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Ugandan Donors Warn of Aid Cuts, Oil 'Curse'

Donors are warning Uganda that it risks losing key funds if the country does not get serious about curtailing rising corruption. Uganda was told that its recently discovered oil reserves could prove a "curse" if government accountability is not enforced.

The country manager for the World Bank in Uganda, Kundhavi Kadiresan, said in a speech given to Ugandan officials on Thursday that donors may be forced to cut funds to the East African nation due to widespread corruption in its government.

The World Bank official was speaking in her official capacity as chair of a local development consortium comprised of major donor countries as well as global institutions such as the World Bank and the International Monetary Fund.

Steven Shalita, spokesperson for the World Bank's Ugandan program, says that the remarks were prompted by a steady string of major corruption scandals in which senior offenders have not been prosecuted.

He says that the organization's country manager was speaking in her capacity as the chair of the Local Development Partners Group and that her comments represented the views of the broader bilateral and multilateral donor community.

"The money given is supposed to be used for poverty eradication, so if it's misused then it creates problems. It means that some people will not get the services that they deserve. So you don't get value for money, so it's a waste. It's a concern for everybody; not just for the World Bank, but also for all the development partners," he said.

In a report last year by the country's Transparency International chapter, 60% of Ugandans reported perceiving their country as "extremely corrupt" or "very corrupt." In the region, Uganda scored worse than Tanzania but better than its more powerful eastern Africa neighbor, Kenya.

Of particular concern is $27 million reportedly stolen in the hosting of a Commonwealth heads of state summit in 2007. Kadiresan said that as much as $100 million are lost each year in shoddy procurements.

She said future aid cuts could be in the form of withholding disbursements, slashing aid levels, and sidestepping direct budgetary support. A significant portion of Uganda's current national budget is funded directly from international donors.

Robert Lugolobi, head of Transparency Uganda, says that graft is no longer a problem Uganda can afford to ignore.

"It has been rising, and now it has reached a level where it effects each and everybody and each and every sector of the economy, and actually the way of life," he said.

The World Bank official also warned Uganda that its newly found oil reserves could turn into a "curse" rather than a blessing if the institutional safeguards to properly manage the revenue flow are not in place.

Lugolobi says that he has not been impressed with the Ugandan government's preliminary oil deals.

"In my opinion the way we have started is not transparent in the way have handled it. Ugandans don't know how the contracts are signed, how those people come to get the contracts. What is entailed in the contracts have been hidden from the people," said Lugolobi.

Uganda has also come under heavy fire from rights groups and Western governments for a parliamentary bill that imposes harsh penalties relating to homosexual activity.