Debt raises concern over public services

Jamada M. Kalinda

What you need to know:

  • The true cost of Uganda’s debt is, therefore, a failure to provide public services and progressively realise socioeconomic human rights such as health and education

International financial institutions such as the IMF and World Bank evaluate debt sustainability based on the following three indicators; present value of debt to exports, present value of debt to domestic budget revenue, and debt service to exports.

Based on these, Uganda’s debt to GDP ratio is at 52.0 percent which is considered sustainable. By the current measurements, a debt only becomes unsustainable if a country is unable to meet its financial obligations and requires debt restructuring.

However, with more than 30 percent of the national budget being allocated for debt servicing, and low budget allocations for education, health, and other public services, what is the true cost of Uganda’s growing debt burden? Is it truly sustainable?

Recently, the government announced that there will be no recruitment of public staff this financial year, this follows similar economic cuts that have been taken like the failure to deploy or budget for the nearly 2,000 medical intern doctors. The budget allocation for education this financial year is at 8.6 percent, which is below the African Union’s recommended of 20 percent. This grim crumbling image of the country’s ability to provide public services is set on the backdrop of a 30 percent budget allocation for debt servicing which is higher than the health and education sector budgets combined.

Uganda’s public debt burden has increased from 46 percent to 50.2 percent between 2020 and 2023. Clearly, servicing the public debt is hindering the government’s ability to provide public services, yet the majority of the money we borrow isn’t efficiently utilised and our project completion rate is below all our East African neighbours. The government is borrowing to construct more roads, but the economic growth from these activities is yet to be realised yet the cost is glaringly clear. The true cost of Uganda’s debt is, therefore, a failure to provide public services and progressively realise social economic human rights such as health and education.

Alternatively, many argue that debt is not obtained in isolation, but to construct roads and improve security such as the government loan for CCTV cameras. However, with poor utilisation of resources and the constraint that borrowing is placing on the provision of public services, everyone has noticed that Uganda’s debt policy is flawed, which could in part explain the Ministry of Finance’s commitment to freeze public borrowing this financial year.

The Initiative for Social Economic Rights (ISER) has over the years called for a Human Rights Impact Assessment in the evaluation of debt sustainability. We believe that the absence of the same is what is leading to an erroneous matric by which debt sustainability is evaluated.  It is not right to conclude that even when a country is servicing its public debt at the cost of providing health care, as our research has shown, its debt is still sustainable. For us not to trap ourselves and the rights of future generations in a loop of poor service delivery, we need to adopt a human rights impact assessment of our debt policy.

A human rights assessment of our debt sustainability would, for example, ensure a country’s ability to provide public services before other loans are obtained. Without a human rights assessment of debt sustainability, the IMF and other loaners may be able to get their money back, but it comes at the cost of a child dying in a hospital because the state cannot pay health workers. What is happening in Kenya should serve as a cautionary tale. The funder will always make sure they get their money back but at what cost? Our healthcare? Our children’s education? Our lives?

Mr Kalinda is a Law student at Makerere University.