UGANDA: Aid cuts threaten vital public services
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Donors cut 6 percent of the annual budget
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Deep-rooted corruption in the Office of the Prime Minister
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Northern recovery programmes likely to suffer
KAMPALA, 17 December 2012 (IRIN) - Hundreds of millions of dollars in donor
aid have been withheld from Uganda in recent months, threatening post-war
rehabilitation in the northern region and key public investments across the
country.
Keith Muhakanizi, deputy secretary to the Treasury, told IRIN that donors,
under a Joint Budget Support Framework (JBSF) - including the World Bank,
European Union, Austria, Belgium, Denmark, Germany, Ireland, Sweden and the
United Kingdom - have suspended "about US$260 million", or 6 percent 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. Uganda has vowed
to recover the stolen funds, boost the accountability to 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 through a public
accounts committee are ongoing, and Uganda's Daily Monitor newspaper
reported on 13 December that the cabinet had approved a measure to refund
$15.5 million to donors from the government's consolidated fund.
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.
Economic fallout
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 said 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]," 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 percent of Uganda's GDP,
the lowest in the region) and much-awaited crude oil production still years
away, analysts say the aid cuts will likely be devastating for the Ugandan
economy. The country is still recovering from last year's high inflation,
which hit 30.5 percent in October 2011. Tax collection and domestic
borrowing make up the 75 percent of the budget not funded by donors.
"Government is the biggest spender in its economy - with cuts, everything
suffers," said Angelo Izama, a political affairs analyst at the US-based
Open Society Foundation.
Uganda's central bank has said the suspension of aid will cut the country's
economic growth by 0.7 percent, reducing its projected 4.3 percent growth in
the 2012-2013 financial year to 3.6 percent.
According to Izama, Uganda can expect to see stagnated social services,
civil servant layoffs and delayed infrastructure projects due to contract
breaches in the coming months.
Northern recovery at risk
With donations withheld pending the results of ongoing investigations, the
fate of programmes under the troubled Peace, Recovery and Development Plan
for Northern Uganda (PRDP) are in limbo. Though the government plan ended in
June, an extension was due to run from July 2012 to 2015.
Ireland was the first donor to respond to the corruption allegations,
suspending approximately $20 million from the budget in October. Fionnula
Quinlan, a press officer with Irish Aid, said the money was due to build
schools, fund basic infrastructure such as water supply, improve public
financial management and prevent gender-based violence.
On 28 November, Sweden issued a statement demanding that Uganda repay some
$6.7 million - the full amount Sweden contributed to roads, schools, health
clinics, legal system and water supply through the PRDP - though it has not
yet been able to verify that the full amount of this money was misused.
The initial result of an independent Swedish study "reinforces suspicions of
embezzlement and shows that the scale is significant," the statement said.
"We are aware that our recovery might slow down some development in northern
Uganda, and it is extremely regrettable," said Charlotte Petri Gornitzka,
the director general of the Swedish International Development Agency (SIDA).
The Ugandan government operates a cash budget, which works on an estimate of
assets, as opposed to an operating budget, which works on forecasted
revenues and expenses. If Uganda's coffers from taxes, loans or donors are
empty, ministries and implementing districts will be left in the lurch.
"By cutting aid they are not punishing us [leaders] but killing children and
women out in the villages who are in dire need of service delivery out
there," said David Odongo, chairperson of Aleptong District in the Lango
subregion.
Martin Ojara Mapinduzi, the district chairman of Gulu District, in northern
Uganda's Acholi subregion, urged donors to revamp the way they distributed
aid rather than cut it. "They should focus on using the district local
government structures and development agencies that directly interface with
the people whom the funds are meant for," he said.
"We are very, very worried," said Luke Nyeko, chairman of Kitgum District,
one of the 55 northern districts that had been benefiting from PRPD
programming.
According to Nyeko, Kitgum stopped receiving government-managed PRPD funds
in September with no explanation, and a number of programmes, including a
scholarship scheme for vulnerable youth, were stopped in their tracks.
"Our people are highly traumatized because of the war, and these students
who should have been moved up through education are going to suffer," Nyeko
said. "There is nothing yet we have been told about that money. Our hands
are tied."
Nyeko added that roads, health centres, boreholes, and staff houses in
schools have now been "completely interrupted". He called on donors to
follow the example of the US government, which supports projects directly
through USAID, as opposed to through Uganda's budget.
Budget versus project support
Direct budget support has been a contentious issue among donors for years,
though the percentage of external support to Uganda's annual expenditure has
decreased over the years. Donor funds account for about 25 percent of
Uganda's budget for the 2012-2013 financial year, compared to 42 percent in
2006-2007.
Norway, a former JBSF partner whose funds were directly involved in the OPM
scandal, stopped funding Uganda's budget directly in the 2010-2011 financial
year, citing a lack of progress against corruption. Though it continues to
provide loans to Ugandan projects aligned to national development
priorities, last month Norway suspended about $10 million in aid intended
primarily for roads and energy projects such as rural electrification and
expanding the national power grid, according to its embassy in Kampala.
According to a March 2012 statement, JBSF partners had already planned to
reduce direct budget support last year, after a joint assessment
"highlighted poor budget credibility and discipline in 2011 and low releases
to some key service delivery functions such as health, water and
environment, and education".
Donors are increasingly tying aid to economic development and good
governance - the same report that uncovered the abused PRPD funds was
highlighted by donors as proof of effective aid, and the kind of investment
they would continue to support.
"But there's a deep irony here, because donor-promoted institutions are
maturing, and as a result donors are cutting aid," Izama said. "The reform
processes that we are seeing today is actually a good precursor to the type
of governance regime you need for a country that has got natural resources,
and whose economy is coming of age."
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Received on Mon Dec 17 2012 - 12:32:17 EST
