Due to its immense debt burden aggravated by the COVID-19 pandemic, the East African country plans to approach creditors for suspension of repayments. After Ethiopia, Zambia and Chad, Uganda is another cautionary example of the debt crisis the Global South is about to face.
The country’s debt load grew by 35 percent in a single year, increasing the default risk to dangerous levels. As Reuters reports, Uganda gobbled up large credit lines from the World Bank, the International Monetary Fund and other lenders in the course of the pandemic.
The country’s debt load is seen surging past 50% of GDP by the end of the current financial year in June, said Finance Minister Matia Kasaija .
In the fiscal year beginning July, the country will use up 20% of all its planned domestic tax revenues to repay interest rates on public debt, Kasaija added.
Numbers like these highlight the importance of a framework that provides debt relief to countries that require it, while ensuring that the relief is calibrated towards attacking the virus, protecting the vulnerable, and staging a green and inclusive economy.
If not addressed, the debt crisis will hold back recoveries and undermine the development prospects of hundreds of millions of people in the Global South.