World Bank Suspends Lending to Uganda

The World Bank has suspended lending to Uganda, this a move that could affect the country’s economic growth.

“The World Bank Group took a decision to withhold new lending to Uganda effective August 22, drug 2016 while reviewing the country’s portfolio in consultation with the Government of Uganda, website like this ” the international body said in a statement on Wednesday night.

According to Finance Minister, Matia Kasaija, Uganda’s outstanding public debt is projected to hit a staggering $ 7.6 billion by end of this financial year compared to $ 7.2 billion last year.

The World Bank said it will continue to “actively work with the Ugandan authorities to address the outstanding performance issues in the portfolio, including delays in project effectiveness, weaknesses in safeguards monitoring and enforcement, and low disbursement.”

The bank further reiterated its commitment to “doing everything possible to work closely with the Government of Uganda, as well as with other stakeholders, to support the country’s development and ensure that all World Bank-supported projects deliver tangible and long-lasting results to all Ugandans, especially the poor and vulnerable.”

This is the second time in a space of less than a year that World Bank is withholding funding to Uganda.

In December 21 World Bank Group President Jim Yong Kim announced the cancellation of funding to the Uganda Transport Sector Development Project (TSDP) due to what he described as “contractual breaches related to workers’ issues, social and environmental concerns, poor project performance, and serious allegations of sexual misconduct and abuse by contractors.”

Kim said that an early review of the World Bank-financed project found inadequacies in Bank supervision and lack of follow-through after serious issues were identified.


“The multiple failures we’ve seen in this project — on the part of the World Bank, the government of Uganda, and a government contractor – are unacceptable,” said Kim.

This followed complaints received from the Bigodi and Nyabubale-Nkingo communities located along the Kamwenge to Fort Portal Road regarding adverse environmental and social impacts stemming from the Project’s construction works, including impacts related to road safety and compensation for land acquisition, as well as serious allegations of road workers’ sexual relations with minor girls in the community, and sexual harassment of female employees.

On October 22, the Bank suspended the financing for the project. After further review, and after the Government of Uganda and the government contractor did not take corrective steps, Bank management informed the Board on December 17 that it was cancelling the project.

But UNRA Executive Director Allen Kagina said steps have been taken to address the situation, expressing hope of the World Bank’s possible change of heart.

Government officials said a statement would be issued today in regard to the unfolding development.


Observers say the new development is likely to reduce foreign exchange flows to Uganda.

The World Bank’s move could as well interrupt commercial and trade finance, through reduction of both Government and private sector access to foreign loans.

In addition, Uganda could face high risk premium on offshore lines of credit, and eventually scare away alternative creditors, as they anticipate a credit squeeze in the future.

On its website, World Bank acknowledges that takeoff of a huge public investment program and resumption of private sector economic activity in the post-election era is expected to drive growth.

“This notwithstanding, the effects of a volatile global economy on demand for Uganda’s exports and timing of key infrastructure projects in the country’s oil sector, could offset any benefits of improved terms of trade due to low oil prices,” says the World Bank.

“Under these circumstances, the Ugandan economy is forecast to grow at a rate of approximately 5.9 percent in FY16/17. Growth will increase to 6.8 percent in FY17/18, and thereafter stay on an upward trajectory into the medium term, if major infrastructure projects are implemented as planned, and private investment intensifies with oil-related activities.”

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