{UAH} The cost of war: Uganda borrows to fund its military in South Sudan

The cost of war: Uganda borrows to fund its military in South Sudan

UPDF soldiers secure the Juba International Airport on January 24, 2014. Photo/DPU 

In Summary

• Central bank sources said that the domestic borrowing ceiling has been raised by Ush675 billion ($259 million), from Ush1.04 trillion ($400 million), to allow the government to plug holes in its revenues and provide for the growing costs of the army's activities in the region.
• UPDF was deployed in South Sudan to secure government installations and ensure safe passage of foreign nationals and civilians after fighting broke out in Juba on December 15.
• Ugandan military officials have been tight-lipped about the cost of the war.

The government of Uganda has raised its domestic borrowing ceiling as it seeks to raise money to plug a budget deficit and, among other expenditures, support its military intervention in South Sudan.

Central bank sources said that the domestic borrowing ceiling has been raised by Ush675 billion ($259 million), from Ush1.04 trillion ($400 million), to allow the government to plug holes in its revenues and provide for the growing costs of the army's activities in the region.

READ: Uganda to increase borrowing

The Ministry of Defence has asked parliament to approve a supplementary budget of Ush170 billion ($65 million) "for regional security," part of which, MPs say, is meant to support the deployment of the Uganda People's Defence Forces in the neighbouring country.

"My suspicion, and that of many Members of Parliament, is that this money has gone to support the war in South Sudan," Kyadondo East MP Ssemujju Ibrahim Nganda of the opposition FDC party told The EastAfrican.

The Ministry of Defence's request is part of Ush482.5 billion ($185 million) that the government is seeking as supplementary funding this financial year and is the first glimpse of the financial cost of Uganda's involvement in the conflict in South Sudan.

The UPDF was deployed in South Sudan to secure government installations and ensure safe passage of foreign nationals and civilians after fighting broke out in Juba on December 15.

The army has since been sucked into the conflict on the side of President Salva Kiir, who is locked in a political and military contest against former vice-president Riek Machar, and has sparked a civil war and a humanitarian crisis in the country.

Urgently needed

Ugandan military officials have been tight-lipped about the cost of the war. When he tabled the request for additional financing for the Defence Ministry, Aston Kajara, Junior Finance Minister, told MPs that Ush85 billion ($32 million) of the Ush170 billion ($65 million) is urgently needed for classified expenditures.

When pressed by shadow finance minister Hassan Kaps Fungaroo to state whether the money was intended for the UPDF operations in South Sudan, Mr Kajara said the money was needed to address "urgent security challenges that require urgent attention."

Defence Minister Crispus Kiyonga was not available for comment.

MPs on the Defence Committee told The EastAfrican that when the minister appeared before them earlier this year, he revealed that the UPDF had allocated Ush25 billion ($9.6 million) to cater for the costs of its deployment in South Sudan and had not expected the deployment to last more than three months.

With the conflict entering its sixth month, however, it is beginning to put a strain on the defence budget and raise questions about how the war is being funded. With the supplementary request, Uganda's defence budget will rise to Ush828.2 billion ($318.5 million).

State Minister for Defence Jeje Odong told MPs last month that the Government of South Sudan had agreed to pay for the fuel that the UPDF is using in the war, but the claim was quickly refuted by Bol Makueng Yuol, Deputy Minister for Education and Secretary for Information in the ruling SPLM party.

A parliamentary inquiry into the army's role in South Sudan ordered by Speaker Rebecca Kadaga in December last year failed to take off.

READ: Uganda defends troop deployment

At a scheduled meeting last week, neither the Defence Ministry officials nor the chairperson of the parliamentary Committee on Defence turned up, leaving MPs to speculate about the funding for the war and its source.

The United States government, the UN and the African Union, pay for Uganda's costs in Somalia, but the lack of an external source of funds is putting the country's defence budget under strain.

ALSO READ: Uganda, Burundi lead East Africa in military spending

The Inter Governmental Authority on Development (Igad), the regional grouping spear-heading the peace effort in South Sudan, is supposed to deploy a regional armed force to enforce a Cessation of Hostilities Agreement signed in January but never respected.

But, while countries like Rwanda, Kenya and Ethiopia have indicated willingness to contribute to this regional force, Igad officials say they do not have the money to pay for the force and are hoping to deploy the troops under the blue helmet so that the UN picks up the bill.

It is not clear how soon such a deployment will be implemented, meaning that the UPDF may stay in South Sudan for a few more months, putting even more pressure on Uganda's defence budget.

Parliament is yet to approve any of the two supplementary budget requests brought before it by the Finance Ministry in February for Ush220.5 billion ($90m) and in May for Ush262 billion ($100m).

That, however, is a formality, as the requests for approval are being done retrospectively. The government has already used a clause in the law that allows it to spend and seek approval within four months to borrow the money from the local market.

Other major expenditures for which the government is borrowing money include the national ID project and cash for the recruitment of extra police officers ahead of the 2016 elections.

In January, the director of research at the Bank of Uganda, Dr Adam Mugume, warned that the conflict in South Sudan, a major trading partner, could shave 0.5 percentage points off Uganda's GDP growth.

The economy appears to have remained resilient, although tax revenues have dropped below target, in part due to the erosion of much of the South Sudan market, although the long-term impact is yet to be seen.

"There are mixed sentiments about it because of the informality of the flow," said a senior central bank official. "There doesn't seem to be any evidence of a major impact."

The official, who spoke on condition of anonymity, said that despite the growth in domestic borrowings, the debt-to-GDP level shows that Uganda "is still in a comfort zone".

Many Ugandan civil servants have gone without salaries for several months, but the Bank of Uganda official said it is not clear whether the delays are related to the squeeze in government finances.

"There has been a payroll cleaning exercise, as far as I know, as well as a systems upgrade so it is hard to tell what has caused those salary delays," the official said.

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