Pressure mounts on lenders to cancel Uganda’s $8.5bn debt

Debt relief cycles

This isn’t the first time that Uganda and the LICs are seeking for debt cancellation. The East African nation in the FY 1995/96 benefitted from debt relief programs like the Highly Indebted Poor Countries (HIPC) initiative and the Gleneagles-Scotland’s Multilateral Debt Relief Initiative (MDRI) in the FY 2005/6.

Since then, however, experts argue that a country has faced numerous calamities like floods, floating islands, desert locusts, landslides and mudslides, COVID-19 pandemic and other such infectious disease as Ebola, Yellow Fever and Marburg.

In addition, the country has been heavily investing in various infrastructure developments such as hydro-electric power dams, roads, airports as well as social protection initiatives to stir the country’s development.

Julius Kapwepwe such calamities and other initiatives have compounded the pre-existing economic and healthcare conditions in LICs and Uganda in particular.

“COVID-19 has also meant increased borrowing, for instance, with about 16 loans acquired for COVID-19 and  other interventions in the economy, just between January and august, 2020. Those loans exclude grants and supplementary budgets at the end of FY 2019/20,” he said.

“With COVID-19 calamity alone, Uganda’s abject poverty levels, have, between January and August 2020 been elevated from the prior 21% to a projection of 25%, with over 2.6million people likely to slip into poverty by December 2020.”

Kapwepwe said numerically, this pandemic will add onto the 8 million poor people at the pre-Covid-19 time; thus, totaling up to nearly 11 million people out of the 43million in 2020 alone in Uganda , even higher if vulnerability numbers due to job loss, shrunk in  salaries, excess production capacity of firms were to be included.

Similarly, Jubilee Debt Campaign, a group established in the late 1990s to campaign for debt cancellation for impoverished countries suggested in May this year that this was an optimistic assessment. The organization said 31 countries were already in debt crisis, with another 82 at risk.

However, World Bank states on its website that DSSI does not impose any non-concessional borrowing ceilings on countries other than those required under the IMF’s Debt Limits Policy and the World Bank’s Sustainable Development Finance Policy (SDFP).

The lender says that countries that are not required to have non-concessional borrowing ceilings under an IMF program or the SDFP will not need to implement ceilings under the DSSI.

“The Institute of International Finance has engaged in ongoing discussions with private creditors and has agreed on terms of reference for voluntary private sector participation,” the bank says, adding “These could help increase the potential for broad voluntary participation by private creditors and encourage countries to request private sector participation, in part by providing clarity to credit rating agencies on the call for participation by private creditors in the DSSI.”

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