THE EAST AFRICAN-NAIROBI-KENYA
Regional
Monday, December 16, 2002
Project Aid Only Increases Uganda's Debt
By RICHARD HASUNIRA
SPECIAL CORRESPONDENT
PROJECT AID has not been effective in enhancing service delivery and economic growth in Uganda, a researchers' meeting at Makerere University was told last week.
Presenting preliminary findings of a study titled Assessing Aid Effectiveness in Uganda, Dr George Movrotas of Oxford University said that donor agencies needed to review their aid strategies if their assistance was to generate greater benefit for target beneficiaries.
The government wants all donor assistance channelled through the budget so it can allocate it based on its own priorities. It says that its new "principles" on management of foreign assistance, set out in the latest version of the Poverty Eradication Action Plan (PEAP) known as "Building Partnerships to Implement PEAP," are meant to eliminate "stand-alone" projects that are characterised by high operational costs and misuse of funds.
At present, the donor community directly finances 52 per of Uganda's budget. In the last financial year, budgetary support amounted to Ush669.3 billion ($368.3 million).
However, donors also provided funding for various projects amounting to about Ush647.3 billion ($359.6 million), which is roughly the same as the budget support funding.
Over the past four years, project funding has been higher than budget support by about 28 per cent, with project funds amounting to Ush2,057 billion ($11.1 billion) between 1997/98 and 2000/1, above direct budgetary support, which was Ush1,608.5 billion ($8.94 billion).
A section of Uganda's donors have indicated that they will not abide by the "partnership principles" set out by the government, which wants donors to channel all their assistance through the budget rather than directly to specific projects.
The move, aimed at strengthening control over the allocation of all foreign aid, is supported by the World Bank and the European Union, but other donors like the United States Agency for International Development (USAid), which runs several projects in Uganda, are opposed to it.
The US is Uganda's second largest bilateral donor after the United Kingdom.
USAid and other donor agencies such as the Danish International Development Agency (Danida) and Austrian Co-operation want to maintain their direct project approach to ensure effective use of their funds, a Ministry of Finance source said.
"Dr Movrotas' findings have now strengthened the government case," the source said.
Dr Movrotas said during his presentation at Makerere University that his findings present "serious" policy challenges that the donor community ought to help the government solve.
According to the researcher, the relative ineffectiveness of project aid in Uganda was quite unique and not comparable to the situation in Kenya and India, where it was found to be more effective than programme aid.
Unplanned start-up delays, difficulties in securing counterpart funding and mismanagement of procurement and finances are among the factors that impact on the effectiveness of project aid, according to the findings.
Ministry of Finance officials said that most of the projects are unviable and unnecessary and are simply vehicles of debt that raise the country's indebtedness without tangible returns.
Projects are also seen to be associated with several other problems: duplication of projects; some of the projects do not reflect prioritisation; and limited government information about expenditures on projects is compounded by limited scrutiny by parliament and the civil society.
Robert Blake, the World Bank country programme manager said recently that although the performance of World Bank-funded projects in Uganda had so far been satisfactory, the Bretton Woods institution had realised that the conditionalities pegged on project funding had been a burden to the government and thus limited the impact of aid funds channelled through projects.
Mr Blake chairs the consultative committee of donor representatives in Uganda.
Last year, the World Bank terminated the $11.5 million financial markets assistance project, which had failed to take off two years after approval.
Other World Bank projects that were rated as having underperformed were Power III ($158 million), Institutional Capacity Building ($42.2 million), Nutrition and Early Childhood Development Project ($40 million), El Nino Emergency Road Repair ($29.1 million) and Environmental Management Capacity Building ($12.4 million).
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