Govt tells Ugandans to prepare for budget cuts

Within 24 hours of the suspension of World Bank loans to Uganda over the widely popular anti-gay law, the country’s authorities have dug in and are exploring options to keep the country afloat in the tough times ahead.

Among the options, the government will revise and effect changes to the Shs52.7 trillion National Budget if ongoing negotiations with the global financing agency fail, the Finance ministry said yesterday.

State minister for Finance Henry Musasizi put Parliament’s Finance Committee on notice, telling MPs to prepare for the possibility of budget cuts, a measure that will require Parliamentary approval.

Also yesterday morning, other countermeasures were reported to be under consideration inside both Cabinet and at State House. The Executive and Legislative arms of government were by yesterday putting on an unapologetic show of unity, agreeing that while budget cuts are inevitable, Uganda’s moral and family values are non-negotiable.

Regardless of how painful the likely budget revisions will be, the authorities were resolute that there will be no backtracking on the Anti-Homosexuality Act, 2023.

The mood among MPs and ministers Daily Monitor heard from was uncompromising on the law.  They were firm in urging Uganda not to betray its moral, cultural and religious values on the amoral altar of global finance.

Some MPs appeared to be, especially buoyed by the President’s affirmation late Wednesday that the World Bank and like-thinking actors underestimate Africans, thinking they can “coerce us into abandoning our faith, culture, principles and sovereignty using money”.

Others seemed to welcome the freeze on new loans as a blessing in disguise. It will now force the government to clamp down on unbridled  institutionalised corruption that costs the country Shs10 trillion annually, which monies if saved can help fill the vacuum left by the withheld loans, they said.

Visions of a new era of committed fiscal responsibility appeared to inform the defiant mood, with some MPs saying here was an opportunity to run a tighter budget and to turn to other, more socially agreeable, development partners.

Early this week, the World Bank suspended financial support to any new projects in Uganda over the law which prohibits and punishes those who dabble in the immorality of homosexuality; recruiting children into the acts, indulging in exhibitionism and promoting the vice.

Yesterday, Mr Musasizi told the House Finance Committee: “So, the moment of truth has come. The World Bank has said, for the existing projects, they will continue but the new projects and those which we have been working on are going to be halted. So, what this means… the budget we did in Financial Year 2023/24 had elements which have been affected.”  

As a consequence of the World Bank freeze on new loans, the minister said “we are thinking, we are still gathering ideas about what to do in line with adjusting the budget. But this requires the approval of Parliament. So we shall be coming back to you”.

The Musasizi revelation came minutes of committee chair, Mr Amos Kankunda, expressing the concerns of MPs about the gravity of the matter, asking “how are we going to absorb the shocks of the World Bank cutting support to us?”

“I know you are aware that as a country, we have been slapped with [a freeze on new loans] from World Bank given the position we took as a country, which we don’t regret, for the passing of the Anti-Homosexuality law and indeed, we are on the right trajectory. We will find ways of surviving,” he said.

“As a committee, this is our responsibility since we handle majorly the supply side of the budget, to make sure we work with the ministry to mobilise sufficient funds and work within our means to make sure the country moves on”.

Though sudden, the cuts were anticipated after the US-based bank and some Western nations (UK, Canada, European Union states etc) threatened to slam economic and other sanctions against Uganda when the law took effect in May.

And so, the minister was alerting the country to that evolving reality. “In the meantime,” he said, “we are negotiating with the World Bank, should we fail to agree, then we shall make some decisions on the budget which we shall bring to you. So, this was just to prepare your minds to get ready for the moment of truth and the tough times ahead”.

He warned that, “…cutting the budget will have serious consequences on our operations as government and as everybody involved in the running of government.”

It is not clear where or what could be slashed from the 2023/2024 national budget, with the minister declining to commit himself in the face of promptings by lawmakers who wanted to know the finer details of the mitigation planning. Before yesterday’s meeting ended, some committee members remained confident Uganda will find a way out, urging the government to take advantage of the loan freeze to review its spending habits, some of which have been criticised as wasteful.

Shadow minister for Finance Muwanga Kivumbi welcomed the looming cuts.

His reasoning being that it is only this way that the government will finally accept to live within its means.

“This is a blessing in disguise. What we will get as a country out of it is that we will learn to live on our own. So, Ugandans should rejoice [because], for once, we can actually live without World Bank money,” Mr Kivumbi said.

His colleague, the equally no-nonsense MP for Mbale Industrial, Mr Karim Masaba, said “as Parliament we expected this when we were passing this law. We have to come back to the drawing board as Parliament to look at how best we can tame our appetite...”

BACKGROUND

   World Bank Portfolio

As of December 31, 2022, the World Bank’s portfolio of IDA-financed credits and

grants stood at $5.4 billion in commitments, comprising 22 national and four regional projects.

Key financing areas

The urban sector dominates the portfolio with a share of 25, followed by energy at 15 percent. The portfolio also includes $791 million (most of which is in grant form)

from the Window for Host Communities and Refugees focused on supporting the implementation of Uganda’s integrative refugee policies.