UK’s aid cuts may disrupt social plans

Jul 05, 2006

MARKET INTELLIGENCE<br><br>The recently announced cutback of 20 million pounds in budgetary aid from Britain will impose more strain on an already stretched national budget.

MARKET INTELLIGENCE

By Sylvia Juuko

The recently announced cutback of 20 million pounds in budgetary aid from Britain will impose more strain on an already stretched national budget.

This may result in delays of implementation of social programmes, analysts warn.

“Given the meager capacity we have on generating domestic resources to fund the budget, any deduction in budgetary inflows escalates the problem,” Charles Ocici, the Enterprise Uganda executive director, said.

“I see greater strain on the social programmes like universal secondary education. The aid cut may force the Government to roll back its implementation,” he said.

Britain announced on Monday it would scale back aid, citing concerns on governance, public expenditure and some of government’s new budget plans.

The announcement comes on the heels of a similar move last December when Britain cut aid amounting to 20 million pounds amid governance concerns prior to President Museveni’s re-election in February.

Dr, Ezra Suruma, the finance minister, said in his budget speech last month that the total amount of resources available in the 2006/07 financial year was estimated at sh4,255b with 59% of the budget projected to be financed by domestic revenues, while the rest would be provided through donor support.

Analysts say cutback in aid comes at a time when Uganda needed all possible support from development partners since the country was grappling with the energy crisis that has constrained production.

Ocici said since the British concerns can be addressed, he was optimistic that the recent announcement could be revised.

“The British are entitled to set conditionalities. The onus is now on the Government to rout out corruption and other concerns raised. It’s not only essential for donor relations but also central for Uganda’s efforts to reduce donor dependency,” he said.

However, Augustine Nuwagaba, a consultant, argues that while aid cuts create temporary shocks, it should not be a cause for alarm.

“We should not create an impression that the country will collapse if aid is cut,” he said.

“Since we are using a medium-term economic framework, the aid cut will create temporary shocks. My problem with the finance minister is short-term planning which makes the economy vulnerable. We should start long-term planning,” he said.

Nuwagaba says it’s a wakeup call for the Government to kick-start efforts to wean donor dependency.

“We should stop depending on other countries’ resources to pay for operational expenditures.

“Our expenditure proposals must be derived from our internal revenue through improvement of tax administration,” he said.

Nuwagaba said research carried out in eight-aid recipient countries showed that it had not created capacity.

“Most of this aid is not put to use because of high levels of corruption.

“Misuse of these resources cripples the entire implementation of these programmes.

“So we should reduce our aid dependency,” he said.

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