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THE EFFECTS OF CENTRAL BANK
INDEPENDENCE ON THE TREND OF
INFLATION AND ITS IMPLICATIONS ON
WOMEN IN UGANDA
IAFFE 18th Annual Conference on
“Engendering Economic Policy”,
June 26-28, 2009,Simmons College, Boston
E. K. Bwanga & C. Kabonesa
Makerere University.
OUTLINE OF THE PAPER
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Definition of concepts
Background to the study
Statement of the problem
Scope of the study
Hypothesis
OUTLINE OF THE PAPER…
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Theoretical perspectives
Methodology
Results
Discussion of results
Conclusion
Recommendations
Thank you.
DEFINITION OF CENTRAL BANK
INDEPENDENCE
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Central bank independence is the autonomy given to
the central bank through a charter which spells out a
strong commitment to price stability and freedom to
pursue it.
It involves government setting the goals that the
central bank is expected to pursue and achieve.
The central bank is not expected to set its own goals
to pursue, but is given adequate scope to pursue the
goals that are set (Fraser, 1994)
WHERE CBI EMANATE FROM
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In Uganda, this autonomy emanated from The
Constitution of Uganda, 1995 and the Bank of
Uganda Statute, 1993.
The Constitution of the Republic of Uganda (1995)
Article 162 Section (1) and (2) specifies the role of
Bank of Uganda with a focus on ensuring economic
stability as the primary goal - promote and maintain
the stability of the value of currency and that in
performing its functions, the Bank of Uganda shall
conform to this constitution but, shall not be subject
to the direction or control of any person or authority.
ECONOMY IN THE 1960’s
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Vibrant
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Real GDP growth rate = 4.8 percent
GDP per capita growth = 3 percent per annum
National savings rate = 13.4 percent per annum.
ECONOMY IN THE 1970’S
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Economic shocks both internal and external.
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DGP declined = 3.8 percent between 1973-1979
Official prices controls
Inflation sky rocketed to 40 percent per annum
compared to 8.2 percent per annum between
1967 and 1970
Gross domestic investment decline from 12.7
percent per annum of GDP to 8.6 percent
between 1963 -70
ECONOMY IN THE 1970’S…..
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Recurrent government expenditure declined
from 14.6 percent of GDP in the 1960’s to 9.9
percent in 1978.
Total government spending declined
marginally 17.5 of GDP to 15.5
(Uganda, 1998)
AGRICULTURE IN DEVELOPMENT
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Dominant sector
It contribution to GDP has been declining,
67% in 1990 to 42.4 in 1997 and currently it
is about 21 % of GDP.
Most women are employed there
WOMEN IN DEVELOPMENT
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80 percent of women work in agriculture.
Form a greater population (sex ratio is
currently 94.5 for men.
Female enrolment is currently 44.0 percent
of population
What do these figures indicate?... Justifies
the study!
POVERTY IN UGANDA
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It is acute in women specially so for those leaving in
rural areas.
41.1 percent of Ugandan’s are relatively poor.
8.3 percent very poor and below poverty line and of
these the majority are women.
There are a host of other statistics to justify the story
of poverty among women esp. in access to water
health, markets information, land etc.
FINANCIAL SECTOR IN UGANDA
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It is thin, shallow in depth and breadth.
Mostly constituted of formal banking sector and of
late the micro finance institutions are coming up.
It is quickly picking up and becoming organized.
Interest rates are high with minimal lending to the
subsistence agriculture.
STATEMENT OF THE PROBLEM
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Economic distortions including high inflation, mass
poverty, balance of payment deficit, weak financial
sector and deficit budget financing
Developed countries’ emphasis on central bank
independence as a measure to control inflation
1993 Uganda government granted independence
central bank.
This study aimed at assessing whether central bank
independence curbed inflation during the period
1993 and 20007
SCOPE OF THE RESEARCH
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Examined whether inflation reduced after
central bank independence, and
The implication of the tend of inflation on the
welfare of women
The study covered the period from from 1980
to 2007.
HYPOTHESES OF THE STUDY
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Inflation would be low and stable after
central bank independence
Low and stable inflation would translate into
better economic welfare for women.
THEORETICAL PERSPECTIVE
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According to available evidence, a fall in
inflation leads to an increase in real incomes
Translates into an increase in consumption
and improved welfare.
METHODOLOGY
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Review of documents and secondary data
from government documents in the Ministry
of finance, Planning and Economic
Development, Uganda Bureau of Statistics to
mention but a few.
Annual time series data on consumer price
index was used to plot the line graph to
compare the trend.
Data from 1980 - 2007
THE TREND OF INFLATION OVER THE
PERIOD 1980 – 2007.
INTERPRETATION OF RESULTS
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Inflation reduced right after CBI
There were a host of other programmes that
were meant to increase productivity,
streamline the functioning of the financial
sector, improve infrastructure
The programmes could have contributed to
the fall in inflation.
DISCUSSION OF RESULTS
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Reduction in inflation could be interpreted as an
indictor of improvement of economic welfare
according theoretical perspective.
However, this did not improve the welfare of
Uganda’s women
Because it did not take long for inflation to start rising
due to the seasonality of agricultural production
However, inflation is more predictable now than
before
FAILURE TO CHANGE WOMEN’S
STATUS
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There are many other constraints women
face such as illiteracy, lack of access to
market information, lack of storage facilities
and poor infrastructure.
DISCUSSION ………
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The marketing chain structure is dominated
by middlemen.
Lack of storage facilities by women to take
advantage of slack periods when prices are
high.
The immobile nature of women that restricts
them to market access
DISCUSSION……….
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Subsistence nature of output that does not
encourage mass marketing.
The output is too little to warrant market search and
better opportunities.
Lack of bargaining power of women in the market
due to the low level of education.
This causes imbalances that favour men when
bargaining for a fair price.
Lack of access to market information.
CONCLUSION
CBI improved the trend of inflation but the
welfare of women still remains an
outstanding issue.
RECOMMENDATIONS
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Government should lay emphasis on the education
of women
Increase access to free and reliable market
information especially on prices
Improve of the marketing strategy by providing
access to storage facilities in rural areas.
Improve on the rural infrastructure ie roads
Support rain fed agriculture by promoting irrigation
agriculture.
RECOMMENDATIONS
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On the rising inflation after central bank
independence, government should avoid
budget deficit financing, and donor support to
finance the budget.
Implement the debt strategy that has been
agreed upon ie limit government borrowing
that has been the main cause of inflation.
THANK YOU FOR LISTENING