Uganda has now turned to local pension funds as a survival mechanism following external freezing of funding from the World Bank.
According to a local news outlet, the government is in talks with the World Bank for the lender to rescind its decision to withhold budget support for Kampala worth Ush6.7 trillion ($1.787 billion).
The global lender halted funding last month in the wake of Uganda’s decision to give a nod to a new anti-homosexual law deemed by the West as a violation of rights of minorities.
Last week, the National Planning Authority, technical officials at the Ministry of Finance, Parliament’s Committee on National Economy, Budget Committee and Finance Committee held a retreat over the economy.
Officials noted that the Treasury is rethinking its fiscal strategy to increase domestic revenue collection, reduce borrowing, cut nugatory public expenditure and reduce supplementary budgets of government agencies spending above their vote.
Other measures, Secretary to the Treasury Ramathan Ggoobi said, are to downsize state agencies, suspend purchase of vehicles, reduce workshops and foreign travel and suspend the creation of new administrative and electoral units.
“We agreed that if this is not done, we will soon go into financial distress and as a country and be flagged by the IMF as a credit risk,” opposition legislator Gorreth Namugga disclosed.
So far, about 100 state agencies have become a source of wastefulness in spending. The government also took commercial loans from domestic and foreign lenders at unfavorable terms to fund key priorities and splurge on luxuries for government executives.
“The Secretary to the Treasury said that should concessional loans fail; we should look at other sources. And pension funds, like National Social Security Fund are some of the options. It’s something we should start looking at because other countries have done it,” Namugga said.
Ugandan legislator Robert Migadde who spearheads the Committee on National Economy told The East African that the government agencies agreed that borrowing from the domestic market should only be a last resort.
“The option is the local market through issuance of Treasury Bonds. And since it is NSSF and other pension funds that buy the Treasury Bonds, in effect this means we will be borrowing from the pension funds,” he explained.
In June this year, Uganda presented a Ush52.74 trillion ($14 billion) budget for financial year 2023/24, which the government targets to finance to the tune of 55 percent through domestic revenue, while the remainder is donor money that funds programmes in health, education, water, energy and infrastructure.