In Uganda, as in much of sub-Saharan Africa, poverty is concentrated in rural areas. Rural
farm households comprise two-thirds of the population, but have per capita incomes equal to only
about one-third those of the urban population. Because agriculture accounts for a large share of
incomes for these households, policies and external shocks that affect agriculture, including shifts
in agricultural terms of trade, increased agricultural productivity, and reductions in marketing
costs, may have significant effects on rural poverty. Constraints to agricultural development vary
sharply across regions, however, because of marked differences in agro-ecologies, infrastructure,
and cropping patterns.
This report presents an initial attempt to quantify some of these key linkages and the
implications of various external shocks and investments using a Computable General Equilibrium
(CGE) model of the Ugandan economy, explicitly focused on regional variations in agricultural
production and household incomes. The base data for the model is contained in a Social
Accounting Matrix (SAM) constructed for this analysis, that quantifies economic flows involving
production activities, commodity supply and demand, household incomes and expenditures,
government accounts, investment and external trade for Uganda in 1999.
Simulation results suggest that agricultural growth has the potential to significantly raise
rural incomes in Uganda provided that markets perform well and producer incentives are
maintained. A five percent increase in agricultural productivity could raise consumption by 1.2 to
2.1 percent among rural households. Price effects are important, as food prices fall by 3.3 to 3.6
percent, benefiting urban households whose total consumption increases by 2.4 to 2.7 percent.
Reducing agricultural marketing margins by 30 percent leads to increases of 2.3 to 4.1 percent in
real consumption of farmer households, as producer prices of agricultural commodities rise in real
terms.