Kampala, Uganda | THE INDEPENDENT | Civil society groups in Uganda have warned on the likely effects of the World Bank move to suspend new loans to Uganda, saying it is time to be more frugal and reprioritize public expenditure.
The Bank is the largest single lender to Uganda accounting for more than a fifth of Uganda’s total foreign debt.
Julius Mukunda, chief executive officer at the Civil Society Budget Advocacy Group, CSBAG says for now there could be no immediate impact on the country’s budgetary needs as the move concerns future projects.
However, the Bank said they would continue reviewing the decision which could be extended to cover ongoing projects.
Mukunda says that even then, the donor will be more aggressive in terms of monitoring.
“It is an issue to worry about as this decision by World Bank may induce other donors to come up with similar decisions,” he says.
The World Bank provides attractive and affordable concessional loans, with low interest rates, 10-year grace period, and a long repayment period, targeting social services like infrastructure, health and education.
Therefore the decision will most likely affect poverty eradication measures, increase inequality, and service delivery in social sectors, which could call for domestic loans.
“With this freeze by the World Bank, we are likely to see an increase in domestic borrowing by the government and we are likely going to see a reduction in foreign reserves and depreciation in shilling,” Mukunda told the media Sunday.
He says it’s now time for Gov’t to spend within its own means, reduce wastage, and fight corruption, as well as review projects to reallocate funds where there are better returns.
Our ED @JuliusMukunda says that they will be more aggressive in terms of monitoring. It’s an issue to worry about. This decision by World Bank may induce other donors to come up with similar decisions. @ugandadebtnet @namagembeck #UGBUDGET23 pic.twitter.com/IdbmRS5vxU
— CSBAG (csbag.org) (@CSBAGUGANDA) August 13, 2023
The Initiative for Social and Economic Rights, ISER-Uganda, is specifically concerned about the fate of funds aimed at helping the education sector recover from the Covid-19 effects.
“We know that Uganda is one of the countries that were affected by COVID in terms education sector,” says Angella Kasule Nabwowe, ISER-Uganda. Ag. Executive Director.
“Can we forego some of the projects that have been going on, can we put a halt on ‘Lubowa’ projects and put funds where money will go to ordinary Ugandans?”
The Bank’s ongoing projects include support to the renovation of 1,000 government aided schools, upgrading of 328km Fort Portal-Kyenjojo-Hoima-Masindi-Kiryandongo road, as well as youth development programs targeting 82,000 of them.
Others include Uganda Support for Municipal Development Project worth 555 billion shillings targeting 14 municipalities with infrastructure like roads, street installations, waste management, construction of markets and urban transport facilities.
Jonas Mbabazi, project manager at ACODE Uganda warned of renewed poverty among women and youth.”We are going to see more women and young people sliding into poverty and this will hamper poverty reduction, so can we be frugal with our resources?”
He also expresses fears over an expected increase in borrowing and the impact it could have.
“The likelihood of an increase in domestic borrowing by the government is going to affect access to financing by the private sector; we will not create more jobs and fewer taxes will be created,” says Mbabazi.
The Ministry of Finance recently revealed that it was considering revising the 52-trillion shilling national budget downwards following the World Bank announcement. But Gilbert Musinguzi of Uganda Debt Network warns against tampering with the allocations for some sectors, especially the human capital development, which he said should be a no-go area.
Instead he emphasizes the need to be economical with the available resources.
“We want to see frugality in government spending,” says Musinguzi, the Quality Assurance Manager at UDN. “Let’s live within our means because things are becoming tighter. In the future, we should work with the development partners in some legislations, to avoid a repeat of the same.”