• Aid flows

Aid flows

This paper provides an overview of the broad economic strategies Uganda has implemented since independence in 1962. The authors conclude that the Ugandan experience demonstrates the vital importance of macroeconomic stability in promoting investments, factor productivity, domestic revenue and exports. The authors argue that there are also challenges in sustaining pro-poor growth that require shifting investment incentives in favour of the production of tradable goods - particularly those that have the greatest potential of increasing the participation of poor people as was demonstrated by Uganda’s coffee sector during the mid 1990s. A balance between macroeconomic stability and public financing towards achieving the MDGs is also crucial.

The authors argue that given Uganda’s dependence on aid in financing its budget deficit, it is critical that a dynamic balance between macroeconomic objectives and overall development objectives are pursued. This implies that in targeting low inflation and stable prices, it is vital that a distinction is drawn between short- and long-term objectives and impacts of macroeconomic policies. The complex relationship between monetary stances, short-term fiscal objectives and current modalities of deficit financing necessitate a firm focus on fiscal efficiency and aid effectiveness as pathways for lowering the cost of credit for financing the participation of poor people in growth.

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