The Uganda Debt Network (UDN) has joined efforts to rally foreign creditors to write off the debt Uganda owes them so that the East African nation can focus on recovering its economy, which has been heavily hit by the Covid-19 pandemic.
Uganda’s external debt increased by 14 percent from $7.66 billion as of December 31, 2018 to $8.75 billion as of December 31, 2019, data from the finance ministry shows. Domestic debt also increased by 21 percent from $3.86 billion to $4.74 billion for the same period.
Repaying these loans is becoming a challenge due to the fact that some of these funds have been misused and the country is also recovering from recent calamities like desert locusts, Covid-19, floods, etc.
UDN says that Low-Income Countries (LICs), of which Uganda is among – are multiple challenges in the social protection strategies and economic outlook because of the above incidents.
They thus recommend that all debts lent to LICs be canceled and that these countries be given a 10-year action of no-interest on new debts.
“The two-fold approaches would consign the LICs into more public expenditure investments tagged to protecting the rights and social protection of the citizens, economic recovery, improved healthcare and others,” says UDN.
“Uganda Debt Network implores the IMF, WBG and G.20 (world’s richest countries) during 2020 to coordinate such a compelling broad global participation of all global actors to this two-fold approach to revival of economies of the LICs, including Uganda.”
The Covid-19 calamity alone has seen Uganda’s abject poverty levels elevate from the prior 21% to a projection of 25% between January and August 2020, with over 2.6 million people likely to slip into poverty by December 2020.
“Numerally, this will add onto the 8 million poor people at pre-Covid-19 time; thus, totaling up to nearly 11 million people (out of a total of 43 million) in 2020 alone, even higher if vulnerability numbers (due to job loss, shrunk salaries and wages, excess production capacity of firms) were to be included,” adds UDN.
Between January and August, Uganda acquired about 16 loans acquired to counter the effects of the pandemic and for other interventions in the economy. Those loans exclude the grants and supplementary budgets at end of FY2019/20.
With that in mind, the Network argues, canceling debts in the only viable option to help LICs shore up their economies.
“The above state of affairs is what is generally presented across the LICs, while increasing inequalities and social unrest that oftentimes disproportionately affect the vulnerable poor, especially the youths and women, across the 6 East African Community States (Uganda, Rwanda, Burundi, Tanzania, Kenya, South Sudan) and Africa at large,” it says.
“While transparency and accountability of the respective Governments and State machinery especially in Africa remain highly wanting and infested with marauding run-away corruption and abuse of public resources led by the political class, a Debt cancelation move remains most viable for healthcare and economic recovery over the short-term, medium-term and long-term in the greater call for social justice in the COVID-19 contextual outfit.”
In Uganda, debt repayment remains a key constraint to comfortable fiscal space and liquidity positions. Uganda, for instance, paid $42.8 million (including $4,488 i.e. nearly $5 million interest payment) between January and December 2019 as external debt servicing alone.
This translated into an approximate Shs160 billion off estimated Shs19 trillion domestic revenues under the Shs40 trillion total national budget for fiscal period 2019/20.
The repayments were to organizations like AfDB, Asian Development Bank, Inter-American Development Bank, IMF and World Bank, and countries like Austria, China, Germany, Japan, France, Kuwait, Saudi Arabia, UK, Belgium, Germany and UK.
Uganda allocates more funds to debt servicing than to the budget for healthcare, social development and agricultural sectors.
In May, President Yoweri Museveni called on international creditors to cancel all of Africa’s debts to ease the economic distress caused by the outbreak of the novel coronavirus.
“The external friends, if they are friends at all, should cancel all the multi-lateral and bilateral loans because this problem (coronavirus) has been created for Africa by Asia,” Museveni said.