Tue, 6 Nov 2012 17:44 GMT

Source: Reuters // Reuters

This Feb 5 2008 file photo shows a child holding the Ugandan national flag at the Coo-Pe refugee camp in Gulu, northern Uganda. REUTERS/Tobias Schwarz

* Norway gives $70 mln a year in aid to Uganda

* Joins Britain, Denmark, Ireland in suspending funds

* Scandal raises doubts over safety of future oil income

By Elias Biryabarema

KAMPALA, Nov 6 (Reuters) - Norway has become the fourth European country to suspend aid to Uganda after $13 million in donor funds was found to have been embezzled.

The growing scandal adds to concerns about corruption under President Yoweri Museveri, accused by his critics of creating a culture of impunity for cronies who steal public money but are loyal to his party, the National Resistance Movement (NRM).

Norway joined Britain, Ireland and Denmark in suspending aid after Uganda's auditor general last month exposed the theft of funds meant for reconstruction in two impoverished regions. It implicated officials in the prime minister's office.

"Norway has suspended any disbursements to Uganda government institutions until further clarification has been provided," Ambassador Thorbjorn Gaustadsather told Reuters, saying Norway's total aid to Uganda amounts to about $70 million a year.

Uganda's information minister, Mary Karoro, said the government was determined to punish all officials involved in embezzling the money that was meant to fund recovery efforts in northern areas after an insurgency by the Lord's Resistance Army in the 1990s and early 2000s.

"We are promising to get to the bottom of this scandal. Everyone involved will be prosecuted and all the money will be recovered," Karoro told Reuters.

So far 12 government officials have been suspended over the theft. Two of them have been charged in court, said the spokesman for the prime minister's office.

Aid accounts for about 25 percent of Uganda's annual budget and cutting the funds would put key public investments in health and education at risk in Africa's largest coffee exporter.

The latest graft revelations have raised fresh questions over 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.