BY TIMOTHY KALYEGIRA
Following the enactment into law the anti-homosexuality bill in May, the International Bank for Reconstruction and Development (IDRD, more commonly known as the World Bank announced on 8th Aug. that it will not be funding future projects in Uganda. This will be with an exception of ongoing World Bank-funded projects.
President Yoweri Museveni and various government officials and political pundits immediately dismissed the World Bank’s announcement. Uganda, they declared, can do with or without World Bank aid. The following day, though, the Minister of State for Finance, Henry Musasizi, told parliament that the government intended to revise downward its 2023/2024 national budget in light of the World Bank’s action. This statement alone showed that Uganda’s budget is dependent on for-eign funding and the funding is substantial enough to require a revision of the budget.
THE REPERCUSSIONS
The withdraw of World Bank support is going to affect the whole country. Uganda, contrary to the claims by the president and various government officials, is far from a financially self-sufficient country. Uganda’s options are to use this opportunity to exercise financial discipline, clamp down on corruption and waste, merge different government departments or even districts. Although this will come along way given the political climate in Uganda.
In its 2023 on the investment climate in various countries, published in August 2023, the United States Department of State had this analysis of Uganda: “President Yoweri Museveni and govern-ment officials vocally welcome foreign investment in Uganda. However, the government’s actions do not always align with its rhetoric…U.S. firms often find themselves competing with third-country firms that cut costs and win contracts by disregarding environmental regulations and la-bour rights, dodging taxes and bribing officials. Shortages of skilled labour, a complicated land tenure system and increased local content requirements also impede the growth of businesses and serve as disincentives to investment.” In this accurate description of Uganda is a summary of the true state of the country.
THE BANDWAGON EFFECT
When a country barely functions, the temptation is to cut corners and make bribery an integral component of the way the system works. Even if the government means to, it’s unlikely to find the financial and public administration discipline that it has not exercised for decades. And then, in its 2022 Report to the Ugandan People, the U.S. embassy in Kampala stated: “Through the 13 U.S. government agencies that comprise the U.S. Mission in Uganda, the United States invests almost USD 1 billion (UGX 3.6 trillion) annually in Ugandan communities, largely through more than 100 implementing partners and civil society organizations, many based in Uganda and Ugandan led, that deliver programs to every district in Uganda.”
What’s more, Western institutions tend to act in tandem; meaning that several European countries and institutions are bound to eventually fol-low the World Bank’s example and suspend all future financial assistance to Uganda. If the United States were to follow the World Bank’s example and also suspend aid to Uganda, that would be a billion U.S. dollars lost which the Ugandan government would have to find from its coffers to keep these American aid programmes going. On the other hand, if the European Union were to follow suit, that would probably be another billion dollars lost by Uganda, and at this point, the effects would start to be felt all across Uganda, down to the remotest villages.
THE BITTER TRUTH
In effect, the three decades of economic growth that the government has been announcing have been heavily subsidised by Western governments and development agencies. The government would have to heavily cut its expenditure, most likely default on its obligations to pay local suppli-ers, civil servants’ salaries would start arriving weeks late, consumer and government consumption would drop, in turn causing an economic recession.
In theory, the government can pull all this off. But it’s difficult to form new habits, especially good ones, overnight. A government used to waste, disorganisation and inefficiency cannot suddenly develop the mindset and discipline to run on a tight budget. The political opposition would take ad-vantage of the resultant economic misery to call for street protests and the government would, as it has many times in recent years, crack down severely on the protests.
The answer, then, is that Uganda can survive without the World Bank, but it will be thrown up against the wall, struggling to get by from month to month, plunging millions of Ugandans even deeper into poverty.
