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Uganda's budget to fall short by $260 mln due to aid cuts

Source: Thomson Reuters Foundation - Mon, 10 Dec 2012 13:18 GMT
Author: Reuters
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    * Economic growth to be hit by aid cuts

   * Donors froze aid due to graft claims

   KAMPALA, Dec 10 (Reuters) - Uganda's budget for the 2012/13 (July-June) fiscal year will fall short by about $260 million or 6.2 percent due to aid cuts by donors over graft, a senior official said on Monday.

   At least five western countries, including Uganda's biggest bilateral donor Britain, suspended their aid to the country after officials in the prime minister's office were accused of embezzling $13 million meant for reconstruction.

   Keith Muhakanizi, the deputy secretary to Treasury - the second highest ranking civil servant in the ministry of finance - said the funding gap would amount to "about $260 million." 

   He said the impact of the aid freeze would be felt from January, adding the government would reduce expenditure "where necessary across the board," without offering further details.

   The central bank governor, Emmanuel Tumusiime-Mutebile, said last week the suspension of aid would cut the country's economic growth by 0.7 percent.

   Donor funding accounts for up to a quarter of the east African nation's annual budget.

   Analysts said the aid cuts, at a time when policymakers are struggling to return economic growth to its long-term path after inflation soared last year, would hit businesses.

   "Government is the biggest spender in the economy. With cuts, everything suffers. There are contracts all around that depend on government expenditure," said Angelo Izama, a Ugandan analyst at the U.S. based Open Society Foundation.

   Critics of President Yoweri Museveni, in power since 1986, accuse him of lacking the political will to punish corrupt public officials, particularly those related to him or those who help finance his re-election.

(Reporting by Phillipa Croome; Editing by Duncan Miriri, Ron Askew)

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