The Independent (Kampala)

Uganda: Donors Reconsider Aid Cuts

Photo: Simon Masaba
Members of the anti-corruption coalition in Uganda (file photo).

Uganda is reaching a crossroads in the way the way it handles corruption. It is either the beginning of the end corruption with impunity or business as usual within the next few years.

The hard-line approach to stamping out corruption, which has seen a host of government officials face trial, is new, and for the first time Uganda is in the process of handing money back to the affected donor countries. These tough actions have led to the possibility of donor countries rechanneling the suspended aid back.

The government tough action on corruption started after the publication of the Auditor General's report on fraud last October. The results led a number of donor countries to freeze aid to Uganda citing misuse of aid money revealed in the report. It now appears the government's response to the matter has caused a change of heart among some of the disgruntled donors.

After paying Ireland back last month, the Tánaiste of Ireland, Eamon Gilmore said in a statement: "I have now instructed my officials to examine options for a possible programme of support for the people of Uganda during 2013."

This is good news for Uganda and shows that the robust actions of the auditor general and the prosecuting authorities are producing the right results.

The Deputy Secretary to the Treasury, Keith Muhakanizi, told The Independent he was optimistic about the dialogue that the government is in with the donors. "The continued implementation of tough reforms should see the restoration of budget support before the end of the financial year," he said.

Although corruption has a long history in Uganda, the straw that broke the camels back was the misappropriation of aid funds from within the Office of the Prime Minister (OPM).

The funds were intended for post-war recovery in Northern Uganda under the Peace, Recovery and Development Plan (PRDP).

The initiative concerned various sectors such as healthcare clinics, schools, roads, water and judicial institutions.

The former Principal Accountant in OPM, Geoffrey Kazinda is alleged to have embezzled US$13 million from it to fund his luxurious lifestyle. Other senior officials are implicated in addition to other charges Kazinda faces.

Ireland demanded its money back and other European donors followed suit. They included Norway, Denmark, Sweden Britain and Germany, who are part of the Joint Budget Support Framework (JBSF). They also withdrew aid. Britain's department for International Development DFID said it was the "result of initial evidence emerging from our on-going forensic audit of the Office of the Prime Minister, which indicates aid money may have been misused".

Damaging the economy:

Western donors fund up to 25 per cent of Uganda's budget with Britain being Uganda's' biggest source of bilateral aid. Responding quickly to the crisis, Uganda paid back Ireland US$5.4 million and will also refund the other affected donors. The aid embargo amounts to a loss of US$263 million in budget support, severely hampering the economy.

Emmanuel Tumusiime-Mutebile, Governor Bank of Uganda (BOU) warned in December 2012 that the economy would not achieve the 5 per cent of growth that was forecast early in the year but would instead grow at 4.3 per cent. The suspension of aid partially contributed to the 0.7 per cent reduction in projected growth.

Having already made adjustments to the budget earlier in September 2012 (in search for additional funding to be allocated for the recruitment of health workers), the withdrawal of aid has been a heavy blow to Uganda's economic forecasts. So, the recent revelation that the aid may not be suspended as originally proposed is positive news for the economy.

Harsh measures set by donors:

The donors are demanding more accountability from government officials and have placed stringent conditions for the restoration of the aid.

Muhakanizi revealed told The Independent that Uganda is ready to "improve its control systems, refund the stolen money, seize assets and ensure that those involved in financial misappropriation are dealt with accordingly"

The auditor general is now doing wider reports into other ministries. Muhakanizi informed The Independent that among the changes being enforced are: the closing of dormant accounts; ensuring the Bank of Uganda crosschecks with accounting officers before payments are made; and instituting strong surveillance measures such as putting cameras in computer rooms. This is meant to restore financial accountability.

What it has achieved?

The recent zeal around the prosecution of corrupt officials is only the latest chapter in the continued efforts by Uganda to root out corruption.

The revelations of the scandals merely confirm many of the doubts Ugandans have about foreign aid reaching its intended recipients. But the aid withdrawal is a new threat Uganda that had not experienced. Muhakanizi is optimistic that this time it is the beginning of the end of corruption with impunity. "The government is very serious about this issue an we believe that the changes put in place will be effective." He then joked, "I am confident in the next 2-3 years you will have nothing to write."

It remains to be seen weather the current spate of corruption cases will lead to a genuine decrease in corruption in Uganda. But one thing is for sure; foreign aid donors are becoming ever more intolerant of corruption and financial mismanagement. They are even willing to exercise not just soft power but even resort to hard power to influence these situations. This case is also perhaps exemplified in the Anti-gay Bill which has also attracted the attention of foreign donors and threats of aid withdrawal.

Muhakanizi is aware of these threats and says "aid withdrawal is something we have been threatened with in the past regarding the Anti-gay Bill. Whether the threat will be implemented I don't know but it should be taken seriously." He was clear to point out that the Bill had no effect on the decision by donors to withdraw aid after the corruption scandal, but it is evident that aid withdrawal is a very real prospect.

It will take some time for Uganda to adapt to having been ranked among the 50 most corrupt countries in the world as slot 130h out of 176 in the most recent Transparency International Corruption index. Hopefully, if the auditor general continues with this intensity then it will be possible locate and convict the perpetrators.

But Uganda may not be ready just yet to be given back the aid. It may be better to reconsider after seeing the punishments handed out to the guilty officials in the courts to gauge the seriousness of the reaction. Aid withdrawal may have been a blessing in disguise, giving Uganda the opportunity to be slowly weaned off of aid. Having 25 per cent of your budget being contributed by foreign support robs Ugandans of their own agency and stifles enterprise.

The fight against corruption is an oft-heard plan that seems to produce few outcomes but makes considerable noise. But if this is what it takes for foreign donors to be happy, then the Anti-corruption Court and Luzira Maximum Prison, are going to be very busy places.

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InFocus

Donors Reconsider Aid to Uganda

Members of the anti-corruption coalition in Uganda (file photo).

The country's hard-line approach in stamping out corruption and handing back misappropriated aid money has led to the possibility of donor countries re-channeling the suspended ... Read more »