Uganda had once been one of the first
countries under the HIPC Program, the country has always looked to find ways to
improve its economic position. Uganda has proven to be a development model for other
countries but with a lack of implementation and persistent corruption, this
becomes an uphill struggle. When there are opportunities for short term loans
and relatively quick money, the less developed economies would rather receive
this instead of investment and incentives for firms to help create jobs and
improve the prospects of less economically developed economies.
Of the 40 countries,
eligible for debt relief, 32 have reached the completion point. The fact that
many countries are receiving debt relief packages with many additional
requirements such as reaching development targets and specific quotas should
point towards growth in these economies. However, of all the countries to have
reached the completion point, over half have not achieved full primary
education. These countries have the means to do so, but struggle. D.R Congo
ranks 183rd on the ease of doing business scale as per the World
Bank. D.R Congo is also known for allowing private firms to extract resources
without formally reporting it. This links to the issue of low levels of tax
revenue because of the lack of formal jobs and systems that have failed to
track employment. This has also lead to questions of whether the countries in
need are doing enough to be independent.
It may be in
the best interest for D.R Congo and Uganda to have high levels of debt. The
fact that both countries have a commodity dominated economy, many issues such
as bad weather and large fall in world prices due to more suppliers could lead
to more applications for debt relief. A
diversification in the economy is one way a country can improve. D.R also has
larges area of forests and rivers within Africa. The hydropower generated from
the river systems could power Africa. With such a large population D.R Congo
should be much stronger.
One can also
make the point that there has been an overall improvement in the economic
situation. Nigeria has been a recipient of debt relief, most notably in 2005
where external debts were greatly reduced. Nigeria is currently the largest
economy in Africa, this is due to the correct implementation of debt relief.
Nigeria also helped themselves with investing in key areas of the economy and
made use of their natural resource. In the short term the debt clearance
creates an imbalance in the economy which is challenging to overcome. This is
where most countries are unable to get the correct details and system in place
to be a weak relationship between economic growth and debt relief. The main
hurdle the WTO and the World Bank come across is long-term debt sustainability.
The organisations looking to aid these economies struggle with the fact that
these countries are internally content with aid. An approach which may promote
growth would be to have strict economic progress reports based debt relief. The
countries will be given debt relief specifically to promote longer term
outcomes. It will
therefore act as an incentive to do well and make sure the recipients of the
relief are not overly reliant. The main and key issue is the lack of self-progression
by these countries. If D.R Congo continues to send false details of the size of
projects and how successful, the country is. The continuation in the culture of
heavy reliance on debt will only make the issue worse.
The challenge of maintaining long term debt sustainability has been a
big issue for poor countries. The challenge of keeping a healthy debt to GDP
ratio is vital for a country to improve and continue to grow. However, in a
society where globalisation and new technology has created a larger gap between
the wealthiest and the poorest, we cannot ignore the main issues. Larger
economies make up for this by giving aid and loans as well as short term help.
The main problem with this approach is that these countries rely on the larger
countries for aid and it leads to lack of internal development.
After writing this essay and looking at multiple sources, the
difficulties of growing an economy are quite high. The uphill struggle these
countries face in trying to compete with technologically advanced economies is
well documented. In Section 3; looking at examining countries, the issue of
countries returning to high debts can be seen. “In 8
countries, debt levels once again exceed HIPC thresholds”. Many countries have
not been improved by these programmes. However, I did find that Nigeria,
Africa’s largest economy had complications with debt and after receiving some
aid from debt relief they continued to grow and invest in the economy.
The issue of
corruption and lack of incentive to eradicate debt has made the situation very
problematic. The IMF and the World Bank have also been known to have private
interests at hand when dealing with impoverished economies. The lack of
education and training with dealing in overseas business, constricts many
countries. The key question that could be taken away from this essay is whether
aid is better taught and not given in terms of money. First hand training and other
programmes could be more effective.