President Museveni has written to the World Bank (WB) promising that his government is addressing the structural gaps and other loopholes that compelled the bank early this month to announce withholding of more than $1.5b (Shs5 trillion) in new lending until further notice.
The President’s letter to WB, also copied to senior officials in the Ministry of Finance, is part of efforts by government to salvage the loans and save many projects whose failure could have wide economic and political ramifications.
The secretary to the treasury, Mr Keith Muhakanizi, confirmed that the President has engaged the WB to resolve the issue.
Mr Muhakanizi who is scheduled to travel to the Bank’s headquarters in Washington DC next month as part of a delegation led by Finance minister Matia Kasaija to plead Uganda’s case at the International Development Association (IDA) 18 Replenishment negotiation meeting, also told this newspaper on Wednesday that the President has further directed that accounting officers that fail to justifiably absorb loans be punished.
IDA is the bank’s concessional funding arm to low-income and post-conflict countries. The WB in its assessment of performance on external financing said Uganda performed dismally with 72 per cent of projects being unsatisfactory between 2007 and June 2016. Only 15 per cent of projects are considered satisfactory.
The bank thus in a September 13 statement said it “took a decision to withhold new lending to Uganda effective August 22, 2016 while reviewing the country’s portfolio in consultation with the government.” The statement noted that the bank would continue to “work with the Ugandan authorities to address the outstanding performance issues in the portfolio, including delays in project effectiveness, weaknesses in safeguards monitoring and enforcement, and low disbursement.”
The bank, however, assured that projects already approved by its board before August 22 worth $1.8b (Shs6 trillion) will remain active. The loans that have not been absorbed also amount to $1.8b. Sources familiar with the matter told this newspaper that the Ministry of Education tops the list of MDAs with the lowest absorption capacity.
Explaining how the country got into this situation, Mr Muhakanizi said: “This is largely inefficiency and a management problem on the part of accounting officers and it definitely bounces back to affect our planning.”
He added that absorption had gone down partly as a result of the ongoing reforms instituted to contain the high frequency leakages (corruption) in the sectors for which the loans are acquired.
“So the accounting officers then decide to sit back on the money,” he explained.
Some of the reforms the Finance ministry has instituted include cleaning-up the payroll to exorcise it of thousands of “ghosts” and tightening the procurement system – especially introduction of the e-procurement system.
The other guidelines that finance officials will table in Washington, he said, is for all projects to have a “component of benchmarking by Parliament” before the loans are approved. Previously, he explained, ministries would push to get loans whose absorption and project implementation plans are not ready.
“For all loans that have not been absorbed, I have evidence where the ministers say they were ready. But by adding a component of benchmarking, they have to justify the request and also satisfy that they are ready.”
Currently, the Bank’s loans go through only four stages, namely Identification (of a project), Pre-appraisal, Appraisal and Negotiations.
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