Uganda Debt Relief Equals 3.7b Dollars
The Monitor (Kampala)
NEWS
June 14, 2005
Posted to the web June 14, 2005
By Elias Biryabarema
Kampala
UGANDA will have a colossal $3.81 billion of its external debt cancelled following a historic consensus reached by the finance ministers of the G8 nations last Saturday that resulted in a commitment to immediately write off $40 billion owed by 18 poor nations.
The Minister for Finance Planning and Economic Development, Dr Ezra Suruma, described the development as "an enormous relief", saying the savings that would accrue from the cancellation would potentially create a profound impact on Uganda's economic development.
The nation's total debt stock, which had escalated over several decades, stood at $4.76 billion by the reading of the 2005/06 Budget. Suruma said in an interview yesterday that Uganda owed 80% of that, about $3.81 billion, to its principal multilateral creditors (the World Bank, International Monetary Fund and the African Development Bank).
"From the calculations of what we have been owing them, that's the value that they have cancelled," he said.
No notice
However, Suruma said the donors had not yet notified the government how much of the debt would be cancelled immediately or whether it would all be forgiven at once.
With the cancellation, he said, Uganda will be saving about 80 percent of Shs 220 billion (Shs 176 billion), which is the amount that would be spent this year in multilateral debt servicing including both principal (Shs 162 billion) and interest (Shs 58 billion).
Asked whether the development would necessitate a readjustment of the budgetary allocations in view of the additional resources availed, Suruma said such a possibility was certain if the donor commitment transforms into immediate benefit.
"Of course we had planned to spend some of our money on servicing these debts so if they are cancelled, then we probably may need to realign our budget," he said.
He mentioned infrastructure, particularly power, roads and railways, as the most pressing development challenges where additional resources could be applied.
Uganda has been shopping around for an investor to finance the construction of Karuma Hydro electric power dam, which President Museveni has insisted should be simultaneously developed with the Bujagali, both on River Nile.
Industrial Promotion Services (IPS) of the Agha Khan Fund for Economic Development (Akfed) was selected in April by the government to sponsor the construction of Bujagali. Debt cancellation will thus possibly permit the government to avail finance and expedite the development of Karuma.
Suruma ruled out availing more to primary teachers, whose plight has continued to deteriorate, saying any more increase of their salary was technically impossible now. In the last week's budget, they were given a Shs10,000 increament, which was derided as negligible.
The Executive Director of Uganda Debt Network, Mr Zie Gariyo, a national anti-debt icon, faulted Suruma on the estimate of how much relief Uganda could get from the G8 debt cancellation, saying it appeared to be insignificant even as the picture is only beginning to unfold.
Supposing Uganda gets any immediate resources from the cancellation, Gariyo said, priority must be placed on both primary and post primary education and creation of a strong human resource.
While hailing the announcement as a milestone in freeing Africa from the trap of disease, poverty and hunger, commentators worldwide have still sounded cautious, saying maintenance of subsidies that lock the continent out of the much needed trade and investment, would quickly erode any impact.
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