter part of 1966, howeTer, copper prices dropped sharply by

- 30 -

about 20 percent resulting in a 1966 average price of £370 per ton. The volume ofcopper exports which had risen from 14,700 tons in 1960 to a 1964-65 average of17.7'0 tons dronned to 15;550 tons in 1966. It is not expected that the volume ofcopper exports will expand further in the near future, and the Mission foresees areturn of prices to about r.2?fl npr ton by the end of the decade. Emnort earningsshould thus be no higher in 1970-71 than the average attained in 1964-65.

88. Exports of tea have been growing fast in recent years, and hold consider-ablD r%vrrtniCQ fr)-r f7vr+.D iYNC; n +.hi- f'11+,11r,- PP+mTATPn IQon -nrrl 1QOA_ -trn11irzabl prms forfurtwher expansioninh fuue Btwn190ad96,olx.rose from 4,l00 tons to 8,800 tons, with much of the increase coming in the lastyear as plarntings rng the First Fiv+re-Year Plan bbegr.a to yield. i 1cn hi s

period prices fell somewhat between 1961 and 1965, but showed a slight recovery in196 Thern,. Mlssilon e=c +ha t e,.ort- volnl wlll grow byr abouti S 000 tons over

the next five years while prices are likely to be slightly lower than the averageof -19641-65.

Q .o ± e'D Up I UUIILU. 4±Q VI±I Lj, WU 4 P U'L.U44j± ± ±L±~'89. ~ ~~~~~~ Beie-hs ocod,oils hch accou.t- for about four-flft'1-hs of'Uganda's present export earnings, the country exports a number of other goods which

are o mlnr irlportnce. ,ol,l of them- --- e4pce to-row considerably dur-n theare of -ITIriiu oI~UUUIU uiIfc: UVi wl4tW~11UL u t:_P-L U~U LU ~LV- U II iLteIU.L,y UuLauru u ilt

Plan period while others are on the decline. Among the expanding items are ground-nuts, iron bar, sugar anilmal feedstuffs, cottonseed oil, and hides. Exports ofnuts are expected to rise from f0.7 million in 1966 to L3.4 million in 1971 as theresultU oi the eUpausiu OnVi of rIlul prioucUtULUi on1 Uin Aud. Ugna Pat r thisLLLO 0 incrteas

will be due to a substantial rise in average price as groundnuts are more valuablethan the other seeds and nuts whlch now maKe up most of thls export category. Ironbar is a promising export product manufactured from scrap and magnetite at the Jinjafactory. It is used as reinforcing rcd in construction, and its use is thus cor-related with investment in buildings. There are no plans for such manufacture else-wnere in East Africa so that Uganda's exports will be limited only by the capacityof her plant and her own internal demand. Exports were negligible in the early1960's not reaching any substantial volume until 1964 when they amounted to 6,900tons. In 1966, exports were 11,088 tons and by 1971 the volume is expected to be35,000 tons. The exports of unrefined sugar have been sharply curtailed in recentyears because of weather conditions and increased internal demand. The Mission ex-pects that Uganda wlll be able to recapture her traditional export market in Kenyadespite plans for increased production in that country. However, after 1971, in-creased competition within East Africa will depress prices, as more Ugandan sugarwill have to be sold overseas. Animal feedstuffs, which are primarily cottonseedcake, and cottonseed oil are closely correlated with cotton production. As thelatter is expected to grow faster than cotton lint exports, foreign exchange earn-ings from these products are estimated to rise from E2.4 million in 1966 to aboutE2.8 million in 1971. Exports of hides and skins have been fairly stable overrecent years. They will probably move to a somewhat higher level in the nearfuture as a result of the increase in slaughtering when the Soroti meat packingfactory is in operation.

90. The products which are facing declining or stagnant export trends aremainly cotton fabrics and tobacco. Their markets are primarily within East Africa,and the expected decline in sales originates predominantly from plans in Kenya andTanzania to expand local production of these goods. Exports of cotton fabrics,after expanding rapidly from about 7 million square yards in 1960 to some 23 millionsquare yards in 1966, are estimated to drop to a level of 12 million square yards by1971. Prices, which have come down recently with increased production elsewhere in

- 31 -

East Africa, are expected to fall further in the future. Tobacco export,s wihlin thieprotected East African market have fluctuated erratically due to weather and chang-ing internal demand. Volume is expected to increase over the next few years, butprices will have to come down drastically because the need to sell most of the in-creased output in world mark(ets will necessitate a sharp reduction. Export earningsare therefore estimated to bes the same in 1971 as in 1966.

S1. The Mission estimates that all other exports talcen together will amount to£7.2 million in 1971, which will be slightly higher-'than the level attained in 1966.

92. In the early 1060's, merchandise imports (c.i.f. Tororo) were fairly con-stant at a level of about fL0 million a year. But, by 1964, higher incomes from in-creased export earnings and expansion in public and private spending increased pur-chases from other countries, raising imports to 152 million in that year and to over£60 million in each of the two following years. The rise in capital goods importswas particularly marked, but imports of consumer and intermediate goods were alsoexpanding rapidly.

93. As national income grows, but more particularly as the investment programgains momentum and domestic manufacturing expands, import requirements are bound torise further. The 1!iission estimates that total merchandise imports may reaclh some£75 million by 1971, and that they may amount to abolt £360 million during thepresent Plan period. Since Uganda has no quantitative restrictions on imports andlittle is known about income and price elasticities for imported goods, such esti-mates naturally contain a large element of uncertainty. But taking the expected ex-penditure pattern and trends as a basis for the estimates, the Mission foresees asubstantial increase in the imports of capital and intermediate goods while consumergoods imports should remain virtually constant.

94. Imports of equipment and construction materials are determined by the leveland composition of investment. The latter is expected to rise by about one-thirdduring the first two years of the Plan levelling off toward the end of the five-yearperiod. However, investment in manufacturing, which has a high import content, willbe concentrated in the early years while the investment in later years will be char-ac-terized by social overhead and infrastructure projects with a lower foreign ex-change component. Thus, the Missicn estimates that imports of equiPment and con-struction materials, which were approximately £114 million in 1966, will rise to aboutf20 million by 1968 and then slacken to a rate of f16.2 million by 1971.

95. The projected increase of economic activity in the non-agricultural sec-tors over the next five years, particularly in manufacturing, will accelerate theimDorts of intermediate goods and raw materials. The Mission estimates that suchimports will rise fromTmBFrillion in 169 to £12.3 million in 1971 and will belargely concentrated in goods for the textile industrvy t.he metal i ndistrtv_ and thechemical industry. It is also estimated that imports of fuels will grow at approxi-matelv the samp rate as in the nast. riqing from 1 3.0 mi11ion in 1966 to F), - millionin 1971. The source of these imports has shifted to the new refinery at lNonbasa.

96. With growing urbanization, it can be expected that imports of food, whichhave inoreased rapidly in +he past, will continue to rise, probably to a level ofabout £10 million by 1971. Virtually all the increase in food imports will be of

- 32 -

East African (mainly Kenyan) origin. Uri thle oUtIUr ihandgu, iipuortui 0o if1an-ubact- eu

consumer goods (including vehicles) may not exceed their present annual level ofabout 12z mllion during the next fi-ve years. This estimate is based on the ex-pectation that with virtually stagnating exports the rate of real income growth inthe monetary sector will decline; that disposable incomes will be reducea throughhigher taxation; that the expected increases in import duties will cut down demand;and that consumption of locally produced goods will increase, some of them replacingpresent imports.

57. Uganda must pay heavy charges to bring her imports inland from the ocean.By the time goods reach her border (at Tororo) they have accumulated charges (calledvaluation adjustments) averaging 12 percent of the c.i.f. YMombasa value. In 1966,these charges amounted to L7.7 million, by 1971 they are expected to reach 18 mil-lion.

Invisibles and Current Account Balance

98. With virtually stagnating exports and rising imports, the traditional sur-plus in Uganda's balance of trade will become far less significant by 1971 (see Table7). To some extent, this may be offset by a small reduction in the service deficitbecause receipts from tourism and other invisible earnings are expected to increasesomewhat faster than payments for freight, insurance, etc. There may also be aslight improvement in the balance of' transi'er payments as it is assumed that moretechnical assistance will be given to Uganda in the future. However, factor incomepayments are expected to continue their upwqard trend not only because of increasingsalary payments f'or expatriates, but prirmiarily because of service payments for thecountry's mounting external debt. Thus, the current account balance, which has beenin surplus during the First Five-Year Plan, may show a deficit of about 120 millionduring the Second Plan.

Foreign Capital Requirements

99. In view of Uganda's very low foreign exchange reserves, the country willhave to rely on external capital to finance the expected current account deficit.In addition, previous loans will have to be repaid and a moderate increase of foreignreserves is urgently required. Amortization payments from public debt obligationsare estimated to reach 120 million during the present Plan period. About the sameamount would be needed to rebuild reserves and to compensate for some private capitaloutflows, even if the latter can be brought to a halt in the near future. The Mis-sion feels that a reserve of 115-20 million by 1971, representing about two to threemonths' imports, would not be excessive in view of the country's heavy seasonal tradefluctuations and potential shortfalls in foreign exchange earnings. Thus, the totalamount of gross capital inflow required during the Plan period would be at least 160million, of which T15 million may be expected to come from private sources - mainlyin the form of contractor finance - leaving some f45 million to be provided by of-ficial aid donors (see Table 7). This assumes, however, that recent capital outflowsto other East African countries and overseas can be reduced drastically. Otherwise,Uganda's foreign capital requirements would be considerably higher.

- 33 -

Table 7: BALANCE OF PAYMENTS, 1966-1971

(In 1 million)

SecondFive-Year

1966 1971 Plan

Exports of gocds and services 78 87 416Merchandise 72 78 380Services 6 9 36

Imports of goods and services -76 -85 -Lo8lMerchandise -67 -75 -360Services - 8 -10 - 48

Bal ancs of goods and servicres 3 2 8Trade balance 5 3 20ServiGc bal anc -2 -I -12

Ciurrent, trannsfers. net 0 2 6

Factor income payments, net - 5 _ - 34

Balance on current account - 2 - Li - 20

TLong-te r %m pri7v+a capi+tl

Longterm1 official cpit net2Disbursements 45From present a-;' com,mi-tments -I91. ±'il u 1 LU LAIIIL UJAi UQ .1.2

Additional requirements 26RLepayments - 20

Resldual - items--n o' reere an20eae r4a- 4--

.. ~~ /A rLr _ _u........ .L_n__ V'h__IIO ba, 4' |..........................)54r

'./ 1'ld L1±Ly ICU LU±IIU UL L 1e-vtZ cIu llUUd LI .LV U.%PJ±Ud.l UUL,L±UW .

100. During the first two years of the Plan, foreign aid is expected to beavailable on a sufficient scale. At the end of 1966, official donors had pledgedsome 1-30 m'Lillioon to the UgancIda UUvernUment. Of this, som-e Eh million appears tohave reached the stage of negotiated project loans although the definition ofprojects and the conluitin.,L for lending seem in some cases to ue rather lenient.I)isbursements of the loans which were given primarily by the UK, Germany, the USand IDA, have already started or are expected to begin soon. In 1966/67 they mayreach more than f6 million, and in 1967/68 approximately E4 million. In addition,more than L2 million would be disbursed each year from international loans to EACSO

- 34 -

projects in Uganda. Thus, total official aid disbursements from existing loan com-mitments may reach f7-1/2 million in 1S66/67 and E8 million in 1°67/68. Togetherwith the expected inflow of private capital (mainly suppliers' credits) this wouldexceed the projected deficit on current account and amortization of public debt by amargin of approximately f10-12 million. Such a surplus would leave considerablescope for rebuilding reserves provided tha-t capital outflows are not too high.

Cost Sharing and Terms of Lending

101. During the last three years of the Plan, disbursements from existing loanswill, howjever, be much lower than in 1966/67 and 1967/68. Great efforts are there-fore required by the Uganda Government, as well as by lending agencies, to prepareadditional projects that would qualify for foreign financing. The Mission has listedin Appendix 1 a number of projects representing total costs of approximately F,47million for which some E3)4 million could be spent during the remaining years of thePlan if such efforts were successful. Roughly one-half of these projects have al-ready been submitted to foreign donors for consideration and others could be sub-mitted within the next few years. The two lists in Appendix 1 are probably not ex-haustive and new projects may be formulated in the near future. On the other hand,some delays in the execution of projects are likely. Therefore, the Missicn doubtswhether more than the E34 million mentioned above could be spent on projects suit-able for external financing during the Plan period. This 134 million compares vwitha remaining financing gap to be covered from official sources of approximately f26million (E4W million total gross requirement less i19 million disbursements from ex-isting loans). Thus, from a balance of payments view, official loans should cover,on an average. apDroximately three-quarters of the project costs if all aid is giventhrough project financing. As the foreign exchange component of these projectsaverages only about LO Dercent, a large share of the loans would need to be avail-able for financing local investment costs and/or associated recurrent expenditures.

102. From a budgetary point of view, a similar cost sharing would be required.The Central GovernmTent, which is the main recipient. nf official aids cwill need ap-proximately L35 million from external sources to implement the investment programCoutli rwa -in t-i repo -yanc-rt. Annthper f'J millinn is reniii rPe tn meet tey-rnal deb-t. bl i -

gations falling due during the Plan period. Disbursements from present loan com-mitments are expected to reach 11), million. Thi s 1 n financng ca nof ia259 mil-lion to be covered by new project lending. Since virtually all projects mentioned-in-- AnncaA 1 {(expected disbur-ents -3) milI-ion w il be umrtaken by teentr'alGovernment, the resulting cost sharing would also have to be in the ratio of threeto one.

10,. vUman'a' capacity .- servic extrna debt is rahe limited __L hU-U

ner present debt buroen is not very high, she will need concessional terms on futurealU UrIIIIIi '1m1en1 secuseL oi uIle 1 arge ll nU CI iV'NLI8 dIIJUII UO Ui v iJ Il LI Ud±La V JI.LU11

the lhlission believes Uganda could utilize, the limitations to her exports, and theIo -eve-l of per capit icoe On_ Dece.be -17 1S66 TT---a- exera puli debt_1__1- 3-low -L vS u± -L r -0 L ULd ±-IIUUIIIC . liui _JCCIU L ) , ±L7/iuu U8,cil1Ua D U0~ ut L'fc -Ld PULLUI I uUSU L

amounted to 43.)49 million (US$122 million), of which f35.22 million (US$58.61 mil-Lion) was disbursed. T o 'L'lLs mus t, bUe added U re - u of1 I1 r d oALouQs bAL,ernai uuiVgda-

tions wh ich are guaranteed jointly by the three East African nations and which had- Ž-, a~rr,drran~ n = 1 … n2 , aCt - . m -I I --- -- - I

reachied EU5 million US`3q riy rniiin !I ) by- i-lSUU. iL,ti service payients on bothUganda's debt proper and her share in EACWO's debt, are estimated to have been 13.7million in 1966. This is roughly equivalent LO )4.8 percent of gross foreign ex-change earnings or to 8-1/2 percent of gross domestic savings in the monetary sector.

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In recent years tne country has been able to obtain foreign capital on leoien-t IerIRi .On the average, these were 3.3 percent interest, 6 years of grace and 24 years' ma-turity during 1963-65. Including one-third of the loans made tO EACSO which carry ahigher rate of interest, these terms averaged 4 percent interest, 6 years' grace and25 years' maturity. If during the next five years Ugarda would continue to obtainofficial capital on such terms, her service payments on public external debt wouldrise to approximately L7.2 million by 1971, of which L3.8 million would be interestand E3.4 million amortization. Despite slow growing exports this would still remaina moderate proportion of foreign exchange earnings - approximately 8-1/h percent -

and also in terms of total domestic savings - some 13-1/2 percent - the bu-den ofservice payments would not appear excessive. But compared to the increase of domes-tic resources which is likely to take place during that period, the incremtent ofdebt service payments - by E3.5 million between 1966 and 1971 - would be consider-able. It would amount to more than half of the additional foreign exchanges earningsand to a much higher proportion of domestic savings. Therefore, the Mission recom-rnends that aid donors continue to offer foreign capital to Uganda at conce,sionalterms, preferably at even slightly lower interest rates than in the recent past.Taking a longer view this will be all the more important as Uganda can be texpectedto remain a recipient of official aid for a long time and the manageability of herexternal debt will then largely be determined by the terms on which such funds canbe obtained.

10h. Recently there has been a tendency in both the public and private sectorsto rely on contractor finance. The terms of such suppliers' credits are usuallyvery severe. Although individual borrowers may well be in a position to bear thehigh burden of this debt, experience in other developing countries shows that suchconditions can create a serious debt problem for the country as a whDle wi-thin arelatively short time. The Mission views this development with some concer?n andrecommends that vigorous a-ttempts be made by both sides, recipients and donors, tohold the amount of contrac-tor financing to a minimum.

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APE L'UL

PROJECTS POSSIBLE FOR EXTERNAL F:ILNTANCING

1. The liission has cormipiled two lists of projects that might merit seriousconsideration for forei;n financing. The first, summarized in Table A.l, includesthose subrmiitted by the end of 1]66 to national or international aid agencies andtherefore presuniably under consideration. The second, contained in Table A.2, pre-sents others that may be ready for consideration within the next few years. Itshould be emphasized that the Mission does not necessarily endorse these schemes allof which have to be subject to detailed appraisal and many of which must be furtherelaborated.

2. The two lists do not include projects for which contractor finance is be-ing sought. This explains the absence of industrial projects. However, there mightbe a possibility of indirect industrial financing through another loan to UDC al-thouglh this would probably require a satisfactory solution of certain institutionaland orgianizational problems mentioned elsewhere in the report. As work on the pres-ent Five-YLear Plan progresses additional projects may come up which might be suit-able for external financing. Also not included in the list are projects -,wJhich mayv.ell be talken up by Uganda but w1hich the i'ilssion presently considers of low economicpriority. An example is the Bujagali Power Scheme which will not need to be startedin the next few years if the desirable coo,peration with Kenya is achieved. Finally,the list excludes regional projects (railways, communication), although Uganda willhave to carry part of the ensuing debt service.

3. In selecting the projects list in Table A.2, the Mission has tried to baseits decisicns on high economic and social priorities. Accordingly, implementationof the schemes would help improve the utilization of scarce resources by removingcritical bottlenecks or enabling the country to expand production of goods andservices for which a demand exists domestically or abroad. In this context, foreignfinance could be used as a lever to provide urgently required technical assistance,and to bring about necessary institutional or organizational changes. Financing ofim-nnprta:nt, scia proiects wonld have an indirect. henPfici 1 imnpct, on Inng-run prn-ductivity and welfare. Another criterion applied by the Mission is the state ofnroctipr readniness nnlv snchemps hipq nICi have alreapdy reahPch an aidvaced rtate of

preparation or which could be prepared in the near future have been included in thelist.

lO The i -ndl d+ i e -s rchule ae- hi tTentIT +adn+~+ T -IT edj on the

assumption that strong efforts will be r,made by both lending and borrowing agenciesto carry outouI the projects as fast as posi'o

D I 4e 4- 1A~ , I _ A; 4A 4 -A _~ A- - V_ A4 __n 4 A _ A A 4 A T) _ _

v Vr JO. ui J_U.Ilal Li UEO'Q UO '0.] O_1611 -1L. ']LL

* .±1 dUltO 1 . J_ 1±J -L-LO a LLUIIVIU UVL iJO UU J: Pi U0O1tLLW UlU i U.lAI I _LU Cl i U I I Uy

foreign aid donors. Total costs of these projects amount to L21 million of which-fLI7 r(IiIIllon hmiu t Ub diLsursed0 wVi uithin tlh present, I Pl± tan peroUU. * m foreig ex1cange

component is 110 million. The list includes three agricultural projects - the Teasmallnolders Scheme, a tobacco scheme and a ranching project - a number oI roadprojects, one airport project, one education and one health project. The

Table A.l: PROJECTS SUBMITTEDI TO FOREIGN AID DONCIRS

(In 1, million.)

Fo:reign Project ProjectedL Annual DisbursementsTotal Exchange Submitted After

Sector/Project Cost Cormponent To 1967/68 19568/69 1.969/70 1970/71 1970/71

Agriculture 5.8 2.2 1.0 1.1 1.0C 0.^ 1.8Of which:TeasmalLholders scheme 4.1 1.7 IDA/CDC 0.7 o.8 0.! 0.7 L. Tobacco sc'heme 0.5 0.1 UK O.1 0.1 0.1. 0.1 (.1Ca-ttle ranches 1.1 0.4 IDA 0.2 0.3 0.l3 0.3

Transport 9 . 1 6.2 1. 0 2.6 2. 8 1.3 1 . 4Of which:Various trunk roads L4.9 3.3 IDA C,L 1.6 2.0 0.9Variouis secondary :roads 1.6 1.1 IDA C0.3 0.7 0c 0.,1Entebbe ai:rport 2.6 1.8 UK 0.3 0.3 0.l3 0.3 4

Education and Health 6.0 1.9 1.5 2.2 1.7 0.6Of which:Secondary schools 3.0 0.7 IDA 0.7 1.,7 0.6Rural hospitals 3.0 1.2 UK 1.5 1.';

All 'Projiects 20.9 10.3 2.0 5.3 5.8 4. 1 3.6

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agricultural Credit Scheme (f6.6 million) which was submitted to IDA in early 1967,has not been included because the Miission feels that this project needs substantialreworking before it would be suitable for external financing. If prepared in a dif-ferent form, it could probably replace some elements of the agricultural projectslisted in Table A.2. The trunk road projects include the following connections:INibarara-Katunguru, Iganga-Mlbala, Ilasaka-Y,yotera-Hutukula, Bukoloto-Bulamagi, Gayaza-Nagalama, and the Sezibwa swamp crossing. The secondary road projects mentioned inthis list include, among others, the Kigezi Tea Roads, the Ankole SmallholdersCircuit and the Bugosa Access Roads.

New Projects 3uitable for External Financing

6. Projects which have not yet been submitted to foreign donors but which theMission considers of high priority for Uganda's socio-economic development, arelisted in Table A.2. Their total costs amount to E25.7 million with a foreign ex-change component of approximately E9-1/2 million. The hlission estimates that someEl7 million could be disbursed by the end of the Plan. Following is a brief descrip-tion of the projects.

7. Tick Control Program. Both beef and dairy herds are seriously affected bytick-borne diseases, which cause very high mortality, especially in young stock.MIortality directly attributable to tick-borne disease over the country as a whole isestimated at between 20 and 30 percent a year. At the lower figure, the potentialvalue of cattle lost is estimated to be around 110 million a year, excluding lossesfrom the debilitation of surviving animals and of the potential benefits foregone bythe inability of high-yielding exotic breeds to survive in a tick environment. ThePIission considers that the highest priority should be given to tick control programs.The project proposes the establishment of 1,800 dipping centers at a rate of 360tick control centers a year. The estimate of requirements of dipping centers in re-lation to livestock population, and the estimates of manpower required to operatethe centers, are based on the experience of a Dilot scheme during the First Five-Year Plan. Staffing is not expected to be a major problem since the VeterinaryTraining Institute will be able to supplv the Veterinarv Assistants. eaclh of whomwill supervise 30 centers. Four Veterinary Officers will be required in each region.Tt is PxneotRd thmt thev will 'h !vailabhle f-rom amon' st,tudent.s returning, from over-seas courses.

Total cost of project: EO millionForev'-ign exchange commonnn+.- 1 rn-ill ion

Executing agency: Veterinary Department

8. Tsetse Reclamation Program. It is proposed that a further 3,200 squaremiles of western and northern Uganda should be reclaimed from tsetse during the Planperiod. Although this is an ambitious prograrri, it is a logical extension of exi:t-ing sch.emes and experienced st.aff are a-available. The bcnefits cannot Ube readily-quantified but are very considerable, provided that care is taken to ensure thatcleared land is effect-i-ely ut-ilized and kept clear of fly.

TU otal cost of proU4J. JLUJJ t 1. -illon

Foreign exchange component: 10.5 millionIIAUUUutiL1 agenc1y. ivTeer±inaIy JJjDepartment

91. Storae for lLa(tin Bad.U* 1dI1xkJ Aut,Ui of IU the two LI export crops,~~~~~~~~-_ _- e_& u u r p

- 3, -

cotUuon andI coffUee, are alrad- conturolleud by-b tLUUUu-y 1iriu U bioar Uud.ub IU lb pr-u

posed to establish a new board to encourage trade in, and exports of, other crops.Ti.Ls new board will 1---irue StUrage fachUlliti U1thr-ugho-ut thU e coUUIlury f L t b i o

achieve its object of increasing production by reducing the waste of unharvestedcrops in ute subsistence sector. Sur-veys ol the requ iEmenits and dutles oL theboard are not yet complete. The Mission has included a nominal figure of 1E.0 mil-lion as the investment in storage facilities for -which imported, pre-fabricatedbuildings could be used.

Total cost of project: 11.0 millionForeign exchange component: L0.7 millionExecuting agency: Ministry of Agriculture

10. Tractor Financing. The Plan envisaged the expansion of the Tractor HireService at the rate of 23( tractors per year, but the IMission considers the numberof tractors at present available adequate for the immediate future and recommendsthat purchases should be confined to replacements with perhaps a modest expansion inthe last year or two of the Plan. The cost of the necessary tractors and their as-sociated implements is estimated at fO.5 million, all of which would be in foreignexchange. Serious difficulties have already arisen over the lack of standardizationin the existing tractor fleet. Replacement and new equipment must be chosen withcare. Additional implements are also required for existing tractors. The estimatedcost is f0.1 million and this equipment must be purchased from specified manufactur-ers in order to be suitable for use with the existing tractors.

Total cost of project: fo.6 millionForeign exchange component: 10.6 millionExecuting agency: Department of Agriculture

11. Groundnut Grading Plants. Groundnuts are widely grown in the subsistencesector. It is hoped that the new marketing board, mentioned in paragraph 9, willstimulate trade in groundnuts. The project consists of 15 grading units designed toimprove the value and marketability of export produce. A request has been submittedto the UK for an interest-free loan to finance five grading units at a cost of about.L80,000. This leaves ten more units for wlhich foreign financing would still beneeded.

Total cost of project: f0.16 millionForeign exchange component: 10.08 millionExecuting agency: Department of Agriculture

12. Agricultural Education Facilities. The need for improving the trainingand education facilities in the agricultural sector requires no emphasis. An ap-proach has been made to the UN for help with certain parts of the project for anurgently needed new cooperative college but further assistance will be required.The program also includes improvement of the existing agricultural colleges and theestablishment of new District Farm Institutes.

Total cost of project: 11.1 millionForeign exchange component: FO.)f millionExecuting agency: Ministries of Agriculture and Animal Industryr

13. Roads. Improvement of the Moyo-Adjumani road and ferry link across the

River Nqile would serve the fast growing cotton production areas in the WkTest NileDistrict providing better access to ginnery facilities. The Obongi-Laropi road isa major feeder to the iioyo-Adjumani road, serving the high potential area along thewest bank of the River Nile. Thlree other road projects have not yet been evalued inany detail and are not included in the present list but may be ready for considera-tion later in the Plan. They are the Kabale-Rwanda border roads the road betwJeenPakTuach and Aruag and the Entebbe-Kampala higlhway. Irmprovement of th-e Xabala-,wandaborder road, if accompanied by improvement to thle road from Kigali, Ruanda, woildprovide Rwijanda with a new and apparently p,actical route to the sea via Uganda andthe East African Railways. At present, trunk traffic over the existing very poorroad is growing rapidly due to Rwanda's strained political relations with Burundi,astride the country's traditional access to the sea. The road would be very expen-sive to build through the rmountain and swampy gorges that mark the Rijanda-Ugandaborder. Uganda ijould benefit substantially by having the transit traffic and tradewith Rwanda that a new road would provide. The economics from Rwanda's point ofview wjould have to be investigated in some detail, although it is clear that thecountry requires better access to the sea. I-provermient and realignment of the Pak-wqach-Arua road, now an all-weather track, would extend the trunk system into the-,est i,ile District. The area is developing fairly rapidly and construction of therail/road bridge at Pakwach may considerably boost traffic on the present road.Study of this road possibility is also required in connection with proposals to ex-tend the rail system to Arua, to avoidl the duplication that is currently envisaged,and to select the appropriate modal solution. The Entebbe-Kampala road is consideredby the Government to be an integral part of its plans for expansion of Entebbe Air-port. The capacity of -the Entebbe-Kampala road, will apparently require expansionin the foreseeable futures present traffic on the road though mostly passenger cars,amounts to about 4,OOO vehicles per day. The existing road is poorly aligned, withinadequate sight and stopping distances during pealc traffic pericds. Whether thecapacity expansion should be achieved by building a parallel roadw,ay or by otherr,eans, including possible reconstruction of the existing road, needs analysis.

Total cost of projects: 1.7 millionForeign exchange ccmponent: 11.1 millionExecuting agency: Hinistry of Communications, WHorks and Housing

lk. Expansion and Rehabilitation of Existing Hospitals. Virtually everyr hos-pital in the country is overcrowded and in need of expansion and improvem-ent offacilities. In addition, the unit at :ilovo is so bad that it must be comnletely re-built. The wjhole program wjill cost an estimated 12.1 million, of which three proj-ects that miRht be financed by foreign aid- a pediatric hospital and institute ofmaternal and child welfare, costing L300,000D a radiotherapy unit at IHiulago Hospi-tal, costing 1175,000; and a new hospital at hloyov costing 1270?000.

Tota] cost of nrolect: L07 F0 mi oForeign exrchange component: L0.3 millionRYpfl]tifYng aencv ni ni strv of H n al th

15 H91tJ±l Trqining *Thhools The purnose of this small project is tor establishten new health schools that will train about 200 nurses) mnidwives, and medical as-sistantsa year, need if t.he A ri cs:tr is to ,nri nt_qin oilo et.h services throughout thecountry at even past low levels.

- 41 -

Total cost of proiect: 1O.L millionForeign exchange component: f0.l millionExecuting agency: Ministry of Health

16. Ambulances for Rural Medical Units. Some 600 ambulances are needed forthe rural medical units to bring patients to health centers in areas where adequatetransDortation is not available.

Total Cost of project: 1o.6 millionForeign exchange component: fO.6 millionRxycuting agencyv Ministry of Health

17_ X_mna a-_Tnia Water and Sewerage Program Sewer fn(iltfAp.q in theseci-ties are already used at capacity and it is expected that the water supplies willhb fully utilized by the end of 1S67. The projected grnwt.h of these areas is suchthat it is essential that a master system be started without delay. The system,pnIanned to. be ncoordinatedH Twith the nes of t-hes ars over +the nert. few dezades,

was suggested by a UNDP Kampala/Mengo regional planning mission. It was originallyenvlsioned that work on this system could be started in 1967 or 1968, but variousadministrative delays in the financing of the feasibility and engineering studieshave made emergency P ntr works ness. fl'm total c of e e pla

cluding the interim works, is V8 million. While work on the major part of the masterplan will probably not be started before 1970, the interi- works are urgently re-quired.

Total cost of project: f8.0 million1'reg exUlag Ct:nioene 'u m1 iAidl 'tliHlll W. i) . 11 l

Executing agency: Ministry of Regional Administration

18. Urban Piped Water Schemes. These schemes cover over 60 towns and are ex-pected to r-un far beyond thle currernt Five-Year Plan. hne Mission feeis that perhaps25 of the towns can be covered during the Plan period. The work has been carried onin the past by the Midnistry of -Works and no difficuity in their continuing tne pro-gram is expected.

Total cost of project: EO.8 millionForeign excuuiarge corlLponenLtb: iO.5 ILLiLlionExecuting agency: Ministry of Regional Administration

Tab:le A.2: NEW7; PROJECTS SUITABLE FOR EXTERNAL FINANCING

(In f million)

Foreign Projected Annual DisbursementsTotal Exchange After

Sector/Project Cost Component 1067/68 1068/6° 1969/70 1070/71 197'/71

Agriculture 13.48 3.3 1.0 2.9 3.1 2.8 3.6Of' whichlTick Contro:L Program °.0 1.0 - 1.8 1.8 1.8 3.6Tsetse Reclar2ation :Pro-:ram 1.5 0.5 0.l4 o.4 0.4 0.3 -

Storage Facilities 1.0 0.7 - - 0.5 0.5 --Tractor Financing 0.6 0.6 0.2 0.1 0.1 0.2 -

Groundnut Gradinlg P:lants 0.2 0.1 0.1 0.1 - - -.AgriLcultura:L Educat:ion :Facilities 1.1 0.4L 0.3 0.5 CD.3 - -.

Roads 1.7 1.1 - - C0.1 0.2 1.t4Of' which:Moyo-Adjumani 1.0 0.6 - - 0.1 0.1 0.8Laropi-Obongi 0.7 0.5 - - - 0.1 0.6

Health and Sanitation 10.5 5.0 1.2 l.4 2.5 1.8 3.6Of' which:Hospital Improvements 0.7 0.3 0. 1 0.3 0.3 - -

Med:ical Tra:ining Sc:hools O. 4 0.1 0.1 0.1 0.1 0.1Ambulanc es O.6 0.6 0.1 0.1 0. 2 0. 2Kampala,/Jinja WMater and Sewerage 8.0 3.5 0.7 0.7 1.7 1.3 3.6Urban Piped WJater Schemes 0.8 0.5 3.2 0.2 0.2 0.2 --

A:Ll Projects 25.6 J 2.2 4 . 3 5. 7 4.8 8.6

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APPE1DIX 2

STAFF REQUIREMENTS

Introduction

IL. One of the crucial bottlenecks hampering Uganda's economic development isthe serious shortage of qualified and experienced staff in Government agencies andparastatal organizations. This bottleneck is partly a consequence of the loss ofmany capable expatriates holding kev administrative positions, and the inability ofthe Government to replace them immediately with the same number of equally experi7enced and qualified Ugandans. Although steps have recently been taken to 'oring innew expatriates, it remains a fact that in many ministries and public organizationsthe staffing situation is still critical. Another iinportant factor contributing to-the difficulty of carrying out the task of planning and developrent has been the in-evitable lag in fundamentallv adaDting the staff and origanizaticn of Governmentservices to the rapidly increasing responsibilities for development. The Govern-mnent's develorment budget has more than doubled since 1961/62, the last vear beforeindependence. As foreign aid is now available on a much larger scale and from agreater number of sOUrGreS the work load in this fieldi is much heavier than before:independence, when official funds came almost entirely from the UK, and typicallywqas in the form of non proiect-llnked budget. s;unnort. All this has led to the cuir-rent situation where most Government officials are fully occupied with daily ad-ministrative f-nctions, andi thus little qualified manpownuer is available for hasicthinking and for systematic planning, either on the macro- or the micro-eCDnomic

--trnl. The nffn-cts of this staff bottlneck -re aireadyr being felt in t-e field of

foreign aid, where standing offers from aid donors cannot bDe fully utilized becausethe administration has grenit difnPficulties in identifying and preparing projects

suitable for international financing. Moreover, it is obvious that misallocationsofscarce resources are bound to occur e insutff-icilent time -and e3ff_ort aedevoted

to utilizing available funds in the most efficient way.

2. At this stage it is difficult to give a detailed assessment of the present+. I A J..J1 114 IS LCX CX j±Cfl.P.LJ L C ALA ±C.±i .114 .4 L C I CL 4.2 14. I.L.)IL.L 3UCa.4,ituat on a- nd t o de- fi n_ e p;-csl the current I andA fuur ned fradtonal staff

The following analysis is therefore fragmentary. It focusses on the demand aspectolf t13h1e problem, as ]ittle iUlormation could be g0theredaboutA the-4. pot etiaL l s e1

of supply from within the country and from abroad. Moreover, a clear distinction is111o21, a-IOCtyIS iIdUCue UDweLVt gaps ui Ge 111e WvD J LULL.:II1LE aullsh.mnent anu auu LWLona.L st U.CL re-

quirements anticipated for the near future. Only in a few instances has the Missionbjeeni aUle to form its own11 jdUtIl1r11i, 11 I11t, Uon± D desirabiLty of± ULC.c±11 c inUd1L1; s npttUUrni,

and frequently the estimates given below represent the Government's view of the sit-uation. uDespiUtz:e-- all tese shortc0minr.g,teMsin oe httispeettoUd~LI~.U11. J~0jJ±e c4.± uiieo OIIU. LIUUiLLL1 , LIlAC- riLZ0LLJOIU LIUjJCO LdldL, Uli1±j PJC~l-t~:t~ICU.LU II

g,ives some indication of the orders of magnitude involved and serves as a startingpoint for f-urther disc-usson of *he s-ubjc.

Staff Requirements for the _ublic Service

Table A.3 compares the total establishment for the public service with theactual number of employees, indicating how many positions are filled by Ugandans andby expatriates. It shows that although the number of Ugandans employed in the public

- LL -

service has grown considerably during the last four years, vacancies are now aboutfour times as higYh as in 1962 and amount to roughly 13 percent of the total estab-lishment. The increase in vacancies can be partially explained by the expansion infunrtions and resnonsibilities of the Ugandan civil service and the resultant rapidgrowth of the total establishment. 1/ Additional vacancies have been created by theefuirn nf a greart ninhber of exnatrj t,,es to their home countries. although recently

this situation has somewhat iriproved. Qualitatively the latter factor weighs heavilyas most of the expatriates have held rp-nonsihle nositions.

Table A.3° PUBLIC SZRVICE ESTABLISHIENIT

TotalAarch 31 Establishment Ugandans Expatriates Vacancies

(1L,OOO persons)

1962 17.7 13.8 3.1 0.81265 22~~~Le.2 6L 2L.4C.Li_ 3. '

1966 23.8 18.0 2.6 3.2

(percent)

1962 100 78 17 5965 4wo 7li 11

1966 100 76 11 13

4. Roughly 10 percent of the present vacancies represent professional grades,mostly administration and education ofLicers, agriculturalists, engineer-s, architects,lawyers, doctors and accountants (see Table A.4). Another 20 percent fall withinthe technical, or sub-professional grades with a salary range of L500-uLl671 a year.Al-though the gaps in professional staff appear to be the rnost critical, it is ob-vious that full use of the highaer grades can only be made if they are supported byadequate techinical and sub-professional staff.

5. With the planned expansion of pu1blic services, the total establishment islikely to grow by about 5 percent a year over the next few years. Thus, additionaltrained manpower will be needed not only to fill the existing vacancies but also toman new positions opening up in the future. On the otiler hand, the number of trainedUgandans is also increasing quiclkly and it is expected that by 1°70 the percentage ofpositions held by them will have risen from the present b76 percent to about 85-90percent. Nevertheless, this still leaves a considerable gap which underlines the

1/ Not only have the services generally increased - particularly for health andeducation - but the admiJnistration also had to assume responsibilit-y forservices which were previously carried by the UK Government (defense, diplo-matic service, etc.).

Tft=1 A I) -PTTZT Tr. cZPPITTfl1 UATlAirr%YV PflqTTTO qI• TMV TH1. PPnPF..qqTrfT\TT. flRLvnF_qTabl A.e PBLIC SP-VICE _XAGA.CY POSITIONS .TE RESINLGA:S

(as of March 31, 1966)

A General1 A ,ini-st-rat-io or9

Lawyers 24A Accounutanst BA Education 33D,: VU lca 1u i, OUli 47

BSc Agriculture 24B Sc F'ore str~y5

BSc Biology 4nDc llutrition wniexrli±sry1BSc Chemistry 2BSc Veterinary 6BSc Agronomy 1BSc Civil Engineer:ing i8Architects 11Electrical Engineers oMechanical Engineer 1Mining Engineers 2BSc Geology 2BA Geography 1MBB Chief Medical Officers 9Dentists 2Economists 2Press Superintendents 3Monotype Superintendents 2Analyst 1Librarian 1Statisticians 2BSc General 3

Total 315

urgency for additional techn:ical aid personnel to be provided by the developed coun-tries.

Staff Requirements of Some Cr-ucial Ministries and Agencies

6. The severe manpower shortage, particularly in senior positions of thecivil service, is particular:Ly marked in a number of important ministries and agen-cies. In the Ministry of Finance, for instance, additional staff is urgently neededto build up a new internal revenue service which will be able to handle the collec-tion of all taxes presently not administered by EACSO (development tax, consumptiontaxes, lottery revenue, etc.). Indeed, the tax program outlined earlier in this re-port can be implemented only if the present tax administration is considerab:Ly im-proved and strengthened.

7. The shortage of qualified staff in road administration, which has developedover the years due to the departure of expatriate professionals in civil service

_46_

Iimposes& a llaJo)i U911S:LsIa1 Ln o1 tie Iml&a1inbuitdence aiiu CULonstrUction of1 r ods. Eighta en-

gineering positions in Headquarters (half of which are unfilled) plus four regionalengineering positions provided by the present Goverrmunt establishiment are clearlyinsufficient to properly operate the highway system. The Mission believes 25 en-gineers including regional positions are required which means a doubling of estab-lishment and a tripling of present strength. In addition, a planning unit in MCW,with one or two transport economists, is needed. While the Government expresses con-cern over the staffing situation, no systematic measures towards the strengtheningof the road administration have yet been taken. it is Government policy to fill ad-ministrative positions with Ugandan nationals; however, at present the supply ofqualified nationals is inadequate, and it Twill take some time before there are suf-ficient numbers with sufficient experience to take over fully the duties of highwayadministration. In the meantime, the Roads Division will have to continue to relyupon the assistance of foreign nationals to a considerable degree.

8. Official estimates of new staff required by the Agricultural Ministriesduring the present Plan period were given to the Mission as follows.

A Scale& Superscale G Scale E Scale Other a/

Department of Agriculture S0 398 - 1,819

Department of Veterinary Service 18 25 136 186

Department of Cooperative Development 3 160 95 255

a/ Agriculture - Field AssistantVeterinay- Vet. Scouvit

Cooperatives - Supervisors

However, the Mission has serious doubts whether so many new recruits - even if enoughsuitable candidates were available - can be absorbed into the departments, with theirlimited supply of experienced supervisory personnel. It recommends that more empha-sis should be given to organizational changes, and to the development of a betterbalanced staff, rather than to a significantly larger establishment. It is apparentthat the ministries cncCerned with the agricultural sector will have to rely on theservices of foreign staff for some years to come. They will be required at threelevels: for economic evaluation and project planningg for research; and to super-vise the execution of development projects.

9. The Ministry of Planning 1/ presently has 19 employees in the professionalgrades, five of which are expatriates. It is estimated that another seven profes-sionals will be needed to fill existing gaps in the establishment. This makes a

1/ Excluding the Department of Statistics.

- 47 -

total of 92 pnsi i-.1ns 18 - oI f whlch cn bef'illed r TTUanrlns The remniing eightl

openings represent the requirement for expatriate staff. Following is a brief de-scripn+Ai on of' the +rns

P-c+j rnQ +n hcb f; - 1a~ I-NT _-rn+i'; D4-.=.

Economist for regional development planning f'illed-*'Econo.nist- f1or financial planin -open-

Statistician openistUV-erL onI miII fillJJVe.Ld 1. _LI.LeL

Adviser on natural resources filledAdUV oL0 nU eng i1ineering1L andU construction f _LUill eU

Adviser on industry open

- Contract for the expatriate expires soon.

10. The Uganda Development Corporation (UDC) at present has a staff of 60 ofwhom 25 are in the professional grades. In recent years, there nas been a seriousrundown in the number of expatriate personnel. At the end of 1966, there was onlyone expatriate on the regular establishment of `UDC, who was nead of one of the twooperating divisions and acting head of the second. There were two other expatriates,both on temporary secondment. The efficiency of UDC s operations in recent ;yearshas accordingly suffered from a serious shortage of qualified and experienced staff.l/In addition, there has been an increasing Government tendency to interfere in theoperations and management of the Corporation.

11. In order to enable UDC to discharge its responsibilities efficiently, theMission recommends that immediate efforts be made to provide a minimum of additionalstaff on the following basis:

1 Deputy General Manager1 Head, Development Division1 Head, Agricultural Section (Agricultural Economist)1 Engineer to head Technical Section1 Financial Controller (for group operations)1 Internal Auditor1 Personnel Manager (with special responsibility for training and

Africanization)1 Head, Marketing Division

To facilitate the smooth and unhampered functioning of UDC the Mission also recom-mends (a) that the Board of UDC be made responsible to a Cabinet Committee repre-senting all ministries which have a strong interest in the Corporation's activities,(b) that such a Committee's directives to UDC be confined to broad questions ofpolicy and not to individual investment decisions, (c) that UDC be given the free-dom to recruit competent staff (including expatriates) and (d) that a comprehensivetraining program be introduced to facilitate the orderly advancement of Africanprofessional staff.

Some Tentative Suggestions

12. Within the foreseeable future, Uganda will not be in a position to

1/ For a detailed discussion of UDC's organization and problems, and the Missionreconmiendations thereon, see Volume Four - Annex B.

- 48 -

overcome her staffing problem with her own resources. The country will need gener-ous support from foreign nations and international organizations Who are willingand able to assist the count yu s economic development. Obviously, it is the respon=sibility of the Uganda Government to work out its staffing requirements in detailand tA +-, indAicate th1c ,-a- + c,rn , iqW (d 01- ,c,i,,rlA 'h fi< I 1 I1¶T avi r -,,znt,-i+ c~ n c, jvor-vln~pn77, ii-and to indicate the positions which should be file b expatriates. :lroe iorder to attract qualified foreign personnel, the Government must clarify the termsof employment arp-d proviA d the nece+ s i v in +he Ca nP MA f.i ' a Ious in

personal and job security, and competitive salaries supplemented by reasonable pen-

13.~~~~~~~~~~~~ -c VInd cano be -xece tocrytebren of this -t<igplcI-n nrrnr,n,flr I flfl fl,,-n' ~-1bnrlnrAanI+

alone. Donor countries should be willing to augment local salaries to the extentnecessary t Ao attraCt quaLie expatriat-es and,n crtlAn c s b willing

to bear the entire cost. Donor countries *-,must also be prepared in some measure tofinaLcel.ot Pllue ho LliU 0ar,d offi sp forI sucih ) UCI. Cst UhIf asths has L b- a 1sLgfcant

bottleneckc in the expansion of existing services. Ploreover, incentives to lengthenthe period of service to four or five years may need to be given. Finally, it m,ustbe stressed that the personnel is required in most cases to fill operational posi-tIuons rauui-er ULIIan to perfuorrui purey auvIsuryo - LuncUlUiOns. Iley shoulu ue useu pri-marily in headquarters staffs of ministries and agencies for the purpose of detailedplanning of projects and action programs and more careful supervision and evaluationof the implementation of programs in the field.

14. N\Jevertheless, a larger expatriate staff can only be a temporary answer tothe problem. In the longer run, the country's administration should essentially berun by Ugandans. In the first place, this requires an educational system which isclosely geared to the country's manpower needs (see Annex IV-F). i4oreover, generaleducation ought to be supplemented by a systematic and sensible program of trainingUgandans on the job by expatriates. The latter could follow the pattern of the UEBtraining program which has been working rather successfully in recent years, andwhich operates on the basis of financial incentives for the expatriates whose bene-fits increase wiith the successful training of their local counterparts.

4 )9 _

Rrr Th`a LA u

A S AWFlrE RESOLuiRCE GAP 1MIODEL OF UGANDA

1. The main text of the report contains the Mission estimate of the resourcebalance in the Ugandan economy over the next five years. it has been estimatedthere,that if the forecasts of exports and GDP are correct and if the policies out-lined are adopted, Uganda will experience a cumulative resource surplus of £14 mil-lion over the Five-Year Plan period; this is equivalent to a surplus of E4.5 millionin 1971. It will be noted that the figure E14 million comes both from TabCe 5 (sav-ings-investment) and Table 7 (export-import). Thus the report presents a consistentresource projection, consistency having been arrived at by means of the incorpora-tion of the implied effects of recommended policies.

2. The purpose of the model that follows is to analyze and illuminate thenature of the variables that make up the resource balances, and more particularly toshow what is implied for these balances if the policy changes recommended by theMission are not adopted. T'hus a comparison can be made between two alternate possi-bilities, one a continuation of the past and the other an incorporation of recom-mended policy, in terms of the levels of macro-economic variables in 1971. In doingso the analysis can show the nature of the resource problem Ugarda will face and canindicate the magnitude of effort required if Mission targets are to be met. Themodel itself is based on the statistical relationships of the key variables over theperiod 1960-65.

3. It should be made clear here that it is very difficult to create a completemodel of an economy that will predict within itself the values of GDP, investment,and exports in a future year. These economic variables, in a country like Uganda areto a large extent related to exogenous factors rather than to the structure of theeconomy itself. Thus the model that follows uses the estimates of the sector spe-cialists on the Mission to derive the levels of these variables in 1971, and confinesitself to structural considerations of the levels of imports and savings implied bythe predictions of GDP, exports and investment.

Si. In general terms there are four key variables involved in projecting gapestimates, exports (E), imports (M), investment (I), and savings (S). As statedabove E.I. and GDP are to be taken from Mission estimates, thus the size of the gapswill be related to the statistical projection of M and S.

5. Let the trade gap be called GT and the Savings-investment gap be calledG. then

(1) GT = M - E(2) GTT = I - S. and for overall ex Dost consistencv:(3) GT = GV

6. For the model we will assume that imports are made up of three components,consumer goods (Mc)1/- intermediate gonds (iMi.) and eanit-1 good1s (M. ) and that ± thyp

1/ Consumer goods imports are defined to include import duties. This is becausewe are interested in expenditure behavior.

- SO -

behave as follows:

(4) M = a + bY

where Y p is monetary GDP at market prices and a and b are coefficients ofthe equation 1/ Similarly;

(5) H =c + dYm

where Ym is GDP in manufacturing, mining, and construction. Finally;

(6) i'L e + fIK

7. Savings we assume to be related to income, but in addition as it is fairlyclear that the next five years will bring about a shift of the gains of growth fromthe rural sector to the urban sector, we will relate savings to the relative sharesof income in those sectors;

(7) S = h + jY + m(Yu/Yr)

where Yr is monetary GDP in agriculture, Y is monetary GDP in the rest ofthe economy, and Y is monetary GDP at factor cost. L

8. Using data found in the am:endLc to this report, the following relation-ships are obtained.

1971 levels (E million)1i = -17.022 + .238 Y._.

6.307 + .810 Ym 2 )-- 107i1k = .307 + 50 IIIk = I ~ + -I)7 T 17

S = 31.91 + .292 Y - 2.7 (Yu/Yr 43

The various relationships are set forth in the table.

9. This table shows that whereas the IMission expects savings to exceed in-vestment andl exports to exceed imports byr T- mjIlionn a nrnion of past trends

in these variables talken with the Mlission forecast of GDP shows savings exceedingin"vstment by 6 million while imports -orts by ,r21 million. In addition

it is pointed out that the anticipated gap between exports and imports is the resultof adverse terms of trade; were the terms of trade to remain at 196 leve"s then ex-ports would be Fl,O1million, with total imports at f98 million leaving a surplus of,

1/ Note that equation (4) is an expenditure function. To the extent that therewere policy changes in the past (lncrease of import duties) we make the as-sumption that the elasticity of expenditure with respect to these changes iszero. Thus with a duty increase, in the absence of increased income, con-sumers are assumed to buy less goods, but to spend the same amount of money.iriereLore, a an u bCar ilvariLdLt Lutude _pUlIcy ichaniges.

- 51 -

12 million. Both the L6 million savings surplus and the E2 million trade surplusare very close to the l4ission's estimate of a L5 million surplus. In order 1toreach this targpt it would only be necessary to Ilowr the marginal imnort ra-te-from 0.35 to 0.32. However, as a result of the anticipated adverse terms of tradethere will have t-o be a strPnuouq effort on imnorts. lowering the marginal rate from0.35 to 0.11.

19 71 -7

MissionEL StM Iat 14ldcSl A L.+i,.' L/

Monetary GDP (market prices) E mill. 324 32h 216Gr-oss domesi saig |7^83

Consumption " 277 276 -L81

Marginal savings rate .11 .12. .19 b/uross fLAixe Ud.jJe captial orm.atiuoiL r mll l±L. L;2 L4 31

Savings surplus/gap (-) " 5 6 h

Exports of goods and services e/ S mill. °0 90 75Mllerczian±die Ulporvus ( C.i.f. T ±roro) C/ ioi5 iiU U-)

Marginal import rate *11 .35 .51 b/Invisible imports I M mi.L. 0 10U u

Resource surplus/gap (-) " 5 - 21 hLoss due to declining export prices 1ULoss due to increasing import prices 13Total terms of trade loss 23Constant price trade surplus 2

a/ 1965 figures revised so as to be compatible with projections for 1966 and 1971appearing in Table 6 of the Statistical Appendix. It was felt that 1966 wasmuch too unusual a year to be used as a statistical basis for comparison with1971, and in addition the data for 1966 is very incomplete.

b/ Historical, 1960-65.

c/ Not including duty.

d/ Duty rate assumed unchanged from 1965.e Includes net transfers.

10. The table makes clear the magnitude of the necessary changes. The main-tenance of the marginal savings rate above the structural level of 11 percent may bepossible with increased taxation. The policies of import substitution, increasedimport duties, and increased taxation (via its effect on income) must bring about asubstantial lowering of import rates and a simultaneous structural shift of demandto domestic sources. It is estimated that the value of excess imports involved is

- 52 -

abLout .JC26 mkillion. Of thisLO onl-y abu LM millionW ill be> taken.. hLr im subs.tu

tion. Thus taxation and structural change must bring about elimination of E21 mil-.io.Jn of potential ann.ual imports by IC71.

_L *L .I mu. uus I' le1ItI empas . JlJ. Ule mo.L -'SC 11 Tize a +11 Lrst Ubv Js v1 a v vSry apJprx 1'aeLll

one. There is no doubt that the relationships could be made more accurate, but thepurpo_e is primarily to poinLt out magnitudes and to illu,,inate the size of thechanges in macro-economic variables that must be brought about through the implemen-ta'Lion of' poj-lc;y lme-asures.

APPENDIX 4

SOCIAL SECTORS

Introduction

1. The social sectors not elsewhere treated include health, housing,water supplies, information, and community development. The Mission did nothave experts on these subjects, but did attempt to arrive at some general.judgment of the feasibility and advisability of the development programs inthese areas.

2. Planning in these sectors is somewhat different from that in theproductive sectors. In most cases the targets for investment during thePlan were arrived at as the result of a compromise between what the par-ticular ministries felt they could undertake in the five-year period andwhat the Government felt it could spare in terms of resources. Thus inmost cases the paramount sectoral constraint is a financial one. Whilethere are some instances of personnel shortages, in general most of theministries involved either have sufficient manpower or have adequatetraining programs. The P'lan envisaged a total expenditure of E47 milliorin these sectors; the Mission believes that this target is not excessivealthough some change in the individual sector allocations may be necessary.

Health

3. Under the Plan the Ministry of Health would invest a total ofr14.6 million. Since the Minmstry has a noinnptent planning staff, it qhinhdhave no difficulty spending this amount provided the necessary funds areavailable. The Mission feels that +he health plan has hben thuiight-out care-fully and that it places proper emphasis on preventive medicine.

4. The plan can be divided into four sections, curative (55 percent),preventive (4O percent), training (3 penrent) and spec-ial works (2 percert).The focus of the curative program is upon increasing the number of availablebeds. Although there is only one doctor to each 18,000 people in the country,doctors can only be used effectively when there are an adequate number ofhospital beds avilable. While the curative progratm provides for the expan-sion and upgrading of a number of town hospitals around the country, threequarters of the projected expe.ndi+ture (E5.9 million) is for the erectlon of22 rural hospitals, each with a capacity of 100 beds. These hospitals, which

been financed and are now being constructed; and external finance will probablybe availbl _1- for the balance.eU~ _C. A d.LL L_ JL ..J _iic LJ_.._c iJL_

v .i1~ ~J.Ll~lle prveLve program -Ls VUeVoU vuo v oU Ull b1U ±1Ig wUit IU1Ui 'UU bU.LC'Il UI

rural medical units on a scale such that eventually each of the 612 gombclolas(admlinListrative divisionLs) will have at least a preventive center wit1hdiagnostic services, inoculation facilities, a lecture hall, and an ambulance.The plan appears meritorious, though the necessity oI coordination with the

community development service in order to build the lecture halls may wJellresult in a somewhat higher cost than originally planned.

6. The training program is well thought-out in relation to the futuremanpower needs of the health service. The expenditures are for building andequipment for the training schools. Finally the special services cover theestimated investment content of subventions to mission hospitals and lepersettlements, as well as expenditures on the malaria program.

7. About 62 percent of the total investment program in health is forbuildings, and a further 11 percent for equipment. The provision (L3.8million) for housing of the staff of hospitals and medical units may appearextravagant, however, it may be difficult to keep good staff, especially inrural areas. without Droviding adequate housing, and it is desirable to havehospital staff living in close proximity to medical facilities.

8. Subject to the availability of funds, the Mission believes thatthe health investmen-t progrnam coul d hp. rrri ed nut in ccordance. wi th theplanning set forth in Table A.5:

Table A.5: HEALTH PROGRAM: PHASING OF INVESTMIENT

(In L million)

1966/67 1967/68 1968/69 1969/70 1970/71

Expenditure 1.4 2.8 3.4 3.9 3.1percent 9.0 19.0 24.0 27.0 21.0

Import content 0.5 0.8 1.0 1.1 0.9

The import content has been calculated at 100 percent of the value ofequipment plus 20 percent of the value of housing and buildings.

9. While health programs have not in the past attracted much externalfinancing, except out of local currency counterparts of aid expended forother purposes, the Mission has listed and described in Appendix 1 some ofthe projects that may merit outside support.

10. Because of the high cost of an expanding health service, theMission suggests that the Ministry of Health review carefully the possibilityof making the service financially self-supporting to a considerable extent.We are inclined to believe that civil servants, particularly those in theupper salary brackets, should pay the full cost of medical treatment. Theremay be some justification for subsidizing medical care for lower-paid civilservants, but in our opinion they should pay more than they do now. In thecase of the general nopulation the Droblem is more difficult. At one timethere was a charge for medical service, but it was abolished in order toencourage all neonle to take advantage of the facilities of modern medicine.In some parts of the country free medical service may still be desirable forthis purpnse hut. in mnst of Uganda mTodern medicine is todav sufficientlyvalued that people would probably not be discouraged from seeking medical

attention if there were to be a nominal charge (1 to 2 shillings) for the lowestgrade of outpatient service and higher charges for the grades now paying. This sug-gestion, we realize. has been made before but nevertheless requires urgent considera-tion.

Wa-ter Development

11. When the Development Plan was prepared, considerable attention was paid tothe formLulation of a unified program. of water development. Since then, however,there has been little or no coordination of detailed project planning and executionamong the ministries concern,ed. There have even been cases where two ministrieshave drawn up water supply projects for the same town. 1/ Moreover, lack of commu-nication between planners and beneficiaries has sometimes resulted in water supplyprojects of a type not entirely suited to the users' needs.

12. The five-year program covers both urban and rural water supplies, metro-pojlt.tuan \Ilampawa and UJija) water and 0sewerage and vater sup-3lles for cattle. I

calls for an expenditure of E6.0 million. Taking into account both financial andadmlnlstrativ,e constraJnts, Ihe 'ISssion beli4eves that - program costlng abut 4aU4I.LL L ,d 1. iv e . 1 1 dL LI 4.0 I LL. LOl U Oi.L0V 0 ULIOL U Cl PI 'S 00 4A VIAL

5.0..U.

million might be carried out if the Kampala/Jinja master water and sewerage could beat Uleast. st4, artedieu before th11e ,_nd ofLI th,1le lan. 'Lile possible p1hasing and import- contentof this investment program is given in Table A.60 The import costs shown there mightbe cut L) by approximdeJat'ely r\.U mil±liULion iLf V sewer iLpes were manulLacturedL local'ly

Table A.6: 1PWATER FROGRAMA: PHASING OF' INVESTMENiT

(In f million)

1966/67 1967/68 1968/69 1969/70 1970/71

TnvstTnpnt 0.5 1.1 1.- 2.0 2.3

Tmport content -= n n n 0.7 o 8

13. The two projects which seem to merit serious consideration for externalfinnancing are dscussed in Appendrx 1.

01n1Y +.NT npmzi (YflTrnfl+.

1). The Development Plan originnlly provJided abouth .5 million frr communitydevelopment and welfare. We suggest that this figure may have to be raised to f3.0million because there is a ssri1ous underestimate of the costs of the communitycenters program.

15. While there is an obvious need for community development and welfare

1/ It is understood that the African Development Bank will be financing a studyof urban water supplies outside the Karipala/Jinja scheme.

- 56 -

programs in Uganda, we believe that experience has shown that the smaller schemestend to have a msuch greater benefit to the country than do the more grandiose ones.Prograrns falling into the former category are the handicrafts scheme9 the rehabili-tation program, and to some extent the National Ugandan Youth Organization (HUYO).These projects all have low costs (the handicrafts scheme is virtually self-support-ing) and all have demonstrated their effectiveness. We recommend that the Ministrycontinue them and at the same time place more emphasis on obtaining high qualitypersonnel to maintain them. In addition, in the case of NUYO, great care must betaken to insulate it from political influences.

16. The social welfare Drogram appears to be necessary and reasonably well-conceived. While it is hard to classify this as a development expenditure, it iscertainly evident. that such institutions n are going to hp needed mnore and more 2s thecountry develops. We would hope that the emphasis be placed here on rehabilitationand training rather than correction.

17. We find it. ear-y- hard to +.re andrsetr es +.h t pyn crnm as it now n t -+.nnrj IATafeel that the present facilities are commensurate with the apparent level of sport-ing enthuiasom an ntaA +td+. iif +ti r aise v. ithe +r, -'-ui +c~ c+ standino, of sorvrt.s -n the

country it should be directed to the gombolola level and built up from that base.Consequently an expenditure of 1600 thousand on lo-a faciliti+es s d be adequate.

18. The ornmmiunityr ncentersprnogrnm is +the bigst Qrsheme nf +.he MinistryT of'Community Development. It was initiated in 164 and it is planned that in the nextfecw; years it will be completed. It is intended that the centers wil b-ecome thefocus for rural living) however, there is serious doubt as to whether most centerswill ever b e meo re t han - 1 aca of f i es fo-_ r t+h,e cenrn tal - go-_ v ernment. T he effectivenessof a center depends on the personnel that run it and the receptiveness of the localpeople. Such a coMbination is apparent orly in a few'-1 centers. Ano+her proble

the use of local labor on a voluntary basis to build the centers. In some parts ofthe -1_ conr thi -may wo k,, but 4in oter -hr - a - n--eed- to b-e a cash, 4----t4,,-ULIA > flV., wlbLO' Allay V1j . IU. V .4LIA Uui V C.l 0 LIlA 1 C LC.y Li QL 1/I LI/ 1iUiL EL CI1L

certainly this has been the case where centers have been built by the NUYO. Further-more, tuhlere have bUeen i1nstuances wihCere tLhIle I9people were not l satisfLie U -LIl w ih e low

cost building materials and have insisted on a more expensive structure. For thesereasons we f eel thLat,0 Uthe os t of LIhe ceritLers yet t LUo bUe built _uld I pIossibly beC asE

much as twice the amount planned. Moreover, we recommend that the Government pro-ceed very carefully and possi'uly reconside parts of this program, giv_ig much more

attention to the training of community center personnel.

1°. In virtually every phase of the Community Development plan there is a needfor staff. There is no doubt that the Ministry can carry out the investment it hasplanned, but there is some doubt about the effectiveness of the programs themselvesif the staff to run them is either inadequately trained or non-existent. We cannotat this point make an accurate assessment of the staff needs, but it is entirelyprobable that the Ministry might be well advised to slow down on some of its pro-grams and to invest some of its resources in staff training facilities.

Information

20. The Mission has not looked in detail at the Plan proposals for radio,television and information. On the basis of the report of the plan working partyon this subject, we would judge the recommended expenditure to be on the whole

- 57 -

wTorthwhile, howvever, we question the contrioution of external broadcastiing to thedevelopment of Uganda and thus suggest that the L470,000 earmarked for this might bebetter spent elsew"here in thle econ.o.,ny. 'Therelfore, we suggest th-at expendlit-ure couldbe reduced to about L850,000. As most of this expenditure would be for equipment we

HousingLT_-___ r2

21. Thie Developmenti ]ian envisages a uotal innvestuuenu Ul .f f L2 L II-lli 11i hIoUs-

ing during the period 1966.-71. However, only 11.2 million is to be spent by govern-ment, and the remaining E21.0 million appears to be an estimate of the value of hous-ing that will be put up by the monetized sector during the Plan period. Of theGovernment share, half wil-L go to the proposed Mortgage Finance Corporation, therest being devoted to a number of small programs. The Mission feels that the 11.2miilion to be spent by government is probably a good estimate, but that the currentprospects for private housing are such that that sector will probably invest 115.0million; however, improved conditions could make this figure as high as 120.0 mil-lion.

22. It is hard to assess the housing needs of the country in the coming years.The expected increase in population is about 1.2 million and it is estimated thatthis will call for about 2L0O,OOO new houses of which about 5 percent will be inpermanent materials, the rest in traditional (mud and wattle) materials. At currentaverage prices these houses will "cost" almost E35 million, and replacement of oldhouses as they deteriorate could easily add another 170 million. However, the totalof 1105 million includes suibsistence housing and particularly the value of unpaidlabor in erecting traditional material housing. A valuation of the full costs ofpermanent material houses and the cement, wooden poles, and tin roofing in non-permanent houses gives an ejstimate of about 125 million, 60 percent of which ispermanent housing. The Mission feels, however, that the current situation in urbanhousing (which is where most of the permanent material houses will be local-ed) issuch that possibly only 1/3 of the needed urban houses will be built.

23. Part of the housing problem is the result of the colonial tradit-,on ofsupplying subsidized housing to high level civil servants. In some instances thissubsidy now runs as high as 90 percent to 95 percent of the economic rent on thehouse. This practice also extends to private companies and thus covers almnost every-one in the upper income levels in Uganda. The result is that the only people whocan afford to buy or build houses have no incentive to do so and hence the onlycustomers for new housing are the employers. Moreover, the largest single employer,the Government, does not have sufficient funds to invest in housing. Accordingly,limited housing accommodations makes difficult essential increases in high--levelstaff and the recruitment of needed foreign personnel on technical assistance pro-grams. Employees whose positions do not entitle them to subsidized housing typical-ly end up living in a small slum room costing as much as 40 percent of their salary.Thus the current housing structure is regressive.

24. It might be thought that with the current housing situation there wouldbe a large amount of housing construction going on. Such, however, is not the case.The most prominent factor is the lack of available urban land. Most land is withouta clear title, and such land that has a title is generally being held for specula-tion.

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25. ~ An-ther feature of the problem is t+he high cost cn-trnction. IT-f we

assume that tenant or owner should be able to devote 20 percent of his income toaccommodation and if we allos.,a standard 8=1/3 year "pfany bar In.L-' thnr n it canbe shown that at every level of income current average accommodations cost morethan theo occupie_r s h oud1 bA be_ payng P-aIrt of thiS is due t+on the hig;h cost of land

and of providing ancillary services such as water and sewers. There is also probablysoCm)e t1rut- in the colntlention thlat t- cost of mtrasis unnecessarily -1gh.

Probably the largest element, however, is the adherence to expensive European build-ing 4 aa 0 and the .lackl oIf l-nnovation in 1developing th1e usee of lloca1 materialsand methods.

26. The plan actually does very little towards alleviating this situation.Desids VaLioUsL ministerii3iald± UVLI4 deeo4n U whI include some senior staff

housing there is a token contribution to the National Housing and Mortgage Corpora-tions. The long-range plan is to turn Uvue-r Il govUrUment housing to the lHHC allo-wthem to rent or sell at economic rates and use the proceeds for building new housing.Such a scheme would entail vastly more capital than the -WC can lend and at the sametime quickly would get the NHC far beyond its technical capabilities. A far morepromising scheme is the 11inistry of Works low cost housing project which is directedtowards the demonstration of how to make permanent housing from traditional (mud andwattle) materials. This includes estates in all the towns, supervised layouts,readily available standardized plans, and demonstration teams. The costs of thisscheme are quite small, its benefits could be large3 it should be given high priority.

27. I^Je recommend as the rnost effective way to help the situation, that thesubsidy on housing for civil servants be first made explicit and by the end of thePlan eliminated. Tnis will have to be modified in certain cases in order to preventthe loss of top grade skilled professionals from government service. We also recom-mend that the building codes be revised to reflect local rather than English condi-tions and that building procedures be made as simple as possible cormmensurate withsafety and public welfare. Finally, we suggest serious consideration of increasedtaxation on unused urban land.

STATISTICAL APPENDIX

Table No.I. Employment and National Accounts

1 Population by Race and Area and Population Density2 Industrial Distribution of Employees, 1960-663 GDP at Factor Cost by Industry, 1960-66 (current prices)4 GDP at Factor Cost by Industry, 1960-66 (constant 1964 prices)5 Expenditure on GDP, 1960-66 (current prices)6 Mission Estimates of GDP, 1966 and 1971 (constant 1966 prices)7 Public Sector Saving and Investment

II. Production in Agriculture and Manufacturing

8 Value of Main Cash Crops to African Growers, 1955 and 1960-659 Distribution of Acreage Under Crops-, African Growers, 1955 and 1960-65

10 Number of Livestock on African Farms, 1955 and 1960-651:1 Volume and Value cfFish Caught, 1960-6612 Recorded Production of Timber, 1955 and 1960-6513 Industrial Production14 Employment in Various Sized Establishments

TIT. Public Finance

15 Central Government :2evenue and Expenditure, 1960/61-1970/7116 GPntra1 Government Caintal Expenditure.. 1960/61-19 66/6717 Functional Analysis of Central Government Expenditure, 1960/61-1966/671 TL.oa GTovernment Re-venue and Expenditure, 1960/61-1970/7119 Central Government Development Expenditure During First Five-Year Plan20 Profits and Losses of Marketing Boards

T'il Money7 andrice

2-1 Bakf Tjg-and: Assets and T iaiite as- at Jun 30 1967 ,--'n

22 Assets and Liabilities of the Commercial Banks as of December 31, 1i60-662:3 Cost of Living Index, 1960-66

V. External F _ n a ,nce

Ba-' an c e O- - oAnAt 4 _nd- 0?75i L. _ L 'l i I X IIJ ULl , UO , ' 1'VV V .1 .iJ_./ f L

25 Merchandise Exports, 1960-66 and 197126 1 Merchan'lse T ±0IImport U.J , 19606 L/ I 197

2'7 Balance of External and Interterritorial Trade, 1960-66 and 197128 Terms of' Trade, 1960-66 and 197129 Foreign Exchange Reserves, 1960-6630,j 1.:$.&U_j. Ee L P ubicu DJeLJ U aOs o.f DeceLWC.ULr _1), 196u

31 Estimated Contractual Service Payments on External Public Debt as ofDecember 31, 1966

Table 1: POPULATIONI BY RACE AND AREA AND POPULATION DENSITY

(Thousands)

C e n s u s Y e a r s Estimated Projection1921 1931 - 198 1959 l96 1971

Race

African ... 3,536.3 4,917.6 6,.449.6 7,635.0European 1.3 2.0 3.4 10.9 9.0Indo-Pakistani) 5.6 14.2 35.z 71.9 88.5Other ) 1.1 2.3 4.3 4e2

Total . 3,553.6 4,958.5 6,536.6 7.740.0 8.93)

Areas

Buganda 12881.1Eastern 1,902.7Northern 19249 03Western 1,503.4

Total 6,536.6

Density

Bueanda 117Eastern 174Northern 39Western 87

Total 86

Ahqtrqc-.t.~~~~~~~~~ .n i

Table 2: INDUSTRIAL DISTRIBUTION OF EMPLOYEES1960-66

(Thousands)

1960 1961 1962 1963 196h 1965 1966

African

Agriculture h9.4 44.8 h7.9 47.0 h7.8 46.8

Cotton Ginning 4.o 3.3 265 3.2 365 4.4

Coffee Curing 2.8 265 3.0 3.0 3.2 3.3

Forestry, Fishing& Hunting 3.6 3.7 3.6 3.0 3.5 3.6

Mining F. Qarrving 5.3 5.8 5.1 Lh9 h.8 6-1

Manufacture of Food-stuffs 7.6 7.8 7.6 7.4 9.h 8.2

Other Mlanufacturing 17.0 17.9 17.1. 17.2 1665 18.6

Construction 29.2 28.6 28.6 25.8 2h.1 31.6

Commerce 10.7 11.1 1065 9.7 9.7 9.2

Transport &Comunications 10.1 9.6 9.0 0 9.6 9 9.7

-4 A ii. 1 15A6 13.4 1 13.9

AfPri^n T nol

Government 34.5 32.0 2865 26.1 29.0 2h.9

Education & Medical

.L).U .L£*y 4 .L)U L*U L LU.Services 25h2 26h6 21h9 25*L0 2'w 372

lotal 228.9 221.0 216.8 208.4 212.3 228.2 231.9

Non-African(All Sectors) 15.6 15.1 11.0 13.2 12.b 13.h 1h.2

GRAND TOTAL 244.5 236.0 230.8 221.6 22L.7 241.6 246.1

Source: 1966 Statistical Abstract1967/68 Background to the Budget

Table 3: GDP AT FACTOR COST BY INDUSTRY,a/ 1960_66A m fT1 T~TI'T TDE^T1RI bUUJf21 rn±umo

1960 1961 1962 1963 196h 1965 1966 b/

Monetary Economy

Agriculture c/ 66.7 66.1 59.5 78.9 82.9 78.8 9L4.7 e/Forestry, Fishing& Hunting 1.7 2.6 3.2 3.1 3.1 3.1 3,3

Mining & Quarrvina d/ 2.5 2.1 2.5 2.7 5.2 7.1 5.5Manufacturing d/ 7.1 8.3 9.6 10.9 13.5 15.1 18,5Electricity 1.9 2.2 2.5 2.7 2.9 3.3 3:.8Construction 4.4 4.0 4. 3.9 3.9 5.1 5,.0Commerce 25,1 25-2 25.2 32.0 3h.5 37.3 hL.hTransport & Conmuni-

cations 6 3 6.n . _ 6 A 6 3 607 7.bServices 23.7 25.0 26.0 26.5 31.0 36.7 h40o

Total MonetaryEconomy _ _9.h lhl.5 138 _ .8_ _,_,, _,,_ _,,,_,,^>QI, 167 1n 3, 3 .2Q 9 9992 A

Non-Moneta-rY Economy

Agriculture [ 0r,5 bh.h [ 7 1. hS.3 52.6 71.5 654,6Forestry & Fishing 5.3 5.8 6.5 7.0 7.6 10.3 11,6

Total Non-MonetaryEco n o m. y li.8J 2U.2 5)3n .2.3 6. 8L8 pi

TOTAL GDP 185.2 191.7 192.7 219.3 243.b 275.0 299,8

a/ Based on official figures, but adjusted to reflect probable changes inforthcoming revision of national accounts.

b/ Preliminary. Estimated actual - adjusted old series.c/ Includes crop processing.d/ Series revised on basis of mission information,e/ One of the main reasons for the very large increase in 1966 appears to

have been the sale to non-quota markets of virtually all the coffeestocks built up in previous years. In the view of the mission, if thenet value of these stocks was included in 1966, this is incorrect: acdjust-ments to prior years? figures should have been made. In addition someof the increase was due probably to an abnormal increase in the offtakeof livestock.

Sources: Real Growth of the Economy of Uganda 195h-62.Statistical Abstracts.Background to the budget 1967/68.Work for pr Pre<. 1Q66-71.

Table 4: GDP AT FACTOR COST BY INDUSTRY,a/ 1960-66AT CONSTANT 1964 PRICES

(f million)

1960 1961 1962 1963 1964 1965 1966 b/

Monetary Economy

Agriculture c/ 69.0 68.4 63.3 77.5 82.8 8L .1 90.8Forestry, Fishing &Hunting 3.1 3.1 3e2 3.1 3.1 3.1 3.2

Mining & Quarrying d/ 4.2 3.8 L.h h.6 5.2 5.0 4.8Manufacturing d/ 9.3 10.5 llr6 12.3 13.5 13.2 15.7Electricity 2.h 2.5 2.6 2.9 2.9 3.4 3.8Construction )49 L.4 h.7 h.2 3.9 5.0 L.6Commerce 26.4 26.9 27.7 32.6 34.5 37.h 4o.3Transport & Communi-

cations 5.8 5.7 5.5 6,o 6.3 6.8 60oServices 29.L 29.2 28.9 28.3 31.0 31[.2 35.6

Total MonetaryEconomy 154.5 154.5 151.9 171.5 183,2 192.2 204.8

Non-Monetary Economy

Agriculture 47.8 4h.1 50.2 50.8 52.6 53.3 56.1Forestrv & Fishing' 69 7-0 7-2 7.3 7 6 7.7 R0

Total.~ Non..JfronetarYEconomy 54.7 51.1 57.4 58.1 60.2 61.0 64.1

TOTAL GDP 209.2 205.6 209,3 229.6 243.4 253.2 268.9

a/ Based on official figures, but adjusted to 1964 prices and to reflectprobable changes in forthcoming revision of national accounts.

b/ Preliminary. Estimated actual - ad-justed old series.c/ Includes crop processing.d/ Series revised on basis of mission information.

Sourczes Real G-rowth of the Enonomyo nfL TTrgnnAn 1dQl95 A9Statistical Abstracts.Background toI., th 1 .u.. 1°67=68Work for progress 1966-71.

Table 5 EXPENDITURE ON GDP, 1960-66AT C`URiRIRE1 PRICES

(s, million)

1960 1961 1962 1963 1964 1965 19?66 a/

GDP at factor cost 185.2 191.7 192.7 219.3 243.1 275.0 299.8indirect taxes less

subsidies 7.2 7.6 9.7 10.9 12.3 15.0 17.8GDP at market prices 192.4 199.3 202.4 230.2 255.4 290.0 317.6Less: External

resource surplus 0.7 -6.6 -3.3 -9.6 -16.9 -3.8 -4.3Gross domestic expen-

diture 193.1 192.7 199.1 220.6 238.5 286.2 31.3.3

Gross fixed capitalformation 18.6 18.0 17.7 20.0 24.2 32.3 30.7Government 5.7 5.2 4.2 4.4 7.1 8,5Other 12.9 12.8 13.5 15.6 17.1 23.8

Gross domestic saving 17.9 24.6 21.0 29.6 41.1 36.1 3.5.0Government b/ -3.2 -4.2 -3.1 0.3 -1.6 -5.4Other 21.1 28.8 24.1 29.3 42.7 l1.5

Consumption c/ 17)i.5 174.7 181.4 200.6 21L.3 253.9 282.6Government 17.8 20.2 23.1 25.9 29.4 35.0Other 156.7 154.5 158.3 174.7 184.9 218.9

a/ Prelimiinary.b/ Includes marketing boards.

Sources: EACSO Balance of Payments figures.Uganda Government Accounts.Real grawth of the Economy oI 'uganda 19,5-62.Statistical Abstracts.Background to the budget 1966-67.Work for progress 1966-71.

Table 6: MISSION ESTIMATES OF GDP, 1966 and 1971AT CONSTANT L966 PRICES

(f million)

1966 1971

Monetary Economy

ericulture a/ 9L -7 1009

Forestry; Fishing. Hunting3

Mining &, Minerals 6,0TvTniifno lr'ti'i nf iR < 9

Electriclty 318 5.2

C ormnerce LL.L 66.8

Transport 7.. 8.2

Total~~~~~~~~~~~~~o >oet Ecoom 22.628.Io-lJUda.L 1'Uonetary Economy 77L.'j 87.7 QL

'No T.T .- - L J-.- - - - - - -7 . O ?7. 7

Loua'L GDP atu Factuor Cost 299.8 )4.

IndLirect ±axes less S-ubsidies - 17. 220 3

GDP at Mliarket Prices 317.6 397.2

a/ 1966 considerably above trend as the result of several factors which arenot expected to continue. 1971 based trend and physical limitations.

b/ Based on 190-200 million investment during plan - 1966 activity waslow, but prices high; 1971 reflects resumption of normal activity, butat 1966 prices.

c/ !966 was an abnormal year in livestock; 1971 calculated as trend from 1965.

I

ty~ ~ ~~~~~~{

SeR < i; mb tAlbe 0,,' 'f.9 -$ ~~~-, t--4tA

\ 3, <_ t ,|I I A

ui~ ~~~o~i

@ X % C D *</ ,/ .% : r

_ N ,- *' .7 °h)>

In0~~~~~~C

Nr ~ ~ -- 'W It '~~~~~~~~~~-~~~~ LU ~ ~ l

1L

0~~~~~~~~~~~~~1

Z 21~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~~~~~12~ ~ ~ ~~~~~~~~~~Y

Table 31: UGANDA - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON0TEPMAL MEDIMU7- AND LOJG-TERM PUBLIC DEBT OUTSTANDING

TNCll',TNMTTCT- JTSRPSED AS OF D.T.RTT C;31; 1966 a/

Debt Repnnirnlh1e in Foign Currenrn

(Tn innnOs eof UTj. riSndollnr mivilpnts)

1 - -, A TOM rl, - a. rki rLAl'JD J UlH.l

Debt Outstanding(Beginning of Period) Payments During Period

Year Including Undisbursed Amortization Interest Total

1967 121,778 i,624 4;5t4L 6,1661968 119,836 2,044 4,590 6,6331969 11794It 20,606 4,162 24,7601970 96,589 3,8b4 3,661 7,5051971 92,611 4,268 3,494 7,7621972 88,197 4,621 3,320 7,9411973 803,1Ll 12,b62 3,138 i5,6001974 70,785 5,081 2,119 7,5001975 65,703 5,200 2,225 7,14251976 60,503 4,425 2;0144 6,4701977 56,o078 4,552 1,883 6,14351978 51,526 4,688 1,715 6,1021979 146,838 14,831 1,538 6,3691980 L2,008 4,983 1,352 6,3351981 37,025 it,759 1,158 5,917

a/ Includes service on all debts listed on Table 30.

Source: Statistical Services Division,IBXD Ecoroomics D2nartment

JuLy 10, 1967

Table 30: UGANDA - EXTERNAL MEDIU4- AND LONG-TEWR a/ PUBLIC DEBT OUTST.AI1JGfINCLUDING UNDISBURSED AS OF DECEMBER 31, 1966

Debt Repayable in Foreign Currency

(In thousands of U.S. dollar equivalents)

Debt outstandingDecember 31, 1966

Item Net of Includingundisbursed undisbursed

TOTAL EXTERNAL PUBLIC DEBT 98,619 121,778

Publicly issued bonds b/ 28,538 28,538

Private bank loan 896 5,460

IBRD loans c/ 7,484 7,484

Loans from governments 61,702 80,296Gerr,.aonly 7 750 5 700

United Kingdom 53,5o8 68,278T7 -; + A C + '.4-es AT -'MI ~TJnited St ate, =i AI ,4,, ,1

D Debt withA an originaL oAr extended mtuuiity .of 0one year or .m.ore.

b T/ Mel of accumula+ed sinkirig funds o -,f ,n. n,oonr

U/ 1V U L d'LUk1± U u. .LLJ1.Lnr~ .LULJU.O VI.J. .4JLi L4, LAL.

r uuarantee b4y U.IK. t .T -.er-men5.

Statistica Services Dv-i0-

Economics Department, IBRI)

-Ju.ly iV, 197'

Table 29: FOREIGN EXCHANGE RESERVES. 1960-66

(Values in E million)

Yeara/ 1960 1961 1962 1963 196LL 1965 1966b/

1. GovernmentC/ 24.8 24.6 22.9 15.8 17.2 8.4 8.3

2. Post Office Savings Bank 1.1 1.1 1.0 1.0 1.0 O.4 O.4

3. Commercial Banksd/ -5.0 -2.7 -h.5 -8.9 -8.9 -6.2 -h.9

4. Share of East AfricanC-rency Tard 1) A 1) 1 - i I 17 9 17A I 5~ 7 1I<-r

TaCX I o 37.1 -I. OA, 26.9 18. 19.

Ir,+ports5. 44.9 45. 27 592 7.

RL'eserves as a percentageof imports 68.4 82.6 74.1 47.7 4.55 25.6

Reserves in months ofimports 8.2 9.9 8.9 5.7 5.5 3.1

Note: Figures not completely comparable with Balance oI Payments.

a/ December 31.

b/ June 30.

c/ Excluding sinking funds.

d/ Assets outside Uganda.

Sources: Statistical Abstracts.Budget Report.Quarter Digest of Statistics.Uganda Ministry of Finance.Reports of East African Currency Board.Mission Estimates.

Table 28: TERSE OF TRADE 1960-66 AND 1971

Export Index Import Index Terms of Trade

1960 84o2 94h4 89.2

1961 86.o 93.1 92.4

1962 84h.8 89.6 94.6

1963 88.6 lOle8 87.0

1964 100.0 100.0 100.0

1965 98.7 ioh.6 9h.4

1966 98.0 107.3 91.3

1971 85.5 123.0 69.5

(1964=looo0)

Sources: Statistical AbstractsBackground to the Budget 1967-68Mission Estima te.

Table 27: BALANCE OF EXTERiAL AND INTETEMRITORIAL TRADE1960-66 AND 1971

(E million)

1960 1961 1962 1963 1964 1965 1966 1971 a/

Exports b/ (f.o.r. Tororo)46.9 46.5 45.8 59.3 72.5 68.8 72.9 78.2External 40.2 39.6 38.7 51.1 62.9 59.1 62.5 68.9Kenya 5.1 5.2 5.4 6.2 7.2 7.1 7.3 6.9Tanzania 1.6 1.7 1.7 2.0 2.4 2.6 3.1 2.4

Imports (c.i.f. Tororo) 42.2 38.4 38.3 45.2 51.8 62.5 67.1 75.0External 35.5 31.0 30.6 35.3 38.3 LS5.9 50.7 59.aKenya 6.2 7.0 7.3 9.4 12.5 15.3 15.6 14.0Tanzania 0.5 0.4 0.4 0.5 1.0 1.3 0.8 1.6

Visible balance of trade 4.7 8.1 7.5 i4.1 20.7 6.3 9.3 3.2External 4.7 8.6 8.1 15.8 24.6 13.2 15.3 9.5Kenya -1.1 -1.8 -1.9 -3.2 -5.3 -8.2 -8.3 -7.1Tanzania 1.1 1.3 1.3 1.5 1.4 1.3 2.3 o.8East Africa 0.0 -0.5 -0.6 -1.7 -3.9 -6.9 -6.0 -6.3

- ea/ :sis-i n tatsti.al t A r

h/ TeIncludinc g reexports.

Sounnrces:q Easqt Af' rican Annu I Tvrade Ronnrf.o 1965Statistical Abstracts

Table 26: MERCHANDISE I1PORTS BY FUNCTIONAL a/ CATEGORY1960-66 AND 1971 VALUES IN L MILLION

1960 1961 1962 1963 19 6 4 1965 1966 1971 b/ c/

Food 5.3 ,.5 5.e 5.5 6.8 8.0 7.7 10.0Manufactured Con-sumer Goods 12.3 1'3.7 13.3 16.1 17.4 21.0 21.1 20.0

Consumer Vehicles 3.1 2.5 2.8 3°7 3.6 4.5 5.0 4.3Intermediate Goods 2.7 3.1 3.8 4.0 4.7 6.9 8.5 12.3Fuels 2.1 2e1 2.5 2.4 2.5 2M7 3.0 4.2ConstructionMlaterials 2.2 2.1 1.6 2.4 2.6 3.1 2.2 3.5

Equipment h.9 5 .1 4.9 6.7 8,7 11.3 11.9 12.7

Total (c.i.f.Mombasa) 32.6 34.0 33.9 4o.9 46. 57.5 59.4 67.0

Coverage and Valu-aLtion Adjustment 9.6 4j.4 4.4 h.8 5.6 5.0 7.7 8.0

l'otal (c.i.f.Tororo) h12.2 38.1,. 38.3 )t.7 52.f 02 5 67,1 75-0

a,/ See: Development Planning in East Africa by Paul G. Clark, p. 30.These categories were also used in the preparation of the Ugandadevelonment pla.n and are the basis for -h f+ ln Table 1 5(Balance of Payments) of that document. Figures include re-exports.

h/ TlUSsio es+lma+e

c/ Net of import substitution.

Sources: Development Planning in East AfricaAnnual Trade ReportsMission Estimates

Table 25: MERCHANDISE EXPORTS, 1960-66 AND 1971

(Quantity l long tons unless otherwise stated, Value - thousands of pounds sterling, Unit Value - E/ton)

Projections Dirfe'e-n:

1971 due to:n 1 966 t-rn of-

1960 1961 1962 1963 1964 f065 1966 1971 prices t-rad

ofrfeeQuantity - 117,107 103,744 131,278 135,219. 137,609 155,381 164,647 166,000Value 17,170 IL 025 20 203 27 206 35 ,03 30,426 36,783 35,700 35,391 -309

Unit Value a! 136.6 135.2 153.9 187.3 257.3 195.8 213.2 215.1

CottonQuantity 58,934 62,197 32,233 58,790 63,485 68,0o6 68,699 76,786Value I4,930 16,716 8,260 14,430 15,857 16,780 15,345 13,395 17,157 3,752Un-t Value 253.3 268.8 256.3 245.4 249.8 246.7 223.6 174.4

Copp-rQuantity 14,713 12,930 15,539 15,320 18,21i 17,283 15,55o 18,000Value 3,689 2,961 3,617 3,615 6,192 7,994 5,753 4,630 6,660 2,030Unit Value 250.7 229.0 232.8 236.0 340.0 462.5 370.0 257.2

TeaQ.-antity hJ05 14,148 5,j43 5,616 6.1149 6,789 8,802 12,730

Value 1,543 1,610 2,089 2,107 2,258 2,422 3,184 4,277 4,604 327Unit Value 375.9 388.1 383.8 375.2 367.2 356.8 361.7 336.0

CMl Seeds, Nguts and F.ernelsl.,antoty 11,315 U'i,733 11,358 7,559 7,384 3,524 13,504 50,000Valun 647 675 554 370 .01 201 706 3,400 2,651 -785Unit Value 57.2 57.5 48.8 48.9 54.3 57.0 52.3 68.o

Aintal Feed StuffsQuantity 78,456 72,528 40,189 65,634 69,953 84,273 92,963 120,000Value 1,771 1,505 928 1,657 1,708 2,076 2,370 2,808 3,060 252Unit Value 22.6 20.7 23.1 25.3 26.. 27.6 25.5 23.1

Qu.ntity 31,083 33,619 35,855 45,303 46,416 19,212 4,869 66,0o0Vrlue 1,4555 1,601 1,628 2-128 2;173 890 237 2.772 3.7211. 4.2

Unit Value 46.8 47.6 45.4 47.0 46.8 466. 18.7 42.0

Zottou Seed Oila-,102 7,288 4,661 7,938 O,196 8,567 r,u RS 12,000

Value 996 996 619 841 999 1,163 741 1,440 i,630 190Unit Value 122.9 132.5 132.8 105.9 108.6 135.7 135.8 120.0

Hiden and SkinsQuantity 3,976 3,318 4,551 3,880 4,069 4,195 3,904 5,160.Value 1,157 823 1,179 1,072 1,121 1,277 1,780 1,342 2,352 1,010Unit Value 291.0 248.0 259.1 276.3 275.5 304.4 455.8 260.0

Quantity 2,242 765 1,153 1,309 2,125 2,729 2,123 5,900Vamue 712 200 363 450 711 1,091 693 1,200 3,687 1.7Uhtt Value 331.0 261.1 31u.8 363.8 331.6 41O.O 285.9 20_5

Iron Bar, Sheet, TubeQuantity 8 2 12 992 6,892 6,969 11,o88 35,000Value 0.7 0.2 1.6 L1 298 366 594 1,572 1,807 60

Unit Value 81.1 98.7 123.8 41.3 43.6 52.5 53.6 b5.o

Cotton Fabrios of std. typeQuantity b/ 6,7417 8,609 13,461 14,508 15,726 15,551 23,201 12,000Value 951 1,299 1,707 1,890 2,258 2,405 3,674 1,160 3,593 2,4'3Unit Value 0/ 282.8 301.8 253.6 260.5 287.2 309.3 299.4 190.0

IleotrinotyQuantity d/ 160 191 189 190 183 190 203 200Value 267 290 318 349 406 418 L44 440 110Unit Value e/ 3.000 3.036 3.365 3.674 4.437 4.400 4.400 4.400

All Other Cosuodities 2,955 3,350 3,222 3,560 6,292 6,928 6,273 7,123 7,123 -

Total (F,O.B. Mobhasa) 48,283 46,051 44,689 59,716 74,077 72,440 76,373 81,239 91,402 I%1163

Plus: Re-eoports 1,338 2,062 3,317 3,023 2,015 1,238 1,183 2,400

Less: Valuation Adtustrent,Co-erage and Tir.ing 2,721 1,630 2,235 3,517 3,533 4,928 4,618 5,457

Total (F.O.R. Toror-) 66,900 46,483 45,771 59,223 72,559 68,75o 72,938 78,182

a/ Weighted average of quota and non-quota.I/ Thousands of sq. yds,

c/ Cts (E.A.) per sq. yd.d/ Millions of KWlH.e/ Cts (E.A.) per KWH.

Soures: Statistial Abstr,-ts, Annurl Traoe Reports, EACVO and Mission Esti.ateo.

Tab:Le 21i-: BaLANCE OF PAYMENTS- /1960-66 AND 1971

(L million)

1960 1961 1962 1963 15.64 1965 1966- 1971-

Exports of goods and services 49.7 h9.8 50.0 63.6 77.6 '74.8 78.1 87.5a) Merchandise h6.9 46.5 h5.8 59.3 72.5 68.8 72.0 78.2b) Services 2.8 3.3 h.3 4h.3 5.1 6.o 6.1 9.3

]mports of goods and services 51.1 44.9 45.3 52.7 59.2 71.3 75.6 85.0a) Merchandise 42.2 38.h 38.3 45.2 51.8 62.5 67.1 75.0b) Services 8.9 6.5 7.0 7.5 7 .4 8.8 8.5 10.0

Balance of goods and services -1.4 4.9 4.8 10.9 18.h 3.5 2.5 2.5a) Trade bala]nce h4.7 8.1 7.5 14.1 20.7 6.3 4, 3.2b) Service ba:lances -6.1 -3.2 -2.7 -3.2 -2.3 -2.8 -2. -0.7

Current transfers (niet) +0.7 1.7 -1.5 -1.3 -1.5 +0o3 +0.5 +2.0

Resouirce surplus/gap -0.7 6.6 3.3 9.6 16.9 3.8 3.0 4.5

Factor income payments -0.7 -0.6 -3. C) -2.5 -;.0 -5.2 -5.5 -8.0

Current account lbalance -1.4 6.0 0.31 7.1 11.9 -1.4 -2.5 -3.5

Iong--term capital, net I. 8 1.1 - 10. 1 -8.1 -12.5 -2.0Private -12:02 _ -4.5 -14.7 -10.5 -15'.1 -2.3Official 7.2 5.6 4. 6 2.4 2.6 0.3

Net drawing of official reserves 5.3 1.0 5.2 0.h 2.8 8.7

C)ther itemsb/ h.3 -6.5 6.7 2.5 -(.3 -2.3

Errors and omissions -3.h -1.6 -2.1 -1.9 -1.9 -3.0

a/ 15960 from Badger repoirt, 1961-65 from EACSO estimates. c/ Estimate, detailed figures not available.b/ Mainly short-term cap:ital. d/ Mission estimate. e/ Mission projection.

Table 23: COST OF LTVNG( INDFX (EXCLUDING RENT). KAMPALA.AND INDEX OF RETAIL PRICES IN AFRICAN IMARKETS,

KAMPAT. j 19(O-6L

Cost of Living Index Retail Prices in(exc.lud. Rer.t),±~ *Lrc-SSUt ,Jb

Kampala /a Kampala

1960 June 144 93Decer,.b"er I1 94) i.L4C. 714

1..L61 UJULMe lb1 .).December 143 104

1962 June .js 93DUecel-[LUer 70 94

1.9763 Ull J-e 153

December 103

1964 June 157 102December 159 107

1965 June 163 125December 166 127

1966 June 169 116December 170 116

/a 1951 = 100

/b 1957 = 100

Source: Statistical Abstract, 1965 and 1966Quarterly Digest of Statistics December 1966Background to the budget 1967/68.

Table 22: ASSETS AND LIABILITIES OF THE COMWERCIAL BANKS AS= t)F~~( DEECEMEBR 31, 196-66

(L million)

1960 1961 1962 1963 1964 1965 11966

Total Liabilities orAssets 24.9 27.0 24.5 30.3 39.7 53.2 h3.7

Liabilities

DenositsDemand 9.0 10.4 11.7 13.1 18.3 24.4 16.9Time :L3 1.9 2.2 2e2 3a8 4.6 7.4Saving 3.1 3.4 3.9 .4 5.8 8.0 9..4

Total 1:3.3 15.7 17.9 19.7 27,8 37.0 33.7

Balances due to:Banks in Ugand ! 0.7 1.14 - - - lo3 9Branbhes in EastAfrica 7.9 6.3 3.7 5.1 9Q7 3.2 0.6

Banks Abroad 1.4 2.3 o,8 3.8 - 8.5 5.2

Other Liabilities 1.6 1.3 2.1 1.7 2.2 3.1 14.3

Assets

Cash '2.4 1.9 2.2 2.1 2.3 2.2 2.5

Balances due from:Banks in Uganda 0.8 1.2 - O.1 0o5 1.8 8.3Banks in EastAfPrij.ca : .5 2.9 - -.5.

Banks Abroad 1.8 3.0 - - 0.8 2.1 1.7

Loans, Advances andBills

Discounted:Ildustry 6.0 5.8 7.0 7.2 8.0Agriculture 2.2 2.0 3.6 3.3 3.8Other .53 6.14 6.3 12.1 19.L

Total a' ±14.2 15.1 17.6 23.1 31.9 38.3 29.3

Investments inEast Africa 0.1 0.4 0.5 0.8 0.8 2.1 3.0

Other Assets :3.2 2.5 4.1 3.8 3.5 3.2 3.7

a/ Including total Bills Discounted. These are not distributed among theother ^a+egori-es.

Sources: Statistical Abstract for 1965,Ueanda Ouarterlv Dieest of Statis3tics. Mviarch 1967

Table 21: sANK OF UGANDA: ASSETS AND LIABILITIES AS AT MUEJ-u 30, 1967

LIABILITIES ASSETS

Shs. Shs.

Paid-up Capital 13,333,333 Foreign Exchange:

Notes in Circulation 279,8749480 Balances with Banks 5,852,337

Coin in Circulation 9,726,063 Treasury Bills 121,561,872

Deposits: Other Investments 53,338,960

Government 55o,843 Total External Assets 180,753,169

Bankers 23,550,768 Government Securities 88,131,460

Other 29,962,428 Other Investments. 60,000,000

Other Liabilities 16,419,202 E.A.C.B. Notes and Coin 244,100

Discounts and Advances 24,643,972

Other Assets 19,64h,416

Shs. 373,417,117 Shs. 373,417,117

fv- -D -I -IIT

Profit,'Loss Prvf t,1J'ssYear before-deducting Export after deducting

export tax Duty tax

A. Coffee Marketing Board

1961/62 - 1.0 - .4 - 1.41962/63 + 2.7 - 1.9 + 0.81963/64 + 5.7 - 6.6 _ 0.91964/65 _ .2 - 5.0 - 5.21965/66a/ + 6.4 - 3.4 + 3.0

Total +13.6 +17.3 - 3.7

13. Lint Marketing Board

1961/62 - .8 - 1.0 - 1.81962/63 - 1.3 - 1.9 - 3.21963/64 + 1.2 - 2.2 - 1.01964/65 - .0 - 2.4 - 2.41965/662/ - 3.0 - 1.6 - 4.6

Total - 3.9 - 9.1 -13.0

a/ Estimate.

Source: Ministry oi' Finance.

Table 19: CENTRAL GOVERNMENT DEVELOPMENT EXPENDITUREDURING FIRST FIVE-YEAR PLAN

(E1 mill ion )

Sector Allocation Plan Targets Actual Expenditure

1. Commodity Production & Tourism 7.8 8.5

Agriculture .5 5.6Tivestock 2.h 2.1Fisheries .1Forestr-y .r .2Tourism *3Tn-g.Industry .

2. Basic Economic Infrastructure 7.7 5.3

Roads 7.2 3.8Airpor'ts ., 1.3

Telecommunications .Surveys and MappingWater Development a/ a/

3. Social Services 10.0 13.6

Education 6.5 7.0Health 2.3 2.7Labor .1Community Development .4 1.3Information .7 .9Housing - 1.7

4. Security 3.4 5.1

5. Administration 2.3 2.3

6. Local Governments 5.8 4.9

Total 37.0 39.7

a/ Included under local governments.

Source: Background to the Budget, 1966-67.

Table 18: LOCAL GOVEFRET 1 REVENUE & EXPEWNDIT[JRE

(E million)

1960/61 1961/6'e, 1962/63 196 3/6a L964i/65 1965/66 1966/67 19'70/71(------------- Acttua]-l ,) (-------------- Estimate ------- -)

I. Revenue 7.8 8.1 11,.9 :13.2 15.1 17.3 18.1 25.CI

1. Taxes 3.7 3.5 '4.8 5.5 6.o 7.0 8.2 14.0

a) Income Taxes 2.6 2.LL 3.9 4.4 4.8 5.5 6.5 9.CIb) Otheir Taxes and Fees 1.1 1.1 0.9 1.1 1.2 1.5 1.7 5.CI

2. Transfers from CentralGveirnriment 2.8 3.3 5,.1 5.4 6.6 7.6 6.9 7.0

3. Miscellaneous Receipts 1.3 1.3 2.0 2.3 2.5 2.7 3.0 4.o

II. Current Expenditure 7.7 8.0 '10.6 :12.5 14.1 15.9 16.7 23.0

1. Wageis arnd Salaries 3.2 3.5 5.1 6.2 7.5 8.7 9.5 144.C

2. Subsidies 2.,7 2.6 1.7 3.4 3.6 4.0 b.0 5.0

3.' Otheir Current Spending 1.8 1.9 3.8 2.9 3.0 3.2 3.2 4.0

III. Current" i u us +0.,1 +0.1 +1.-3 +O.7 +1.0 +1.4 +1.4 +2.0

IV. Capital Expenditure 1.1 .7 .8 1.3 1.8 1.5 1.8 3.0

V. Overall Deficit/Surplus -1.0 ... 6 .6 -. 8 -. 1 - .4 -1.0

Soulrces: Ministry of Planningt anci Mission estimates.

Table 17: FUNCTIONAL ANALYSIS OF CENTRAL GOVERNMENT EXPENDITURE

(f, million)

1960/61 1961/62 1962/63 1963/64 15964/65 1965/66 1566/67(…---------- Actual ---------- ) Estimate

1., General Admin:Lstratiorn 2.0 1.8 1.9 2.1 2.7 2c 2.9

2. Security 3.14 3.4 3.51 5.3 7.5 11.0 10.1

a) Defense .1 .0 .5, 1.5 2.5' .2 4. 7b) Policea andl Justice 3.3 3.4 3.1L 3.8 5.C i3 5.-1

3. Economic Services 3.14 3.5 14.3 1.6 6.14 6-9 9.0

a) Agricilturea/ 2.0 2.2 3.1 3.3 3.7 5 5b) Other 1.14 1.3 1.2 1.3 2.7 2.3 3.5

4., Community Service,s 2.8 2.7 1.5, 1.2 1.E 2.1 3.'5

a) Roads 2.3 2.2 1., 1.0 1.5 3.0b O) 0therL/ .5 .5 c .2 .3 .3 *5

5., Socia:L Service3s 9.1 10.0 7.3 El.6 11.6 1-L. 12.0

a') Education 5.4 6.2 3.95 14.9 6^9 61 6.o'b) Health 3.2 '3-3' 2.l, 2.6 3.2 3.6c) Other .5 .5 1.0 1.1 1.' 5I 2.1

6., Unallocab:Le 5.3 8.5 13.1 13.6 16.c 17. 16. c,

Total Expenditure 26.0 29.9 32. C0 35 .4 46. c; 522.3 54.0

a/ Iriclucling forestry, hunting and fishing.;/ Fire protection, water supply, sanitation, etc.

Souxrce: Ministry of Finance and Ministry of Planning.

Table 16: CENTRAL (OVERZNN_EN CAPITAL EXPENIDITURE

(L rnill:Lon)

1960/61. 1961/62 1962/63 1L963/64 1964/65 1965/66 1966/67. ...( --.-- Actua:L …) Prelim. Estimate

1. General Administration .8 .6 .4 .3 .9 1.1 .9

2. Econcmic Services .5 .6 .4 1.0 1.8 2.3 3.0

a) Agriculture .2 .2 .2 .7 .7 1.1 1.7b) COther .3 ,h .2 .3 1.1 1.2' 1.3

3. Community Services 1.5 1., .4 .1 . .7 1.8

a) Roads 1.2 1.1 .4 .1 .4 .7 1.8b) Cither .3 3 .0 - - -

. Social Services 1.2 1.,1 1.3 2.1 3.1 2.0 1.8

a) Education .1 .0 .9 1.3 2.0 1.1 .6b) H:ealth 1.0 .,9 .3 .3 . .7 1.1c) Other .1 .2 .1 .5 .7 .2 .1

5. Unallocable .4 .,4 .4 .4 1.0 .4 .5

Total Capital. Expenditure 4.4 4.1 2.9 3.9 7.2 6.5 8.o

Source: Ministry of Finance and Ministry of, Planning.

Table L5: CENTRAL GOVERNMENT REVENUE AND EXPENDITURE(12 million)

… - 19M7l1 1961/62 1962/E,3 1963/64 19E7g)59- 190912999 1-96T 67 -1 ]70/;71(- --- -------- Actual (-----Estima-be-_-

I. Revenue 21.4 23.2 29.5 34.0 41.5 141.1 47.4 67.0

1. Taxes 16.0 16.0 20.1- 25.3 31. 8 30.0 36.2 52.0a) ImpPOrt duties 6.2 6.14 9. 0 81. 9 11. 5; L2.8 1l4.0b,) Ex-cise taxes 2.5 2.8 3.1 3.8 4.9 6.3 7.9c ) EXFport du-ties 2.6 1.8 3.3 7.9 9.7 5.0 '.8d) Income taxes 3.5 3.6 3.7 3.7 14.3 4.6 6.7e:) Other taxIBs & fees 1.2 1.14 1.0 1.0 1.,4 1.3 1.8

2. YisceLlaneous Receipts,/ 5.4 7.2 9.4 8.7.7 7 11.1 1:1.2 15.0

II. CLrrernt E&nenditine 21.6 25.8 29.1 31.5 39.3 145.9 V46.o 62.0

1. Governnent Consum1?tion 13.9 15.1h 15.7 17'.2 21.1 27.0 271.4 140.0a) Wages & salaries 9.0 10.3 9.1 9.7 11.7 :L3.3 13.9 20.2b) Ot-her goods & services 14.9 5.1 6.6 7'.5 9.7 1L3.7 1:3.5 19.83

2., Transfers 6.14 9.0 11.2 12.1 14.2 -L14.4 15. 1 16.5a,) Pensions 1.0 2.9 3.6 3 3.8 2.'b) Educa-tional g:rants 1.8 1.5 1.2 1.6 1. 95 2.0 2.3 4.5c ) FICSO O.8 1.2 1.3 1.5 2. C) 2.0 '2.1 2. 5d) Local government 2.8 3.3 5.1 5.14 6.6 D .8 6.9 7.0

3., IntereDst 0.2 0.2 0.° 2 0. 3 0.°4 o.8 :1.1 2.5

14. MisceLlaneous 1.1 1.2 2.0 1.-° 3.3 3.7 2 .4 3.0

III. Cu1rrernt S11rpl1s or Deficit -0.2 -2.6 +0. 4 +2.5 +2. 2 -*4.8 +L. L4 +5.(

IV. Capital Expenditures/ 14.4 14.1 2.9 3.9 7.2 6.4 8.0 16.0

V. OVeraLl Deficit --4.6 -6.7 -2. I; -1.3 -5.0 -11.2 -6.6 -116.Financed through: O1., Foreign Aid 1.14 3.6 2.C) 2.3 1.7 2.9 5.7 7.02. *Domes-tic Sources=W 3.2 3,.1 C. -10 3.3 8.3 0.9 4.OJ

a/ Mainly interest., dividends and sales of goods and services. b/ i4ainly changes in cash balances & domestic borrowing.c1 Assiymin- T 'hat, s,irplus oc th,e snci.al secicit- 3 'stzrl i3 Tar e1y inVE-sted in Government bonds. d/Rxed capital formation,.Source: ,si"inist,ry o; 7inance anri 'inis brj- cf P?,annirn.

Table 1: EMPLOYMENT IN VARIOUS SIZED ESTAELISHMENTS

lo1 - 99 100 - 499 500 & MoreIndustry Employees Employees Employees Total

1963 1964 1963 1964 1963 1964 1963 1964

Meat, Fish, )Grain, Baking.)Conf. ) 12% 18% 25% 27% 63% 55% 2,550 2,947

Misc. Food, )Sugr,Trohar,rv.)

Beverages ) 69% 69% 31% 31% --- ___ 1,459 1,59h

Textiles, Furn 12% 9% 88% 91% - --- 857 879

Sawn Plywood 15% 19% 41% 4% 81% 77% 3,250 3,619

Misc. Wood 43% 44% 57% 56% _ _ 3,106 3,523

Furniture 64% 63% 36% 37% --- --- 1,005 1,013

Printing 100% 100% --- --- --- --- 159 189

Rubber, Chem. )Oils,Fats,Soap) 39% L,al 61P 8-- 712 1,9

Clay, Cement 2 370%v 71 --- 4 10 1,676

Met. ind. aEng. Repairs ) 56% 64% 44% 36% --- _ 3,257 3,479

37% 39% 41% 37% 22% 24% 19,220 20,838

Estimated in Establishments Employing 1 - 9 persons. 8,079 7,537

Source: Census of Industrial Production and Enumeration of Employees.

Table 13: INDUSTRIAL PRODUCTION (VALUE ADDED)

(f million)

1963a/ 1961Ž1 19662/ 1971E/

Sugar milling and tobacco 3.87 2.86 2.91 4.45

Other foodstuffs 0.35 0.64 0.68 1.41

Beverages 0.93 0.99 1.11 1.60

Textiles, wearing apparel, footwearleather, rulbber 1.78 2.60 3.72 7.75

1';%',,rniture w.ood, cOrk &1 paper products 0.6Al 0.73 0.73 1.31

fl4.- I. - -A 11A 1 I A A 4A.A i LLU.± OU.LiCL 'J.)j) 4..)U \J.V

ni_ .A _ .F n 7C r- rn r'I. ' Anhlie,IIiA.als adiI'L chekFLiUcal produLucts v .4,Lv U. ,4 v. L .46

No-et'icmnea prdut 0.76 0.88P 1.3622

BOase mi-eta'l ind-ustrie1s; a-nd ea

manufacturers 2.01 4.28 !-57 6.98

Total Manufacturing 11.12 13.90 16.01 28.80

Mining and quarrying 3.03 5.19 4.91 5.24

Note: Added value of copper split betwqeen Mining and Metals 84 percentto 16 percent. (This gives totals greater than individualsectors which has been put down to under counting.)

a/ Recently prepared by Statistical Department at current prices with adjustmentmade in Mining-Quarrying Sector.

b/ Calculated from gross output at current prices.

c/ Mission estimate at 1964 prices.

Table 12: RECORDED PRODUCTION OF TIMBER,1955 AND 1960/61 - 1964/65

(Thousand cu. ft.)

Conifers Mvule Mahogany Muhimbi Others Total

1955 158 406 793 147 1,735 3,239

1960 Jan.-June 24 60 379 14 1,080 1,557

1960/61 30 520 829 36 2,407 3,822

1961/62 91 437 862 45 2,262 3,697

1962/63 91 350 712 39 2,343 3,535

1963/64 2b0 189 659 101 2,413 3,602

1964/65 187 522 841 1 2,565 4,116

Source: Statistical Abstracts.

Talle 11: VOLUME ANJD VALUE OF FISTH CALTC-HT, 1960o66

Volume ValueThousand Ton E million

196r 6~2.1

1961 62.32.

1962 65, 2.

1963 68.82.196 ((n -Is ioa )8.

'oI, AoA ),0

1016-6- (Provi Sionalf N. AnxI'40. 'W

.5-.. '-"-' I . ~J ~t4.¼J 4.&1-''2*-- -4.

Table 10: NUMBEI?. OF LIVESTOCK ON AFRICAN FARMS,1955 AND 1960-65

(Thousands)

Cattle Goats Sheep Pips Donkeys

3955 3,094 2,514 1,093 12

1960 3,618 2,592 865 16

1961 3,383 2,533 832 16

1.962 3,465 2,340 760 15

1.963 3,464 1,991 861 19 16

1.964 3,h97 2,014 755 32 17

1.965 3,627 1,998 791 37 17

Source: Statistical Abstracts.

Table 9: DISTRIBUTION OF ACREAGE UNDER CROPS, AFRICAN GROWERS,1955 AND 196C0-65

(Thousand Acres)

1955 1960 1961 1962 1963 1964 1965

Arabica Coffee 25 36 41 h1 h2 43 O4

Robusta Coffee 291 h99 538 561 588 594 648

Cotton 1,586 1,516 2,072 1i804 2,01h 2,138 2,2L1

Tobacco 7 11 9 10 14 11 19

PThnt2ins 1 41i5 1 5146 1521 1 603 1;743 1I84h 1;:045

Maize 379 349 1,1)J,22 39X' 1h78 703

Milept 1,716 1;846 2j002 2jO34 2038 2082 2;029

Groundnuts h25 428 556 616 589 627 621

Beans 6L1 - 583 721 677 681 789 1,023

S-wY,e e t A Pt a o es 580q 5990 705~ 627 586 70Q 7831

Cassava 556 606 78h 653 706 593 888

Source: Statistical Abstracts.

Table 8: VALUE OF MAIN CASH CROPS TO AFRICAN-GROWERSI1Q55 AAM I 04n-A65

Bigisu RobustaArabica Coffee Cotton Tobacco

2,016 14,054 11, 584 180

19OU 1,037 12,458 10,51 169

1961 972 8,770 12,575 193

1962 1,962- 11,79M..' 6,106 292

1963 1,066 14,251_/ 12,432 339

1964 2,376_/ 19,074 10,106 583

1965 1,444 19,793 14,709 656

a/ Covers all coffee.

b/ Includes arabica valued at E649.00 not grown under theBigisu Coffee scheme.

Source: Statistical Abstracts.

Table 7: PUBLIC SECTOR SAVING AND INVESTMENT

(E million)

1965/66 1966/67 1970/71

I. Saving. total - 2.5 + 7.6 +15.6

1- flovPrnmPnt - Lt-7 + 2_ + 7.0

2~ MV~1-.ncp P'Rtn ri - -nn

31 ini nl G.ovrnw _+.v qv.+.Pma/ - + + 2.0

if TT- A-ne Boars - 7 .07 .£. Uganda~ Elc,^t or 1.+ 20+3.Uganda Ai veli;.,,ert + +

TT. Investment, toal123 6.2.

1.. ± vernylient u.u F . ) 9 .0

2. Uganda Electricity Board 1.1 .0 i.l

3. Uganda Development Corporation 1.9 2.5 3.0

4. EACSO 1.3 3.5 2.0

Ill. Saving Deficit (-) Surplus (+), total -14.8 - 9.0 - 9.5

1. Government -12.7 - 7.0 -12.0

2. Marketing Boards - 1.6 .0 .0

3. Social Security System - - + 2.0

4. Uganda Electricity Board + .5 + 1.2 + 2.4

5. Uganda Development Corporation - 1.2 - 1.8 - 2.2

6. EACSO + .2 - 1.4 + .3

a/ Net of Government contributions.

Source: Mission estimate.