Uganda
and the International Monetary Fund
About the Country
The Problem
In 1996 and 1997, Uganda sought the help of the IMF to reduce the large debts that it owed to foreign countries and banks. When a country has a foreign debt, it has to pay interest on the debt as well as a portion of the principal every year, which therefore meant that Uganda couldn't use this money to pay for clean water, medicine, education, and road maintenance. Uganda's large debt also meant that foreign private investors were unlikely to want to invest in the country because of the risk that they would not get their money back. It was important for Uganda to reduce the amount of its foreign debt so it could use the money to fight poverty- Uganda was one of the poorest countries in the world, with an estimated 44% or its population living in poverty. The problem of poverty in Uganda is related to problems in education and health. There are widespread health problems due to limited access to clean water, doctors, medicine, and transportation.
IMF
In 1997 Uganda was one of the first countries to qualify for IMF assistance under the Heavily Indebted Poor Country program. Under this program, foreign countries and banks agree to cut the amount a country owes them by a large amount provided the country effectively implements an antipoverty program. Uganda qualified for the IMF HIPC program because it demonstrated that it followed good economic policies during the 3 year period prior to 1997.
As a result to the HIPC program, Uganda committed to support economic growth and to make sure that poor people directly benefited from the improved economy. Uganda's poverty-reduction programs included privatizing businesses that had been run by the government, improving communication and transportation networks, helping export industries, and providing universal access to health care and education. The Ugandan government also created a Poverty Action Fund as a part of its budget to monitor antipoverty programs carried out under the HIPC program. This makes it easy to ensure that Uganda used the money it saved from the debt reduction on health, education, and other poverty-reduction programs. Because Uganda met all the commitments under the HIPC program, in 2000 it was one of the first countries to receive a substantial reduction in its foreign debt under an enhanced HIPC debt-relief program.
Results
The results of Uganda's efforts to reduce poverty within the IMF-supported program and with the support of foreign countries and banks are encouraging, and Uganda is viewed as a successful model for the IMF HIPC program. As of 2004, Uganda was experiencing strong economic growth, low inflation, and increases in exports. Statistic show that poverty had been reduced over the past 10 years or so. Additionally, support from the IMF, including the HIPC, helped Uganda to gain credibility among other international donors, that are now providing significant aid to Uganda. Regardless of these gains, Uganda is still a poor country facing problems with HIV/AIDS, rebel forces, and government corruption. Much has been accomplished, and much more remains to be done.