President Museveni has urged the international lenders to cancel debts to African countries with the view of freeing up resources to address the impact of COVID-19 pandemic, Chimp Corps report.
“We call for more action on comprehensive debt relief package, particularly debt cancellations by multilateral and bilateral creditors to enable us have required funding for COVID- 19 pandemic response,” said Museveni in a speech sent to the United Nations General Assembly on Tuesday evening.
The President described as “laudable,” the international community’s support so far extended in dealing with this pandemic and the decisions of the IMF, the World Bank Group, and the G20 last April to immediately suspend debt service payments of 76 countries for one year.
However, said Museveni, “the agreed suspension of debt is not enough to respond and recover from the COVID-19 pandemic, including, to navigate its devastating social and economic impacts.”
The Ugandan economy has been severely hit by the COVID-19 pandemic and, in particular, such key sectors as services (tourism), transport, construction, manufacturing and agriculture.
The country has been borrowing heavily including from the World Bank to mitigate the impact of the pandemic.
In June, the World Bank Board of Directors approved a $300 million budget support operation for Uganda to boost the Government’s capacity to prevent, detect and treat the coronavirus, protect the poor and vulnerable population, and support economic recovery.
Uganda’s total public debt stood at Sh 48.91trillion (US$13.33bn) as at the end of December 2019, compared with Shs 46.36trillion (US$12.55bn) in June same year, according to the finance ministry.
Of this, external debt accounted for Shs 31.53trillion (US$ 8.59bn) while domestic debt stood at Shs17.38trillion (US$ 4.73 bn).
Other countries including Mozambique, Angola, Cabo Verde, Congo, Djibouti and Egypt remain heavily indebted.
Just like Uganda, these African countries face high debt-to-GDP levels, which are unsustainable.
In addition, the high fiscal deficits (gaps between spending and revenues) will force countries to explore alternative financing for development projects. Consequently, loans become a recourse, further exacerbating their debt burden.
Cancellation still tricky
Calls for debt cancelation for poor countries have been ongoing for many years.
In 2005 the World Bank and the IMF canceled $55 billion of the debt owed by Africa’s most impoverished states; still, a full cancellation would be unprecedented.
Also, total debt forgiveness usually involves intense political negotiations. The China Development Bank and the Export-Import Bank of China account for most of the lending to African countries.
These institutions are closely linked to the Chinese government and its Belt and Road Initiative. Therefore, they are likely to toe the official position of the government.
In April 2020, China expressed a willingness to provide Africa debt relief, but not forgiveness.
In a meeting with African leaders in mid-June to discuss the COVID-19 response, China’s President Xi Jinping offered to cancel Africa’s interest-free loans, but indicated that negotiations would be carried out bilaterally.
An African Union (AU) study on the economic impact of COVID-19 released in April 2020 showed that the continent could lose up to $500 billion and that countries may be forced to borrow heavily to survive after the pandemic.
Africa needs at least $100 billion to immediately resource a health and social safety net response, and another $100 billion for economic stimulus, including a debt standstill, the financing of a special purpose vehicle for commercial debt obligations, and provision of extra liquidity for the private sector, according to the UN Economic Commission for Africa (ECA).
Nevertheless, Museveni said key sectors of Uganda’s economy, especially agriculture and ICT, had endured through the COVID- 19 pandemic.
“Production levels increased exceeding pre-COVID- 19 levels. Coffee exports continued to surge despite the Corona virus pandemic with April 2020 figures, showing growth compared with a year ago,” said Museveni.
“Uganda has been able to stand up and weather this storm because of the correct actions we took as Government, including the correct policy on promoting private sector-led growth.
The President also called on United Nations to allow African representation on the Security Council.
“After 75 years, we should take bold steps to address this long-standing injustice and imbalance in the present configuration of the Security Council. We should make way for equitable representation of unrepresented and under-represented regions, especially the African region,” he observed.
“African issues dominate the agenda of the Council. Still, it remains the only region without representation in the Permanent Category of the Security Council, and also under-represented in the Non-permanent category. We should demonstrate the political will to redress the historical injustice done to the African continent. We, therefore, urge all Member States to work towards achieving progress for a comprehensive reform of the Security Council.”