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World Bank fallout: Can Uganda survive without foreign assistance?

Pothole filling in Kampala city

Pothole filling in Kampala city

Over the years, scholars of all walks of life have voiced their opinions on the subject matter of foreign aid, and the impact it has had on the recipient ‘needy’ countries.

For the most part, they agree that it [foreign aid] has been a bad omen to underdeveloped countries like Uganda. Taking into account the prevailing face-off between Uganda and one of its major funders, the World Bank President Museveni as if in direct retaliation for a statement released by the international lender to suspend funding to Uganda for passing the Anti-Homosexuality Act, wrote a letter [the following day] on August 9, 2023 unapologetically affirming the state’s stand on the matter of aid.

In his letter, the president blatantly tells the donors that their loan and aid packages are neither decisive nor indispensable elements for Uganda’s desired social-economic transformation; even continuing to label it [aid] a source of distortion and stunted growth across Africa precipitating crises in Niger, Burkina Faso, DR Congo, et al.

The written message gave off a chest-thumping pan-African demeanour reminiscent of the former guerrilla’s revolutionary days and is bound to generate support for the leader from his mostly traditional electorate since he reverberated the populace’s general stand on the gay rights issue.

Many important issues were brought to light by the mail namely: the ghosts of foreign aid. Raising an old debate on the poison of foreign handouts, and loans.

THE AID

For instance, it is common knowledge that aid, and loans never get to reach the grassroots, let alone leave donor countries. In the letter, the president revealed that the ministry of Agriculture, Animal Industry and Fisheries took out a loan of $800 million [Shs 2.9 trillion] over a period of ten years only to spend it on seminars! The loan wasn’t used to set up the much-needed zonal diagnostic labs, research centres, or mechanised equipment, the general ranted.

This signals that a big chunk of the loan was most probably remitted to the donor countries where ministry officials took trips to attend the said seminars. This is because donors tie aid to their respective countries and home-grown companies to further their economic interests in what has come to be known as tied aid.

On the word of the Organisation for Economic Cooperation and Development [OECD] in a 2021 Development Assistance Committee [DAC] report, up to 21 per cent of aid is tied, that is, 40 per cent [$16.7 billion] of USA’s aid, 37 per cent [$1.5 billion] of South Korea’s aid, and 17 per cent [$4.8 billion] of Germany’s aid is designed to make its way back to the donor countries.

Implying that we take out loans that are never going to bear fruit in our societies but, instead, snap the cuffs on us; we [un]knowingly make business for our lenders. This was unmasked in the same letter President Museveni wrote when he stated that aid policies were directly against growth. He gave an instance that despite locally manufacturing ARVs and other drugs, donors weren’t allowing the government to buy Ugandan-manufactured drugs with their money!

In his words, “To qualify for aid, we had to forget our own industrialization and job creation for our people and support ... the job creation for the other people”.

To parade his distaste for foreign aid, and public borrowing, the president attached a metamessage from June 2017 in which he stopped the minister of Finance, Planning and Economic Development Matia Kasaija from borrowing $914.79 million [Shs 3.3 trillion] because as he noted most of the borrowing has been having no value addition to Uganda’s transformation journey.

It, therefore, comes as a shock that after the president realised the worthlessness of borrowing, Uganda’s public debt has blown up at a rate never seen before from Shs 34 trillion [$8.9 billion] at the time of drafting the published metamessage [2017] to Shs 80.7 trillion [$21.74 billion] in 2023, a spike in borrowing of Shs 46.7 trillion [$12.6 billion] in six years.

In passing, the written publication mentioned market arrangements Uganda has with the USA such as AGOA – Africa Growth Opportunity Act as a fall-back position Uganda has retained that is crucial for its transformation.

What the president conveniently overlooked is that to maintain the AGOA agreement, Uganda must satisfy USA human rights requirements among which will include gay rights. In the recent past, Guinea, Ethiopia and Mali have been banned from AGOA for human rights violations. If Uganda doesn’t acknowledge gay rights, it’s most likely going to be knocked off AGOA’s trade list.

Even so, only oil-producing countries in Africa have benefited from AGOA namely: Nigeria, Angola, Gabon, and Equatorial Guinea. Predominantly, Uganda’s aid comes in the form of bilateral aid which is assistance given by any government directly to the Uganda government.

Emergency/humanitarian aid, say during or after disasters, multilateral aid that is aid from international organizations like the World Bank; and non-governmental aid which is channelled through nongovernmental organizations [NGOs] after it is raised from public donations.

In the past five years, for example Uganda has been a beneficiary of aid from the World Bank to a tune of $4,380.8 million [Shs 16 trillion] in loans, and grants. From the United Kingdom [UK], Uganda receives more than £95 million [Shs 442.5 billion] annually in aid; in addition to $1 billion [Shs 3.6 trillion] annually from the United States that it invests in Ugandan communities through 13 agencies, the USA embassy website in Uganda clarifies.

In the recently read national budget for the financial year 2023/24, loans and grants amounted to Shs 2.78 trillion [$753 million] while external financing/project support contributed Shs 8.26 trillion [$2.2 billion]. This brought the total foreign contribution to the 2023/24 financial budget to Shs 11.04 trillion [$2.9 billion] translating to 20 per cent of the national budget that is dependent on foreign aid.

I tried to reach out to Ramathan Ggoobi, the permanent secretary, ministry of Finance, Planning and Economic Development, and secretary to the Treasury, to comment on what alternatives the ministry is working on to bridge the gap that will be caused by the withdrawal of foreign aid, and what happens to the 20 per cent financing of the national budget when all external support is axed. All attempts to reach him on his phone were unsuccessful.

The spokesperson, ministry of Finance, Jim Mugunga was available to speak but intimated that he couldn’t place his comments above the president’s 27-page letter on foreign aid, and those of the minister of state for Finance, Planning and Economic Development Henry Musasizi who told the parliament’s finance committee to prepare for possible budget cuts. In Jim Mugunga’s words, the issue had been milked!

All else equal, aid has its perks because it has translated into more than a few hospitals, roads, scholarships, even vaccines. But the juice of it isn’t worth the squeeze because of the malevolent intentions attached to it. By way of illustration, in 2011 India refused foreign aid from England because it had no impact on its development; however, Britain begged India to keep taking the money!

When India landed its third spacecraft, the Chandrayaan 3 on the moon on August 23, 2023 on a small budget of $75 million, something the UK hasn’t accomplished, India came under fire from the British press who went as far as demanding that India returns the £2.3 billion it allegedly took in aid between 2016 and 2021.

This goes to show that foreign aid bears ill will and isn’t meant by the givers to be properly used for development. Rather, donors are counting on it getting fumbled so that they can have the recipient(s) in a chokehold so that they can exploit them.

In as much as the ruling class, and elite in Uganda, and Africa at large romanticise the idea of an aid-free continent, the reality couldn’t be further from the truth. Foreign aid, and loans are the meat and potatoes of governance in Uganda and are perhaps the most logical explanation for the source of the ruling class’ obscene wealth.

kimaona@yahoo.com

Comments

+1 #1 kabayekka 2023-09-06 10:14
Well with such an economic crisis on the door steps of Africa, one reckons there need to be an economic solution to such an economic problem.

Not much solution can be expected from the sexual problems of the bedroom! All these outlined economic exploitation the NRM new them when it captured state power 1986. M7 was well known as an African communist, a socialist and an African Ujamaa!
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+3 #2 Akot 2023-09-06 11:23
Only Kampala-Entebbe road is well constructed to ensure Museveni is safe & he flys up country to avoide dangerous roads, right?

As it is, 40 years of Museveni won't be long enough for Ugandans & they will protect, ensure his stay with next fake presidential, parliamentary, local elections!

In what state will Uganda be by the time Museveni dies of old age at +90 years of age?
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+3 #3 kabayekka 2023-09-06 21:26
M7 was indeed a Mozambique and Angola African communist or Nyerere Ujamaa student.

He has turned coat! Why has he taken many years of his life to change into a very ambitious capitalist! Is that what many people say; "Money surely is sweet especially when there is lots of it around"!
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+1 #4 Uhuru 2023-09-06 22:27
You think better when your back is against the wall. This is a great opportunity for Uganda to explore options for self suffiency.

Yes, we may go down economically but we will recover and be much stronger than we were with the WB loan, most of which got stolen anyways.

When Idi Amin sent the Indians packing, Uganda's economy went down and Ugandans learnt a lot of lessons from that and are now in charge of their country and economy and can compete favorably with the so called foreign investors.
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+1 #5 Lakwena 2023-09-07 08:02
With HONESTY, AUSTERITY and CONCERN for others/Ugandans by the current leadership, yes.

But with the current GREED, DISHONESTY, financial INDISCIPLINE and APATHY for others/Ugandans, by the leadership (our Problem of Africa) NYET!
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