The debt crisis and debt relief ‘Uganda: A Case Study of a LIC’ by Owen and Witts 2017 and associated resources are licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Starter: What was the ‘Make Poverty History’ campaign about? Watch the clip at https://www.youtube.com/watch?v=3mJU58A9SNc - what is the message of this clip? Who are the G8? What had they promised to do? For more information see: http://www.makepovertyhistory.org/takeaction/

Lesson objectives Understand how the debt crisis affected Uganda Understand the impact debt relief has had in Uganda

Why do countries get into debt? Some countries get into debt because they borrow money to develop their industry. An example is Zambia, where large amounts of money were borrowed to develop the copper industry. When the price of copper dropped and interest rates increased in the 1980s Zambia became unable to pay its debts. Other countries get into debt because they have corrupt leaders who say they are borrowing money to develop the country but then spend the money on projects benefiting themselves and their families.

Uganda’s debt crisis Conflict under President Idi Amin meant that Uganda’s economic growth suffered. At the same time the price of coffee on the world market dropped reducing the amount of money Uganda could gain from exports. This led to the government borrowing money from other countries. Eventually, Uganda found itself needing to spend 80% of its GDP on servicing this debt; it couldn’t do this and fell into arrears. This also left little money for developing the country. Over 60% of Uganda’s debt was owed to multilateral organisations such as the African Development Bank.

Cancelling Uganda’s debt In 2005 the G8 finance ministers met in London and agreed to cancel the debt of 36 Heavily Indebted Poor Countries to the IMF, the World Bank and African Development Bank. Uganda was one of these countries. ‘Since 2005, for the 36 countries which had some of their debts cancelled: • Their debt payments have fallen from 10% of government revenue to 4% • The proportion of children completing primary school has increased from 51% to 66% • The number of women dying in childbirth has fallen from 680 per 100,000 births to 500’ From: http://jubileedebt.org.uk/press-release/ten-years-since-historic-debt-cancellation-agreement-new- crises-threaten-africa

TASK: Drop the Debt Gordon Brown made global debt a focus of the Gleneagles G8 meeting in 2005. Working in pairs, produce a statement arguing for the G8 to drop Uganda’s debt which could have been presented at this meeting. Share your statements as a class.

Debts creeping back up Uganda benefited from debt cancellation, but it is now borrowing more money with the aim of developing the country. There is concern that debt could reach the level before debt cancellation in 10 years. To find out more see: https://www.youtube.com/watch?v=UowYGvBoj30

TASK: Was it a good idea to drop Uganda’s debt? Read the article at http://news.bbc.co.uk/1/hi/business/4245629.stm and answer the following questions: What happened to the money that would have been spent on meeting debt payments after the HIPC initiative began? Why have some people criticised the Poverty Action Fund? Why is Uganda still in debt? What could Uganda do to make its debt levels sustainable? Do you think debt relief in Uganda has been successful?

Exam Alert! For an example of a LIC you have studied, what impact has debt relief had? (4 marks)

Reflection... Peer or self assess your answer to the exam-style question and make any improvements needed. You will get one mark for making a point and a second for developing it. You need to make two points and develop both of them to get full marks.

Homework (Flipped learning) What is quality of life? What influences your quality of life?