Letter from Uganda
January 2005A letter sent by Ugandan civil society organisations to the UK and other G8 ambassadors on the international debt action day.
STATEMENT BY CIVIL SOCIETY IN UGANDA ON
UGANDA’S DEBT CANCELLATION FOR THE
G7 FINANCE MINISTERIAL MEETING IN LONDON, FEBRUARY 2005 PREAMBLE We members of Civil Society, aware of the upcoming G7 Finance Ministers’ meeting in February 2005 in London, call upon the G7 countries to consider a total cancellation of poor countries’ external debt. We therefore call on the British High Commissioner and Ambassadors of Canada, France, Germany, Italy, Japan and the United States to convey our statement to their Finance Ministers for consideration. CONTEXT We appreciate the efforts made by international creditors (World Bank and IMF) in reducing Uganda’s debt burden through HIPC, which has increased Government’s expenditure on social services. However there are still challenges relating to reducing the debt levels, slashing dead stock, inadequate coordination and follow up and delayed implementation of HIPC. Uganda Debt has continued to swell due to beyond sustainable levels for instance the present value of debt to export stood at 185% in 2002; the ratio of dead stock to GDP has continued to raise from 62% in 1998 to 71% in 2003; debt service to export of goods and services averaging at 19% in 2003; debt service to domestic revenue at 20%. All these indicators are above the HIPC target. Since the HIPC completion point, Uganda has borrowed US$ 1.5 billion from multilateral creditors. The impact on debt stock, combined with lower export growth has been to raise the NPV of debt to export ratio to 305% which is more than double the HIPC debt sustainability threshold. With the continuing un-sustainable debt levels, in the long-run the servicing of debt will absorb budgetary and foreign exchange resources. In this situation, government spending on key social sectors such as health, education and social services will be reduced. RATIONALE FOR DEBT CANCELLATION Uganda’s debt levels have continued to escalate since the enhancement HIPC in 1999 which aimed at deepening and broadening debt relief and creating stronger linkages between debt relief and poverty reduction. Uganda’s total external debt stock increased from US$ 3.6 in 1999 to US$ 4.3 billion 2003 and total debt payment amounted to US$ 180 million in 2003 compared to US$ 133 million in 1999. Cancelling Uganda’s external debt would enable Uganda to achieve its development goal of halving poverty by 2017. WE DEMAND THE FOLLOWING ACTIONS: Full unconditional cancellation of Uganda’s total external debt. Total cancellation of Uganda’s debt that will broaden its narrow link to exports and relate more to poverty and government expenditure on basic social services. The G7 should systematically address the needs of poor countries such as Uganda including trade liberalisation conditionality, tariffs on exports including non-tariff barriers and quota free access. Support regional integration initiatives and making WTO more transparent. Support the establishment of an arbitration process which would permit creditor and debtor countries to negotiate on more equal basis G7 Governments should support initiatives that foster Good Governance and ensure that Government of Uganda takes all necessary measures to ensure governance and financial discipline, without which the benefits from dropping the debt and the sustainable use of aid, thereby leading to poverty eradication and development in Uganda, will not be realized. The G7 should ensure that the IFIs establish open, transparent and accountable procedures and allow watchdog institutions including civil society organisations to audit their actions. Support Government to ensure that there is economic stability; commitment to reduce poverty, mechanisms to monitor poverty and government expenditure; anti-corruption reforms and rebuilding the capacity of government to deliver services. Government should strengthen debt capabilities and coordination. Government should pursue maximum HIPC relief negotiations, acceptance of grants and only concessional loans and seeking a legal framework for debt relief