Donors trim Uganda budget aid over graft concerns

By Elias Biryabarema

KAMPALA (Reuters) - International donors said they would trim at least 10 percent of their $360 million contribution to Uganda's budget in the year to June 2011 because of concerns over corruption.

"Total budget support disbursements will ... be at least 10 percent lower than intended, owing to weak progress in a number of sectors and a failure to address high-level corruption," the Joint Budget Support Development partners said in a statement late on Monday.

Those partners include the European Commission, Britain, Germany, the World Bank, Denmark, Belgium, Ireland, Norway, the Netherlands, Austria and Sweden.

Although Uganda's economy has thrived over the last decade, President Yoweri Museveni, in power for 24 years, has faced mounting accusations from donors of widespread corruption and deteriorating public services.

In March, donors said graft had become endemic and the government's refusal to pursue cases of grand corruption was breeding a culture of impunity.

Bill Page, a partner at Deloitte & Touche, told Reuters the squeeze on budgetary aid would pressure the government to collect more revenue to fill the budget funding gap.

"This development will bring more pressure to bear on government to collect more revenue and I think the government is also likely to turn to Treasury bills to try to raise more money to meet this gap," he said.

In June, Uganda announced a 16 percent rise in spending to $3.31 billion for 2010/11, with 25 percent of that amount expected to come from donor loans and grants.