Rédaction Africa Links 24 with The Observer
Published on 2024-03-27 08:07:21
Thomas Sankara, the revolutionary president of Burkina Faso, once gave a speech that is famously referred to as the ‘speech that killed Thomas Sankara’. In this speech, he boldly stated that “debt is a cleverly managed reconquest of Africa aimed at subjugating its growth and development through foreign rules.” Sankara warned that repaying such debts would lead to the death of the nation. This speech was delivered at the OAU summit in Addis Ababa on July 29, 1987, just two months before his assassination.
Decades later, South Africans protested against a $3.7 billion IMF loan in 2020, and Kenyans also voiced their opposition to a $2.34 billion IMF loan in 2022, which was tied to a condition that doubled the VAT rate for fuel. However, when Uganda received $120 million from the IMF under the Extended Credit Facility in 2024, there was a surprising lack of public outcry.
The total amount lent to Uganda by the IMF under the ECF since June 2021 has reached $870 million, with additional funds of $491.5 million provided in May 2020 under the Rapid Credit Facility. While the IMF offers zero-interest loans with reasonable terms, the structural conditions attached to these loans have historically led to negative outcomes for low-income economies like Uganda.
For example, Egypt recently had to devalue its currency and increase lending rates to secure IMF funding, resulting in a 38% loss in currency value and reduced household incomes. Similarly, Pakistan is negotiating IMF loans with strict conditions that include imposing new taxes and raising prices on essential goods.
Uganda’s recent increase in central bank rates and lending rates following the IMF loan raise concerns about the country’s economic stability. Despite claims of inflation risk, Uganda’s inflation rates have been relatively low, and the reported need for tightening measures seems unsubstantiated.
The IMF’s loan conditions for Uganda are based on performance in governance, debt management, revenue generation, and anti-corruption efforts. However, Uganda’s high debt-to-GDP ratio, low tax revenues, and governance issues present challenges in meeting these conditions. Reports of corruption and human rights violations further highlight the questionable decision to provide loans to Uganda.
While the IMF cites macroeconomic criteria and reforms as justifications for lending to Uganda, the lack of transparency and accountability in these processes raises doubts about the effectiveness of such loans. Ultimately, the ongoing cycle of debt accumulation without significant improvements in governance and economic management poses a long-term threat to Uganda’s development.
It is crucial for Ugandans to scrutinize not only their government but also the institutions and lenders providing financial support. Without addressing underlying issues of governance and corruption, the cycle of debt reliance and economic instability is likely to persist, jeopardizing the country’s future prosperity.
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