World Bank Cuts Grant To Uganda

The East African (Nairobi) NEWS

March 28, 2006 Posted to the web March 28, 2006 By David Kaiza, Special CorrespondentNairobi

The World Bank has cut Uganda's fifth Poverty Reduction Support Operation fund by 10 per cent.
The World Bank Country Manager for Uganda Grace Yabrudy, told Finance Minister Ezra Suruma that the bank directors decided to reduce the $150 million grant to $135 million because of its concerns over increased public sector expenditure.
Out of the $135 million, $22.5 million is not a grant, but as credit, thereby reducing the substantial grant to $113.5 million.
The World Bank's concern is that Uganda is putting more money into public administration expenditure at the expense of poverty eradication.
Despite the reduction in the grant, it looks unlikely that government will act on the caution, following the creation of nearly 16 new districts, 13 of which are already operational with an additional 14 new Members of Parliament. Equally, the government has promised to pay the salaries of local government councillors, whose numbers run into the thousands.
For five years now, the Bank has, under the Poverty Reduction Support Programme automatically been unequivocally extending grants to the Uganda government. This grant is therefore the first indication that the Bank was becoming uncomfortable with the government's reluctance to act on matters affecting how money is used in the country. In her remarks to the minister, Ms Yabrudy said, the Bank wanted to see reduced annual budget allocation for public administration. "Once again, we request the government to pay close attention to this critical issue and to ensure that this trend is reversed in the coming fiscal year," she said.
A semi-annual budget performance report for 2005/06 shows that State House spent an additional 14.6 per cent on its wage budget and overshot its non-wage recurrent budget by 52.4 per cent.
The Public Service spent an additional 18.7 per cent of its budget, coming mostly from non-wage recurrent and development expenditures, which spent additional 39.8 per cent and 60.3 per cent respectively. The Ministry of Foreign Affairs overspent on wages by 12.7 per cent.
The Bank also said it wanted Uganda to show seriousness in fighting corruption - the most recent prominent case being that of the theft of funds from the Global Fund Against Malaria, Aids and Tuberculosis which led to a suspension of the grant to Uganda.
The Bank also wants the government to be stringent in public finance management to reduce corruption. It also asked the government to work towards reducing development disparities between northern Uganda and the rest of the country by bringing the Kony war to an end.
The Bank sounded an alarm on the runaway population growth in the country. It urged the country to, "adopt measures to address its exceptionally high population growth rate which impedes progress toward the Millennium Development Goals."
The Bank chose the occasion of the grant agreement, which for the first time was signed in Kampala as opposed to the traditional Washington DC, site to issue an uncharacteristically strong worded advice to Uganda.

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