Each year, major lending institutions such as the International Monetary Fund (IMF) and the World Bank dispense billions of dollars to developing countries in the form of concessional or non-concessional loans, grants, advice, and development assistance (Cage, 2009; Nelson, 2014). At face value, it is believed that these lending institutions are instrumental in providing the funds needed by most developing economies to considerably increase expenditure and consequently achieve noteworthy improvements in their socio-economic and political development (Cavagnero, Evans, & Carrin, 2007). However, many critics continue to highlight the adverse outcomes experienced by developing countries as a direct consequence of funding from these institutions (Alemazung, 2010). The present paper uses Uganda as an example in discussing and analyzing current issues related to lending institutions, the health care system, and human capital.
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Funding and Social, Economic, and Political Development of Uganda
Before delving deeper into the discussion on how funding from international lending institutions has continued to impact the social, economic, and political development of Uganda, it is important to contextualize the debate by differentiating between concessional and non-concessional loans. According to Odedokun (2009), a concessional loan “is a subsidized credit and, by definition, has a grant element built into it and can, therefore, be conceptualized as a grant when it is being compared with a non-concessional loan” (p. 2). Although concessional loans are to a large extent geared toward triggering the social, economic and political development of developing countries by virtue of the fact that they are not influenced by market lending rates, they are nevertheless tied to binding and non-binding conditions as well as controversial economic policy interventions that have been criticized for projecting a neocolonial orientation in the developing economies. On the other hand, non-concessional loans are subject to the IMF’s or World Bank’s market-related interest rates and are therefore costly to service and hence inappropriate for many poor countries irrespective of the fact that they are not tied to aid conditionality or unreasonable economic policy interventions (Nelson, 2013).
With a per capita GDP of $1,200, life expectancy rate of 53.24 years, and a population of 34,612, 250 as per the 2011 estimates, Uganda provides a good example of a country that has continued to embrace the macroeconomic policies advocated by the World Bank and the IMF with the view to stimulating its social, economic, and political development (Barkan, 2011). The funding by the two international lending institutions has, at best, provided mixed results in the Ugandan context. In social development, for example, concessionary loans and grants provided by these institutions and other development partners have assisted Uganda to expand its education system and health care networks (Ooms & Hammonds, 2008). However, critics argue that the continued dependence of policy-based lending has been accompanied by greater involvement of international actors in formulating national education and health care policies in the country, a move that has received widespread condemnation for supporting neocolonialism in important national institutions (Barkan, 2011).
In economic development, available literature demonstrates that Uganda’s economy has continued to perform well due to two main reasons, namely (1) the substantial debt relief the country received during the early 2000s through the IMF’s and the World Bank’s Heavily Indebted Poor Countries initiative, and (2) the continuing trend of Uganda to become “a major recipient of general budget support from the IMF, the World Bank, the United Kingdom, the Netherlands, and the Scandinavian countries” (Barkan, 2011, p. 8). At one time, for example, the macroeconomic policies advocated by the IMF and the World Bank saw the Ugandan economy achieve annual rates of growth of between 8 and 11 percent; however, these rates have now declined to between 5 and 7 percent (Barkan, 2011). Overall, despite the promising figures, critics argue that continued lending from these institutions has served as a major disincentive for the Ugandan Revenue Authority in terms of revenue collection, not mentioning that foreign lending has continued to entrench institutional corruption and facilitate a return to the ‘big man’ rule in the country (Barkan, 2011).
In political development, loans and grants from international lending institutions have been used to develop political institutions in the country (Ooms & Hammonds, 2008), not mentioning that the macroeconomic policies advocated by the IMF and the World Bank have continued to entrench transparency and accountability in the country’s institutions (Barkan, 2011). Today, courtesy of these institutions, the democratic space in Uganda is more open, and the country’s national assembly, electoral body, and other institutions are more accountable to the people. However, critics argue that funding from these institutions has failed to turn Uganda into a democracy, as President Yoweri Museveni is an autocratic leader despite his success in establishing a measure of peace, political stability, and economic growth (Barkan, 2011).
A healthy population strengthens the economies of aid recipient countries in numerous ways, giving credence to the international lending institutions’ policy-based approach to prioritize healthcare (Koenig & Atim, 2010). In the Ugandan context, a healthy population means that more money will be available for economic development as it is not diverted to health institutions and spent on sick people. Today, for example, the Ugandan government is spending a lot of money on HIV/AIDs, malaria, tuberculosis, and other infectious diseases. Second, a healthy population means that the government will not borrow more money from international lending institutions to settle recurrent health budgets. This is yet to be achieved in Uganda, as the government continues to rely heavily on international lending institutions to settle, increasing recurrent health budgets (Koenig & Atim, 2010). Third, a healthy population means that more people will have the capacity to contribute immeasurable human resources into the country’s economic development. Today, for example, a sizeable proportion of the Ugandan population is not productive owing to health-related reasons (Cavagnero et al., 2007). Lastly, a healthy population means that more and more children will be able to attend school and become productive later in life.
Using Foreign Aid to Leverage Health Care
It is evident from the literature that Uganda continues to rely heavily on foreign aid to maintain its health care system, as available statistics demonstrate that between 20 and 50 percent of the recurrent health budget is provided by international aid (Koenig & Atim, 2010). According to these authors, Uganda continues to use foreign aid to support the huge budget for the health sector, which is traditionally allocated a paltry 10 percent of the country’s approved budget estimates. The authors further note that in the 2008/2009 financial year, for example, Uganda’s overall public allocation to health per capita was slightly over a quarter of the internationally recognized USD 40 per capita per year.
Moving on, it is well known that Uganda has continued to rely heavily on foreign aid to (1) enhance health policymaking and implementation, (2) structure health outreach networks and community-based organizations (CBOs), (3) fund public health institutions charged with the responsibility of training health professionals, (4) promote advocacy and capacity building in health, (5) equip public health care institutions with the required medicines and machines, (6) run programs on HIV/AIDS, tuberculosis, and other related infectious diseases, and (7) fund semi-private health entities and non-governmental organizations working in areas such as reproductive health and poverty eradication (Koenig & Atim, 2010).
However, as demonstrated in the literature, the heavy reliance on foreign aid by the Ugandan leadership has not translated into dramatic health care improvements in the core areas mentioned above (Alemazung, 2010; Nelson, 2014). For example, the country is yet to successfully meet some millennium development goals (MDGs) tied to foreign aid, such as reducing by two thirds the mortality rate among children under five, reducing by three quarters the maternal mortality rate, as well as halting and beginning to reverse the spread of HIV/AIDS and the incidence of malaria and other major illnesses (Koenig & Atim, 2010, Pearson, 2009).
Drawing from the above, it is evident that the effectiveness of foreign aid in Uganda can best be described as mixed, particularly in the context of the country’s social, economic, and political development. Consequently, although foreign aid may be critical in leveraging the healthcare system in a developing country such as Uganda and also in developing its human capital base, there is need for policy coherence in all development agendas to ensure that the level of foreign aid received by the country is positively reflected in its social, economic, and political development.
Alemazung, J.A. (2010). Post-colonial colonialism: An analysis of international factors and actors marrying African socio-economic and political development. Journal of Pan African Studies, 3(10), 62-84. Web.
Barkan, J.D. (2011). Uganda: Assessing risks to stability. Web.
Cage, J. (2009). Growth, poverty, reduction and governance in developing countries: A survey. Web.
Cavagnero, E., Evans, D.B., & Carrin, G. (2007). Aid for health: Should policy-makers worry about its macroeconomic impact? World Health Organization Technical Briefs for Policy-Makers Number 3. Web.
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Koenig, S., & Atim. B. (2010). Health spending in Uganda: The impact of current aid structures and aid effectiveness. Web.
Nelson, R.M. (2013). Multilateral development banks: Overview and issues for Congress. Web.
Nelson, S.C. (2014). Playing favorites: How shared beliefs shape the IMF’s lending decisions. International Organization, 68(2), 297-328. Web.
Odedokun, M. (2009). Multilateral and bilateral loans versus grants: Issues and evidence. Web.
Ooms, G., & Hammonds, R. (2008). Correcting globalization in health: Transnational entitlements versus the ethical imperative of reducing aid-dependency. Public Health Ethics, 1(2), 154-170. Web.
Pearson, M. (2009). Achieving the MDGs: At what cost? Web.