Kisumu, 20/02/2008
  By Leo Odera Omolo
  
  UGANDA is to receive some USD 80 million from Germany for budget support and selected projects in the water energy and financial sectors.
  
  A total of USD 21.4 million will go towards poverty reduction. The new deal was recently disclosed by the German Ambassador to Uganda Reinhard Butchnolz during a meeting with Finance State Minister Fred Jachan Omach.
  
  In April last year, Uganda and Germany reached an agreement on financing for three years from 2007 to 2009.
  
  Omach said at least USD 22.1 million would be utilized towards technical support for the three years.
  
  The aid package was agreed upon following a visit to Uganda by a high-powered delegation from Germany during which German President Horst Kohler initiated talks on areas in which his country will cooperate with Uganda.
  
  In this regard Hon Omach said the two countries discussed Germany’s interest in developing Uganda’s railway network. But the Minister gave no further details in regards to the envisaged plan to improve railway network.
  
  During the visit, President Kohler also toured most of the projects in Uganda which are funded by his country.
  
  At least USD 21.4 million will go towards poverty reduction, while water and sanitation projects will consume USD 14.2 million
  
  According to the German envoy Mr. Butcholz who signed the agreement on behalf of his government, another USD 22 million will be split between renewed energy and the development of the financial sector.
  
  The latter is a new USD 2.8 million projects by the German government to develop cheap money transfer infrastructure for rural communities. A microfinance programme for rural areas that uses mobile phones and other communication technologies to transfer money has already been set up.
  
  Another USD 1.9 million has been allocated to increasing access to financial services in rural including northern Uganda said the Ambassador.
  
  The system will also see the funds moved from the urban-based microfinance institution to rural customers, although officials have warned that putting a cap on the internet rates charged by these institutions could derail the programme.
  
  Uganda’s average rates in the microfinance sector can be as high as 28 percent but Germany says that putting a cap on the rates could create disincentives for key players to expand or remian in the micro-credit sector.
  
  “An internet cap for these microfinance institutions would be detrimental to these plans” said the envoy.
  
  In addition to funding other projects in the financial sector, Germany’s government is also one of the countries supporting Uganda’s upcoming credit reference review bureaucracy which has lost almost USD 8.5 million.
  
  This is Uganda’s second agreement with a key donor on budget support following the country’s spending spree last year which saw the government spend USD 157 million in preparation for the commonwealth Heads of Government meeting (CHOGM) in November. Funds were diverted from other sectors to host the summit.
  
  At  the end of last year Denmark, the African Development Bank and other European donor’s jointly gave the Uganda government a combined grant of USD 150 million for water and roads.
  
  “It is indeed notable that donors keep pumping money in Uganda even though they remain skeptical of the government’s willingness to fight corruption.”
  
  During the visit President Kohler told his host that the country needed to establish an anti-corruption court and refute mismanagement at all levels of government in order to continue receiving financial assistance and aid.
  
  An audit of CHOGM funds, which were widely believed to have been grossly mismanaged, is yet to be released but the donors are not holding back.
  
  Germany has been one of Uganda’s main donors since 1964 and its total financial commitment to the country to date stands at more that USD 840 million.
  
  According to the Ambassador, Uganda remained one of Germany’s priority partners and will continue receiving budget support and aid for selected sectors.
  
  Ends
  Leooderaomolo@yahoo.com