Uganda can do without aid – minister

Kampala.

Uganda can stand on her own and fully fund its budget even if all western countries decided to withdraw financial support over the anti-gay law, the Finance Minister has said.
Speaking on the sidelines of the international insurance conference on Friday, Ms Maria Kiwanuka said government will untilise the two remaining sources of funding including taxes and borrowing to finance its budget.
She said: “Government has taken deliberate efforts over the years to reduce reliance on aid in favour of more domestic revenues. That’s why our budget today is funded 80 per cent using revenues generated locally.”
Currently, donor support accounts for about 20 per cent of the country’s total budget.

“Our aim is to see that the country is run on money that is domestically generated and on borrowing which are financially sustainable,” Ms Kiwanuka added.

The minister’s statement followed announcements by some western countries that they had suspended aid to Uganda over the enactment of the anti-homosexuality law.

The Norwegian government, among others, withdrew $8.3m (about Shs21 billion) in budget support to Uganda last week, saying the anti-gay new law violates fundamental human rights and the Ugandan Constitution.
The United States of America and Sweden also said they were reviewing their assistance to Uganda over the law.

A statement by the US Secretary of State John Kerry after President Museveni signed the Bill into law read: “...we are beginning an internal review of our relationship with the government of Uganda to ensure that all dimensions of our engagement, including assistance programmes, uphold our anti-discrimination policies and principles and reflect our values.”
It was also reported that the Netherlands and Denmark were considering slashing their aid package to Uganda.

Ms Kiwanuka, however, urged Ugandans to shift focus away from consumption to production, as government looks for other revenue streams in the wake of aid cuts.

“As we change our focus away from consumption to production, there will more impetus on local generation of money. Tax payers should also be vigilant and insist on value for money in the delivery of public services,” she said, stressing the fact that emphasis should be put on production rather than consumption and value for money spent.

The alternative sources of revenue
Government has been using three sources funding including taxation, borrowing from other governments or countries and from capital markets by issuing treasury bills and bonds and donor aid.
Capital markets are viewed as the cheapest avenue for raising cheap long-term capital.

While reading the 2013/14 budget speech, Ms Kiwanuka noted that other non-traditional financing sources such as limited non-concessional borrowing, contractor finance or suppliers’ credit and using external and domestic debt markets would be used to finance key infrastructure investments in the country.

She also noted that non-concessional borrowing for consumption expenditures is not productive and does not generate the necessary returns required to enhance growth and development, adding that any future borrowing from external or domestic sources will only be secured for financing the productive sector to address the infrastructure

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