Uganda is implementing austerity measures in response to budget cuts and low domestic revenue collection. According to Keith Muhakanizi, Deputy Secretary to the Treasury, the donor aid cut is equivalent to 1.3 per cent of Uganda’s GDP, while the total amount of aid cut by the donors stands around $180m out of $200m that was supposed to be provided by the major development partners. The Development Partners have also suspended about $600 billion ($240m) approximately 30 per cent of annual budget under the Joint Budget Support Frame Works (JBSF) for at least six month following revelations by the Auditor General that Shs50b is believed to have been stolen by some officials in the Office of the Prime Minister. But deeper cuts were announced recently by EU ambassador, Roberto Ridolfi, revealing that the EU, UK, World Bank, Austria and other countries have now decided to suspend up to $300m promised in budget support each year until 2013. Mr Ridolfi, reiterated that: “EU budget support for the Fiscal Year 2012/2013 will not be paid until progress has been confirmed. EU institutions are not yet in a position to determine the future provision of budget support in Uganda.”
In response to this, the Government is making adjustment across board by shifting its budget priorities to key sectors of the economy. According to the The State Minister for Economic Monitoring, Mr Henry Banyenzaki the government would have to check wasteful expenditure
Analysts have said that the foreign aids cut by Development Partners in the 2012/2013 may hamper growth of the economy and devastate Ugandans especially when Uganda, the region’s third biggest economy, raised spending by 16.7 per cent to Ush11.2 trillion. According to the budget speeches for 2012/13, the Uganda’s Budget is $4 billion. Kenya’s costs $17.682 billion, while Tanzania’s will spend $9.493 billion, followed by Rwanda’s $2.76 billion. Tanzania and Rwanda still depend heavily on donors as Kenya and Uganda finance their budgets by between 86 and 76 per cent through domestic revenue sources.