Africa-Press – Uganda. The increasing occurrence of natural disasters, primarily in poor countries, has prompted the World Bank to create an allowance where debt repayments can be paused in times of crises.
The World Bank revealed this during the Finance Summit in Paris, France, noting that this will ease crisis financing for low developing countries and help governments build advance emergency systems.
“We work to make people better prepared for threats of any kind by sharing our expertise, building resilience, and insuring against risks,” a World Bank statement, said, noting that “to allow countries focus on meeting urgent needs of their people instead of on loan repayments, the World Bank had launched climate resilient debt clauses.
However, the World Bank did not indicate whether it had plans to write off debts, even as a number of participants including Carly Munnelly, a senior adviser at Save the Children, said that while pausing debt repayments was helpful, “it is insufficient to address the crippling debt burden faced by many countries today, which are undermining governments’ capacity to invest in health, education, and other rights”.
Countries such as Uganda have already indicated that the debt burden has constrained investment in key sectors of the economy with the largest portion of tax revenue going to debt repayments.
“The increase in the debt service … takes away money from the budget which would have funded other government priorities such as health and education,” Finance Minister Matia Kasaija, said during his Budget speech.
Uganda now plans to access climate and green financing, leverage private equity for infrastructure investments and scale up public private partnerships to make its debt sustainable.
Additionally, it plans to limit non-concessional debt to high impact, high return projects such as Standard-Gauge Railway.
During the summit, hosted by French President Emmanuel Macron, several countries unveiled measures to raise finance to fund priority sectors of their economy.
A number of African economies have been weakened by Covid-19 and now dependent on borrowing.
During the summit the World Bank also launched a tool kit, which it said, will help developing countries to provide new types of insurances that will backstop development projects in crisis preparedness.
“This will enable businesses to sustain operations and protect jobs, build resilience and long-term sustainability,” the World Bank said.
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