Temporary settlements in northern Uganda
International Financial Institutions like 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 those indicators Uganda’s debt to GDP Ratio is at 52.0% which is not considered unsustainable. 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 over 30% 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 2000 Medical interns Doctors who are supposed to support the country’s health sector.
The budget allocation for education this financial year is at 8.6%, which is below the African Union’s recommended minimum of 20%. This grim crumbling image of the country’s ability to provide public services is set on the backdrop of a 30% 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% to 50.2% 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 utilized and our project completion rate is below all our East African neighbors.
The government is borrowing to construct more roads, but the economic growth from these activities remains to be seen yet the cost to the people is glaringly clear. The true cost of Uganda’s debt is therefore a failure to provide public services and progressively realize social economic human rights like health and education.
Alternatively, many argue that debt is not obtained in isolation, it is obtained to construct roads and improve security like the government loan for CCTV cameras. However, with poor utilization of borrowed 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 should be considered 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?
The author is a law student at Makerere University
Source: The Observer
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