COVID-19 and the Underlying Symptoms of African Economies

Ugandan development expert Fred Muhumuza wonders if the monies from debt relief will be channeled to those in need.

Marktstand auf dem Kampala Markt

Image: of Stuart Tibaweswa Selling your greens under lockdown after sleeping in Nakawa Market, Kampala, Uganda.

One fact about the COVID-19 pandemic is its impact on persons with underlying conditions that undermines even the best medical efforts. This is also true for many Africa economies that have underlying weaknesses in service delivery and have failed to utilize local and foreign resources to realize inclusive growth, thereby fueling discussions on how best to effectively channel development aid. Most of the countries have glaring deficiencies in their politics and policies that have resulted in institutional weaknesses, corruption and bad governance. The continent is yet to create political structures and economic systems that identify development priorities and design the correct planning and implementation mechanisms with proper monitoring and accountability.

Towards the end of the last century, persistent poverty and vulnerability in Africa triggered approaches that went beyond mere injection of additional development finance to include reforms of government policies and institutions. Uganda, was a front runner in completing the Poverty Reduction Strategy Paper that came with a lot of debt relief under the Highly Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI). The underlying logic was to pool all resources (local and foreign), build the capacity of Government to plan, implement, uphold governance and human rights, and then later account to all stakeholders. Donor resources were withdrawn from direct delivery of services outside government systems, and civil society (mainly NGOs) was required to shift gears towards sensitization of communities for joint monitoring and demand for accountability. Project support gave way to budget support, which was believed to offer greater flexibility and ability to deliver jointly agreed positions.

Two decades later, the story has not changed, partly because Governments failed to live up to the task. A combination of factors including poor governance, concerns about political survival and security, corruption, and institutional weaknesses led to the diversion of money from development causes that would impact the poor. The trust and confidence of citizens and development partners was breached and eroded. Even under the pandemic stories about corruption and poor service delivery continue to dominate political and social discussions almost outcompeting the Covid-19 messages.

In Uganda, the anticipated results have been difficult to realise and/or sustain as poverty has increased from 19.7% in 2012/13 to 21.4% in 2016/17. The number of vulnerable non-poor has remained stagnant at about 43% for a decade. Underlying policy distortions and implementation challenges continue to undermine progress. Little attention has been paid to basic primary healthcare, effective provision of agricultural inputs, extension services and post-harvest handling. Instead the focus is on agro-processing for value addition in a country where 68% of the population is still trapped in subsistence farming – literally with nothing to sell to the food processors.

The arrival of COVID-19 has not only exposed underlying weaknesses in the health system and public sector delivery mechanisms but also fragility in livelihoods. Millions of urban poor could hardly survive for a few days following the lockdown that disrupted jobs that sustain their hand-to-mouth lifestyles. Lack of adequate data on the poor and vulnerable made it difficult to target relief aid and created room for more corruption. The failure of traditional channels to effectively support the poor and vulnerable communities has raised questions about the need for new approaches to development.

Donors who had practically retreated from budget support but are willing to support COVID-19 related interventions are concerned about the ineffectiveness of the delivery mechanisms and related value for money. Despite their current commitment towards addressing the emerging emergencies due to the pandemic, the future of budget support as modality of funding is still uncertain. The IMF Report of May 2020 for the disbursement of funds to Uganda under the rapid credit facility, indicated that budget support had increased from 187 billion Ugandan Shillings (US$ 50.5million) in 2018/19 to 2,635 billion (US$ 712.2 million) in 2019/20 but was expected to shrink again to Shs 390 billion (US$ 105.4 million) by 2021/22. The increase has contributed towards coronavirus related spending of Shs 578 billion (US$ 156.2 million) in just about two months from March 2020.

The uncertainty about the coronavirus is equally matched by continued uncertainty  whether African countries will eventually build systems to deal with underlying conditions that make their populations less vulnerable to local and global shocks. The spiraling debt and increasing cost of its service has left the countries fiscally challenged with hardly any sources for emergency funds and without any room for additional borrowing. Yet the need to borrow has never been greater. Uganda’s public debt as a percentage of GDP is expected to increase from 45.1% in 2019/20 to 57.9% in 2022/23. Interest payment has almost doubled from 2,260 billion Ugandan Shillings (US$ 610.8 million) in 2017/18 to 4,022 billion (US$ 1,087 million) in 2020/21.

Unless the underlying conditions of poor governance, weak institutions and related corruption are dealt with, the continent will remain vulnerable to health, political and social shocks. The corrupt, who even steal life-saving drugs from the sick, cannot give us confidence that donations and the monies from debt relief will be delivered to those who are most in need. Thus, Covid-19 has reopened the old debate on how best to utilise financial resources to realize impactful inclusive growth in Africa.

Dr. Fred Muhumuza is a development policy analyst and researcher committed to formulation of public policies and implementation frameworks that ensure inclusive growth. He works closely with Governments, Civil Society and Development Partners/Donors. He lectures at the School of Economics, Makerere University.


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