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Renowned American economist Prof. Jeffrey Sachs is determined to address the issue of unfair interest rates paid by African countries, including Uganda, to secure funds for development. Sachs, currently visiting Uganda at the invitation of the government, revealed this during an interview with a local TV station on Sunday.
Sachs emphasizes the importance of African countries accessing funds on more favorable terms, similar to those enjoyed by other nations globally. He believes that such efforts could enable Uganda to increase its debt ceiling substantially without risking severe financial crises. This, in turn, would facilitate greater project financing and investment in critical infrastructure and human capital, such as education, thereby accelerating economic growth.
Highlighting the disparity in interest rates, Sachs points out that Uganda is burdened with unfairly high rates compared to countries like Japan and the United States. While Japan pays around 1% interest on long-term loans and the US pays about 4%, Uganda faces significantly higher rates.
“In the West, they caution about high debt levels, yet the US and Japan carry much higher debt relative to their national income,” Sachs explains, underscoring the discrepancy in treatment.
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During his interview, Sachs elaborated on the consequences of these unfair rates, citing exorbitant figures that African countries like Uganda are forced to pay when accessing international markets for loans. He argues that such high-interest rates impede Uganda’s ability to invest in long-term development projects.
Sachs aligns his proposition with the views of UN Secretary-General Antonio Guterres and the G21, which includes the African Union. He advocates for basic financial reforms that would ensure countries like Uganda receive fairer terms on loans, akin to those offered to other nations.
“If Uganda were to seek a 30-year bond on the international market, it would face outrageously high interest rates, unlike more developed countries,” Sachs asserts, highlighting the need for systemic change in global financial practices.
According to Sachs, accessing funds at friendlier rates could propel Uganda towards rapid economic development, comparable to that achieved by Western nations. He emphasizes the potential for Uganda to attain similar levels of success within a relatively short period through fairer financial arrangements.
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