Making Budget Reform Matter for Poverty Reduction

1. Making Budget Reform Matter for Poverty Reduction Progress in implementing Uganda’s PRS Paul Mpuga April 27, 2006

2. 1. Outline • Pre-1986 Uganda • 1987-97: Economic stabilization, institutional & infrastructure rebuilding • 1997-04: Focus on poverty, service delivery • The National Budget, dialogue, PAF • Challenges • Conclusion

3. 2. Background • Pre-’86 – failed state, no rule of law • Breakdown of infrastructure/instns • GDP decline by 2.7% p.a. • 3-digit inflation • Government control &active in most sectors • National budget tool for implementing controls

4. 3. 1987-97: Stabilisation/reform • Wide spread poverty –UNHS1 56% (North 71%) [now 38%, 63%] • Net prim sch enrolment 62% [84]; adult HIV prevalence 18% [6-7]; access to safe water 25% [55]. • Life expectancy 48 yrs [44], stunting (<5yrs) 45% • Initial reforms • ERP -May 1987, currency revaluation • Fiscal reforms; major civil service reforms • Decentralisation (pilot in ‘93)

5. Reforms • Deepening and institutionalisation of reforms • Financial sector reforms (FIS ‘93) • Forex/interest rate, current a/c liberalisation ‘94 • Marketing liberalisation/dismantling of GoU monopolies – CMB, LMB, F&B … • Promoting investment, - Privatisation, UIA • Fiscal management - URA

6. 4. 1997-04: Poverty/services delivery • PEAP ’97 - [target reduce pov to 10% by 2017], • 1st rev 2000, 2nd 2004. PEAP summary used as PRSP • UPE, public service reform, health user fees • Focus on good governance/security • Provides framework for public policy action. • Guides medium term sectoral plans, district plans, national budget process & public investment progs • To monitor progress GoU produces a Poverty Status Report every two years.

7. 5. 2004 –: Back to growth • PEAP revised 2003/4 - 5 pillars – • Economic management; • Production, competitiveness and incomes - pro-poor growth, MSMEs, agric/rural devt; • Security, conflict resoln & disaster mgt - Northern Uganda recovery process • Governance; and • Human development

8. 6. The national budget & poverty focus • Budget Act 2001 outlines process and stakeholder participation • Process largely open &transparent, spending units -CG/LGs, DPs, civil society involved. • Increased oversight role by Parliament • SWGs active in budget dialogue • PAF (intro in 1997/8) to protect poverty reducing expenditures from cuts • PAF as share of GoU expenditures has been growing (17% in FY98, 37% FY05), as well as candidates for PAF!

9. National budget • Cap on supplementary budget at 3% of original budget. • Supplementary bgts need approval of Parliament • Public Finance &Accountability Act, and Procurement Act, 2003 helping to improve transparency/accountability of public spending • Annual sector reviews helping to monitor progress. • PEAP matrix to be used by all DPs. • Planned PEAP implementation review will provide key evidence on indicators and improve link to budget. • Gender budgeting guidelines to improve allocations

10. 7. Challenges • Increased Y poverty: ‘00 - 34% to 38% ’03 [UNHS3 underway!]. • Inequality: Gini cf ↑ from 0.38 to 0.43.

11. Challenges • Growth of GDP 4.9 – target 7% • Inflation –within target, but volatile, driven by agric! • Exchange rate volatility • Growth of exports low – 4.4% and trade policy not well coordinated • Large trade deficit • Energy/infrastructure gaps

12. Challenges • Translating PEAP priorities into MTEF • Resource constraints – MTEF ceilings. • Needs galore! Services, infrastructure, energy, defense, PA, … • Transparency and efficiency, VfM • Low LE, infant/maternal mortality high • Access, & quality of public services • High population growth/high fertility rates • Policy interventions – G-tax, LGs, RDS!

13. 9. Conclusion • Uganda has been at the centre of reforms • Great strides in reducing poverty &improving service delivery • PEAP has provided key link to budget • Budget reforms and inclusion key in improving allocations. • Quality, value-for-money still an issue • Ad hoc interventions disrupting policy/sector performance