World Bank faults Uganda over low loan absorption

Oct 18, 2016

Development partners are concerned about the delayed utilization of money borrowed, says finance minister Matia Kasaija.

PIC: Finance minister Matia Kasaija says "something has to be done about" non-performing managers

The World Bank has raised concern over the Ugandan government's low absorption rate of loans.

Talking about the negotiations he had with the World Bank, finance minister Matia Kasaija said that the development partners are greatly concerned about the delayed utilization of money borrowed.

"Their biggest concern is low absorption for loans," he said when asked.

About a month ago, the Word Bank suspended support to Uganda and this has put the implementation of the country's 2016/17 budget at stake since World Bank is one of the major sources of funds for the country's budget.

In a recent cabinet meeting, Prime Minister Dr. Ruhakana Rugunda said Uganda has in the last seven years lost about sh92b due to delayed utilization of borrowed money.

The other key concern of the World Bank, according to Kasaija, is the need for the Ugandan government to put in place safeguards on social and environmental concerns.

On the measures the finance ministry intends to implement to convince the World Bank to suspend the suspension, Kasaija said: "I have already warned managers of various government entities to ensure there is timely absorption for the funds."

He said low absorption of loans is very common in agencies where there are incompetent managers.

"I have to tell you that there are non-performing managers who need to be replaced. Something has to be done about them."

On what his ministry plans to do regarding delayed implementation of loans arising from failure of government to provide counterpart funding, the minister said: "No sector will be allowed to seek a loan unless counterpart funding is secured. In fact, I will not sign any more loans until I am assured that money for counterpart funding is available."

Kasaija and the secretary to the Treasury Keith Muhakanizi spent the whole of last week in Washington DC, USA negotiating with the World Bank to lift the ban on Uganda.

The talks however ended without the bank accepting to lift the suspension as the delegation from Uganda had requested.

"We were well received but suspension is yet to be lifted. The discussions are still going on. Soon they will also send a team to come to Uganda," Kasaija told New Vision.

Muhakanizi recently admitted before parliament's  public accounts committee (PAC) that Uganda is the worst performer in the utilization of borrowed funds in the East African region.

Uganda's public debt has been sporadically rising in the recent past and has now reached about US$10b.

After making research on contradictory reports about Uganda's indebtedness, Uganda Debt Network (UDN) carried out research and established that the country's total public has now reached US $11b.  

If the Standard Gauge Railway loan of US$12.5b materializes, it means Uganda will have exceeded the 50% ceiling of the ratio of public debt to its GDP of about US$27b.

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