Analysts call for total debt cancellation over Covid-19 impact on economy

Sunday September 06 2020
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Debt analysts speak to journalists on Sunday. Photo | Ismail Musa Ladu

BY ISMAIL MUSA LADU

Despite wanting transparency and accountability mechanism in many if not most governments and State machineries particularly in Africa, low income countries (LICs), among them Uganda, need to be relieved of the heavy debt burden.

According to Uganda Debt Network (UDN), a national policy advocacy organisation, the sooner the total debt cancellation as opposed to debt service suspension is enforced in addition to instituting a 10-year action of no-interest on new debts, the better for everyone involved.

For the case of Uganda, debt repayment has remained a key constraint to comfortable Fiscal space and liquidity positions.

Uganda, for instance, paid $42.8 million (about Shs157.7billion), including nearly another $5 million interest payment (about Shs18.4billion), 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.

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The repayments were to African Development Bank, Asian Development Bank, Inter-American Development Bank, IMF, World Bank-IBRD and World Bank-IDA. Others also included Austria, China, Germany, Japan, France, Kuwait, Saudi Arabia, UK and others)

“The two-fold approaches— total debt cancellation and instituting a 10-year action of no-interest on new debts, 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,” Mr Julius Mishambi Kapwepwe, a development aid policy specialist said at a news conference this afternoon at the UDN headquarters in Kampala.

He continued: “Even though I hate to say that 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.” 

Mr Kapwepwe who is also the director of programmes at UDN implores the IMF, WBG and G20 (world’s 20 richest countries) during 2020 to coordinate such a compelling broad global participation of all global actors to the two-fold approach (total debt cancellation and instituting a 10-year action of no-interest on new debts) will aid the revival of economies of the LICs, including Uganda.

It should be noted that the previous escalating debt burden situation for LICs including Uganda resulted into debt relief programs such as the Highly Indebted Poor Countries (HIPC) Initiative in Financial Year (FY) 1995/96 and the Gleneagles- Scotland’s Multilateral Debt Relief Initiative (MDRI) in FY 2005/2006.

How did we reach here?

In the case of Uganda, for instance, the country has faced recent calamities like: floods, floating islands, desert locusts, landslides and mudslides, COVID-19 pandemic and other such infectious diseases as Ebola, Yellow fever and Marburg.

Such calamities, according to UDN statement issued earlier today have compounded the pre-existing economic and healthcare conditions in LICs and Uganda in particular.

“COVID-19 has also meant increased borrowing. About 16 loans have been acquired for COVID-19 and other interventions in the economy, just between January and August 2020. Those loans exclude the Grants and Supplementary budgets at end of FY 2019/20,” Mr Kapwepwe noted. 

With COVID-19 calamity alone, Uganda’s abject poverty levels have between January and August 2020 been elevated from the prior 21 per cent to a projection of 25 per cent, 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 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, notes the statement.

The above state of affairs is what is generally presented across the LICs, while increasing inequalities and social unrest that often times disproportionately affect the vulnerable poor, especially the youths and women, across the six East African Community States (Uganda, Rwanda, Burundi, Tanzania, Kenya, and South Sudan) and Africa as a whole.

Enough is enough

As it is now going by the IMF observation, Sub-Saharan Africa is heading for its deepest recession in 50 years due to COVID-19 impact on the livelihood, businesses and the economy.

“Debt cancellation is in everyone interest. No one deserves to be in shackles of debt chain, and this is why we should be involved in this campaign,” Ms Christine Byiringiro, a policy analyst said, before Ms Peninah Mbabazi, policy and governance specialist added that: “This is the time for all types of creditors to come clean and endorse total debt cancellation accumulated to date, considering that they (financiers and creditors) have in many ways, including through the interest paid on the loans over the years, collected enough.” 

Ms Byiringiro and Ms Mbabazi also reiterated the position of United Nations that, the choice is no longer between Debt default and continued Debt-service payments, but rather a wave of either unilateral defaults or orderly payment cancellations that should be agreed between the LICs and the Creditors. 

iladu@ug.nationmedia.com

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