Why donor cuts have Uganda very worried

With an estimated Shs200 billion in expected foreign aid frozen, it is increasingly feared that education, health, and the justice law and order sectors, among others, will soon not be able to function normally.

Over the past few weeks, Sweden, Ireland, Norway, Britain and Denmark have suspended aid to Uganda following reports that huge sums of money for the Peace, Recovery and Development programmes in northern Uganda ended up in private bank accounts of officials in the Prime Minister’s Office.

The most immediate impact that the suspensions had was to jolt President Museveni into swift action, meeting on Monday last week with a group of Uganda’s development partners concerned over misuse of aid money.

In meeting the envoys, President Museveni moved to restore lost confidence and support by reassuring the donors about how his administration is working hard to fight corruption.

But there are far reaching implications that these suspensions will have beyond the reputation crisis Mr Museveni is facing. It is understood that not less than Shs200 billion—equivalent to about 32 per cent of total direct donor financial aid for the fiscal year 2012/13 has been suspended since the corruption scandal in Prime Minister Amama Mbabazi’s office turned on its head.

An analysis shows that this money was earmarked for provision of vital social services to Uganda’s poorest citizens in key sectors such as education, health and energy.
The implications of aid suspensions appear even more dire with reports of a slump in domestic revenue collections.

Uganda Revenue Authority recorded a Shs55 billion shortfall last month, and a worsening trade balance—Uganda’s current import bill is more than double export receipts reflected by a reported Shs2.5 trillion deficit.

Last week, the Finance ministry told the House that the government was struggling with cash flow problems weeks into the aid suspensions. The decision, the first to be taken of the five donor countries, followed disclosures in a forensic audit report by Auditor General John Muwanga showing that as much as € 4million (Shs13.3 billion) in Irish funds, of a total € 12 million (Shs40 billion) donor kitty reportedly fiddled with, had gone missing in suspected fraud last year.

The suspension will hurt essential programmes funded by Irish Aid, Ireland’s development arm in the country, available information shows, including a successful education scheme to vulnerable Karamojong children.

Affected sectors
Financial and technical assistance that Irish Aid has been rendering to the Uganda Police, Ministry of Justice, Prisons Service and the Uganda Human Rights Commission will also affect the sectors.

However, three quarters of the UK’s total aid, which is channelled through NGOs and UN agencies in the country is not affected by the freeze.

But some 20 projects, including maternal health, which Britain’s Department for International Development, is currently supporting through the government and civil society may be affected by the aid suspension.

Finance Ministry officials declined to comment despite repeated requests last week.
A source said the officials, including Minister Maria Kiwanuka, were under strict instruction not to comment until government sorts outs the row with donors.

THE NUMBERS

-The UK has frozen at least £11.1million (Shs 45.6 billion)

-Norway has frozen at least $ 10million (Shs 25.8 billion)

-Ireland has frozen at least € 16 million (Shs 52.8 billion)

-Sweden and Denmark are reported to have frozen Shs 50billion together.

-At least 25% of Uganda’s budget 2012/2013 budget is funded by development partners. Suspending bilateral aid presents a lot of implications.

-The suspensions follow a report by the Auditor General revealing as much as Shs 40billion in donor funds had been abused by officials in the Prime Minister’s Office.

-Prime Minister Amama Mbabazi has since apologised for the “massive theft” and recently said:

"Ugandans are as angry as the citizens of the development partners,"

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