Uganda’s economy goes into a tailspin as “Jajja” drains the oil piggy bank
By Charles Kamya Ssentamu
Uganda is coming to terms with the consequences of President Museveni’s unrestrained kleptomania as it emerges that the Oil Fund, which with a balance of nearly a billion dollars was one time considered the national piggy bank, is dry.
The unnerving revelation came to light as Ministry of Finance officials finally admitted that the treasury could no longer rely on the Oil Fund to finance budget shortfalls because there was almost no money left there. David Bahati, the braze faced junior minister for planning told parliament that only Ushs 70 billion was left in the fund, and therefore other means of financing a Ushs 700 million hole in the budget should be found.
Bahati was seeking permission to borrow from other sources and reminded legislators that they had always signed off on earlier drawdowns from the fund.
With a lot of money going into financing Museveni’s adventures that include buying arms and similar reckless spending, Uganda’s economy is slowly grinding to a halt.
Domestic arrears have climbed to Ushs 3.9 trillion shillings, nearly 10 percent of the budget. Without settling domestic debt, local businesses can’t expand production and create jobs. They cannot settle their obligations to banks, leaving the financial sector with mounting non-performing loans.
Uganda’s combined domestic and external debt is now estimated at around 52 percent of GDP, edging the country towards a situation where it cannot finance debt payments, meaning Ugandans are in serious trouble! Already debt servicing is consuming close to 20 percent of the country’s revenue earnings.
Separate from national reserves, the Oil Fund was set up in 2015. It was an attempt by Museveni to control the country’s oil wealth like his personal fortune. It essentially was an account into which proceeds from Uganda’s oil program are kept at the Bank of Uganda. The fund has over time accumulated nearly a billion dollars.
Alarm bells had been set off in 2010 when, short of funds to bribe his way to victory in another sham election, Museveni suddenly purchased a squadron of 6 Sukhoi 27 fighter jets from Russia. He pegged the purchase on proceeds from the oil program.
According to knowledgeable sources, there was a giant scam in the extravagant arms purchase. The cost of the jets and associated armaments and training was inflated more than three-fold.
The alarmed parliament tried to rein in Museveni’s insatiable appetite for money by legislating the Oil Fund and putting in place strict rules for accessing it. But not to be outflanked, Museveni has bribed his majority in parliament to approve withdrawals from the fund, ostensibly to fund infrastructure projects.
Using this ruse, Museveni has gone on to deplete the fund. He has depleted the wealth not only of current Ugandans, but of generations to come.
The projects he spends on are in reality sluice funds. Their cost is always inflated to funnel funds back to Museveni.
In parliament, Bahati then dropped the bombshell that some 770 billion shillings had been taken from the fund between 2015 and 2019 and there was now too little left to meet budget emergencies.
Everybody is placing the blame at Museveni’s door. In near abdication, Finance Minister Matia Kasaija said Museveni was “the ultimate finance minister” and that he only works under his boss’s instructions.
For his part Treasury Secretary Keith Muhakanizi blames the depleted fund on the appetite for new administrative units, i.e. districts, and their attendant implications for the cost of public administration. The new districts are themselves a function of M7’s political gerrymandering where he creates new units to swell the number of MP’s allied to him in parliament.
Under Ugandan law, a political constituency is supposed to be at least 100,000 residents. But Museveni has been creating constituencies as small as 9000 people in places like Karamoja.
With the window for concessional borrowing now closed, Museveni has no choice but to contract expensive commercial credit to fund his appetite for money.
With the oil program at a standstill, that is likely to take the country back twenty years, when 80 percent of GDP went into debt servicing.
Museveni will be the first president in the region to beggar the next generation, and its offspring!, commented an economist.