Uganda Reportedly Resorts to Internal Loans After Suspension of External Funding
In August, the World Bank halted budget support for Uganda worth $1.7 billion in response to the signing of an Anti-Homosexuality Act by the country's president in late May. The government holds negotiations with the World Bank about revoking the lender's decision, according to local media.
Uganda's authorities decided to turn to local pension funds to cope with financial difficulties
following freezing of external funding from the World Bank, media reported.
Commercial loans from domestic and foreign lenders were also taken by the government at disadvantageous terms to combat financial challenges, the outlet noted.
"The Secretary to the Treasury said that should concessional loans fail; we should look at other sources. And pension funds, like the National Social Security Fund (NSSF) are some of the options. It’s something we should start looking at because other countries have done it," opposition legislator Gorreth Namugga was quoted by the media as saying.
Ugandan legislator Robert Migadde who chairs the Committee on National Economy explained that the country'd Treasury plans to operate through the issuance of bonds and since it is NSSF and other pension funds that buy the Treasury Bonds, in effect this means borrowing from the pension funds, the outlet noted.
However, the official stressed that borrowing from the domestic market should only be considered a last resort.
Last week, according to the media, multiple national bodies engaged in economic and financial issues, including National Planning Authority, the state's Ministry of Finance, Parliament’s Committee on National Economy and others, discussed the current economic situation in Uganda.
Officials said the Treasury is reconsidering its fiscal strategy to increase domestic revenue collection, reduce borrowing and public expenditure, the media said.
In particular, Secretary to the Treasury Ramathan Ggoobi said that the body is considering measures, aiming to downsize state agencies, halt purchase of vehicles, cut workshops and foreign travel and suspend creation of new administrative and electoral units, the media revealed.
"We agreed that if this is not done, we will soon go into financial distress and as a country and be flagged by the International Monetary Fund as a credit risk," Namugga noted.
In June, in response to the Anti-Homosexuality law, the United States imposed
visa restrictions on Ugandan officials and the US President Joe Biden threatened aid reductions and other punitive measures against the country.
This August, following the US move against Uganda, the World Bank suspended loans to the country on the grounds that the law "contradicts" its values.
Uganda’s President Yoweri Museveni estimated
the World Bank's move as an attempt to "coerce [Uganda] into abandoning [its] faith, culture, principles and sovereignty, using money," and called the Western actors, including the lender, "insufferable.