World Bank lifts suspension of lending to government with $1.5bn credit line

The World Bank has announced the resumption of more than Shs5 trillion ($1.5bn) in new lending to the government after almost ten months of suspending loans to Uganda and back and forth meetings over the issue.

On Tuesday, the bank wrote to Keith Muhakanizi, the secretary to the treasury, communicating its decision to lift funding for key road projects.

The roads are the 100km Kyenjojo-Kabwoya road under the Albertine Region Sustainable Development Project (ARSDP), and the 340km Tororo-Mbale-Soroti-Lira-Kamdini stretch under the North Eastern Road-Corridor Asset Management Project (NERAMP).

The Bank in a statement dated May 19 said it recognises the progress made by the government in addressing the issues that were impacting the overall performance of the Bank-supported portfolio, including project implementation and proactive safeguards compliance.

“We are continuing to work closely with the government of Uganda to ensure that these efforts are sustained, and have communicated to the Ugandan authorities the resumption of our International Development Association (IDA) lending program,” the statement reads in part.

IDA, is the Bank’s concessional funding arm to low-income and post-conflict countries.

The statement adds that: “We fully expect the government of Uganda to continue to improve implementation performance to realise the development impact of the portfolio and provide a strong platform for the reinstated lending program.”

The World Bank is the single largest institution that extends loans to the Uganda government at 22%.

However in its assessment of performance on external financing mid last year, Uganda performed dismally with 72% of projects being unsatisfactory between 2007 and June 2016. Only 15% of projects are considered satisfactory.

Uganda was ranked worst in the region behind Kenya, Tanzania and Rwanda which had the highest absorption. The loans that were not absorbed amounted to $1.8bn.

Consequently, the Bank in a 13 September, 2016 letter said it “took a decision to withhold new lending to Uganda effective 22 August, 2016 while reviewing the country’s portfolio in consultation with the government.”

The withholding of new lending sparked off turmoil in government, including partly being blamed for the sluggish performance of the economy the whole of last year.

Secretary to Treasury Keith Muhakanizi, admitted that “absorption had really gone down” partly as a result of the ongoing reforms instituted to contain the high-frequency leakages (corruption) in the sectors for which the loans are acquired.

Funding for the road projects was suspended in December 2015 after a contractor on one of the projects, the Kamwenge-Fort Portal road, was accused of sexual harassment of minor girls and women on the site.

The Bank’s acting Vice President for Africa, Mamta Murthi in a letter to Mr Kasaija said the decision is based on satisfaction of government’s efforts in addressing the issues that led to the suspension earlier.