Ugandan Debt

murphaph

Anybody see Newsnight (Fri. 10th June)?
Interesting that debt cancellation just a few years ago (1997~8) has had no effect on Uganda as they just went out and borrowed more than ever before and spent it on guess what.....the military! Yay!

There was a Ugandan journalist explaining why he felt debt cancellation and aid in general was bad for Africa. Briefly;

1) Aid causes a culture of laziness.
2) Aid to a wealthy country like Uganda is spent by the government on bribing the opposition so although there's a democracy on paper there's none in practice.
3) So much foreign aid enters Uganda that the economy cannot absorb it and the central bank has to buy back currency and hold it as treasury bonds. This drives up interest rates to levels where businesses cannot afford to borrow and invest.
4) Aid is syphoned off by those in power. It is spent lavishly on themselves and this drives up inflation for the poor suckers at the bottom. He claimed aid made most people POORER.
5) The Ungandan version of Revenue's head officer was inrterviewed. She claims that Uganda is wealthy enough to support itself no problem but that the department is underfunded by government and only collects app. 45% of tax due to the state. She reckoned because aid makes up the shortfall that nobody in government was pushed.
6) Last year Uganda used up 0 tonnes of it's EU export quota of (I think it was) half a million tonnes of sugar. There appears to be no will to trad because aid comes in anyway so the government doesn't exactly encourage it.

It was dead interesting to get perspective from inside Uganda. Ultimately the concensus was that as long as the aid flows then Africa will keep getting poorer.

pete

murphaph wrote:

Anybody see Newsnight (Fri. 10th June)?
Interesting that debt cancellation just a few years ago (1997~8) has had no effect on Uganda

Uganda and the Shortcomings of the HIPC initiative[1]

5th December 2002

Uganda is known as the star-pupil of the IMF in Africa. During the last ten years, the country pursued exactly the policies, which the IMF usually prescribes, i.e. fiscal austerity combined with structural adjustment, and also implemented a far reaching poverty reduction strategy. Based upon these achievements, Uganda was the first country to benefit from debt relief under both the original and enhanced frameworks of the Heavily Indebted Poor Countries (HIPC) Initiative. She reached the completion point under the original framework in April 1998 and under the enhanced framework in May 2000. The total debt relief, which Uganda should have received under the HIPC framework, amounts to $347 million and $656 million in net present value (NPV) terms.

However, even though 2 years have passed since the reaching of completion point, Uganda has up to now not been able to secure full HIPC relief from all her creditors. Assuming full HIPC relief, Uganda’s stock of debt in NPV terms as of June 2001 would have amounted to $1,147 million. Yet, the failure of several creditors to deliver their share of relief, meant that actual debt stood at $1,469 million, i.e. $322 million more than expected.

http://www.jubileeresearch.org/worldnews/africa/uganda051202.htm

as they just went out and borrowed more than ever before

$850 million borrowed from... The World Bank.

and spent it on guess what.....the military! Yay!

Any figures for this? They're in the middle of an 18 year civil war, aren't they?

murphaph

pete wrote:

Any figures for this?

Just relaying what was stated by the Ugandan journalist and Kirsty wark in her piece on Newsnight mate. Not making it up myself but I think they increased their military budget by 23% immediately after their debt cancellation kiced in.

pete wrote:

They're in the middle of an 18 year civil war, aren't they?

Interesting that the Ugandan government advisor interviewed by Wark never mentioned the term 'civil war'. He said they were having 'problems' with 'gangs'. He may have been playing a civil war down of course. But one man's civil war is another man's brutal oppression of poor people by a corrupt government. I'm not saying this is the case in Uganda but it might be and has happened a lot before.

What I'm trying to convey is that there are seemingly intelligent people in Uganda who believe debt cancellation and increased aid is not a good thing for the people. The figures might look good but the effect on the ground has been miniscule while the ruling classes have benefitted immensely.

the overall impression of Uganda was of a very bountiful land that should be exporting her produce and generating wealth for her people, but she isn't and this was exclusively blamed on bad governance.

Interestingly the Ugandan journalist pointed out at the end that although international aid into Africa has increased massively over the last 30 years th continent is poorer than ever. Makes you wonder.

Sand

Any windfall from debt cancelation should go into trusts to be administered by a selected panel of academics/human rights/economics types. The panel should obviously be recruited form the country in question and be as independant as is possible - the US/UK and the other nations cancelling the debt should establish a watchdog body to ensure the trust panel remains free of corruption. Keep 10% for future generations, the rest is spent directly on projects approved by the panel. Put a strict limit on growth of the military budget, because if not to Swiss bank accounts and mansions, this is where it will go if they can get away with it.

This seems to be the new model for international finance/aid where the local government cant be trusted to act in the peoples interests, and it makes sense. The kleptocracies and military juntas need to be kept well away from the benefit of any debt cancellation.

Otherwise you might as well hand out money to every homeless alcoholic you meet on the streets with a hard luck story.

pete

murphaph wrote:

Just relaying what was stated by the Ugandan journalist and Kirsty wark in her piece on Newsnight mate. Not making it up myself but I think they increased their military budget by 23% immediately after their debt cancellation kiced in.

And yet the World Bank ponied up another $850 million in loans. Fantastic.

http://www.jubileeresearch.org/analysis/reports/G8final.pdf

Despite the growing international attention being paid to the problems of long run debt sustainability, the loan pushers just keep on pushing. The World Bank alone has lent Uganda the first HIPC country to reach Completion Point and an oftquoted 'success story' of the initiative $850m since the year 2000, against total debt cancellation under HIPC of around $2bn.

Interesting that the Ugandan government advisor interviewed by Wark never mentioned the term 'civil war'. He said they were having 'problems' with 'gangs'. He may have been playing a civil war down of course. But one man's civil war is another man's brutal oppression of poor people by a corrupt government. I'm not saying this is the case in Uganda but it might be and has happened a lot before.

http://www.globalsecurity.org/military/world/war/uganda.htm

What I'm trying to convey is that there are seemingly intelligent people in Uganda who believe debt cancellation and increased aid is not a good thing for the people.

Their being in Uganda doesn't automatically mean their analysis is right.

murphaph

Sand wrote:

This seems to be the new model for international finance/aid where the local government cant be trusted to act in the peoples interests, and it makes sense. The kleptocracies and military juntas need to be kept well away from the benefit of any debt cancellation.

Exactly. At a minimum any debt cancellation benefits will have to be administered directly by outsiders. These tinpot regimes simply can't be trusted to look after their people with our money. Of course the cynic in me might think that in the past our own corrupt western governments have been doing their best on behalf of our oil and gas companies to keep these wasters in power to make sure the locals don't get too uppity about their oil being raped. Corporations run the world afterall.

murphaph

pete wrote:

Their being in Uganda doesn't automatically mean their analysis is right.

I don't believe I ever said it was, but that's their opinion and they're closer to the scene than you or I so perhaps it shouldn't be discounted as quickly as some other opinions. All the interviewees in Uganda came across as clever, well rounded people who despaired at their government's 'handling' of their country. Shovelling aid into Africa has of course built hospitals and schools, but throw enough mud and some will stick.

Cork

Debt write offs with the same countries looking again for loans?

Once bitten.............

Tin pot dictators don't go hand in hand with economic or social reform.