A "shocked and disappointed" Uganda has been given no official explanation for the unexpected delay in getting early debt relief under the HIPC Initiative, Deputy Finance Minister Basoga Nsadhu told Africa Recovery at the 31March-2 April ECAfinance ministers' meeting in Addis Ababa. "We have done everything under the sun to meet all the requirements," he said. Even IMF Managing Director Michel Camdessus told the London Financial Times that Uganda's completion point – when a country obtains enough debt relief to ensure "debt sustainability" and enable it to "exit" from the debt treadmill – would be around September 1997. But, Mr. Basoga Nsadhu said, the months of optimism suddenly turned negative just before the 10-12 March meetings onUganda of the World Bank and IMF Boards. Leaks to the press signalled the Boards' intent to postpone the completion point into 1998 or 1999.
Before that, Mr. Basoga Nsadhu said, the Bank and Fund had been "very supportive" because of Uganda's "many important reforms, some initiated locally, others in consultation with them." Uganda has an "irrefutable" 10-year track record and has been touted as the "angel of economic reform in Africa," said Mr. Basoga Nsadhu, wondering if "we are being punished because we are overqualified."
All this is a bad sign for other African HIPCs, he warned: "If we are the darlings of the World Bank and we are being given this kind of treatment, how are we sure that our friends will get fair treatment, considering the unique problems that each country has?"
Led to anticipate a September 1997 completion point and thinking "we could convert some of the huge resources we are using to pay debt," Uganda had started some social and infrastructure programmes. These include universal primary education – enrolment rates are already rising – and upgrading or building regional referral hospitals and county health centres and refurbishing the central Mulago hospital. A road programme to open up the agricultural heartland is also under way, with some equipment already supplied to districts. But the rest of the money for equipment "will now be consumed" by debt service, he said.
The government has written formally to the Bank and the Fund arguing that any postponement in getting debt relief "would be catastrophic." It is also unhappy at not seeing the preliminary debt sustainability analysis document until after it had been presented to the Boards. Uganda has made some progress, but "the HIPC would give us a leap forward in our internal programming," he declared.
Uganda has been given a lot of credit for its years of successful adjustment, Mr. Sarbib said, and it was nearly at the "decision point" only a few months after the Initiative was approved – it normally take three years. The issue now "is by how much we are going to shorten the time between the decision point and the completion point," usually three years.
If the completion date is September 1997 or April 1998, "the cost to Uganda in terms of [debt relief] would be minimal," said Mr. Madavo – Mr. Sarbib put it at some 5-6 per cent of a potential relief package – and a substantial cost difference would only occur if the completion date were in 1999. Uganda and its supporters want an earlier completion date, but some IMF and Bank Board members have "other concerns, looking beyond Uganda to the implications for the overall Initiative," Mr. Madavo explained.
Despite the HIPC case-by-case format, some Board members fear that "there are not too many Ugandas in terms of the length of performance," Mr. Sarbib added. If in the first HIPC deal there is no gap between decision and completion, "you risk creating a precedent which not all countries will understand."
He said Board members had expressed "no particular concerns" over Uganda, and "no doubt or scepticism" about performance in education, health and rural development, Mr. Madavo added. But some really want a "very tightly managed" deal that benefits only those HIPCs that are "truly performing." So while in Uganda's case, the track record is "very clear and very long," Mr. Madavo said other cases might not be so clear cut. The members "most hawkish on performance in the [Bank/IMF] Boards are the ones who have said we cannot possibly merge the decision point and the completion point," Mr. Sarbib said. Their message is that "if Uganda has to wait, then everybody else [knows] we are very serious about performance." In a sense, Uganda had to go first "because no one can question the legitimacy of their case. But because it is Uganda, the ones who wanted to make a point" about the seriousness of sustained performance criteria "have chosen to make a case with Uganda." Mr. Sarbib insisted that eligibility for HIPC is now a "very good incentive" for countries already in Bank/Fund programmes "not to let the clock go back to zero."
The Bank Vice Presidents remained optimistic and reassuring, despite the history of internal and external factors which have made it hard for many countries to stick with Bank/Fund programmes, and unlikely that many can now do so for six straight years. Mr. Sarbib said "when you have an exogenous shock, we take care of it, we take it into account." So if export revenue falls sharply due to terms of trade changes, "then the relief will be greater." And there should be no conception of winners and losers, argued Mr. Madavo, stressing that the Bank, the Fund and African countries are working together to achieve sustainable levels of debt in order to accelerate development.