“The purpose of this study was to investigate the effects of structural adjustment policies on the supply conditions of coffee, Uganda’s major export, which
accounts for over 90% of foreign exchange earnings and about 50% of tax revenue. Because of a lack of quantitative data, it was impossible to compute the price elasticity of supply related to higher producer prices of coffee made possible by the structural adjustment policies, especially devaluation. Instead, qualitative information was gathered on own producer price of coffee, smuggling, efficiency of the marketing system, the opportunity cost of
competing crops, and the prospects of introducing new technology/and farming
systems. The qualitative evidence suggests that the supply of coffee is price inelastic:
the lack of price response is due to adverse pricing policy that taxes the farmer
excessively and the inefficiencies of the marketing system that cause delay in paying the same farmer. Given this conclusion, Uganda has to devalue by a very large percentage in order to effect an increase in coffee exports; she cannot afford to forego the required large reduction in export duty to increase the producer’s price, if she were not to devalue.”
