23 September 2016

Uganda: Shs5 Trillion Loan Suspension Worries Uganda - Rugunda

Photo: Racheal Ajwang/Daily Monitor
A man counts Uganda Shillings (file photo).

Kampala — Although far-reaching impact of the World Bank pulling the plug on new funding for Ugandan projects is yet to be felt, government officials are already in panic mode. Some government officials are describing the move by the World Bank as extreme and should have come as a last resort.

"I wish to state that the Government of Uganda has noted the drastic decision of the World Bank to suspend loans to a number of Uganda's externally funded projects.

As you may already know, Cabinet took up the matter of slow implementation and low absorption of all Uganda's externally funded projects - from the World Bank, Africa Deveolpment Bank, Islamic Development Bank," premier Ruhakana Rugunda told the third National Partnership Meeting between Uganda and development partners at the Kampala Serena Hotel on Thursday.

The World Bank last week announced it was suspending new funding to Uganda over concerns of poor management and weak absorption. The estimates, according to ministry of Finance officials, were that the World Bank was expected to extend loans worth about $1.5b (Shs5 trillion) over a period of three years for financing agriculture, water and transport sectors, among others.

The World Bank is the single largest institution that extends loans to the Uganda government at 22 per cent.

In its own assessment of performance on external financing, the government has performed dismally with 72 per cent of projects being unsatisfactory between 2007 and June 2016. Only 15 per cent of projects are considered satisfactory.

Uganda has accessed $7.3b (Shs24.7 trillion) during that same period, according to the 2015/16 Government Assessment Report.

"The findings show that the fiscal performance has not been good because 72 per cent of all projects proved to be unsatisfactory in financial performance.

The low absorption of funds resulted in unnecessary costs incurred in servicing of the loans, including penalties which are usually referred to as commitment charges," Ms Christine Guwatudde Kintu, the Permanent Secretary in the Office of the Prime Minister, says.


The government is engaging the World Bank for the suspension to be lifted as it implements reforms such as expediting land acquisition, tracking procurement and sorting out delays in counterpart funding.

The fault was blamed on several government officials signing loan agreements with lending agencies yet the government has not provided its share of contribution towards the project.

For instance, China's EXIM Bank did not want to conclude a financing agreement for the Standard Gauge Railway (SGR) before the government undertakes land acquisition for the corridor. At the opening of the Ministerial Briefing: "Organising for delivery in government: getting results through transformational leadership" on Thursday at the Kampala Serena Hotel, Mr Rugunda stressed that government credibility was on the line because of poor implementation of projects.

Change your culture

Speaking on behalf of the Local Donors Group, Ms Jennie Barugh, the head of UK's Department for International Development in Uganda, said there was a need for culture change and behaviour by Ugandans in government if projects are to be delivered on time and at the right price.


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