ANNEX A
KENYA, RWANDA AND UGANDA
Kenya
External debt stands at $6.2 billion. About half is owed
to multilateral creditors and 38 per cent to official bilateral
creditors. The debt service ratio is 24.8 per cent (1995㭜),
but it is projected to fall below 20 per cent by 2000, mainly
due to clearance of arrears and an increase in the concessionality
of outstanding debt.
Though poor, Kenya does not meet the criteria for heavy indebtedness
at present. In net present value terms, the debt/exports ratio
is 148 per cent, below the threshold of "heavy indebtedness"
(200-250 per cent) defined by the World Bank for the purposes
of the HIPC initiative. Moreover, the current projection is for
the sustainability of its debt to improve over the next five years,
with a sharp fall in 2002. The debt/exports ratio is projected
to fall below 100 per cent in 2000.
Kenya agreed a rescheduling with the Paris Club in 1994,
but—at its own request—on non-concessional terms,
and hopes to maintain sufficient creditworthiness to enable it
to tap international bond markets. There is currently no ECGD
cover for export credits for Kenya, but this could be restored
given sound policies, including a renewal of IMF support, in the
light of the favourable debt outlook. All bilateral Kenyan aid
debt to the UK was forgiven in the early 1980s. Subsequent aid
has been all on grant terms.
Rwanda
Rwanda is one of the three poorest countries in the world
(per capita income of $180 at end-1996). The percentage of the
population living below the poverty line rose sharply from 40
per cent in 1985 to 53 per cent in 1992. The viability of the
economy was dramatically undermined by the halving of world coffee
prices. With the devastation caused by the 1994 genocide and war,
the poverty situation has worsened.
External support will be required for some years to come.
The Rwandan Government's own financial contribution to the reform
effort is constrained by a narrow tax base and a high debt burden.
Debt is an overriding development constraint. Total external debt,
including $99 million arrears, amounts to about $1 billion (84
per cent of GDP) and domestic debt a further $223 million. The
bulk of the external debt, some 83 per cent, is owed to multilateral
creditors, with a further 12 per cent owed to bilateral creditors.
Even after using available debt relief mechanisms, Rwanda
will be faced with an unsustainable debt burden. In 2000, Rwanda
is forecast to have a net present value of debt to export ratio
of 732 per cent and debt service ratio of 54 per cent. On the
grounds of key debt indicators Rwanda is eligible for HIPC debt
relief.
Current external debt service (including repayment) amounts
to 23 per cent of government revenues—this masks a very
high dependence of export earning on a few crops unstable in price
and output and the high requirement for budgetary expenditures.
Along with high military expenditure (37 per cent of the 1997
recurrent budget) and tight primary budget deficit targets, this
leaves little scope to use domestic resources for the social sectors
(29 per cent of recurrent expenditure).
Uganda
External debt stands at $3.4 billion. Of this, 75 per cent
is owed to multilateral creditors and 10 per cent to Paris Club
official creditors. The NPV of debt to exports ratio stood at
240 per cent in 1996-97. The debt service ratio stood at 20.4
per cent in 1996-97.
Uganda was an early beneficiary of Paris Club concessional
terms rescheduling, and was the first to obtain a stock of debt
reduction under Naples terms (67 per cent). However the benefit
to the country was moderate. Uganda will be the first country
to benefit from debt relief under the HIPC initiative; the decision
point was reached in April 1997; the completion point will fall
in April 1998. The UK was prominent in pressing strongly for such
rapid implementation in Uganda's case because of its strong record
of sustained economic reform. In addition to the further debt
reduction it will give under the Paris Club contribution to HIPC
relief, the UK has also donated £6.5 million to allow a full
implementation of the African Development Bank's share of HIPC
debt relief for Uganda. All Uganda's aid debts to the UK were
forgiven in the early 1980s. All subsequent aid has been on grant
terms.
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