Debt Burden undermines Economic
Growth and National Development
By June 2010, Uganda had a total
external debt stock of US$ 2,343 billion according to the Semi Annual Report on
External Assistance to Uganda(MoFED).Considering that recently the World Bank approved
credit worth US$50M to finance the national Budget, and with the challenges in
Aid Management identified in the Development Cooperation Uganda Report
2008/2009, it is difficult to determine how effectively this credit will
achieve the objective of improving service delivery and poverty reduction as
said by Chris Kassami, the Permanent Secretary of Ministry of Finance and
Secretary to the Treasury. The credit being disbursed into the consolidated
fund provides government lee-way to flexibly allocate these funds to its
priority areas yet widespread mismanagement and corruption cited in the
Development Report undermines efficient resource utilization. As a result, some
donors are reported to have reduced on disbursements pending their analysis of
human rights and good governance.
Uganda has been a beneficiary of
several debt burden relief since the 1980s and also benefited from debt
cancellation under the first Highly Indebted Poor Countries (HIPC) Initiative
of about US$ 650 million in 1998 and the Enhanced HIPC of US$ 660 million in
2000. Debt accumulated from the 1970s was as a result of borrowing
for economic recovery and stabilization programmes given the political
unrest in the period but debt cancellation, provided an avenue for borrowing
more external credit. This also portrayed Uganda as a risk free country
prompting donors again to lend to her increasing debt stock annually but the more relief we
get, the more compelled to borrow yet by the time of the relief, the debt
burden tends towards unsustainability. Does this mean we learn nothing and
forget everything?
Government’s frequent acquisition
of credit which is accumulating annually may drift us back into the Pre-HIPC
Initiative era. HIPC savings were intended to facilitate poverty reduction
programmes yet poverty is reported to be highest in rural areas; one is bound
to wonder whether these funds really achieve their objectives not withstanding
other inequalities whose gaps keep increasing by the day. But the big question
still remains; how differently we’re going to manage the incoming credit funds
and service this debt as expected since good debt servicing is attributed to
good debt management and governance. Cases of poor service delivery especially
in the rural settings have frequently featured where little or nothing has been
done to improve the situation.
Accumulation of debt stock is
attributed to new loans disbursements together with on-going loans. Good debt
servicing is strongly attributed to good debt management and governance but a
permanently growing debt status may undermine economic growth and development
since resources used to service debt contribute to the crowding out of
investment. A large debt
burden requires more funds for repayment thereby draining the economy of what would
have otherwise been used for development.
As a result of poor financial
management and indiscipline, the burden is transferred to the future
generation. What makes us think that we should remain on the receiving end of a
“white man’s hard saved taxes” just to be extended to us and mishandled since
its impact is almost invisible. We need government to act as expected and fully
hold the duty bearers accountable, punishing them to deter others from further
misuse of funds.
Where there is a will, there is a way.
#Just saying...
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