HomeRegional NewsEast AfricaUganda slashes government budgets to pay for power

Uganda slashes government budgets to pay for power

Ugandan finance
minister Maria
Kampala, Uganda — ESI-AFRICA.COM — 03 February 2012 – The government of Uganda has been forced to slash ministry and other departmental budgets as it scrambles to avert a crisis in the face of private power generators threatening to plunge the country into darkness over hundreds of billions of shillings in unpaid arrears.

Local newspaper “The Monitor” reports that it understands that the decision to starve non-critical sectors of cash was taken by finance minister Maria Kiwanuka with the backing of Cabinet “’ a development which highlights the cash squeeze currently facing the government as it seeks to implement activities set out in the 2011/12 budget announced in June last year.

A detailed break-down of how badly specific ministries were affected remains scanty, but Finance Ministry spokesperson Jim Mugunga has confirmed the cuts and asked the affected government agencies to bear with the situation.

“We had no choice but to make hard decisions in order to raise the money needed to subsidise thermal power generation,” he explained. “The US$40 million allocated in the budget was not enough and we had to effect cuts to raise an additional US$160 million. In fact, by July we had already spent all the money budgeted, yet we had a crisis on our hands.”

Mugunga indicated, however, that the Finance Ministry had not touched core government activities in implementing the stop-gap measure. “We cut recurrent expenditures, targeting areas such as travel and procurement of vehicles, among others.

After Minister Kiwanuka had raised the US$160 million from this re-allocation, sources revealed that later she had authorised the payment to power generators. The most recent instalment of US$51 million was made last month.

Cabinet is then reported to have taken the unpopular decision to withdraw the huge subsidies the government, had until recently, been making to the power sector, and asked consumers to prepare to foot the entire bill. This is what led to the 40% increase in the cost of power in new tariffs announced by the Electricity Regulatory Authority last month.