The Future of Smallholder Farming in Eastern Africa - Uganda ...

Consequently, trade liberalisation policies which included tariff reductions, removal of
import licensing, lifting of import restrictions, relaxation of investment restrictions and
dismantling of quantitative restrictions on imports were undertaken with the long-term
objective of redressing economic imbalances, stimulating growth and restoring
sustainable development. The policies were implemented to enable the economy cope
with new international environment and withstand external shocks. The fact that
domestic firms had to face competition from imports was the real focus of an export-led
growth strategy compared to the previous import substitution strategy. The new focus
implied the importance of maintenance of a competitive position by all producers within
the economy. Moreover, the removal of quantitative restrictions on imports also meant
that capital inputs could be accessed more easily and this, coupled with the exchange
rate liberalization, would further stimulate the export-led economic growth.
However, the growth in the agriculture sector since the advent of trade liberalization is
mixed (Nyangito and Okello 1998). Production of the main food commodities increase
by 1984, peaked by 1987, but decline after 1991. This trend is attributed to output
pricing and marketing problems, including increased food imports that depressed
domestic food production. But trade liberalization has led to increased participation by
the private sector in food trade and this might have enhanced agricultural production of
particular crops (Republic of Kenya, 1994). On the cash crops sub sector, policy
reforms have led to increased producer prices as a result of removal of explicit and
implicit taxes but this has been accompanied by high costs of production as a result of
removal of subsidies on inputs, leading to ambiguous overall impact results. Recent
trends in export of principal crops show that there is a general fluctuation in quantities
exported, with coffee and tea showing lower fluctuations as compared to maize, skins
and hides (Figure 2). These observations indicate that the impacts of policy reforms,
particularly trade liberalization on the performance of the agricultural sector are not
clear.