World Bank back on board with Shs 7 trillion funding to Uganda

The World Bank has officially restored its financial engagement with Uganda, paving the way for the disbursement of $2billion or approximately Shs 7 trillion in new funding. 

The move effectively ends a two-year freeze on new public loans, which had created considerable fiscal strain on the nation. 

The resumption of aid is contingent upon Uganda implementing agreed-upon mitigation measures to ensure that the development projects adhere to the multilateral lender’s strict social and environmental standards.

Ramadhan Ggoobi, the Permanent Secretary, Ministry of Finance confirmed that the new funding would start trickling in over the next three financial years.

The funds, he said, would be used on roads and bridges, electricity transmission and last mile distribution, building infrastructure in regional cities, schools, IT, agriculture, water and irrigation, export guarantee scheme, skilling and social protection.

The Cause of the Two-Year Suspension

The World Bank’s abrupt halt on new financing, announced in August 2023, was triggered by the enactment of Uganda’s Anti-Homosexuality Act (AHA). 

The Bank stated that the law "fundamentally contradicts the World Bank Group's values,” and that its mission to eradicate poverty could only succeed if it includes everyone. 

Mitigation Measures Clear the Way

In June this year, however, The World Bank lifted its funding freeze on Uganda, saying it was confident that the government had put in place "mitigation measures" to ensure projects would not discriminate against LGBTQ+ people.  

A World Bank spokesperson confirmed that the institution had worked closely with Ugandan authorities to put in place "strong measures to mitigate against potential harm from the law."

The Bank’s management assessed the efficacy of these additional mitigation measures within ongoing projects and deemed them satisfactory. 

Consequently, the World Bank Board has approved three new projects focusing on critical sectors with significant development needs: social protection, education, and the management of forced displacement and refugees. 

This targeted approach aims to ensure that the vital development assistance reaches all Ugandans without discrimination, despite the contested legal environment.

The injection of Shs 7 trillion in cheaper external financing is expected to significantly ease the financial pressure Uganda has faced since the 2023 suspension. 

During the funding freeze, the government had increasingly relied on expensive domestic borrowing to fund its expenditures, leading to higher interest costs.