RESTRICTED
WORLD TRADE WT/TPR/G/4
30June1995
ORGANIZATION(95-1754)
Original: English
TRADE POLICY REVIEW
UGANDA
Report bytheGovernment
Inpursuance oftheAgreement establishing theTrade Policy Review Mechanism
(Annex 3oftheMarrakesh Agreement Establishing theWorld Trade Organization),
theinitial policy statement submitted bytheGovernment ofUganda isattached.
Note: Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onUganda.Uganda WT/TPR/G/4
Page iii
TABLE OFCONTENTS
Page
OVERVIEW 1
A. TRADE POLICIES AND PRACTICES 3
1. GENERAL TRADE POLICY OBJECTIVES 3
2. SECTORAL TRADE POLICY OBJECTIVES 4
3. DESCRIPTION OFTHE IMPORT AND EXPORT SYSTEM 5
4. THE TRADE POLICY FRAMEWORK 5
5. IMPLEMENTATION OFTRADE POLICIES 6
B. RELEVANT BACKGROUND AGAINST WHICH THE ASSESSMENT OFTRADE
POLICIES WILL BECARRIED OUT: WIDER ECONOMIC AND
DEVELOPMENTAL NEEDS, EXTERNAL ENVIRONMENT 8
1. WIDER ECONOMIC AND DEVELOPMENT NEEDS, POLICIES AND
OBJECTIVES 8
2. THE EXTERNAL ECONOMIC ENVIRONMENT 10
3. PROBLEMS INEXTERNAL MARKETS 16Uganda WT/TPR/G/4
Page 1
OVERVIEW
Uganda which became independent inOctober 1962 isanEastAfrican country whose post-
independent history hasbeencharacterised bycivilstrife andpolitical instability. However, withthe
coming intopower oftheruling National Resistance Movement Government, theruleoflaw,peace
andstability havebeenrestored.
About 90percentofthe17million population ofUganda liveinruralareas where theydepend
directly onagricultural andrelated activities forlivelihood. Atthemoment thecountry relies heavily
oncoffee andafewprimary commodities foritsexports. Inorder towiden (expand) theexport base,
theGovernment ofUganda hasembarked onanambitious Export Diversification Programme topromote
thenon-traditional crops.
Since May1987, theGovernment ofUganda hasbeenpursuing boldmacro-economic policies
andimplementing anEconomic Recovery Programme aimed atachieving economic stabilization in
theshort-term andsustained growth inthemedium tolongterm.
Asaresult ofthese measures, Uganda 'seconomy registered anaverage annual growth of
5.7percentforthelastsixyears. Overthisperiod, percapita incomes roseby2.8percentperannum.
However average percapita stillremains verylowatUS$170.
TheEconomic Recovery Programme (ERP) aimed atthree major objectives:
(a) Restoring economic stability byreducing inflation through fiscal management and
monetary performance;
(b) Accelerating growth inproduction forexport through priceliberalization, deregulation
ofeconomic activity andencouraging saving andinvestment;
(c) Expanding social andeconomic infrastructure toincrease productivity, reduce poverty
andimprove standards ofliving ofthepopulace.
Uganda 'seconomy wasdevastated bypolitical andcivilconflict extending overtwodecades
between 1966-1985. When theNRM came topower in1986, itembarked uponstructural adjustment
programmes aimed atreviving theeconomy asquickly aspossible.
DuetoGovernment 'sdetermination inpursuing sound macro-economic policies andthe
implementation ofstructural reforms, inflation hasbeen brought under control, there hasbeen
improvement inthebudgetary deficit andasubstantial riseinprivate transfers totheeconomy. Uganda
hasmadegoodprogressineconomicrecoveryasGovernmentmovesfromrehabilitationtodevelopment.
TheGovernment hasmade great efforts toprovide anattractive andappropriate environment
forforeigndirectinvestmentthroughrealisticpolicies.Government'sactiontoreturnover2,500foreign
expropriated properties hassparked offmajor rehabilitation investments witharesultant expansion
ofemployment andincome opportunities. Thismove hasrekindled business enthusiasm andrestored
confidence andsecurity totheaspiring investors.
Efforts havealsobeenmade tobroaden hecountry 'staxbasewithout discouraging savings
andinvestment. Inorder tostreamline andenhance taxcollection ataxbody known astheUgandaWT/TPR/G/4
Page 2Trade Policy Review
Revenue Authority (URA) wasestablished in1991 andsince itsinception, ithasmade remarkable
success inrevenue collection.
Priority objectives inthetradesector havefocused onaplantoregain Uganda 'sprevious peak
export levels andsetting thestage forenhancing export volumes andearnings withaviewtoachieve
aselfsustaining export sector. Tothiseffect, measures thathavebeenadopted include therehabilitation
ofthetraditionalexportsectorandthepromotion,developmentandexpansionofnon-traditionalproducts;
promotion ofsustainable industrialisation; promotion andfacilitation oftheefficient marketing of
agricultural produce; adoption ofamarket-determined exchange ratesystem; trade andmarketing
liberalisationincludingremovaloflicensingandpricecontrols.Othermeasuresaretariffandtaxreforms
andtherehabilitation oftheessential infrastructure.
Although theabove measures haveledtosome improvement intheperformance oftheexport
sector, Uganda stillhasanarrow export base. Thegovernment hastherefore, mounted avigorous
export andinvestment promotion drivetoexpand theexport basethrough diversification andpenetrating
intonewmarkets.
While themarket improvement intheeconomy willcertainly enhance thesuccess ofthiseffort,
amore liberalized andopenmultilateral trading system resulting fromtheUruguay Round Agreements
willnodoubt contribute agreat dealtotheattainment ofUganda 'sobjectives. Itisforthisreason
thatUganda fulfilled allthenecessary conditions tobecome anoriginal member oftheWTO.Uganda WT/TPR/G/4
Page 3
A. TRADE POLICIES AND PRACTICES
1. GENERAL TRADE POLICY OBJECTIVES
WiththeadventoftheNationalResistanceMovementGovernmentinJanuary1986,anEconomic
Recovery Programme wasembarked uponin1987. Following theadoption oftheERPandthevarious
structural Adjustment Programmes (SAPS) under it,tradepolicy hasbeendirected towards thefollowing
general objectives:
- Torestore incentives inorder toencourage growth, investment, employment and
exports;
- topromote anddiversify trade withparticular emphasis onexport promotion;
- toremove bureaucratic constraints anddivest from ailing public enterprises soasto
enhance sustainable economic growth anddevelopment through theprivate sector; and
- toliberalize trade atalllevels.
Inlinewiththeabove objectives, promotion ofexports isattheforefrontthrough therestoration
ofthecompetitivenessofUganda'sexportcommoditiesandincreasingtheiroutput.Exportdiversification
isbeing encouraged inorder tomove away fromthemono-crop dependence oncoffee, andtoexpand
thecountry 'sexport base.
TheGovernment 'seconomic development policy focuses onexport diversification andgrowth
based onthree following objectives:
- Revival oftraditional exports ofcoffee, cotton, tea&tobacco.
- Increase inproduction ofemergent exports ofmaize, beans, simsim, fishproducts and
hides andskins.
- Identificationandpromotionofnewnon-traditionalagriculturalcommoditiesparticularly
inthesericultural, horticultural andfloricultural sectors.
Inorder toallow market mechanism todetermine theallocation ofresources, thepremium
between theofficial andfreemarket exchange rateswasreduced; therequirement offoreign exchange
surrender wasabolished withtheconsequent legalization oftheforex bureau system. Inaddition, price
controls wereabolished andthebureaucratic import andexport licensing system wasreplaced bythe
non-goods specific andnon-quantity specific export andimport certification system.
Byandlarge, therefore, Uganda 'stradepolicy envisages aprogramme ofliberalization within
thewider context ofstructural adjustment. Uganda iscommitted toapolicy ofprogressive liberalization
ofitstrade andeconomy.
Furthermore, thepolicy outlook hasbeen reflected intheremoval ofsupport forandthe
privatization ofpublic enterprises andthedismantling ofthemonopoly ofpublic sector concerns
especially themarketing boards.WT/TPR/G/4
Page 4Trade Policy Review
2. SECTORAL TRADE POLICY OBJECTIVES
(a) Agriculture
Agriculture isthebackbone ofUganda 'seconomy. Itisdominated bysmall holders each
cultivating anaverage of2.2hectares. Thegrowth oftheagricultural sector greatly determines the
performanceoftheUgandaneconomy.Agricultureaccountsfor50percentofGDPandover90percent
ofmerchandiseexports.Besidesprovidingemploymenttoabout80percentofthepopulation,agriculture
remains theeconomic baseformany ofthemanufacturing andservice industries. Indeed Uganda 's
comparative advantage ininternational markets relies onagricultural exports. Itis,therefore,
Government 'sstrategy tofacilitate production through theprovision ofessential infrastructure. Policies
are,therefore, geared towards thefollowing broad objectives:
- Toimprove, expand anddiversify agricultural production inorder toensure food
self-sufficiency aswellasstrengthening theforeign exchange earning capability.
- Toincrease incentives tofarmers andthusimprove thequality oflifeandthe
environment.
- Tocreate employment.
Inorder tofulfiltheabove objectives, pricecontrols andparastatal marketing monopolies were
abolished. Tariffs onagricultural inputs generally carry verylowdutyrates.
(b) Industry
ThegoaloftheGovernment 'sindustrialization policy istoestablish astrong, viable, sustainable
andinternationally competitive industrial sector. Theobjectives ofUganda 'sindustrial policy areto
strengthen functional linkages between agriculture andindustry, andtoincrease thedevelopment and
exploitationofnaturalresourceswithaviewtoachievingefficiency,competitiveness,higherproductivity
andselfsustaining growth. ItisGovernment 'spolicy topromote export-oriented industries inorder
towiden theexport base. Government alsoaims attheestablishment ofsmall andmedium scale
industries invarious partsofthecountry toachieve balanced regional development. Industry accounts
for12percentofGDP ofwhich 5percentismanufacturing. Manufacturing accounts for1percent
ofexports.
(c) Tourism
Upto1970, tourism wasafastgrowing industry inUganda anditwasthethirdlargest foreign
exchange earner. Likeanyother sector, tourism wasadversely affected bythepolitical turmoil that
characterised thecountry inthe1970s andearly1980s. ItisGovernment policy toconserve Uganda 's
wildlife heritage aswellastheenvironment forposterity. Government aimsatrestoring theformer
tourism glory ofUganda soastomaximize foreign exchange earnings from thesector. The
Government 'sdecision toabolish visarequirements for50countries, itslaunching ofatourism master
planinmid-1993 coupled withtheliberalization policy, peace andstability, hasattracted apositive
response frominvestors. Donor support hascontinued tobesignificant inwildlife conservation sector
where thewildlife population hasconsiderably increased. TheUganda Tourist Board hasbeencreated
tospearhead thedevelopment ofthetourist industry inUganda.Uganda WT/TPR/G/4
Page 5
3. DESCRIPTION OFTHE IMPORT AND EXPORT SYSTEM
(a) Imports
InlinewiththeGovernment trade liberalization policy, import control measures havebeen
dismantled. Withtheabolition ofimport licensing in1991, importers areonlyrequired tofillanimport
registration form. Onthebasisofthecompleted form, theimporter isissued withanimport certificate.
Thecertificate hasnoquantity, value orsource limitation. Itisvalidforsixmonths andisrenewable.
Afewproducts areonanegative listforreasons ofsecurity, public morality, health, plant
lifeandtheprotection ofinfant industries. Allimports valued atUS$5,000 andabove aresubject to
pre-shipment inspection.
(b) Exports
Export procedures aresimilar totheimport system outlined above withtheexport licenses
being replaced bytheexport certificates.
Exportation ofafewitems isrestricted andrequires prior authorization duetoreason of
environmental andwildlife protection.
4. THE TRADE POLICY FRAMEWORK
(a) Domestic lawsandregulations governing theapplication oftrade policies
Theprincipal lawregulating tradeistheExternal Trade Actof1964. Other lawsandregulations
governing trade policies are:
- TheFinance Statute, 1993.
- Customs andExcise Management Act,1970.
- EastAfrican Customs Regulations.
- Customs Tariff Act,1970.
- Finance Statute, 1994.
Theother trade related legislation inUganda include:
- TheInvestment Code, 1991.
- ThePatents Statute, 1991.
- TheTrade Marks Act,1953.
- TheCopyright Act,1964.
- TheUganda National Bureau ofStandards Act,1983.
- TheFood andDrug Act,1964.
- ThePublic Health Act.
- TheUganda Export Promotion Council Act1983.WT/TPR/G/4
Page 6Trade Policy Review
(b) Process oftrade policy formulation andreview
Trade policy formulation andreview inUganda istheresponsibility oftheExecutive armof
theGovernment. Theresponsible Ministry initiates thepolicy andtheresponsible Minister presents
theproposed policy measures toCabinet. Iftheproposal isapproved byCabinet, adraftbillisprepared
bytheAttorney General 'sChambers, approved byCabinet, published intheofficial Gazette andtabled
beforeParliamentbytheMinisterresponsible.WhenthebillispassedbyParliamentintolaw,itacquires
thestatus ofaStatute. TheStatute becomes lawwhen ithasbeenassented tobythePresident.
(c) Multilateral, bilateral, andregional trading arrangements, theirscope, duration andgoals
Uganda 'sexternal tradepolicies aredesigned tocreate anenabling environment forinternational
economic integration inorder toensure asufficiently large market forhercommodities aswellasthe
development ofherindustries.
Inpursuit ofthatobjective, Uganda hasentered intobilateral, multilateral, regional and
preferential trade arrangements aslisted below:
- Common Market forEastern andSouthern Africa (COMESA).
- EU-ACP Lomé Convention.
- GATT/WTO.
- UNCTAD.
Ugandahasoperativebilateraltradingagreementswithmanycountries.Undertheseagreements,
Uganda anditspartners accord eachother m.f.n treatment inallmatters withrespect totheirmutual
trade relations.
5. IMPLEMENTATION OFTRADE POLICIES
(a) Trade policy measures andtheirimplementation during theperiod under review
* Tariffs
Uganda 'stariff structure hasbeenadjusted withmost dutyratesranging from 0percentto
30percent. Forexample printed books andnewspapers theircustoms dutyis0percentwhile customs
dutyoncommon salt,tyres andwindow glass is10%. Detergents andpaints haveacustoms duty
of30percent.
Allimports intothecountry aresubjected tonormal customs import regime without exception.
Allimports enter Uganda atm.f.n ratesexcept imports thatreceive preferential tariff treatment under
COMESA trading arrangements. However, dutyfreeprovisions, concessions orexemptions aregranted
bytheMinister ofFinance andEconomic Planning.
* Levies andother charges
Sales taxischarged onimports andexcise dutyischarged onimported luxurious items.Uganda WT/TPR/G/4
Page 7
* Customs valuation
Customs valuation ispegged totheBrussels Definition ofValue (BDV) butarrangements are
underway tochange totheGATT\WTO system.
* Rules ofOrigin
Currently, Uganda operates theCOMESA andACP/EU rules oforigin.
(b) Programmes inexistence fortrade liberalization, including those agreed inthecontext of
structural adjustment and/or debtnegotiations
Ugandastarteditsreconstructionprogrammein1981.ThesecondandthirdReconstructionProgrammes
followed in1983 and1984-85 respectively. During theperiod 1981-85, Uganda wascharacterized
byacivilwarsituation which eroded thewould begains fromthethree reconstruction programmes.
Withtheadvent oftheNational Resistance Movement (NRM) Government inJanuary, 1986,
anewEconomic Recovery Programme came intobeing in1987. Thiswasfollowed byasecond
Economic Recovery Programme in1989, thefirstStructural Adjustment Programme, 1991 andthe
second Structural Adjustment Programme, 1994, respectively.
Trade liberalization inUganda waspreceded byastabilization measure through aseries of
currency devaluations, themostnotable onehaving taken placeinMay, 1987, when theUganda Shilling
wasdevalued from shs.1,450/= to6,000/= (approximately 75percent), demonetized byafactor
of100andtaxed by30percent. Thus thenewexchange ratebecame U.shs.60/= perU.S.dollar.
Since thattime, theshilling depreciated toabove shs.1,250/= inApril 1993, andsince thenithas
beenappreciating toacurrent levelofabout shs.920/= perUS$.
Concurrently withtheevolution oftheexchange andpayment regime towards amarket based
system, wastheabolition oftheimport andexport licensing. InSeptember, 1990, anexport certificate
system wasintroduced. Theholder oftheCertificate isallowed toexport anygoods except those
specified inashort negative list.1
InNovember 1991, animport certificate system similar totheoneforexports wasintroduced.
Import controls asameans ofprotection havelargely beendismantled infavour oftariff measures.
(c) Prospective changes intradepolicies andpractices totheextent thatthese changes arealready
announced orcanbemade known
ItisGovernment Policy tostrengthen theUganda Export Promotion Council sothatitmay
provide thenecessary support services toexporters onasustainable basis. TheGovernment isalso
considering theimprovement oftheexport credit guarantee scheme runbytheBank ofUganda, so
thatitcanattract thefullparticipation ofcommercial banks.
TheGovernmentiscommittedtoprovidingfurtherincentivesforexportproductionbyimproving
exporters 'access toworking capital. They include among others, aDevelopment Finance Fund and
Export Refinance Fund. TheGovernment hascommissioned astudy ontheexport processing zones
andapreliminary report isout.
1Thenegative listincludes: waste andscrap offerrous castiron; wood charcoal; round woods;
coffee husks; game trophies andunprocessed fresh fish.WT/TPR/G/4
Page 8Trade Policy Review
B. RELEVANT BACKGROUND AGAINST WHICH THE ASSESSMENT OFTRADE
POLICIESWILLBECARRIEDOUT:WIDERECONOMICANDDEVELOPMENTAL
NEEDS, EXTERNAL ENVIRONMENT
1. WIDER ECONOMIC AND DEVELOPMENTAL NEEDS, POLICIES AND OBJECTIVES
Asindicated inA(1), Uganda hassince 1987 embarked upon twoEconomic Recovery
Programmes andtwoStructural Adjustment Programmes inanattempt toreverse thedeclining trends
intheeconomy andachieve asustainable rateofeconomic growth andequilibrium inexternal payments.
Thebroad objectives oftheprogrammes were:
(a) Torehabilitate theeconomic, institutional andsocial infrastructure soastosupport
theproductive base;
(b) torestore monetary andfiscal discipline;
(c) enhance expenditure control;
(d) topromote foreign investment anddomestic savings; and
(e) topromoteexportsandincreaseforeignexchangeearningcapabilities,throughincentive
schemes.
Anumber ofpolicy measures havebeenimplemented toachieve these objectives. Among
them are:
* Exchange Rate
TheUganda shilling wasdevalued instages. During theperiod 1987-1990 efforts weremade
toachieve amarket determined exchange rate. Thelegalization oftheparallel market forforeign
exchange inJuly1990gaverisetotheForex Bureau market. InJanuary 1992, anauction system for
theofficial foreign exchange wasinstituted withtheobjective offurther liberalization oftheexchange
andpayments regime while permitting market determination oftheshilling exchange rate.InNovember
1993,aninter-bankforeignexchangemarketsystemwasintroduced.Underthissystem,therequirement
ofsurrenderingcoffeeexportreceiptstotheCentralBankwasabolishedandtheweeklyforeignexchange
auction ofdonor resources wasabolished.
Similarly, thedaily foreign exchange market attheBank ofUganda wasstopped andthe
requirement forCommercial banks tosurrender theirexcess invisible receipts totheCentral Bank was
eliminated.
Asaresult ofthose measures, foreign exchange iseasily available atthebureaux forthe
importation ofgoods, travel, education, etc.Between July1993andJune1994, forinstance, thevolume
ofgross purchases bybureaux increased from US$33 million permonth toUS$43.356 million.Uganda WT/TPR/G/4
Page 9
* Export incentive
Exporters arenolonger required tosurrender theforeign exchange earned fromtheirexports
totheBank ofUganda. Incentives toproduction include theabolition in1990, ofthemonopoly of
marketing boards topurchase locally andtoexport which hasculminated inthederegulation ofproducer
prices. Asaresult, farmers havebeenabletogethigher prices fortheirproduce inthedomestic
economy andpayment hasbeenprompt. Inaddition, dutydrawbacks onmaterials andinputs arein
place while there iscoffee zerorating ofexport tax.
* Revenue mobilization
Inorder toimprove revenue collection, anewtaxbodyknown astheUganda Revenue Authority
(URA) hasbeenestablished andthere isalready remarkable success inrevenue collection since its
inception inSeptember, 1991. Monthly revenue collections havealmost trebled from lessthanshs.
12billion toover30billion. URA facilitates thebusiness community through itsquick andefficient
handling ofexports andimports.
* Promotion offoreign investment
Foreign investment hasbeenstrongly promoted tocomplement thelowlevelofdomestic saving.
Since itsinception inJuly, 1991, theUganda Investment Authority, which isaone-stop-centre for
anyaspiring investor hasregistered commendable success. Inaneffort toattract foreign investment,
theUganda Investment Authority offers incentives which include:
- Taxexemption onimport dutyandsalestaxonimported plant, machinery, vehicles
andequipment.
- Firstarrival privileges -import taxfreevehicle andallpersonal effects enterthecountry
taxfree.
- WithonlyUS$300,000 innewinvestment, aforeign investor isrelieved frompaying
corporation tax,with-holding taxandtaxondividends for3years. Iftheinvestment
extends toUS$500,000 thentheinvestor gets5to6years taxholiday withanextra
yearforinvesting inapriority area. TheInvestment Code isbeing reviewed withan
aimofmaking itmore flexible andfavourable.
Inabidtorestore foreign investment confidence, theGovernment hasexpeditiously handled
theexpropriated properties issueoftheAsian Community whowereexpelled byIdiAmin byreturning
alltheproperties tobonafide claimants.
* Rehabilitation ofinfrastructure
TheGovernment hasgonealongwayintherehabilitation ofroadinfrastructure ofbothtrunk
andfeeder roads andthehealth andeducation institutions. Allthese efforts areaimed atthepromotion
ofaproductive base.WT/TPR/G/4
Page 10Trade Policy Review
2. THE EXTERNAL ECONOMIC ENVIRONMENT
(a) Major trends inimports andexports
(i) Imports
Measures which haveinfluenced imports intherecent pastinclude:
- Liberalization offoreign exchange regime;
- theintroduction oftheforeign exchange auction system andtheimport support; and
- theabolition ofimport licensing.
Table I
Summary ofexternal trade
(US$'000)
Year Imports Exports (including re-export) Trade surplus
1981 341.079 258.1 -82.979
1982 349.574 371.696 22.122
1983 349.879 376.534 26.655
1984 330.503 408.728 78.225
1985 324.294 404.637 62.343
1986 379.71 422.851 43.141
1987 582.531 333.039 -249.492
1988 531.801 300.091 -231.71
1989 578.287 298.133 -280.154
1990 551.095 190.102 -360.993
1991 522.689 196.009 -326.68
1992 524.433 171.353 -353.08
Source: Statistics Department, Ministry ofFinance &Economic PlanningUganda WT/TPR/G/4
Page 11
Figure I
Source: Statistics Department, Ministry ofFinance andEconomic Planning.
Inthefuture, import volume isexpected toriseinlinewiththegrowth intheeconomy. Growth
inpetroleum demand islikely togoupinresponse tothehigher imports ofvehicles particularly by
theprivate sector.
(ii) Exports
TheGovernment continues tofocus itsattention tothedevelopment andpromotion ofexports.
Tothisend,therefore, steps havebeentaken to:
- Expand thecountry 'sexport basethrough diversification ofexports andbreaking into
newmarkets forthese exports;
- rehabilitate andexpand thetraditional exports; and
- promote newinvestments bothlocal andforeign soastoproduce forlocalconsumption
andforexport.
These measures havepaidoff.Merchandise exports (f.o.b) in1993/94 amounted toUS$237.4m
compared toUS$157.1m in1992/93. Export unitvalues improved in1993/94 ascompared to1992/93,
mainly onaccount ofalittleimprovement incoffee prices ontheinternational market. Coffee receipts
improvedsignificantlyfromadeclineof5percentin1992/93toanincreaseof53.6percentin1993/94.WT/TPR/G/4
Page 12Trade Policy Review
Noncoffee exports rosefromUS$58 million in1992/93 toUS$85 million in1993/94. Notable
among themwasabigincrease of145percentintheexport volumes offishfrom2,400 metric tonnes
in1992/93 to5,890 metric tones in1993/94. Accordingly theexport receipts from fish,more than
doubled from US$4.4 million toUS$10.7 million respectively.
Export receipts fromcereals, especially maize almost doubled in1993/94 while those ofbeans
increased by59.4percenttoUS$12.1 million inthesame period (Vide Table II).
Table II
Exports ofmerchandise
(US$ million)
Period 1991/92 1992/93 1993/94
Total Exports 169.25 157.11 237.42
Coffee
Volume (60kg.bags)
Unitcost(US$/kg.)117.35
2.27
0.8699.14
2.02
0.82152.28
2.22
1.14
NonCoffee 51.90 57.98 85.14
Electricity
Volume (Gigawatts)
UnitCost(US$/kg.)1.41
....
....1.54
274.90
5.600.68
249.20
2.73
Cotton
Volume ('000mtons)
UnitCost(US$/kg.)11.48
8.99
1.285.34
4.90
1.094.92
5.26
0.94
Tea
Volume ('000m tons)
UnitCost(US$/kg.)6.22
6.67
0.936.53
8.42
0.788.57
9.72
0.88
Tobacco
Volume ('000mtons)
UnitCost(US$/kg.)3.23
1.64
1.986.75
3.74
1.807.00
4.12
1.70
Fish
Volume ('000mtons)
UnitCost(US$/kg.)6.85
....
....4.42
2.40
1.8410.67
5.89
1.81
Hides &Skins
Volume ('000mtons)
UnitCost(US$/kg.)3.83
....
....4.09
4.75
0.866.22
5.07
1.23
Cereals
Volume ('000mtons)
UnitCost(US$/kg.)11.88
....
....7.90
64.48
0.1215.71
74.12
0.21
Beans
Volume ('000mtons)
UnitCost(US$/kg.)3.33
....
....7.59
28.87
0.2612.10
43.38
0.28
Others 3.68 13.82 19.14
... Datanotavailable.
N.B. Maynotsumupduetorounding.
Source: Ministry ofFinance andEconomic PlanningUganda WT/TPR/G/4
Page 13
(b) Developments intheterms oftrade andcommodity prices
Regarding developments intheterms oftrade, itisimportant toindicate thetwomovements
thathavedriven theprofile overthe14years. First, theunitimport price faced byUganda hasbeen
relatively stable overtheperiod starting from1984. Secondly, theexport priceindices based oncoffee,
cotton andtea(Uganda 'smajor commodity exports) fellsignificantly from1988 to1992. Ofrecent,
there hasbeenarecovery intheunitprice ofexports since 1993 when thecoffee exporting countries
agreed onatwenty percentretention scheme. This, together withtheboom incoffee prices, isgoing
tosignificantly improve theterms oftrade performance forUganda in1994-1995.
Thedevelopments indicated above imply thattheoverall terms oftrade index deteriorated
from1980to1992implying thatthefinancing ofthecountry 'simports during thisperiod waslargely
fromsources other thanourownexport proceeds. During 1994/95 thispicture issignificantly reversed
owing totheimproved export prices andanetincrease inprivate transfers.
TheTable andChart below show themovements inUganda 'sterms oftrade from 1980 to
1993.
Table III
External Trade Indices
(Base: 1987 =100)
Exports Imports T.O.T.
Year Vol. Unit
priceValue Vol. Unit
priceValue Val.a
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
199373.7
84.9
116.2
98.0
90.9
103.2
95.7
100.0
97.0
118.4
90.2
81.6
76.3
73.6146.9
91.0
95.7
114.4
128.9
109.5
132.5
100.0
85.8
69.9
45.0
43.3
36.7
42.6107.5
76.5
108.2
110.1
117.1
115.3
127.8
100.0
84.7
83.0
46.1
40.4
31.8
35.5n.a.
82.9
78.6
73.8
53.9
43.3
69.4
100.0
102.9
107.8
94.4
72.6
78.2
95.377.1
83.6
89.7
97.0
106.2
109.0
105.6
100.0
106.9
114.8
109.4
109.2
109.6
108.5n.a.
69.3
70.5
71.6
57.2
47.2
73.2
100.0
110.0
123.7
103.2
79.3
85.7
103.4n.a.
62.7
63.1
60.7
48.3
38.3
72.3
100.0
109.5
124.3
100.8
75.6
86.9
105.8189.9
108.9
106.7
118.0
121.4
100.5
125.5
100.0
80.3
60.9
41.1
39.7
33.5
39.3
a Non-oil value.
Source: Bank ofUgandaWT/TPR/G/4
Page 14Trade Policy Review
Figure II
Source: Bank ofUganda.
(c) Balance ofpayments developments
Uganda 'sBalance ofPayments hasshown significant improvements inthelasttwoyears,
following theimproved internal macro-economic conditions which haveallowed forlarge flows of
foreign resources andbetter terms oftrade resulting from higher international coffee prices.
Thecurrent Account deficit (excluding official grants) which amounted toUS$372.93 million
or12.1percentofGDPin1992/93 reduced significantly toUS$299.43 million (7.94 percentofGDP)
in1993/94 andisprojected tonarrow further toUS$216.78 million orjust4.42percentofGDP in
1994/95. Theimprovement isbrought about bytheup-turn ininternational coffee prices afterthe
coffee retention scheme which wasagreed upon bymajor coffee exporters inOctober, 1993.
Consequently coffee earnings jumped from US$111.33 million in1992/93 toUS$172.43 million in
1993/94. Withfurther improvements incoffee prices thatresulted fromthefrostdestruction ofBrazilian
coffee fields inJune1994, coffee earnings areexpected tohitalevelofUS$431.84 million in1994/95.
Uganda hasalsowitnessed asizeable return offlight capital informofprivate transfers. Private transfers
which amounted toUS$129.11 million in1992/93 morethandoubled in1993/94 toUS$303.46 million;
andthelevelisexpected toremain thathighduring 1994/95.Uganda WT/TPR/G/4
Page 15
Thecapital account hasalsoimproved overthepasttwotothreeyears. In1992/93 thecapital
account recorded anetsurplus ofUS$142.63 million, which improved further toUS$195.18 million
in1993/94 andisprojected atUS$183.16 million attheendof1994/95. Disbursements onlongand
medium termloansamounted toUS$241.62 million in92/93, growing toUS$294.15 million in1993/94
andisexpected toreach US$311.20 million during 1994/95.
Asaresult, theoverall Balances ofPayments positions for1992/93 and1993/94 havebeen
surpluses ofUS$8.58 million andUS$106.35 million respectively, andexpected atUS$167.41 million
for1994/95.
These overall balances havebeenmainly financed bybuild upinOfficial Reserves. Gross
ReservesoftheMonetaryAuthoritiesgrewrapidlyfromUS$112.0million(enoughtocover2.06months
ofimports) asatendof1994/95, equivalent to4.3months ofimports ofgoods andservices.
Uganda 'sexternal debtstock hasgrown veryrapidly overthepasteightyears, commensurate
withdevelopments inthecapital account. Thiswasmainly because oftheneedtorehabilitate entities
thatwere destroyed during theperiod ofturmoil andtotryandcatch upforthelostyears, yetthe
government hasaverylimited domestic resource base. Thedebtstockgrewfromaround US$1.6 billion
in1987 toUS$2.64 billion atend1992/93 andtoUS$2.99 billion asatend1993/94. External debt
stock isexpected tobeslightly overUS$3.0 billion attheendofthecurrent period. Debt service
obligations (including IMF) amounted to106.63 percentoftotalexports in1992/93, reducing to
57.97 percentin1993/94 andmayreduce tolessthan30percentbytheendof1994/95
(d) International macroeconomic situation affecting Uganda 'sexternal sector.
Ontheinternational level, therecovery ofdemand inindustrial country export markets and
therecent pickupinthecommodity prices especially coffee aremajor positive factors forthecountry 's
external sector. Ingeneral, industrial countries registered economic growth averaging 2.7percent
in1994, upfrom1.3percentintheprevious year. Coffee prices increased fromaverage lowlevels
oflessthanUS$1.5 perkilogram intheperiod 1987 to1994 tohighs ofUS$2.5-4 perkiloduring
thelatterpartof1994-1995following afrostinBrazil, theworld 'slargest coffee producer andexporter.
Asaresult, coffee proceeds areprojected atUS$432 million in1994/95, more thantwice thelevel
registered inthepreceding financial year.
Another prominent feature intheexternal sector hasbeensubstantial increase inprivate transfers
which reflect inpartrenewed confidence oftheinternational community inthecountry 'seconomic
prospects. However, thehuge foreign exchange inflows have, tosome extent, beenachallenge to
economic policy management because ofrealexchange rateappreciation. Prospects fordebtrelief
havealsoimproved asthemajor industrial countries arewilling toreduce thestock ofdebtowed to
official creditors andtoincrease concessionality forcountries which areheavily indebted. Bytheend
of1993/94, Uganda hadreceived uptoabout US$40 million inform ofcashdebtrelief.
In1994, Uganda became thefirstcountry tobenefit fromthe"Naples" Terms ofdebtreduction.
AtotalofUS$75 million ofpre-cut offdebtowed totheParis Club wascancelled inrecognition of
Uganda 'sadjustment efforts. Newandformal trade links havebeenestablished withSouth Africa.
CloserintegrationofSouthAfricaintotheregionalandworldeconomycouldboosttradeandproductivity
throughout theSub-Sahara region.
Notwithstandingthepositivedevelopments,economicconditionsstillremainlessthansatisfactory
given thefactthatUganda isstillpoor. Projected annual growth ofatleast5percentisheavilyWT/TPR/G/4
Page 16Trade Policy Review
dependent onfavourable weather conditions andthecrucial assumption thatthecountry 'sadjustment
effort supported bytheIMF remain ontrack. TheCountry isstillheavily indebted, mainly to
international agencies whocannot reschedule.
3. PROBLEMS INEXTERNAL MARKETS
Problems faced byUganda intheexternal markets apart from theinstability incommodity
prices relate tostandards, tariffs andnon-tariff measures including tariff escalation. Uganda being
alandlocked country, incurs highfreight charges which result intouncompetitive pricing ofexports.
Uganda alsolacks thecapacity tosustain regular adequate supplies (especially ofagricultural
commodities) totheinternational markets.