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Aid cuts now threaten vital public services in Uganda

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With donations withheld, programmes under the troubled Peace, Recovery and Development Plan for Northern Uganda are in limbo. Photos/FILE

With donations withheld, programmes under the troubled Peace, Recovery and Development Plan for Northern Uganda are in limbo. Photos/FILE  Nation Media Group

By Special Correspondent, IRIN

Posted  Saturday, December 22   2012 at  18:02

In Summary

  • Donors, under the Joint Budget Support Framework (JBSF) have suspended about $300 million, or 7.1 per cent of the annual budget, for at least six months.
  • The suspension of aid will cut economic growth by 0.8 per cent, from the projected 5 per cent in 2012-2013 financial year to 4.2 per cent.
  • Uganda has vowed to recover the stolen funds, boost the accountability of its public financial system, and prosecute guilty officials.
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Hundreds of millions of dollars in donor aid have been withheld from Uganda in recent months, threatening post-war rehabilitation in the north and key public investments across the country.

Keith Muhakanizi, Deputy Secretary to the Treasury, said donors, under the Joint Budget Support Framework (JBSF) — including the World Bank, European Union, Austria, Belgium, Denmark, Germany, Ireland, Sweden and the United Kingdom — have suspended about $300 million, or 7.1 per cent of the annual budget, for at least six months.

The cuts followed allegations that officials in the Office of the Prime Minister (OPM) embezzled up to $13 million in donor funds intended for recovery in the northern region.

Uganda is trying to win back donor esteem by meeting their conditions — Denmark, for instance, has demanded a full refund of stolen money — the introduction of better control systems, and written confirmation of the government’s commitment to crack down on corrupt officials.

Recover funds

Uganda has vowed to recover the stolen funds, boost the accountability of its public financial system, and prosecute guilty officials. At least 12 implicated OPM employees have been suspended, and two senior officials are on remand facing prosecution.

Hearings before a public accounts committee are ongoing, and Uganda’s Daily Monitor newspaper reported on December 13 that the Cabinet had approved a measure to refund $15.5 million to donors from the government’s consolidated fund.

Mr Muhakanizi said public services would not be impacted by the cuts until the next financial quarter, starting January 2013, when another instalment of donor funds is due to be released.

“We will take adjustment measures where necessary across the board,” he said. Uganda has already shifted its budget priorities once this financial year.
In September, Members of Parliament refused to pass the budget without additional funding being allocated for the recruitment of health workers.

Josephine Watera, lead researcher on the Parliamentary Social Services Committee behind that resolution, says more than $100 million in extra funds were eventually granted and pulled from a number of sectors.

Though she insisted that budget battle was necessary for the survival of the country’s deteriorating health sector, she admitted the government’s short-term fixes will have unforeseen long-term impacts on the sectors the money is moved from. “The Ministry of Finance says it is not impacted by the donor funds [being suspended],” Ms Watera said.

“And maybe we will mostly feel the impact two years later, but shifting money in the budget will not see it replaced to where it came from.”

With relatively low domestic revenue collection (13 per cent of Uganda’s GDP, the lowest in the region) and the much-awaited crude oil production still years away, analysts say the aid cuts will be devastating for the Ugandan economy.

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