The Government has decided to pay back to the Peace, Recovery and Development Plan (PRDP) donor account, the money that was lost to fraudsters in the Office of the Prime Minister (OPM).
Prime Minister Amama Mbabazi said it would be sourced elsewhere, but when convicted by the courts of law, the suspects would be punished and made to refund it.
He said the Police investigations into the fraud were ongoing and some people had already been interdicted.
Mbabazi was briefing the media on the actions that the Government was taking to restore confidence among development partners, following the loss of billions of shillings in the OPM.
The briefing was at his office on Friday.
It is reported that sh14b was diverted from the donor account of the PRDP to the Crisis Management and Recovery Account from where it was stolen.
Denmark, Ireland, Britain and Sweden contribute development aid to the PRDP account.
However, three of these countries suspended disbursements following the Auditor General's report that indicated that billions of shillings could have been lost to unscrupulous officials over a period of two financial years.
"Once we know how much is involved, we shall do restitution to the development partners' account," Mbabazi said.
He explained that the Auditor General's report was already before the parliamentary public accounts committee for a full investigation.
He said the perpetrators would be prosecuted in court.
"Police investigations are still on-going and anyone who was involved will not survive," he warned.
He appealed for technical assistance from development partners to secure public funds, saying the much touted Integrated Financial Management System had failed.
"I fear that this and what happened in the pensions sector may be an eye opener to what might be happening in other sectors of the Government," Mbabazi warned.
"If people are stealing billions in all departments, then the implications are serious. We should have a system with safety valves."
Mbabazi denied ever receiving donor funds on his private account as alleged by some international media.
The UK's Daily Mail reported recently that Mbabazi had received £10m (sh42b), part of development aid, on his private account.
He said he had instructed his lawyers here and in England to study the issue and advise him on the possible remedy available.
"It is ridiculous, a wild figment of someone's imagination to suggest that I took money and then called for the investigations," he said.
On the purchase of his new official car, Mbabazi explained that when he was appointed Prime Minister, he found an old Mercedes Benz vehicle that had been used by his predecessor for seven years yet the recommended number of years is four.
It was costly to maintain due to frequent mechanical breakdowns, prompting the Government to provide him with a new one.