Creditors deny Uganda $15 million of debt relief and violate the Cologne Agreement

An acrimonious and secretive meeting of the Paris Club of official Creditors in Paris on 12^th September denied the Ugandan government $15 million of debt relief promised at the G7 summit in Cologne in 1999. The meeting revealed deep divisions between G7 creditors, as Germany joined Austria, Italy and Japan in opposing deeper debt relief for Uganda. Canada, the USA and the UK delegations had argued that Uganda should have her “post cut-off date debt” (all the debt incurred after 1981) cancelled under the Cologne Agreement, but this was opposed by the group led by Austria and including Italy, Japan and Germany. $15 million represents almost 40 per cent of what is available in the Ugandan government's Poverty Action Fund—a fund exclusively dedicated to the eradication of poverty in Uganda—for the financial year 2000-2001.

Austria, Germany, Japan and Italy insisted that aid debt, or Overseas Development Assistance (ODA) debt, previously written off be considered in current calculations for what Uganda should pay. The UK delegation had argued that in determining the level of debt sustainability for Uganda, creditors should not include her ODA debt (i.e. concessional debt) – as the Cologne Agreement had committed creditors to writing off ODA debt completely. It is therefore not eligible for inclusion in calculations regarding sustainability. Austria, Germany, Italy and Japan did not agree, and insisted that ODA debt be included. The result is that the hard-pressed Ugandan government will be denied $15 million of debt relief promised to it at the Cologne summit.

The Ugandan government was forced to agree to this unsatisfactory relief package, as it has made commitments to poverty reduction this year, which can only be met if the HIPC initiative is fully implemented.

Ann Pettifor, Director of the Jubilee 2000 Coalition said:

“Uganda has met hundreds of structural adjustment conditions to qualify for debt relief. It has passed through the entire, elaborate set of hoops and hurdles that is the HIPC I process. The reward has been broken promises from powerful creditors meeting as a secretive cartel.

“Even after the debt relief offered (which will total $2billion), the country will pay at least $50 million each year in debt repayments. This is one of the countries with the highest levels of HIV infection in the world, which has already left one million children orphaned”.

There is a high degree of confidence that Uganda will use its debt relief for poverty reduction. In the past the government has used debt relief to help raise primary school enrolment from 54% to 90% and has also managed to bring down the HIV infection rate mainly through community education programs. The Poverty Action Fund, a transparent and accountable mechanism set up to administer the resources gained through debt relief, could use this money to bolster these community programs which are now trying to address the devastating affect of AIDS on family structures. Representatives of the richest countries in the world, Germany, Austria, Japan and Italy have secretly reneged on the Cologne Agreement and conspired to reduce the effectiveness of the Ugandan government's efforts to deal with its profound social problems.