Several weeks ago, the World Bank suspended new projects in Uganda due to concerns over the newly enacted Anti-Homosexuality Act, which discriminates against individuals based on gender, or sexuality.
The World Bank clarified, however, that all existing projects and those with prior commitments would continue as planned until their completion. As of now, $1.7 billion out of the $4 billion allocated to Uganda for healthcare, agriculture, roads, energy infrastructure, and education has been earmarked for disbursement between 2024 and 2029.
This raises questions about Uganda's self-sustainability and how the country will secure the remaining funds needed to meet its development goals. The Kampala Capital City Authority (KCCA) is one of the largest beneficiaries of World Bank funding, with $450 million (approximately Shs 1.7 trillion) already committed from 2012 to 2029.
Given that KCCA receives an average of Shs 100 billion per year from the World Bank, the suspension could significantly impact Kampala's development. Eng DAVID LUYIMBAZI SSALI, the deputy executive director of KCCA, expressed optimism in a conversation with David Lumu. He is hopeful that the World Bank's suspension will be lifted by the time the authority seeks additional funding for projects planned after 2029.
What do you make of the World Bank's withdrawal from new projects in Uganda?
We have limited options for concessional loans in the country, unlike the abundant resources provided by the World Bank. Concessional funding features near-zero interest rates, making it affordable for almost every nation. The World Bank's withdrawal is undoubtedly a setback for Uganda.
However, there are other sources for both concessional and non-concessional loans that can help fill the gap. It's worth noting that interest rates from non-concessional lenders are generally less favorable than those offered by the World Bank.
Some alternative concessional lenders include the International Monetary Fund (IMF), African Development Bank (AfDB), African Development Fund (ADF), Japan International Cooperation Agency (JICA), and the Islamic Development Bank (IsDB). On the non-concessional side, export credit agencies like the United Kingdom Export Finance (UKEF) are available.
The impact of the World Bank's withdrawal is significant because each country is allocated a specific quota from these concessional financing institutions. Losing out on our quota from the World Bank is concerning. However, there's a silver lining for the Kampala Capital City Authority (KCCA); our funding for the years 2024-2029 has already been committed.
As a result, we can proceed with implementing the Greater Kampala Metropolitan Area - Urban Development Strategy (GKMA-UDS), a $650 million project, around $150 million of which is allocated to KCCA. This commitment, made in May 2022, ensures our funding is secure.
At KCCA, we don't anticipate the need for new World Bank loans in the immediate five-year window. We are planning for new projects from 2029 to 2034 and hope that by then, the World Bank's suspension will have been lifted. While we may be secure for the next five years, the broader country may face challenges, especially for institutions needing allocations in the months following the World Bank's withdrawal announcement.
To what extent has the World Bank's funding of projects for KCCA been affected?
For years, the World Bank has served as the main cornerstone for all development projects within the Kampala Capital City Authority (KCCA). Recently, the African Development Bank (AfDB) also stepped in, launching a $288 million project aimed at improving the city's roads over the next five years, up to 2028.
We are currently in the final stages of the $175 million Kampala Institutional and Infrastructure Development Projects (KIIDP) Phase II. Prior to this, we completed the first phase of KIIDP, which was valued at $125 million.
How will the World Bank decision impact the ordinary city dweller?
From 2012 to 2019, the support we received from the World Bank had a significant impact on improving the well-being of the city. For the 2023- 2024 financial year, KCCA has a budget of Shs 380 billion, out of which Shs 200 billion is allocated for wages and Shs 53 billion is designated for road projects.
When compared to the World Bank's contribution of $450 million over 18 years since 2012, which amounts to approximately Shs 100 billion per year, it's clear that the World Bank has been a major contributor. However, the government is prepared to address the changes that will result from the World Bank's exit. Thankfully, we do have alternative options, even if they may not be as favorable.
We will continue to consult with the cabinet, parliament, and the ministry of Finance to determine our next steps concerning funding. This is crucial to shield the average city resident from any immediate financial impact.
What is KCCA's Plan B in the five-year period before all World Bank projects expire?
Even before the expiration of the five-year period, our needs extend beyond those covered by World Bank support. One urgent requirement is the $200 million budget to overhaul our drainage system. Initially, we planned to collaborate with non-concessional partners like the Canadian Commercial Corporation for both technology and funding.
However, due to the Anti-Homosexuality Act (AHA), this Canadian initiative appears to be in jeopardy, prompting us to seek alternative solutions quickly. For road construction, we're in discussions with United Kingdom Export Finance (UKEF), another non-concessional funder, to secure about €250 million. This will enable us to reconstruct approximately 175km to 200km of city roads.
These projects are scheduled between 2024 and 2029 to mitigate the impact of the World Bank discontinuing its support. It's worth noting that even if the World Bank hadn't ceased its funding, we were already exploring other avenues like non-concessional loans and grants. For example, we have secured a $98 billion grant from the Japan International Cooperation Agency (JICA) to modernize 27 city junctions by replacing roundabouts with signalized junctions. Therefore, grants remain a feasible alternative to address the funding gaps at KCCA.
What KCCA projects will be affected by the World Bank's withdrawal?
No current project within KCCA is affected by the World Bank's withdrawal of support. The major upcoming project, the Greater Kampala Metropolitan Area - Urban Development Strategy (GKMA-UDS), received approval in May 2022. It has already been cleared by cabinet and received parliamentary approval. We now have less than four months to finalize the financing agreement.
This project is committed for the next five years. Any new borrowing will only commence once our ongoing projects are completed. For example, as we conclude the Kampala Institutional and Infrastructure Development Projects (KIIDP) phase II, we have initiated the GKMA-UDS.
Between 2024 and 2029, we'll be laying the groundwork for another major project or program. I'm optimistic that within this five-year period, circumstances may change, allowing Uganda to regain World Bank support.
As for projections beyond the next five years, KCCA remains a dynamic component of the economy. Our plans for the next half-decade are already secured with World Bank commitments, and we are actively exploring partnerships with other institutions.
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What is your projection after five years? Are we ready to go it alone without World Bank support?
KCCA serves as a vital cog in the economic machinery of Uganda. While our programs for the next five years have secured commitments from the World Bank, we're also actively seeking additional partners. Our requirements greatly surpass the funding we receive from the
World Bank.
For instance, we need to address a range of challenges: from fixing stormwater drainage systems to reconstructing and upgrading roads. We also aim to install street lights to bolster the night economy and enhance public safety. Waste management-- from garbage generation to collection and disposal--is another area that needs attention. Furthermore, we have slums requiring improvement to elevate the residents' quality of life.
In addition to infrastructure, social amenities are also on our priority list. Our schools are in need of refurbishment, and hospitals must
be built and upgraded. Following directives from His Excellency the President, each of Kampala's five divisions should have two markets, all of which must be constructed. Clearly, the scope of our needs at KCCA far outstrips what the World Bank can provide on its own.
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