KAMPALA (Reuters) - The World Bank said on Wednesday it was reassessing its assistance to Uganda over corruption allegations, potentially adding more fiscal strain on the east African country reeling from aid cuts by four major European donors.
Uganda's largest bilateral donor, the United Kingdom, alongside Norway, Ireland and Denmark, recently announced their suspension of aid after a report by the auditor general showed about $13 million was embezzled by officials in the prime minister's office.
The money had been meant for reconstruction in Uganda's northern and northeastern regions devastated by years of insurgency.
"The recent allegations indicate that the overall fiduciary environment in Uganda needs to be strengthened to ensure better management of public resources," a statement from the World Bank's Uganda office said.
"In light of these recent events, the World Bank Group is reviewing its development assistance to Uganda while also strengthening its own measures to ensure that its funds are used for their intended purposes."
The World Bank is Uganda's largest multilateral lender, supplying cheap credit for health and transport infrastructure.
Uganda receives between $350-400 million annually, of which $100 million is direct budget support, Steven Shalita, the World Bank's senior communications specialist in Uganda, said.
Theft of public funds is commonplace in Uganda and critics say the incumbent leader Yoweri Museveni's reluctance to punish venal officials has allowed a culture of impunity to thrive.
Analysts say the entrenched graft has slowed the delivery of vital public services and is a drag on growth.
So far, 12 government officials have been suspended over the theft and two of them have been charged in court.
The graft revelations have raised fresh questions about the government's ability to safeguard future earnings from oil exports, after hydrocarbon deposits were found along the border with the Democratic Republic of Congo in 2006.
Production is expected to commence in 2017.
(Reporting by Elias Biryabarema; Editing by Yara Bayoumy and Michael Roddy)