Uganda’s struggle with debt

The Guardian, June 14 1999
Researched with help from Christian Aid

The top man at Uganda ‘s ministry of finance in Kampala keeps an old greetings card in his office. It shows an employee who has just been given a miserly pay rise and has gone to his boss to show him what he thinks of ‘trickle down’ economics. He is standing on the desk and peeing on the boss’s head.

Fifty miles to the east, in a primary school in the bush near Jinja, a headteacher shows his visitor around. Here is the year-six classroom, with its bare bricks, dusty floor and corrugated iron roof, where pupils outnumber the teacher by 236 to one. They share 40 text books. Here is the year one classroom, with the words of the Ugandan national anthem on the wall and a five-foot high ant hill in front of the blackboard. The headteacher says 40% of pupils drop out before year seven, their parents unable to afford £2 a term for fees.

Half a mile away, Zama Nabula, 41, points to four hummocks in the red soil on the patch of land where she grows the beans on which she lives. This is where she buried her children, all of whom died from nothing worse than measles because she had no money to pay for a doctor. Then she points to two bigger hummocks: her husband and the co-wife with whom she shared him. It was the same for them.

Uganda is the great success story of the third world, one which the World Bank and the International Monetary Fund like to hold up as their model of achievement, where the politics are democratic and the economics are conservative, where the old state agencies have been privatised and the free market rules supreme, and to which at least in theory the wealth of the rest of the world trickles down.

As a result of its willingness to obey the nostrums of the west, Uganda is also the first nation in Africa to have seen any of its international debt relieved under the Highly Indebted Poor Countries (HIPC) scheme, unveiled by the World Bank in September 1996.

Yet nearly three years later, the sole African recipient of this relief continues to spend more on repaying its old debts than on its schools and its health services combined. Most payments go to the same institutions – the World Bank and the IMF which lent the Ugandans the money in the first place to help them rebuild their infrastructure after the civil war ended in 1986.

This is the tale of two kinds of arithmetic. The first concerns the statistics of poverty. The Ugandan government has worked assiduously with international agencies to collect them: 88% of the population live in the bush, most eating only what they can grow; 46.6% consume less than 3,000 calories a day, the World Health Organisation’s measure of absolute poverty; some 50% of the poor are consuming only 1,373 calories a day; 5.3% of children under four are wasted by malnutrition, and a further 38.3% are stunted.

In the village of Wantai, near Jinja, 15 women describe their lives. They talk about poverty, famine and shortage of water. Behind them, in among the bright green vegetation, are their tiny mud-wall houses, built on bare soil and without a chair or a bed. From time to time a child totters by, hauling a plastic container of drinking water from the greasy, grey puddle full of frogs at the edge of a swamp. The women say their greatest dream is to educate their children. Their greatest worry is illness. In both cases their enemy is shortage of cash.

At the nearest clinic, some four kilometres away, doctors, supported by Christian Aid, charge only £1.25 for medicine. It is too much. Official surveys found that 44% of Ugandans were unable to afford health care the last time they were ill. The women say that there are 338 families in the parish, and nearly all have seen early death from malaria, Aids, measles, stomach infections. From every 1,000 babies, death takes away 97 at birth and another 147 before they reach five.

Deep in the bush Francis Magoma lies motionless on a papyrus mat. He is 30 and dying of Aids. He has boils all over him, he is anaemic, his intestines are in revolt, he has pain all over, but he has no meaningful medicine and only one meal a day. He never married, his mother could not cope with him, and now he lies alone on the floor of his elderly uncle’s hut, waiting to die. Just under 10% of the population are HIV positive. 13% of children are orphans.

The second kind of arithmetic concerns the economy. When Yoweri Museveni led the guerrillas of his National Resistance Movement to victory in 1986, he inherited a country in shambles terrorised by Idi Amin, plundered by Milton Obote’s government, wrecked by the civil war that followed. Farmers were growing only for their families; civil servants were working without pay and knocking off early to scavenge for cash elsewhere; inflation was running at more than 300%. No one even knew exactly how bad things were: the old ministry of finance had been burned down with most of its records.

After 12 months in power, Museveni abandoned the Marxist economics he had learned in the bush and turned to the World Bank and the IMF for help. He adopted their policies and borrowed their money. By 1995 he had cut inflation to 6.1%, and gross domestic product was rising by up to 10% each year. With added interest, he owed $3.39bn (£2.12bn). At that time the bank and the IMF refused to jeopardise their credit rating by allowing any of debt to be written off.

When HIPC was unveiled, Ugandan officials in Washington were ecstatic. They were told that since they had already adopted the required policies and made the approved reforms they would receive their relief by April 1997. It didn’t happen. The World Bank’s shareholders – particularly the governments of the US, Japan and Germany – threw up obstacles and queried figures. Emmanuel Tumusiime-Mutebile, permanent secretary at the ministry of finance (and owner of the ‘trickle-down’ greetings card), watched in alarm: “They were haggling among themselves about the size and the nature of the relief. They said they wanted to help but they could not afford it.”

In the end, the relief arrived a year late. During that year Uganda ‘s reviving economy had boosted its exports, and since HIPC chose exports as the means of deciding how much relief should be allowed, their benefit to Uganda plummeted by $238m to $30m a year. The Ugandans had previously secured grants from other countries worth $40m a year to help pay their debt. With HIPC’s arrival these grants stopped. The net effect of the World Bank’s brave new initiative was that Uganda was actually worse off, by some $10m a year.

Faced with this embarrassing outcome, the bank agreed to ‘front load’ the relief so that it was higher for the first five years. This lifted the annual relief temporarily to a little over $40m for each of those years. The Ugandans were still left to pay a further $120m a year.

The Ugandans have continued to play the game. Every cent they saved in debt relief has been diverted into a poverty action fund, to which they have added new funds. They are trying to cut the number of people in poverty by 50%. Before 2015 they aim to build 26,000 new classrooms. By 2002 they want no more than two children to share each text book. But the reality of market-led economics is the same in Uganda as it has been in the west: the new wealth has favoured the better-off, while the poorest 20% have become poorer.

Last month the finance minister wrote to his opposite number in each of the G7 countries, due to meet in Cologne on June 18, to advise them that unless the scheme is overhauled their latest claim to be cutting third world debt is too little and too slow.

Uganda – the numbers

Life Expectancy        42 years

% of population with access to safe water       42%

% of population below poverty line (1994)      92%

Coffee exports as % of total exports               69%

GNP per capita                                                  $325

Debt owed per capita                                       $183

(Source: World Bank)