Article Outline
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Government Role in the Economy
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In 1987 Museveni adopted reforms designed to reduce the size of the state and privatize many economic activities, and in return Uganda has received large loans from the World Bank and the International Monetary Fund (IMF). Under the reforms the government eliminated state regulations over the exchange rate and state control over prices for export crops. More importantly, the government succeeded in diversifying its foreign exchange base by steadily reducing its reliance on coffee exports. Excellent macroeconomic management enabled the government to reduce inflation from 200 percent annually in the late 1980s to an annual average of 8 percent in the period 2000–2005.
In 2003, 69 percent of Ugandan workers were engaged in agriculture, 8 percent in industry, and 23 percent in services. Only a small fraction of the workforce is engaged in paid employment, and the largest wage employer is the government. Since the 1970s wages have failed to keep up with the cost of living, forcing those receiving salaries to supplement their income through farming or business. In addition, inadequate wages led to widespread corruption in most government services.
Agriculture (including forestry and fishing) makes the largest contribution to the GDP, amounting to 33 percent in 2005. Almost all farmers work small plots, primarily with rustic tools, and subsist mainly on their own food crops, notably bananas, cassava, sweet potatoes, and millet. They also grow crops for sale, both for local consumption and export. Historically, almost all foreign exchange was earned by the sale of cotton on the world market. Later, coffee surpassed cotton as the most important foreign exchange earner. The economy still is heavily dependent on world coffee prices, but the government has successfully promoted a more diversified foreign exchange basis. Besides coffee and cotton, important export crops include tea, tobacco, cocoa, corn, beans, cut flowers, sesame, and vanilla. Livestock (particularly cattle) and animal products are also important export earners.
The thickest stands of timber are in the center and west of the country. In 2005 production of roundwood timber amounted to 40 million cu m (1,412 million cu ft). Much of the wood cut in Uganda is burned for fuel. Nile perch and tilapia are the most important fish caught in Ugandan lakes. The total catch was 377,300 metric tons in 2004. A growing export industry based on fish processing plants developed in the 1990s.
In 2005 services produced 43 percent of GDP. The largest contributor was government services, followed by retail and wholesale trade, construction, transportation and communications, and the hotel and restaurant sectors. The tourist industry, which collapsed during the Idi Amin regime, recovered in the 1990s and has become very important to the economy. Most tourists came from Western Europe, particularly Britain, and the United States. Favorite destinations for tourists are Jinja, where the Nile exits Lake Victoria, Queen Elizabeth National Park in the southwest, Kabalega National Park in the north, and the Kasubi Tombs in Kampala.
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