The economic reform programme initiated in 1987 in Uganda was one of the most ambitious
programs of economic liberalization in the African continent. Combining both quantitative
and qualitative evidence on livelihood diversification of rural households drawn from the
household income surveys conducted by the Uganda Bureau of Statistics and the LADDER
village reports, this paper examines the effects of the economic reforms on the livelihoods of
rural households. The evidence suggests that economic reforms have had a positive impact
on the livelihoods of small-holder farmers in Uganda, many of whom have moved out of
poverty in the past decade. While coffee and cotton producers have benefited most from the
reforms, the response of the Ugandan agricultural sector to the reforms has been broadbased
with increasing production evident both in the cash crops and food crops sectors. The
dynamism of the agricultural sector has in turn contributed to rapid growth in non-farm
activities in the rural economy in recent years and provided households with greater choices
in their livelihood strategies. However, not all the policy measures have contributed
positively to livelihood diversification that allows households to move out of poverty. Three
constraints to livelihood diversification are identified: the design and implementation of the
fiscal decentralisation programme, the availability of agricultural finance and the provision
of agricultural advisory services.