UGANDA 1 Identifying Options For An Effective And Sustainable Fiscal Adjustment © 2023 International Bank for Reconstruction and Development/International Development Association. The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Photo credits: Morris Mugisha Design/Layout: Artfield Graphics Printed in Uganda by Artfield Graphics Additional material relating to this report can be found on the World Bank Uganda website (www.worldbank.org/uganda). Identifying Options For An Effective And Sustainable Fiscal Adjustment ii Table of Contents ACKNOWLEDGEMENTS ...................................................................................................................... iv FOREWORD ....................................................................................................................................... v KEY MESSAGE ................................................................................................................................... vi ABBREVIATIONS .............................................................................................................................. viii 1. INTRODUCTION .............................................................................................................................. 1 2. IDENTIFYING BROAD MACRO-FISCAL OPTIONS FOR AN EFFECTIVE AND SUSTAINABLE FISCAL ADJUSTMENT .................................................................................................................................... 5 3. IDENTIFYING OPTIONS FOR ENHANCING EFFECTIVENESS EFFICIENCY AND EQUITY OF SPENDING IN AREAS CRITICAL TO SERVICE DELIVERY .......................................................................................... 17 3.1. INTERGOVERNMENT FISCAL TRANSFERS .............................................................................................................................. 19 3.2. PUBLIC INVESTMENT MANAGEMENT ................................................................................................................................... 28 4. IDENTIFYING OPTIONS FOR ENHANCING SPENDING FOR HUMAN CAPITAL DEVELOPMENT.............. 39 4.1.HEALTH ................................................................................................................................................... 41 4.2. EDUCATION .......................................................................................................................................... 54 5. CONCLUDION ............................................................................................................................... 67 REFERENCES ....................................................................................................................................69 iii Identifying Options For An Effective And Sustainable Fiscal Adjustment Acknowledgements The Uganda Public Expenditure Review 2022-23 was undertaken as a programmatic, analytical, and advisory task executed jointly between the Government of Uganda and World Bank staff and consultants. On the World Bank side, the overall task was led by Rachel K. Sebudde (Senior Economist), while the Government side was led by Charles Byaruhanga (Advisor on Budget) Ministry of Finance, Planning and Economic Development. Within the World Bank, the multi-sectoral team. Module I team was comprised of Rachel K. Sebudde (Senior Economist, EAEM1); John Matovu (Consultant); Daniel Lukwago (consultant); Alex Giron Gordillo (consultant); and Massimo Mastruzzi (Senior Economist). Module II(a) on intergovernmental fiscal transfers was delivered by Rachel K Sebudde (Senior Economist), Barbara Magezi (Senior Governance Specialist); Per Tidemand of DEGE Consult (Lead Consultant); and Florence Kuteesa (Consultant). Module II(b) on public investment management was delivered by Rachel K. Sebudde (Senior Economist); Jonas Arp Fallov (Senior Public Sector Specialist); Edgardo Mimica Miranda (Lead Consultant); Fernando Bretos Ferlluga (Consultant), and Fred Kasalirwe (consultant). Shawn Powers (Senior Education Economist); Karina Acevedo-Gonzalez (Consultant); and Daniel Lukwago (Consultant) worked on Module III (a) on education, while Module III(b) on health was delivered by Collins Chansa (Task Team Lead and Senior Health Economist), Rogers Ayiko (Senior Health Specialist), Ezrah Trevor Rwakinanga (Consultant), William Kiganda (Consultant), Elizabeth Mabel Asege Ekochu (Health Specialist), Rachel Sebudde (Senior Economist), Julia Mensah (Senior Health Specialist), and Brendan Michael Hayes (Senior Health Specialist). Data analysis was supported by Hirut Wolde (Consultant) and Macklean Kwesiga (Ministry of Finance, Planning and Economic Development). The analytical work was strengthened by comments and suggestions from peer reviewers, including Christian Eigen- Zucchi (Lead Economist), Emilija Timmis (Senior Economist); and Joao Leonel Antunes. On the government side, great collaboration and leadership was provided by the Permanent Secretary and Secretary to Treasury Mr Ramathan Ggoobi, Dr. Diana Atwine, the Permanent Secretary (Ministry of Health), and Mr Ishmael Magona (Ag Director Budget), with the core team comprising Charles Byaruhanga (Advisor Budget), Sarah Byakika, Tom Aliti, Richard Kabagambe-Tureebe, Nimrod Agasha, Albert Musisi, Moses Bekabye, Mohammed Kabaale, Mustapha Achidri, Ivan Kasozi, Ian Mugizi, Rachael Mirembe, Francis Muhumuza, Timothy Namboga, Lillian Nabiryo, and other staff of the Budget Department in the Ministry of Finance, Planning and Economic Development. The team appreciates the overall guidance from Vivek Suri (Practice Manager at concept and first part of the work), Philip Schuler (Lead economists/Ag. Practice Manager), Abha Prasad (Practice Manager); Marek Hanusch (Program Leader), Francisca Ayodeji Akala (Practice Manager), Anne Margreth Bakilana (Program Leader), and Amparo Elena Gordillo-Tobar (Senior Health Specialist), Rosemary Mukami (Country Manager), and Keith Hansen (Country Director). The team would like to thank Esther Ampumuza for providing logistical and administrative support throughout the process. We are also grateful to Virginia Larby for excellent editorial support. We are thankful for the great partnership we enjoyed with the Ministry of Finance, Planning and Economic Development, the Ministry of Health, the Ministry of Education and Sports, and the Ministry of Local Government. This partnership allowed us access to most of the data used in this report. The preliminary findings from this report were shared by the National Treasury and the discussions with government at various points of producing this work enriched the outcome. Identifying Options For An Effective And Sustainable Fiscal Adjustment iv Foreword Uganda’s economic policy over the first half of the road leading to its Vision 2040 raised fiscal risks and long-term development vulnerabilities. The country pursued a debt-financed infrastructure drive, aimed at addressing binding constraints to growth, and raising productivity. This strategy has reduced spending on human capital development priorities, contributed to crowding out of private sector credit while public investments have not yielded the desired returns, and raised fiscal and debt vulnerabilities, exacerbated by relentless exogenous shocks. At the same time, Uganda is entering a pivotal stage in its development path, where human capital – the knowledge, skills, and health that people accumulate throughout their lives – has the potential to be a central driver of the country’s development. Yet even as Uganda’s population is projected to increase by 60 percent in the next 20 years, the country has been underinvesting in its human capital. The World Bank estimates that at current levels of investment in human capital, a child born in Uganda today will grow up to be only 38 percent as productive as he or she could be with complete education and full health. For Uganda to benefit from a demographic dividend, the country will need substantial resources to serve a larger population, but it must further elevate its investments in social services to improve the current poor levels of access and quality. In addition, providing equal access to human capital development is key to addressing the inequality of opportunities and making future growth more inclusive. Spending on social sectors has been consistently low and inefficient in Uganda, contributing to inadequate and inequitable access as well as poor learning and health outcomes. A combination of the past underspending in these sectors and the fast-rising population make the scale of this challenge overwhelming. Uganda has many achievements to build on, as one of the first countries to embrace the idea of universal primary education and a leader in employer- led skills development, and a world leader in its generosity toward refugees, including in their human development. It has also commenced a fiscal consolidation that has decelerated the rate of growth of debt. This public expenditure review explored the options for an effective, sustainable, and inclusive fiscal adjustment that will ensure more balanced budget allocations, tap avenues for enhanced revenue mobilization to provide resources for increased spending, and raise efficiency in spending. Therefore, in addition to identifying the options for an effective and sustainable fiscal adjustment, the review provides options for enhancing effectiveness, efficiency, and equity of spending in two human capital development areas of health and education, and for two areas critical for service delivery: public investment management and the intergovernmental fiscal transfers. I do sincerely hope that this report, and its subsidiaries in more detailed form, will make a useful contribution towards the ways in which the Government of Uganda and its partners, including the World Bank, design and implement policies and programs. In so doing, we hope to continue to support Uganda’s efforts to seize this critical and time- bound opportunity by investing more, investing smarter, and investing now in the future productivity of its people. Keith E. Hansen Country Director Kenya, Rwanda, Somalia, and Uganda v Identifying Options For An Effective And Sustainable Fiscal Adjustment Key Message Uganda has huge ambition to become a modern and prosperous economy by 2040, underpinned by a rich endowment of resources, including a fast-growing youthful population. However, the country is still poor, with untapped potential, including a very low human capital, such that a child born in 2022 is expected to be just 38 percent as productive as they would have been had they completed education and enjoyed full health. This is compounded by the stalled structural transformation, declining productivity, and slowed economic growth over the most recent decade. Economic policy to address these challenges over the first half of the road leading to Vision 2040 has increasingly raised fiscal risks and long-term development vulnerabilities. Uganda has pursued a debt-financed infrastructure drive, aimed at addressing binding constraints to growth, and raising productivity. This strategy has reduced spending on human development priorities, contributed to crowding out of private sector credit while public investments have raised fiscal and debt vulnerabilities and not yielded the desired returns. Uganda’s risk of debt distress rose from ‘low’ to ‘medium’, a situation exacerbated by COVID-19 and relentless exogenous shocks. Increased spending on infrastructure has been at the expense of investing in social sectors such as education and health, which experienced a decade-long decline in real per capita allocations, thereby impacting service delivery. And this notwithstanding the enormous challenge with spending due to the fast-growing population expected to more than double to around 104 million by 2060. In 2020, the World Bank estimated that the cost of providing social services almost doubled just to maintain the existing suboptimal quality and access outcomes – e.g., with only one- third of Ugandan students completing the 7-year primary cycle and gross enrollment rates in secondary schools stagnating at around 30 percent. The resources needed to be significantly increased to enhance quality and access levels and achieve the Sustainable Development Goals (SDG). For example, to meet the Education and Sports Sector Strategic Plan (ESSP) targets for the 2020–2025 period, the education sector budget would have almost doubled to US$ 979 million per year. At the same time, to get on track to meet the universal health coverage goals by 2030, the required resources needed to be increased from US$ 1.4 billion by 2020 to US$ 1.8 billion by 2030. Mobilizing such resources must be combined with efficiency improvements within the education and health sectors, as well as effective management of their budgets through better systems and controls, a greater role for the private sector, and increased support from development partners. Beyond allocation efficiency, the impressive performance on releasing funds to spending units is not followed with efficient execution, particularly for externally financed projects. On average, approximately two thirds of the capital budget was executed from 2015−16 to 2020−21, with delays particularly common due to weak project planning and development practices, inadequate counterpart funding, poor coordination among MDAs and local governments, as well as challenges in land acquisition for the right of way. To meet the Education and Sports Sector Strategic Plan (ESSP) targets for the 2020–2025 period, the education sector budget would have almost doubled to US$ 979 million per year. At the same time, to get on track to meet the universal health coverage goals by 2030, the required resources needed to be increased from US$ 1.4 billion by 2020 to US$ 1.8 billion by 2030. Identifying Options For An Effective And Sustainable Fiscal Adjustment vi Overall, Uganda’s fundamental development challenge is how to adjust the current growth model to one where public investment is well managed and with high return to benefit the private sector activity and allow it to eventually lead economic growth. The private sector will then be supported by the state through investments in human capital and targeted regulations to promote a green inclusive growth to reduce inequality and poverty, and to ensure sustainability. Furthermore, the government urgently needs to facilitate structural transformation so that land, labor, and capital move into higher productivity activities before oil production commences and potentially destabilizes the economy. Government embarked on a fiscal consolidation and expenditure rationalization agenda following the mid-term review of the National Development Plan III. This fiscal consolidation agenda can be converted into a genuine fiscal adjustment that is more effective and growth accelerating by pursuing a balanced adjustment in spending to allocate more resources to human capital development and growth enhancing activities, while improving the domestic revenue mobilization effort. The latter would come about by expanding the tax base, closing leakages in the tax policy frameworks (such as tax expenditures), and raising efficiencies in tax administration. Higher revenues will raise government capacity to spend and reduce borrowing, especially from domestic sources, which has dire implications on the private sector. Secondly, expenditure policies must genuinely reduce wasteful expenditures, including through cuts to the large public administration budget and efficiency improvements across government. In the proposed new balanced growth nexus, human capital development must be at par with infrastructure development. Overall level of spending for health in Uganda is inadequate, inefficient and not equitably distributed. With government spending on health services low and declining, households and external development partners provide 85 percent of the total current health expenditures, up to 84 percent of which is off-budget. Per capita public spending varies widely across subregions and is mainly directed to higher-level facilities. Spending for medicines and medical supplies is below minimum standards. Hence, there is a shortage of skilled health providers and essential supplies at health facilities. Catastrophic health expenditure and healthcare-related poverty have reduced, but not for many households, especially in rural areas. To improve health service availability and readiness in Uganda, the government must increase health funding and improve efficiency by adopting strategic purchasing of health services, tilting investment towards primary healthcare while optimizing specialized healthcare, and strengthening public- private partnerships. Similarly, public spending on education in Uganda has been consistently low, inefficient, and inequitable, contributing to inadequate and inequitable access as well as poor learning outcomes. Uganda has many achievements to build on, as one of the first countries to embrace universal primary education and being a leader in employer-led skills development. In the short and medium term, the country will have to massively increase the public expenditure on education to meet long-term development goals, respond to the upward school-age population growth and expand equitable access to high quality education. Alongside this increase, it is crucial to implement measures and reforms aimed at improving the efficiency and equity of education spending, thereby maximizing the impact of both current and increased resources. To maximize the return on capital investments, government must improve efficiency in the execution of public projects by deepening reforms in public investment management, beyond the administrative processes set up so far at the pre-investment phase of the project cycle. While strengthening the legal environment around public investment management, providing funding for project preparation, and building capacity are still critical success factors, project implementation, maintenance of physical assets, and incorporating climate change perspectives in managing these investments, have joined the list. Efficiency gains in capital utilization could generate an additional 0.2–0.5 percentage points of GDP growth annually. Finally, deepening reforms to the intergovernmental transfer systems remains crucial to improving service delivery. vii Identifying Options For An Effective And Sustainable Fiscal Adjustment Abbreviations ACE Architecture, Engineering, and Construction BIA Benefit Incidence Analysis BIM Building Information Modelling CAPEX Capital Expenditure CatHE Catastrophic Health Spending CBA Cost Benefit Analysis CCT Coordinating Center Tutor CEP Collection and Enforcement Plan CHE Current Health Expenditure CIT Corporate Income Tax DC Development Committee DDEG Discretionary Development Equalization grant DES Directorate of Education Standards DLI Disbursement Linked Indicators DRMS Domestic Revenue Mobilization Strategy DTS Digital Tax System ECD Early Childhood Development EFRIS Electronic Fiscal Receipting System ESSP Education and Sports Sector Strategic Plan EU European Union FY Financial Year GAR Gross Attendance Ratio GDP Gross Domestic Product GER Gross Enrollment Rate GGHE-D General Government Health Expenditure from Domestic Sources GoU Government of Uganda GPT Graduated Personal Tax HAQ Health Access And Quality HC Health Center HD Human Development Identifying Options For An Effective And Sustainable Fiscal Adjustment viii IBP Integrated Bank of Projects ICOR Incremental Capital Output Ratio IFMIS Integrated Financial Management Information System IGFT Intergovernmental Fiscal Transfers IGFTRP Intergovernmental Fiscal Transfer Reform Program IMF International Monetary Fund KCCA Kampala City Council Authority LG Local Government LGFC Local Government Finance Commission LGMSD PA Local Government Management of Service Delivery Performance Assessments MoFPED Ministry of Finance, Planning and Economic Development MoES Ministry of Education and Sports MoLG Ministry of Local Government MTEF Medium-Term Expenditure Framework MTP Medium-Term Plan NAPE National Assessment of Progress in Education NDP National Development Plan NIRA National Identification and Registration Authority NMS National Medical Stores NPA National Planning Authority NSSF National Social Security Fund NWR Non-Wage Recurrent OGT Other Government Transfers OPAMS Online Performance Assessment Management System OPEX Operations expenditure OSR Own Source Revenue OTMIS Online Transfer Information Management System PAP Project Analysis and Public Investment PAYE Pay as You Earn PBS Program-Based Budgeting System ix Identifying Options For An Effective And Sustainable Fiscal Adjustment PDM Parish Development Model PER Public Expenditure Review PFM Public Financial Management PHC Primary Health Care PIM Public Investment Management PIP Project Implementation Plan PLE Primary Leaving Examination PMP Project Management Professional PPP Public Private Partnership SDG Sustainable Development Goal SDGSIM Sustainable Development Goals Simulation Model SGR Standard Gauge Railway SSA Sub-Saharan Africa STEI School of Electrical Engineering and Informatics STEM Science Technology and Engineering STR Student-Teacher Ratio TDMS Teacher Development and Management Systems TGE Total Government Expenditure TSA Treasury Single Account TVET Technical and Vocational Education and Training UgIFT Uganda Intergovernmental Fiscal Transfers UGX Uganda Shilling UHC Universal Health Coverage UN United Nations UPE Universal Primary Education UPOLET Universal Post O Level Education URA Uganda Revenue Authority URSB Uganda Registration Service Bureau USE Universal Secondary Education USMID Uganda Support to Municipalities Institutional Development VAT Value Added Tax Identifying Options For An Effective And Sustainable Fiscal Adjustment x xi Identifying Options For An Effective And Sustainable Fiscal Adjustment 1. INTRODUCTION 38% of potential 1. Uganda has ambition to become a modern and prosperous economy by 2040. Realization of this vision hinges on implementation of 5-year national development plans productivity expected initiated in 2010 when government shifted from the poverty reduction action plans to longer term planning. These to be attained by a plans constitute government’s operational framework child born today in for transforming Uganda into a modern and prosperous country. The first National Development Plan (NDPI) Uganda covered the period FY09/10 to FY14/15 and the second (NDPII) was for the period FY15/16 to FY19/20. The third would survive to age 5 stood at 95/100, while 29 percent of (NDPIII) was launched in FY20/21 and is expected to end those surviving were stunted, and so at risk of cognitive and by 2025. The NDPs should have provided the framework physical limitations that can last a lifetime. A typical Ugandan for allocation of resources through the corresponding child who starts school at age 4, completed 7 years of education five-year medium term expenditure framework (MTEF)s by age 18, with this indicator reducing to 4.5 years if adjusted and annual budgeting process. for learning, with 2.5 years considered “wasted” due to the poor quality of education. This is well below the sub-Saharan 2. While naturally endowed with many resources, Uganda average of 8.3. Given the range of fatal and non-fatal health is still a poor country with untapped potential. Uganda outcomes that a child born would experience as an adult, the has some of the most fertile soils in the region and with survival rate is also low, with only 70 percent of children who about 6.9 million hectares of arable land, representing 70 have surpassed age 15, living beyond 60 years. percent of the total arable land in the East Africa region. But agricultural productivity is low. In addition to the huge 4. These development challenges have been compounded by oil reserves expected to start production within two years, the stalled structural transformation, declining productivity, Uganda also has numerous minerals that have not been and slowed economic growth over the most recent decade, in exploited. The bulk of the population that has shifted out contrast to the earlier success in economic policy formulation. of the natural resource-based production are into low On the back of liberalization and pro-market policies pursued productivity services. Uganda has almost doubled its over 1990s and early 2000s, Uganda maintained a stable population over the last two decades from 24 million in macroeconomic environment and implemented strong private- 2000 an estimated 47 million by 2022, according to the sector oriented reforms that raised average economic growth United Nations (UN) estimates. Almost 50 percent of this to over 8 percent per year, and almost halved the poverty rate population is below 15 years of age, hence a dependency from 57 percent in 1992 to 31 percent in 2006. Since then, both ratio of 86.7 – one of the highest in the world. Almost 70 the pace of growth and poverty reduction have been slower, percent of the population still relies on agriculture, but structural transformation stalled as many economically its productivity is still low. Uganda’s per capita income active people remain trapped in low productivity, low-income reached US$ 930 per person (using the World Bank Atlas activities due to both a poorly educated and rapidly growing method), which was still below the low-middle income (3 percent per annum) labor force. Agriculture and non-wage threshold of US$ 1085 for 2023. smaller enterprises employ the bulk of new entrants into the labor market. 3. Despite having a fast-growing population, Uganda has a very low human capital, with a child born in 2022 5. Economic policy to address these challenges over the last expected to be 38 percent as productive as he/she would decade has increasingly raised fiscal risks and vulnerabilities, have been had they completed education and enjoyed calling for a fiscal adjustment. Over the last decade, Uganda full health. The World Bank’s Human Capital Project has pursued a debt-financed infrastructure drive, aimed estimated that at that time, the probability that a child at addressing binding constraints to growth, and raising 1 Identifying Options For An Effective And Sustainable Fiscal Adjustment Identifying Options For An Effective And Sustainable Fiscal Adjustment 2 productivity. This strategy has reduced spending on spending on human development, by delving into the human development priorities, contributed to crowding efficiency, effectiveness, and equity of spending within out of private sector credit, and raised fiscal and debt the education and health sectors; and (iv) Module IV vulnerabilities. This situation was exacerbated by COVID-19 synthesizes the findings and recommendations into a and faces high risks on account of relentless shocks. To summary report. address these challenges, the government embarked on 7. This report is the summary report. It therefore a fiscal consolidation and expenditure rationalization synthesizes the key messages from the preceding modules agenda during the National Development Plan III mid-term. for policy makers. Overall, while Uganda has embarked To support this process, the World Bank and Government on a fiscal consolidation, fiscal adjustments in budgeting of Uganda (through its Ministry of Finance, Planning and spending alongside revenue enhancements and and Economic Development) have undertaken a Public efficiency improvements are required for the country Expenditure Review (PER) focused on selected aspects to realize faster and sustainable growth (fiscally and of fiscal policy management and outcomes with a view environmentally) and improvements in socio-economic to determine how Uganda can achieve a more inclusive outcomes. Efficiency improvements can be realized from growth agenda amidst a fiscal consolidation. further reforms in the intergovernmental transfer systems, 6. This PER 2022-2023 identifies options for an effective, as well as better management of the public investment sustainable, and inclusive fiscal adjustment. It therefore processes. Whereas efficiency improvements in education details Uganda’s macro-fiscal challenges and government’s and health are critical, additional resources are required current fiscal policy stance in relation to both the short- to ensure a meaningful human capital development out term shocks and longer-term structural issues such as of a young and fast-growing population. demographics and structural transformation; it outlines 8. The report structure follows the above modular spending problems in key sectors (e.g., infrastructure and approach and hence presents the macro-fiscal options for human development) and their impact on efficiency and adjustment in chapter 2. Chapter 3 presents the options for effectiveness of fiscal policies; and it provides an assessment improving effectiveness, efficiency, and equity in critical of the broad options for expenditure rationalization and areas of service delivery, focusing on the systems for restructuring. The PER is organized in four modules intergovernmental fiscal transfers to local governments and as follows: (i) Module I identifies broad options for an management of public investments. Chapter 4 elaborates effective and sustainable fiscal adjustment; (ii) Module II on the options for enhancing spending for human capital identifies options for enhancing effectiveness, efficiency, development, focusing on education and health, before and equity of spending in two areas critical for service Chapter 5 concludes. delivery: (a) public investment management; and (b) the intergovernmental fiscal transfers (IGFT) system, that includes the plans and assumptions underpinning the Medium-Term Plan (MTP) for financing of local service delivery; (iii) Module III identifies options for enhancing Overall, while Uganda has embarked on a fiscal consolidation, fiscal adjustments in budgeting and spending alongside revenue enhancements and efficiency improvements are required for the country to realize faster and sustainable growth (fiscally and environmentally) and improvements in socio-economic outcomes. 3 Identifying Options For An Effective And Sustainable Fiscal Adjustment Identifying Options For An Effective And Sustainable Fiscal Adjustment 4 5 Identifying Options For An Effective And Sustainable Fiscal Adjustment 2. IDENTIFYING BROAD MACRO-FISCAL OPTIONS FOR AN EFFECTIVE AND SUSTAINABLE FISCAL ADJUSTMENT Macro-fiscal developments cut back on planned spending. Whilst public investments increased from 4 percent of GDP during NDPI to 19 percent 9. Overall growth decelerated during the decade prior during the NDPII period, private consumption remained to COVID-19, as the effects of the first generation of pro- the largest driver of growth. Over this period, public debt market and public sector reforms have dissipated. Real rose from about 30 percent of GDP to almost 50 percent in GDP growth lost two full percentage points between NDPI FY20/21, despite the rebasing of GDP in 2019 that raised the (FY09/10 – FY14/15) and NDPII (FY15/16- FY19/20) pushing economic base by almost 18 percent. Debt vulnerabilities Uganda well below its peers. COVID-19 cut short the strong have increased and for the first time since the country recovery that had been achieved between 2018 and 2019, received debt relief in 2006, the country’s risk of debt further weakened the link between economic growth and distress rose from ‘low’ to ‘medium’ under the joint World poverty reduction, and increased inequality. It could have Bank-IMF Debt Sustainability Analysis completed in June also reversed the benign structural transformation that had 2021.1 While the fiscal deficit has since reduced to about 5 reduced the workforce employed in on-farm agriculture percent by FY22/23 and the rate of growth debt stabilized, and a take-off in non-farm activities. Post COVID-19, GDP vulnerabilities remain due to its changing structure to started to recover, rising from 3 percent in FY19/20 to 5.3 more expensive debt. percent during FY22/23 ply chains, fluctuations in financial markets and weather. However, the transformation of 11. With the surge in public investments, public gross labor has remained limited, with the bulk of the workforce capital formation, in real terms, more than tripled, employed in low productivity jobs. Total factor productivity albeit with low efficiency in use of capital. Gross capital has been, on average declining over the last decade. formation grew at an average 19 percent per annum over Because of the fast-growing population, per capita real FY14/15-FY18/19, compared to the increase of 4 percent GDP growth decelerated from 2.1 percent between FY09/10 observed in FY09/10-FY13/14. On the other hand, private and FY13/14, to 1.1 percent in the five years prior to the investments growth accelerated more slowly from 4 percent COVID-19 crisis, a rate that has been maintained over the to about 6 percent over the same period. This sluggish past four years to FY22/23. growth in private investments signified the inability of public investments to crowd in private investment, the 10. Uganda’s fiscal policy over the first half of the road negative impact of public sector borrowing on private leading to Vision 2040 has raised its fiscal and debt sector credit in instances where such investment was vulnerabilities, contributed to crowding out of private funded by domestic borrowing, and the overall cost of sector credit, and did not generate sufficient growth. doing business in the country. Moreover, efficiency of use On the back of low revenue collections, the fiscal deficit of capital worsened - proxied by the incremental capital expanded substantially over the recent past, from 4 output ratio (ICOR) which increased from 5.6 to 6.1 over percent of GDP in FY15/16 to 9.2 percent in FY20/21 as the this period. This signifies an efficiency level well below government responded to the COVID-19 pandemic. This is that of a typical developing country, for which ICOR is despite the development budget execution challenges that expected at about 3. COVID-19 cut short the strong recovery that had been achieved between 2018 and 2019, further weakened the link between economic growth and poverty reduction, and increased inequality. 1 IMF-World Bank Debt Sustainability Analysis, March 2019. Identifying Options For An Effective And Sustainable Fiscal Adjustment 6 12. Overall, Uganda’s fundamental development challenge is how to adjust to a new growth accelerating and inclusive Elasticity of Uganda’s tax is less than development model, away from the current growth model based on debt-financed government spending – that has unitary with excise duty portraying emphasized infrastructure with a low return. The new the lowest model must ensure public investments are well managed and with high return to benefit the private sector activity and allow it to eventually lead economic growth. The state would then support through investments in human capital 0.65 0.75 0.77 and targeted regulations to promote a green inclusive growth to reduce inequality and poverty, and to ensure sustainability. Furthermore, the government urgently needs Excise International VAT to facilitate structural transformation so that land, labor, Duty trade taxes and capital move into higher productivity activities before oil production commences and potentially destabilizes the economy. At the same time, government entered a period with excise duty portraying the lowest (0.65), followed of fiscal consolidation to keep debt on a sustainable path by international trade taxes (0.75) and VAT (0.77) and, and limit private sector crowding out, whilst the economic signaling a need to continuously improve the design and recovery reels with shocks, and remains in critical need choice of bases that fits the economic structure. However, of revitalization of key sectors (education and health). productivity of the tax instruments is low across all tax Going forward, a fiscal strategy that can create space for instruments. While Uganda’s VAT C-efficiency2 has increased critical spending priorities, whilst also supporting Uganda’s to 14 percent by FY21/22, it is the lowest among its peers, process of fiscal consolidation, is crucial. with the VAT regime eroded by exemptions, zero-rating, deeming practices,2 and not adjusting enough with the Revenue effort and outcomes changing economic structure of transactions. Similarly, a 13. Uganda’s revenues effort of about 12–13 percent of GDP generous incentive system has partially eroded corporate remains well below its potential estimated at between income tax (CIT) tax efforts, which too has a very low 18–20 percent, and far below the country’s peers. While C-efficiency which results in a CIT collection of 1.6 percent of recent efforts had raised this ratio to 13.4 percent by FY21/22, GDP, the lowest amongst peers. PAYE also remains meagre it remains below the average for Sub-Saharan Africa that due to exemptions of some income groups, including was 20 percent of GDP in the period FY15/16-FY20/21. At security personnel, members of parliament, judges, and 13.2 percent in FY23, it had not even reached the lower judicial officers. band around the SSA average, which is 14 percent. With 15. The Domestic Revenue Mobilization Strategy (FY20- an elasticity of less than unitary, revenue growth has not FY25) and earlier recommendation by the World Bank4 matched the growth that the economy has registered. has only partially been implemented. Uganda’s recent 14. Whilst structural factors are important, the low tax tax reform goals have been fourfold – to broaden the tax effort is also partly an outcome of low efficiency in base, increase efficiency of collection, create incentives collection. A large section of the economy is untaxed, for the private sector, and ensure equity of taxation. New especially the informal and the commercial agricultural administrative processes, including the introduction of an sectors, which complicate efforts to widen the tax base, Electronic Fiscal Receipting System (EFRIS) and Digital Tax leaving Uganda reliant on indirect taxes and international Stamps, have been associated with increased compliance trade for its revenue effort. Indeed, whilst the system is and revenue gain since the year FY20/21.5 Nevertheless, buoyant, elasticity of Uganda’s tax is less than unitary, technology should be leveraged to increase tax compliance, especially through further integration of data from third- 2 The c-efficiency ratio is an indicator of performance and efficiency of a tax system. It is estimated as the ratio of the revenue collected as a share of what would be collected with a standard rate (i.e., product of standard rate and consumption). 3 Deeming refers to the practice of central government assuming VAT liabilities – i.e., VAT payable on taxable supplies is charged but not paid by the recipient of the taxable supply. In Uganda, the recipient of the supply is recognized as a licensee undertaking mining or petroleum operations or is recognized as a beneficiary on an ongoing aid-funded project. 4 World Bank 2018 5 Namunane 2022 7 Identifying Options For An Effective And Sustainable Fiscal Adjustment party sources, and fully establishing e-TAX functionalities boost revenues. On the tax administration side, a more such as simplified returns, prefiling and online registration. effective tax register through enhanced filing and actual The doubling in size of the Taxpayer Register to 2.6 million payment of taxes requires removal of uncertainty about taxpayers over the five years ending FY21/22, has not the accuracy of the registration database and the number been met with corresponding improvement in filing and of active taxpayers. Further, the administrative and policy compliance (i.e., less than 30 percent of total register efforts to manage offsets, arrears, and debt that have being monitored by URA). yielded significant improvements in the past few years must be enhanced. This calls for a well-resourced Collection 16. On the tax policy, despite adopting a tax expenditure and Enforcement Plan (CEP) to validate arrears, institute governance framework, the strategy on addressing collection measures, and enforce difficult debt. policy leakages remains unclear. Tax expenditures were estimated at around 3 percent of GDP in FY21/22, but Spending trends and socio-economic outcomes most spread across tax heads. The reform of the excise 18. Increased spending on infrastructure has been at the duty regime generated growth in excise revenues, but expense of investing in social sectors such as education the system still carries the burden and economic losses and health, which experienced a recent decade-long decline that result from cigarette and alcohol consumption, while in real per capita allocations, thereby impacting service the multiple rates are non-neutral and influence supplier delivery. The government allocated large resources for behavior and create opportunities for tax planning. Lastly, the construction of several large infrastructure projects, the tax system is quite regressive (par Kakwani index such as two dams (Karuma and Isimba), as well as the that is –0.58), with this regressivity mainly attributed to motorway connecting Entebbe Airport with Kampala to indirect taxes, VAT, and excise duty. VAT is most regressive mention a few. At the same time, the non-wage recurrent because consumption goods (food, beverage, alcohol and transfers to local governments (LGs) per capita declined tobacco and utilities related housing, water, electricity, and by 51 percent in primary education and 65 percent in gas) that attract VAT, represent 10 percent of household health from their peaks in the 2000s. incomes. On the direct taxes, PAYE is also quite regressive. This calls for a review of the tax structure to make the During this time, the share in total public sector spending structure more progressive. on education and health stagnated between 12.5 percent and 12.7 percent, while that to infrastructure sectors took 17. To raise the tax effort, Uganda would need to accelerate double this share. In FY16/17, the government embarked implementation of reforms, including those in the DRMS. on reforms to start reversing this trend, increasing fiscal For tax policy, it would have to close the leakages within transfers to LGs for non-wage recurrent and capital the VAT instrument by reviewing of the list of exemptions, spending in education and health. This effort continues zero-rating, and deemed VAT applied to goods and services to compete for fiscal space with a range of other large supplies to energy contractors and subcontractors, infrastructure investments already underway or planned construction, agricultural tools and machinery, health, in the sectors of energy, transport – such as the Standard education, and passenger transportation services among Gauge Railway (SGR) connection to Kenya, oil well access others. The excise duty regime could also be further roads and the oil pipeline to Tanzania worth an estimated improved by raising the rates for cigarettes and harmonize $3.5 billion, ahead of the planned start of production in 2025. the alcoholic and non-alcoholic multi-tiered regime. Additionally, policy changes such as creating a single tier structure, and taxing all cigarettes at the same specific tax rate would yield more revenue. As for alcohol, there is a need to rationalize taxes on beer to remove special dispensation for local producers. Also, classifying beverages according to alcohol content/strength would 6 World Bank 2020. Identifying Options For An Effective And Sustainable Fiscal Adjustment 8 The new model must ensure public investments are well managed and with high return to benefit the private sector activity and allow it to eventually lead economic growth. . The state would then support through investments in human capital and targeted regulations to promote a green inclusive growth to reduce inequality and poverty, and to ensure sustainability. 19. Despite this competition on account of infrastructure, 21. These resources would have to be significantly Uganda faces an enormous challenge with spending due increased to enhance quality and access levels and to the fast-growing population expected to more than achieve the Sustainable Development Goals (SDG) goals, double to around 104 million by 2060. On average, over also representing government’s ambition. For example, to 60 percent of this population will be below 24 years of meet the Education and Sports Sector Strategic Plan (ESSP) age, calling for huge investments in education and health, targets for the FY19/20-FY24/25 period, the education sector to become fully productive and contribute strongly to the budget should have almost doubled to US$979 million per country’s development. This sharp increase in the size of year. At the same time, to get on track to meet the universal the population will aggravate the country’s many ongoing health coverage goals by FY/29/30, the required resources challenges in the delivery of basic education and health needed to have increased from US$1.4 billion in FY19/20 services. Substantial resources will be required to serve to US$1.8 billion by FY29/30. Mobilizing such resources a larger population, achieve significant improvements must be combined with efficiency improvements within in quality, and address the current low access rates. If the education and health sectors, as well as effective investments in health and education are not shifted to a management of their budgets through better systems higher trajectory in the short term, the access and quality and controls, a greater role for the private sector and gap will keep increasing over time and catching up at a increased support from development partners. later stage will prove extremely difficult. 22. Beyond allocation efficiency, budget execution 20. In 2020, the World Bank estimated the cost of providing challenges remain. There has been an improvement with social services in Uganda to almost double just to maintain respect to releasing the funds budgeted to spending units, education and health outcomes at the 2019 sub-optimal but actual execution worsened between NDPI and NDPII quality and access levels.6 This would mean that only one- for both recurrent and capital budgets. Overall execution third of Ugandan students complete the 7-year primary rates numbers also mask major challenges in project cycle and gross enrollment rates in secondary schools execution, particularly for externally financed projects. On remain stagnated at around 30 percent. Maintaining this average, approximately two thirds of the capital budget status while absorbing a growing population of students was executed from FY15/16 to FY20/21. Aggregate budget was estimated to raise the total cost of providing education performance of GoU funded projects was higher (averaged services (primary and secondary) from US$480 million in 99 percent) compared to external funding (averaged 84 FY18/19 to an average of US$833 million during the period percent) over the past twelve years. Delays are common FY19/20-FY24/25. Similarly, the expenditure needed to in the execution of externally funded projects mainly due provide basic health services to the growing population to weak project planning and development practices, in line with the 44 percent coverage rate was to rise from inadequate counterpart funding, poor coordination among US$703 million to US$914 million by FY29/30. MDAs and local governments, as well as challenges in land acquisition for the right of way. 7 World Bank, 2007. 8 World Bank 2009. 9 World Bank. 2010. 10 World Bank. 2011. 11 World Bank. 2013. 12 See details in World Bank 2023. 9 Identifying Options For An Effective And Sustainable Fiscal Adjustment 23. The enumerated fiscal challenges - limited progress on mobilization of domestic revenues, increasing debt service burden, low productivity of capital, and an overly committed budget, call for alternative fiscal options. The 60% of Uganda’s fiscal consolidation started by government has reduced the population is below fiscal deficit by almost 4 percentage points over the past 24 years of age three years to about 5 percent of GDP in FY22/23. However, expenditure allocation is yet to address the imbalances between spending in infrastructure and socio-economic and improved efficiency in implementation of public sectors, and inefficiencies in spending abound. A major projects is also assessed. adjustment in budget allocations was undertaken over a decade and half ago, aiming to find space for growth as 25. The results of the simulation re-emphasize the need for also recommended by the World Bank PER (2007),7 hence Uganda’s fiscal operations to improve both allocation of doubling the allocation towards infrastructure development resources and efficiency in the utilization of the resources. and sustaining high spending in these sectors since then. Sustaining fiscal policies that have been pursued over the last decade will grow the economy, but not at the However, corresponding recommendations to address country’s full potential while social indicators continue to inefficiencies have either been implemented very slowly stagnate or decline. In recognition of the need to adjust, or not at all. Follow-up sector specific,8,9 or issue specific10,11 the government has started on a fiscal adjustment path, PERs have also been implemented only selectively. This aimed at improving fiscal outcomes. The current fiscal stance PER drew lessons from implementation of previous by government can be expected to modestly accelerate recommendations, which informed the formulation of growth and slowly achieve some social indicators. There is the new ones. In addition to raising resources for many room to readjust the budget that would result in a higher underfunded priorities in the country, the PERs underscored growth path. By reallocating resources to create further the need to improve efficiency and effectiveness of spending. balance between the governance and security programs, integrated infrastructure programs and other productive Options for fiscal adjustment sectors – especially agro-industrialization, minerals and 24. As government pursues a fiscal consolidation path, manufacturing and social sectors especially health and it is crucial to ensure an adjustment that will maximize education – Uganda’s fiscal policy can generate higher economic and social outcomes, including addressing growth and better social indicators. The outcomes would the budget execution challenges to raise efficiency of be even more sustainable if the country mobilized domestic spending. An assessment of the fiscal options available to revenues more strongly and spending such additional government, provide insights on how this fiscal adjustment revenue in a balanced manner; raised efficiencies in could be undertaken.12 Using the simulations generated by spending in social sectors, and increased the marginal Sustainable Development Goals Simulation (SDGSIM) model, productivity of capital. various policy considerations were compared to a BASE scenario which attempted to replicate the macroeconomic indicators during the past five years (FY16/17-FY21/22) and A typical balanced adjustment would project them up to FY29/30. entail a 1% increase in budget share With a key assumption that the government will not for agro-industrialization, mineral undertake any specific extra measures, the BASE scenario development, and manufacturing is assessed against alternative simulations to determine (categorized as growth enhancing the required fiscal policy options that would achieve the sectors), combined with 2% points desired development objectives, not achievable under this increase in the share of spending on business-as-usual scenario. In each of these alternative education and health, while reducing simulations, different financing options are explored. the share of administration, governance, Lastly, a holistic simulation that assumes balanced fiscal strategy with increased resources for the social sectors and security by 2%. Identifying Options For An Effective And Sustainable Fiscal Adjustment 10 26. This analysis has demonstrated that a balanced fiscal 29. At the macro-fiscal level, the government ought adjustment is crucial not only for reducing the fiscal to undertake deeper reforms that will support a more deficit, but also to generate faster growth and better meaningful fiscal adjustment, effective and sustainable, social outcomes in Uganda. A typical balanced adjustment to generate higher growth and support better socio- would entail a 1 percentage point increase in budget economic outcomes. This PER recommends the following share for agro-industrialization, mineral development, measures that are expounded in Table 1: and manufacturing (categorized as growth enhancing i. Make the fiscal consolidation agenda more effective sectors), combined with 2 percentage points increase and growth accelerating by pursuing a balanced in the share of spending on education and health, while adjustment in spending, while improving the domestic reducing the share of administration, governance, and revenue mobilization effort. More balanced spending security by 2 percentage points. Such a strategy would would mean allocating many more resources to human accelerate average GDP growth to 6.6 percent over the capital development and growth enhancing activities. period FY23/24 to FY29/30, compared to about 5.2 percent under the recent re-prioritization under the mid-term of ii. Pursue expenditure policies that will genuinely reduce the NDPIII. The improvement would arise, notwithstanding wasteful expenditures, including through cuts to the the additional savings from efficiency improvements. large public administration budget, improve efficiency across government, strengthen anti-corruption 27. The funding needs for social sectors are large partly systems, and re-allocate the budget system. because they have been underfunded in the past, but also because of the huge population pressure. Within the iii. Expedite implementation of outstanding reforms under health sector, there is scope for raising efficiency through the Domestic Revenue Mobilization (DRM) strategy improved distribution and management of health workers, and earlier recommendations of the World Bank (2019) and through strengthened procurement and management study to expand the tax base, close leakages in the of essential drugs and medical supplies. Notwithstanding tax policy frameworks, such as tax expenditures, and the potential efficiency gains herein, government spending raise efficiencies in tax administration. Higher revenues on health is too low. Increasing it would enable households will raise government capacity to spend and reduce to reduce their out-of-pocket spending on health, enable borrowing, especially from domestic sources, which the government to ensure adequate staffing, replace has dire implications on the private sector. obsolete medical equipment and expand access to drugs and medical supplies. Similarly for education, inadequate iv. Undertake policies to reduce inefficiencies in the funding, inefficiencies, inconsistent policies in early social sectors especially education and health. childhood education, and gaps in effectiveness of teaching These inefficiencies include absenteeism of teachers, lead to late entry, grade repetition, and low development repetition and drop out of students as well as diversion of basic skills. of funds. Detailed reforms on education and health are elaborated under module 3. 28. More efficiency gains will come from deeper reforms of public investment management (PIM) system and v. Improve efficiency in the execution of public projects by the intergovernmental transfer (IGFT) system. Recent deepening reforms in public investment management, reforms to the PIM system notwithstanding, stronger especially with respect to project implementation and mechanisms and capacities in project preparation and maintenance of physical assets and incorporating execution, better management of assets, a stronger legal climate change perspectives in managing these framework containing incentives for enforcing established investments. Efficiency gains in capital utilization guidelines, and stronger technical capacity in PIMs across could generate an additional 0.2–0.5 percentage government, will generate efficiency gains, crucial to sustain points of GDP growth annually. Detailed reforms high levels of growth and poverty reduction. Similarly, under the PIM are well elaborated under module 2. recent reforms to the IGFT system have brought enormous efficiency gains by improving the processes for transfer of funds to service delivery units at LGs but will need to be enhanced through better budgeting and planning, as well as more discretion to LGs. 11 Identifying Options For An Effective And Sustainable Fiscal Adjustment Table 1: Main Findings and Recommendations to Address the Macro-Fiscal Challanges Key Theme Key Findings/ Issues of Concern Recommendations 1. Macro- Uganda’s recent fiscal policy has not generated Adjust the growth model based on debt-financed fiscal policy sufficient growth, raised its fiscal and debt government spending – that has emphasized infrastructure inconsistency vulnerabilities, or contributed to crowding out of with a low return – with one where public investments private sector credit, and threatens the country’s are well managed and have a high return. This will benefit hard-earned macroeconomic stability. the private sector activity and allow it to lead economic growth eventually, supported by the state through Sustaining the same policy stance modestly investments in human capital and targeted regulations accelerates growth but does not significantly to promote a green inclusive growth to reduce inequality improve social economic indicators. and poverty, and to ensure sustainability. Whereas the infrastructure deficit remains, fiscal consolidation should be pursued with a further rebalancing of fiscal spending by reducing the share of public administration, governance, and security while increasing the budget share for growth enhancing sectors and human capital. Pursue expenditure policies that will genuinely reduce wasteful expenditures, including through cuts to the large public administration budget, improve efficiency across government, strengthen anti-corruption systems, and re-allocate the budget system. Reduce inefficiencies in the social sectors – especially education and health The changing structure of debt, towards more non- Maximize efforts to access and use concessional financing. concessional borrowing, has increased liquidity Mobilizing such resources must be combined with pressures and heightened the risk of crowding out efficiency improvements within government MDAs. public investments in critical areas. Reforms recommended in earlier work and within the Expedite implementation of outstanding reforms under DRM strategy have only partially been implemented the DRM strategy. 2. Budget allocative Despite the rapidly growing population and Significantly increase funding towards social sectors efficiency i n c re a s i n g a m bi t io n f o r s o c i a l e co n o m ic (especially education and health) to enhance quality and challenges transformation, the spending on social sectors access levels and achieve the Sustainable Development remained minimal. Goals (SDGs). In addition, reduce inefficiencies in the social sectors – especially education and health (see recommendations on education and health). Despite a significant amount of resources allocation Continue to strengthen reforms in the PIM systems, to the capita budget, inefficiencies in PIM are a such as stronger mechanisms and capacities in project major drain on Uganda’s growth and development preparation and execution, better management of assets, outcomes stronger legal framework containing incentives for enforcing established guidelines, and stronger technical capacity in PIMs across government, stopping leakages through corruption and mismanagement. Identifying Options For An Effective And Sustainable Fiscal Adjustment 12 Key Theme Key Findings/ Issues of Concern Recommendations Declining funding to LG (only 11 percent of Increase funding for other LG services such as water, the total government discretionary budget in agriculture, and rural roads, and stay on track with FY20/21) commitments under the Uganda Intergovernmental Fiscal Transfer (UgIFT) program, which has brought enormous efficiency gains by improving the processes for transfer of funds to service delivery units at LGs but will need to be enhanced through better budgeting and planning, as well as more discretion to LGs. 3. Budget execution Inadequate funding for routine and capital Increase funding for routine maintenance of capital and management maintenance leading to quicker depletion of capital assets to meet minimum internationally acceptable challenges assets. standards of at least 25 percent of the capital budget. This implies that for every US$ 3 million invested in new roads, government should be investing US$1 million in maintenance. Supplementary expenditures distort annual planning Strengthen capacities of MDAs and LGs to budget for and budgeting processes, and some are approved known expenditures. without matching revenue or funding sources, hence distorting the cash budget system. Improve funding of the contingency fund to be used more effectively in the case of emergencies. Amend the PFM Act to limit the 3 percent threshold that the Minister of Finance can approve without prior approval of Parliament, to only the total budget allocated to MDAs and LGs, not the overall annual resource envelope. Align development partners funding (especially projects) with the government planning and budget cycle to minimize in-year additional funding. The stock of domestic arrears has been growing Strengthen commitment controls and sanctions regime over the last decade despite putting in place the for officers responsible for unauthorized spending commitment control system. commitments, with penalties at personal/individual level, and through automatic confirmation of fund availability before incurring expenditure commitments. • Closely monitor unpaid government financial obligations on a quarterly basis. • Ring-fence the budget provisions allocated to clearing domestic arrears to prevent them from being redirected to other budgetary spending Classified expenditures denting Uganda’s budget Develop and operationalize regulations for accounting transparency efforts; increased by over 500 for classified expenditure as stipulated under Section percent in nominal terms over the past six years. 81 (2)(g) of the Public Finance Management Act 2015 (as amended) to ensure proper use and accounting for these expenditures. 13 Identifying Options For An Effective And Sustainable Fiscal Adjustment Key Theme Key Findings/ Issues of Concern Recommendations 4. Revenue effort Uganda’s revenue effort remains below that of regional Close gaps and leakages in tax policy and improve efficiency and outcomes peers and the government’s own target of 16 percent in tax administration. of GDP. 4a. Uganda relies More than half of taxes in Uganda were derived from • Improve efficiency of taxes, especially the CIT mostly on VAT, other VAT, other international taxes, and PAYE. CIT exemptions by rationalizing tax expenditure (exemptions, international taxes, have doubled from UGX 177.19 billion in FY16/17 to UGX depreciations, and deduction etc). and PAYE 335.73 billion in FY21/22 4b. Low revenue Uganda’s VAT (14 %) and CIT (4 %) collection-efficiency • Scale up the use of DTS and EFRIS and address the growth is partially is below the sub-Saharan Africa average. However, the challenges faced by the two innovations such as an outcome of low adoption of technologies such as Digital Tax Stamp forgery of DTS and invoice trading. collection efficiency in VAT and CIT. (DTS) and Electronic Fiscal Receipt Invoicing System (EFRIS) has improved the performance of VAT. The VAT collection efficiency has more than doubled. 4c. Broadly, In some instances, the scope of exempt and zero- • Reduce the scope of exemptions and zero- there were rated items were limited. In others, the scope was rated supplies to exports, basic and life-saving inconsistencies in expanded. For example, in FY19/20, the exempt list medication, and educational material for primary the implementation of recommendations was expanded to include aircraft; insurance services; and secondary education. proffered to deal rice mills; agricultural sprayers; operators of technical/ with inefficiencies vocational institutes; free zones and industrial parks; related to VAT and wood, welding, and sewing machines. exemption and zero rating 4d. The stock of In FY21/22, the stock of offsets stood at UGX 188 billion, • Match budget resources put aside to pay-off offsets has increased up from UGX 94.9 billion in FY16/17. successful audits with increased audit capacity. despite efforts to refund taxpayers in a credit position 4e. VAT deeming Revenue loss from deemed VAT has increased fourfold • Improve transparency and minimize the scope of practices continue from UGX 147 billion (0.1 percent of GDP) in FY15/16 to companies benefiting from deemed VAT. to challenge the UGX 582 billion (0.36 percent of GDP) in FY21/22 integrity of the VAT system. 4f. There is scope to The current system increases the burden and • Excise tax rate for cigarettes could be increased increase excise tax economic losses that result from cigarette and alcohol significantly and harmonized for all cigarette rate for cigarettes consumption and lead to revenue losses. In addition, the brands. and harmonize the alcoholic and multiple rates are non-neutral and influence supplier • Create a single tier structure, taxing all alcohol and non-alcoholic multi- behaviour and create opportunities for tax planning non-alcoholic beverages at the same specific tax tiered regime. rate. Identifying Options For An Effective And Sustainable Fiscal Adjustment 14 Key Theme Key Findings/ Issues of Concern Recommendations 4g. The tax register The taxpayers register more than doubled to 2.6 • Remove uncertainty about the accuracy of the has been growing; million taxpayers in five years ending FY21/22. Out registration database and the number of active however, few of these, URA filing and compliance covers less than taxpayers. registrants file or pay taxes and the 1 million taxpayers. While filing ratios are seemingly • Review registration process for accuracy and on-time ratios have high, they are calculated as a percentage of targeted simplicity. fallen. active taxpayers and not as a percentage of the tax • Clean databases, ensure data integrity and register. Relatedly, on-time filing ratio for PIT dropped minimize duplication and multiple TINs. from 14 percent in FY17/18 to 3 percent in FY19/20. While that of VAT was relatively high, it also dropped from • Match data to other registration systems 84 percent to 75 percent in the same period. • Allocate a TIN to all ID card holders. • Progressively lift on-time VAT filing rate and reduce non-filers. 4h. There is an Data sources such as that related to government • Fast track the review and enhancement or unexploited suppliers [i.e., the Integrated Financial procurement of the e-tax system. potential to Management System (IFMS)]; the National • Integrate e-tax with primary registries such as the leverage technology to increase tax Immigration Registration Authority (NIRA); and the Uganda Registration Service Bureau, NSSF, KCCA, compliance. Uganda Registration Service Bureau (URSB) which to enable URA to use third-party information to registers business; have not been fully utilized to prepopulate returns, validate returns, and inform establish taxpayer compliance gaps. audit and investigations. • Train URA staff in using the vast amount of data to support service delivery, audit, and investigations. 4i. Resources for Resources set aside to process refunds have significantly • Set aside budget resources to facilitate refunds. processing refund deviated from the rate of processing over the DRMS • Develop capacity to audit and process refunds. claims have been period FY18/19–FY21/22. For example, actual refunds made available but have not kept were greater than resources set aside by MoFPED to up with the rate of refunds in the FY21/22 by UGX 0.95 billion. This may processing. undermine the prompt processing of approved refunds or slow down the rate of verification and audits. In addition, increased resources ought to be matched with administrative capacity to verify large high-risk taxpayers to reduce invalid credits. 4j. Debt and arrears While the amount of debt collected has increased • Reduce the government delays in paying tax recovery have fourfold – from UGX 348 billion to UGX 1,321 billion in commitments made to some companies. improved over time. the period between FY16/17 and FY21/22 – the stock of • Integrate the e-tax system with the debt and However, there is scope to curtail the debt has increased at the same pace from arrears management register. accumulation of debt UGX 1,275 billion to UGX 4,683 billion in the same period. and arrears. • Reduce the backlog of cases in the court system. • Reactivate the URA Board debt committee to authorize debt write-offs. 4k. While many The government has approved a framework for tax • Review and reform legal loopholes that undermine reforms have been expenditures and commissioned a repository of tax transparency in tax expenditure. made, capacity expenditures. In addition, the government continues • Develop capacity to estimate tax expenditure. challenges constrain policy efforts to estimate the cost of tax expenditures and publish a • Establish the operational definition and the full to address tax report every year. Also, tax expenditures continue to be expenditures scope of tax expenditures. introduced every year using the budget frameworks. However, policy inconsistencies that provide for • Develop capacity to identify and track the cost and discretionary tax expenditures undermine the reform benefit of tax expenditures. efforts. In addition, operational definition and the full scope of tax expenditures have not been established. Capacity challenges in data analysis have also been identified. Identification and tracking of cost and benefit also remain a challenge. 15 Identifying Options For An Effective And Sustainable Fiscal Adjustment Identifying Options For An Effective And Sustainable Fiscal Adjustment 16 17 Identifying Options For An Effective And Sustainable Fiscal Adjustment 3. IDENTIFYING OPTIONS FOR ENHANCING EFFECTIVENESS, EFFICIENCY, AND EQUITY OF SPENDING IN AREAS CRITICAL TO SERVICE DELIVERY 30. In line with the above recommendations, this module explored the options for improving the effectiveness and efficiency and equity of spending through two critical areas. These included: (i) public investment management (PIM) processes, to identify bottlenecks and their implications to the overall efficiency and effectiveness of fiscal management; and (ii) the intergovernmental fiscal transfers (IGFT) system, to identify gaps in the broader policy domain of intergovernmental fiscal relations, implementation progress of ongoing initiatives (e.g., IGFT reform program which began in 2016), new needs created by the COVID-19 crisis, and fiscal space for future transfers in meeting the objectives of the IGFT reform program. The key outcome of the assessment and recommendations are summarized below. 13 Such studies included LGFC, 2012. 14 Interviews were undertaken in a total of 16 LGs: eight higher-level local governments and eight lower-level local governments were selected to represent geographical variation (northern, eastern, western, and central parts of Uganda) and type of local government (district councils, city councils, municipal councils, sub-counties, town councils, city and municipal divisions) 15 After adjusting for inflation and population growth. 16 These devolved functions include: (i) social /community development; (ii) administration including LG planning functions and statutory bodies like district service commissions; (iii) work and transport; (iv) natural resource management; (v) trade and commerce; and (vi) pre-primary education. Identifying Options For An Effective And Sustainable Fiscal Adjustment 18 3.1. Intergovernmental Fiscal Transfers 31. Since the early 1990s, the Government of Uganda (GoU) 33. The intergovernmental fiscal transfer reform program has pursued decentralization as a key government policy has expanded is scope since inception. According to the for improved local service delivery. This has included data and information obtained through field interviews various initiatives to improve local government financing in selected LGs14 and consultations with relevant national arrangements, such as the Fiscal Decentralization Strategy ministries, departments, and agencies (MDAs) involved (2001) and more recently, the Intergovernmental Fiscal in its management, the IGFTRP has since 2021 focused Transfers Reform Program IGFTRP of 2017. The latter was on four main objectives of improving: (i) adequacy and updated in 2021 and implemented with a medium-term equity, and increase discretion in the financing of local expenditure outlook up to and including FY23/24. service delivery; (ii) central government performance in the oversight, management, and delivery of LG services; LG 32. The intergovernmental transfer reform that started performance in the management of local service delivery; in 2017 has improved efficiency, adequacy and equity and the effectiveness and efficiency of service delivery in financing local governments to deliver services. The by frontline providers. Even though substantial progress implementation of the fiscal decentralization strategy had has been made in several areas, gaps remain. If such failed to achieve the objective of improving LG autonomy and gaps were closed, the IGFTRPs would yield much higher streamlining transfers. The IGFT reform therefore was born efficiency and effectiveness of the intergovernmental out of various studies13 to address this challenge, including transfer system. the PER 2013 (World Bank, 2013) which underscored the stress on services due to declining real value of grant (i) Adequacy, equity, and discretion in the financing of allocations, declining own source revenue, and increased local service delivery staff vacancies, under the weight of fast increasing districts • Adequacy: The fiscal transfers increased by 33 and LG units. percent in real per capita terms15 from UGX 80,552 in FY15/16 to UGX 106,937 in FY22/23. This overall 19 Identifying Options For An Effective And Sustainable Fiscal Adjustment Fiscal transfers increased by 33% in real per capita terms from UGX 80,552 in FY15/16 to UGX 106,937 in FY22/23. improvement reflects an effort by the Government of critical staff shortages. For this purpose, in the FY21/22 Uganda to improve the adequacy of funding to key budget, GoU strategically allocated an additional social sectors, urban infrastructure, and refugee- UGX 74.2 billion to understaffed LGs but fell short of hosting local governments with the support of donor planned increments in FY22/23. Effective employment funding (EU budget support, and World Bank Uganda of additional staff in LGs was further constrained by: (i) Intergovernmental Fiscal Transfers (UgIFT) and Uganda late allocations through supplementary budgets; (ii) Support to Municipal Infrastructure Development weaknesses in local and central government human (USMID) programs. However, some devolved sectors resource management; and (iii) wage increases of and functions have so far not been addressed through science staff. the plans for financing.16 Furthermore, in FY22/23, this • Discretion: Since 2001, the IGFT system in Uganda upward momentum was reversed due to the tightening has been characterized as being overly conditional, of the fiscal space following the Covid-19 pandemic, which limited the ability of LGs to allocate resources debt-servicing demands, selected salary increases and in accordance with local needs and priorities leading the prioritization of the Parish Development Model to allocative inefficiencies. The IGFTRP has sought (PDM), which commenced in that financial year, with an to reduce earmarking and enhance discretion of allocation of slightly more than UGX 1 trillion. Without IGFTs, partly by reducing the earmarking of NWR considering the exceptional FY22/23, the increased and the formula-based components of development level of funding through IGFT followed the agreed transfers, and by increased funding for the DDEG. medium-term plan (MTP), which is supported by the The former succeeded in part but is constrained by World Bank funded UgIFT Program for Results. The the limited application of formula-based allocations UgIFT program focuses on education, water, microscale for sector grants, which are still heavily earmarked irrigation agriculture, and health. – approximately 2/3 of sector grants are earmarked. • Equity: This has been pursued through agreement The latter was successfully implemented up to FY20/21 on formula-based grants for all sectors, managed with external support (i.e., European Union budget through a solid system for grant simulations – the support and World Bank USMID. However, DDEG grant Online Transfer Information Management System allocations were reduced in FY21/22 and FY22/23 due (OTIMS) – developed with ODI assistance. The formula- to a reduction in the USMID allocation17 and domestic based allocation of Non-Wage Recurrent (NWR) grants funding in response to the shrinking fiscal space and has made them more equitable. In contract, whilst a shift in government priorities to improve household formulas for equitable allocation of development incomes through the PDM. The PDM more than tripled grants have also been developed, these grants are the total DDEG budget (domestically and externally only partially allocated in accordance with formula financed), which amounted to about UGX 0.3 trillion. (and performance) because: (a) grants are still not consolidated (e.g., Discretionary Development Equalization grant (DDEG) is allocated by formula but only within and not across the specific windows); Approximately and (b) usage of alternative concepts of “equity” is based on equal allocations by administrative units. Earmarked 2/3 of sector Sector The reforms have only lately sought to address Grants grants are inequitable allocations of wages more systematically, earmarked with emphasis on allocation of additional staff to underserved schools, health facilities, and LGs with 17 The reduction of USMID allocations from the World Bank was a response to the failure of government to re-vote funds back to MCs, that had been swept back to the Treasury as part of the TSA implementation. Identifying Options For An Effective And Sustainable Fiscal Adjustment 20 (ii) Central government performance in the oversight, enhanced. The improvements are driven by the internal management, and delivery of services at LG level efforts of LGs as they seek fiscal incentives and recognition as well as the Performance Improvement Plan (PIP) support The IGFTRP has strengthened the way MDAs relate to from MOLG and MDAs. Specific areas for improvement LGs through improved oversight and technical support. of IGFT include revenue mobilization, human resource Externally funded projects supporting the IGFTRP have management and development, as well as monitoring helped to improve systems, processes, and capacity for and supervision of service delivery. The fiscal incentives improved service delivery across all four priority service could be strengthened if a larger part of the education delivery sectors. For example, under the UgIFT program, and health development IGFT was allocated on a formula 43 of the 50 disbursement-linked indicators (DLIs) related basis rather than being earmarked for Health Centre IIIs to implementing actions within a Local Service Delivery (HC IIIs) and secondary seed schools. Improvement Matrix (SDIM), had been achieved by end of FY22/23. The seven outstanding actions relate mostly (iv) Effectiveness and Efficiency of Service Delivery to environmental and social safeguarding requirements Several issues still constraining efficiency and effectiveness and the full transition of staff and facilities (schools, of the IGFT system in delivering services are both health, and water) in refugee-hosting LGs to mainstream crosscutting IGFT in nature and sectoral. In the context GoU systems. More effort is required to address gaps in of a constrained fiscal framework, the need for making performing their functions – particularly in the areas of the most efficient use of fiscal resources allocated to LGs performance improvement support to LGs, monitoring is crucial for improved service delivery. This supports the of service delivery and construction projects, as well as overarching PER theme of raising efficiency to create fiscal provision of technical support. space for growth and service delivery. The gaps include: (iii) Local Government performance in the management • Gaps in performance assessments at facility and of local service delivery lower-level LG levels. The responsible sector agencies Since FY17/18, the annual Local Government Management and MoLG have designed and piloted performance of Service Delivery Performance Assessments (LGMSD assessments. The LLG performance assessment PA), have been implemented through a strengthened, for FY22/23 commenced in August 2022, while comprehensive, objective, and timely system for all implementation of the health sector Results Based higher-level LGs (districts, cities, and municipalities). Finance (RBF) mainstreaming strategy and a broader Also supported through the UgIFT program, the LGMSD School Performance Assessment (SPA) pilot is in PA are linked to fiscal incentives, and the results from the process. These would need to be rolled out across assessments influence the size of DDEG and formula-based all LG levels to improve efficiency and effectiveness sector grants (education, health, water/environment, and of the IGFT system. microscale irrigation). The Office of the Prime Minister has • Lack of coordination pf the non-IGFT financing to LGs increasingly taken charge of coordinating implementation service delivery. External financing will continue to be of the LGMSD PA while the Ministry of Local Government a critical source of funding for sustained and improved coordinates related capacity building efforts. The results service delivery at local governments. It manifests of the annual LGMSD PA have improved gradually and as direct donor support to LGs and through Other consistently since FY17/18, although could be substantively Government Transfers from Ministries to the LG annual A broad assessment of the data and information management systems noted that their relevance and functionality is varied, with some at the verge of being dysfunctional, complex, costly, and therefore unsustainable. 21 Identifying Options For An Effective And Sustainable Fiscal Adjustment budget estimates. However, the potential sources of provided a clear strategic direction for the functionality, external financing have neither been fully exploited without which the systems may gradually lose their nor effectively coordinated to achieve the desired relevance, become difficult to manage, and eventually IGFT reform objectives. In addition, the reform to use be abandoned. Accordingly, GoU should undertake local government systems for better coordination of a more in-depth and systematic assessment of the EF is still in infancy. To enhance coordination, use and systems within the current evolving policy and strategic impact of external financing on allocative efficiency environment to secure evidence on salient issues and and enhance service delivery, central government guidance on how to enhance utility, sustainability, must support LGs to adopt the practices within the and interface of the systems. aid management cycle, as articulated in the Treasury • Sustainability of medium-term plan for financing Instructions, in a phased manner. MFPED), working service delivery. Over the last three or four fiscal years, with MOLG and all relevant ministries should commit the annual budget estimates have always been aligned to harmonize the modalities for donor coordination, with the agreed medium-term plan for increasing build capacities of policy makers and implementers, budget allocations to the transfers but achieved largely and mobilize external resources. through supplementary expenditures. The persistent • Lack of strategic direction for the Data and Information in-year adjustments of the IGFT estimates demonstrate Management Systems. Government has established challenges in translation of the prior commitment into several data and information management systems annual and medium-term expenditures. To support that are critical in the implementation of the IGFT the commitment to reliable and predictable funding reform agenda. They undertake functions related to of enhanced service delivery, government must setting service delivery baselines, resource allocation pursue realistic baseline (annual budget) and forward through IPFs, formulation of service delivery targets, estimates (outer years of the MTEF) within a fiscal tracking budget execution, and accounting for progress consolidation framework supported by refinement of towards enhanced service delivery. The key systems the medium-term planning and budgeting. include Program-Based Budgeting System (PBS), 34. Based on the above gaps and several issue-specific Online Transfer Information System (OTIMS) and challenges constraining the IGFTRP, this PER recommends Online Performance Assessment Management System actions for improvement. Some of these issues relate (OPAMS), and sector data and information management to specific IGFTRP objectives, while others relate to systems at both central and local government levels. the implementation of previous PER recommendations A broad assessment of the systems noted that their and other aspects of LG finance and the overall fiscal relevance and functionality is varied, with some at decentralization agenda. Table 2 summarizes the key the verge of being dysfunctional, complex, costly, findings and recommendations. and therefore unsustainable. GoU has not readily Key Data and Information Management Systems Program-Based Online Transfer Online Performance Budgeting System Information Assessment (PBS) System (OTIMS) Management System (OPAMS) Identifying Options For An Effective And Sustainable Fiscal Adjustment 22 Table 2: Main Findings and Recommendations to Progress the Intergovernmental Fiscal Transfer System Reform Issue Main Findings Recommendations 1. Grant Since 2015, the reforms have sought to Review details of grant earmarking and enhance consolidation consolidate grants into a maximum of three dialogue on grant consolidation. This would entail grants – one development grant, one NWR creating a more uniform approach to DDEG, with grant, and one wage grant. This has not been minimal “windows” as well as emphasis on one fully achieved as development grants have formula-based development grant for each sector. several specific “windows” with internal grant earmarking, conditionalities and implementation arrangements. 2. Local Additional LG structures are contentiously Introduce moratorium or strict guidelines for creation of government created, leading to local challenges of funding new administrative structures (districts, sub-counties, proliferation new service delivery facilities (e.g., HC IIIs and town councils and parishes etc). secondary schools), administrative buildings, staff structures, and political representatives. Review and reform the current policies/criteria Within the last year, sub-counties increased from regarding allocation of facilities by administrative 1152 to 1495 while the number of town councils unit rather than populations served. more than doubled (to 583). The creation of new administrative units is in part spurred on by policies for allocation of funding in accordance with administrative units (parishes and sub-counties) rather than population served. 3. Equity IGFTRP has successfully achieved more equitable Development funding to prioritise formula-based allocation of NWR in accordance with agreed grants and DDEG across windows. formula. Sector development funding for new facilities to Allocation of development funding through need- prioritise most underserved areas (defined as clients based formula or targeting equal distribution by facility) rather than solely focused on administrative of infrastructure by administrative unit rather units. than population/formula has not been equitable. The allocation of HC III and seed schools do not Wage: future allocations of wage to prioritise follow other need-based criteria. understaffed facilities and LGs. Additional support required to strengthen central and LG staff allocation DDEG is allocated in accordance with a formula and recruitment procedures. within specific windows of the DDEG, but allocation of DDEG across windows is very inequitable and can only be achieved through grant consolidation. Wage: IGFTRP has initiated efforts for more equitable allocation of staff across facilities and LGs, but practical implementation falls short of intended budget allocations. Data on actual staff deployment in underfunded LGs is not readily available, and wage budget is not fully executed by LGs. 23 Identifying Options For An Effective And Sustainable Fiscal Adjustment Issue Main Findings Recommendations 4. Discretion Discretion of IGFTs is very limited and has Prioritise enhancement of DDEG. and allocative deteriorated, despite reform intentions. efficiency Prioritize discretion within formula-based sector Tight earmarking of funding undermines the development grants. This can be achieved by shifting potential for LG allocative efficiency and leads to the most conditional development grants towards severe underfunding of a range of mandatory LG the formula-based development grants to increase functions, which are non-funded by conditional the pool of funding applicable for fiscal incentives, grants. which also enhance effectiveness 5. IGFT IGFT transfers are executed in a transparent Strengthen MTEF planning and execution to ensure transparency manner and generally in accordance with budgets. all agreed targets under IGFTRP (UgIFT) MTP are and execution achieved and that the need for supplementary budgets However, a major concern from LGs has been the is minimised. late supplementary budgets that have impacted effective execution. GoU adherence to agreed MTP under UgIFT has often been achieved only through supplementary budgets. The impact at LG level has been most significant for budgets that require more substantive LG preparations like recruitment of additional staff and development expenditures. The use of supplementary budgets is a consequence of weak MTEF planning and execution. 6. Performance A comprehensive performance management Closely monitor the planned expansion of performance management system under IGFTRP has shown good results assessments to LLG and facilities for evidence of their for effective at LG levels, but it is yet to be fully implemented relevance for enhanced service delivery. use of at LLG and facility level. The completion and resources roll-out of these systems are critical for impact Adopt fiscal – and relevant non-fiscal – incentives on service delivery. for LLG and facility performance. The fiscal incentives of the LGPA requires a reasonable level of funding for the formula- based development grants that are currently squeezed by high levels of earmarked health and education sector funding and low levels of DDEG for non USMID LGs Identifying Options For An Effective And Sustainable Fiscal Adjustment 24 Issue Main Findings Recommendations 7. External The level of subventions (funding of devolved LG Review all elements of non-devolved funding for finance functions through central government votes) has possible devolution and management through the and other increased in recent years and exceeds non-wage IGFT system. government IGFTs. It is a sign of incomplete decentralisation transfers that deserves closer analysis and action – or at Monitor distribution of OGT and EF and feed into least closer monitoring, including distribution future dialogue of resource allocations. patterns across LGs. Undertake an in-depth study of OGT and EF allocations Part of the subventions are captured in LG across LGs. budgets as “Other Government Transfers” (OGT) Harmonize modalities for donor cooperation to promote or “External Finance” (EF). Both OGT and donor consistency in the use of government systems within funding (EF) are distributed very unevenly with LGs and between CG and LGs, including access to quality a bias towards rural LGs as well as significantly or reliable data on donor support, and practices for higher levels of funding in Northern Region integration of donor support into IGFTs. compared to other parts of Uganda Institute a capacity building program for CG and LG policy makers and technocrats aimed at enhancing their understanding and competence for integration of donor funding into budgetary decision-making, focusing on alignment of donor funding to LG priority objectives and needs and accountability. Formulate a technical assistance program to mobilize external resources to support design of manuals or guidelines; sensitize and build capacity of LGs to adopt the required reform within an AID Management Framework and ensure donor support. 8. Own source OSR has in real terms (adjusted for inflation and A comprehensive reform of OSR policy framework is revenue (OSR) population growth) declined substantially over required to ensure that LGs in Uganda generate levels the last two decades, and today it is less than of OSR that are comparable to other similar countries. a third of what it was during the first decade of 2000s. This is primarily because LGs never A policy review of LG OSR to be considered as a basis found an alternative and buoyant resource to for future OSR policy reforms. compensate for the abolishment of GPT. TSA application on OSR to be reviewed – particularly LG OSR in Uganda is very low compared to for OSR supposedly retained at LLG levels. international comparisons of OSR/GDP, only about 25% of what the global average and e.g., 25% of LG OSR in Tanzania. Several reforms are currently supporting LG OSR at the local level with improved ICT based collection systems etc. However, national data on OSR suggest that these are insufficient to overcome previous years’ decline. The policy environment is currently not conducive for OSR strengthening as LGs are not assigned revenue sources that have high revenue potential, low collection costs and without overlaps/ interference from central government. The meagre generation of LG OSR provides an added burden on central governments to finance LGs solely through IGFTs and weakens local accountability. The TSA application on OSR is causing significant cash flow problems in LGs and warrants reconsideration of practices. 25 Identifying Options For An Effective And Sustainable Fiscal Adjustment Issue Main Findings Recommendations 9. Data and Data and information systems have evolved into Undertake an in-depth systematic assessment of the information complex, resource intensive, under-utilized, and systems to determine measures that will promote value management costly initiatives that are difficult to manage. and utility of the data and information systems. The for IGFT assessment should particularly focus on: (i) relevancy, systems Ongoing e-government reforms have implications (ii) functionality enhancement and accessibility, (iii) on relevancy and/or interlinkage between the sustainability, (iv) interface with overall e-governance IGFTR – specific tools and the broader PFM systems, and (v) effective application to improve tools like TSA. accountability. 10. Medium- Whereas the MTP has been adhered to and Formulate a clear financing strategy for IGFT, not term budgeting has improved transfers to local government, it necessarily driven by external funding. This will and planning benefitted those areas covered by the projects require: (i) undertaking a systematic re-examination for financing of which are in turn externally funded. of the approach to medium-term projections to assess IGFT reforms resource implications for IGFTR and determine realistic Persistent in-year adjustments of transfers objectives and targets for the reform; (ii) reformulating create uncertainties and affect implementation. the IGFTR policy priorities, and (iii) reformulating the expenditure baselines, including for staff requirements Medium-term expenditure framework does not and implied wage bill, etc. provide a binding anchor to plan and budget for financing of service delivery. MTEF estimates Strengthen MTEF to enhance sustainability and beyond the first year are as good as irrelevant predictability of fiscal transfers. for planning. The priority is to improve multi-year budgeting to improve reliability of forward MTP estimates. This will require: (i) formulation of a realistic and affordable expenditure baseline to guide aggregates and IPFs for MTEF projections; (ii) MFPED, MPS, MLG, and other relevant MDAs to undertake a budget function or verification of IPFs; (iii) committing to using the IPFs, once credibly formulated; (iv) systematically assessing the annual fiscal transfer performance by LG, region, and grant, and building consensus to measures to address the issues; and (v) adopting a fiscal policy for sustainable equitable shares and allocations of national revenues for intergovernmental transfers. 11. Recentralization of accounting and reporting Rethink the principles, objectives and expected Strengthening roles, while legal – both through constitutional outcomes of fiscal decentralization. This must the foundation amendment in 2005 and the PFM Act 2015 – incorporate the lessons of implementation over for IGFT reform weakened local accountability and confused the last two decades and desired practices for a reporting lines and accountability between CG sustainable IGFTR. and LGs. Develop one simple document containing the guidelines Dependency on transfers from CG, weak and instructions to support implementation of IGFTR. engagement between CG and LG in the prioritization and budget decision making, etc Formulate and implement a sensitization and have reduced LGs into administrative extensions institutional building program to create a shared of CG. appreciation as well as build capacity; this includes political ownership pf the reform. Weakened institutions and coordination arrangement – for example with the LGSC and MLG roles perforated, only the externally funded institutions (FD-SC and FD-TC) remain functional. Lack of clear strategy to enhance own source revenue. Identifying Options For An Effective And Sustainable Fiscal Adjustment 26 Issue Main Findings Recommendations 12. Reform MDA coordination and support to the reforms Develop sector norms regarding equity of staffing awareness have generally improved in recent years. The and minimum level of NWR support for political UgIFT incentives /DLIs have helped in this regard. endorsement. The development of such norms should be made explicit for political endorsement IGFTRP documentation has improved in visibility, and commitment. but political endorsement is not comprehensive, and some aspects of reform receive much Strengthen documentation and visibility of IGFTRP more focus (schools and HC IIIs by sub-county results. in particular) than others (the performance management system and broader objectives of Ensure that political leadership is engaged and adequacy, equity, and discretion) that require committed to intended local service delivery reforms better communication and deeper policy dialogue. through IGFTRP. The NRM manifesto includes commitment to More systematic effort to build capacity across LGs initiatives such as schools and HC IIIs by sub- will be needed to ensure sustainability of the reform. county and the Parish Development Model but This should also entail long term TA at national level is silent on wider service delivery improvements for reform management. through programs like IGFTRP. Overall, sector norms regarding equity of staffing or minimum level of NWR support are available but lack political endorsement. Technical assistance has proved critical for many aspects of systems development and MDA training, yet capacities are not yet fully built across LGs. 27 Identifying Options For An Effective And Sustainable Fiscal Adjustment 3.2. Public Investment Management The improvements around the administrative processes of the pre-investment phase of PIM must be followed with deeper reforms in critical areas, including project prioritization and selection, budgeting, and implementation. 35. Given the government’s resolve on fiscal consolidation, 36. Cognizant of the benefits that would accrue in closing increasing the efficiency of the capital budget provides a the efficiency gap, the government embarked on reforms tangible and sustainable option to pursue this agenda. With that have administratively improved the pre-investment up to 56 percent of the budget spent on non-discretionary stages of its public investment management (PIM) system. items, Uganda’s budget is quite ‘rigid’ and hence in general These included setting up a dedicated department in terms, more difficult to adjust in the short to medium term, MoFPED to spearhead the PIM reforms. This department when compared to other SSA countries where this share is has developed and promoted the use of standard guidelines much smaller, at 48 percent. This rigidity has increased as and user manuals for project preparation and appraisal, government assumed increased roles and functions that national parameters to aid in project and program appraisal, have evolved over time to become institutional and policy as well as criteria for selecting projects into the public caps and make it difficult to adjust the budget. With this investment program (PIP) – all of which aim to streamline challenge, it becomes important to increase the output the process for preparation of public projects. To strengthen of each shilling spent in the budget. The dividend that the gatekeeping function for public projects, an inter- can be reaped from improving the institutions, systems, ministerial/inter-agency arrangement – the Development and processes guiding decisions on how to prepare, Committee (DC) chaired by Permanent Secretary and implement, operate, and maintain public investment Secretary to Treasury of MoFEP – was constituted as an projects is significant. According to IMF estimates, an independent reviewer of project proposals before they average country obtains 30 percent less output in terms enter the national budget. The guidelines that underpin of physical infrastructure for a given expenditure than the DC processes and project section criteria are publicized, the most efficient. Up to two thirds of this efficiency gap and an integrated bank of projects was set up to digitalize could be clawed back through improved PIM institutions information across the entire project cycle and aid the (IMF 2015). appraisal function of the DC. Capacity enhancement efforts 18 MoFPED 2022. Identifying Options For An Effective And Sustainable Fiscal Adjustment 28 in project preparation and appraisal, as well as selected requires more than one year to be executed. Yet not all strategic areas of procurement has preceded a sustainable projects are funded systematically. As a result, cost- and capacity development drive started through the Makerere time-overruns on projects; high commitment fees in the University PIM Centre of Excellence. case of externally funded projects, and shortened life span of projects due to poor operation and maintenance 37. These reforms have brought some good practices to of created physical assets persist. The Auditor General’s Uganda’s PIM system. The usefulness of a standard process Report for FY20/21 again noted that out of a sample of 371 for entering projects into the national budget, supported projects in the PIP, 342 projects (92 percent) with budgets by guidelines for government officials to prepare projects, totaling UGX39 trillion had gone past their planned exit and a systematic process for reviewing and appraising the periods, with some extended by more than 12 years and projects before they are included in the budget, cannot be only 40 percent of the projects in the PIP were still within underestimated. The effects of these reforms are already their expected time. visible in the improved quality of projects submitted by MDAs to the Development Committee for approval and 39. It is evident that the improvements around the admission into the PIP. Moreover, the percentage of administrative processes of the pre-investment phase of projects that are underpinned by a cost-benefit analysis PIM are being discounted by challenges in critical areas, (CBA) out of the total entering the PIP, while still low, has including project prioritization and selection, budgeting, improved from 10 percent by FY14/15, to 37 percent for and implementation. These must be addressed urgently to FY20/21, as reported by MoFPED. While the gatekeeping raise value for money in delivery of projects and support function is yet to ensure that all new projects entering the envisaged fiscal consolidation agenda. On the one the budget are properly studied and appraised in line hand, challenges with project prioritization and alignment with the standardized process, it has also stopped some to the achievement of program (previously sectoral) ‘bad’ from entering the system – out of the 222 project objectives, remain. And since the programs poorly define proposals that were considered by DC during FY19/20, 19 and do not appropriately cost their priorities, they also were rejected at concept stage and only 122 made it into fail to drive the investments that are financed externally. the PIP for that year. On the other hand, actual implementation is constrained because budget allocations do not fully cover the costs of 38. Notwithstanding the progress achieved in the PIM implementing ongoing projects through genuine multi-year process, several challenges remain. There are instances commitments, while the budget takes on new projects. in which measures and guidelines have not been adhered This is further exacerbated by budget cuts during budget to. According to the Auditor General’s Report for FY20/21,18 execution and the fact that projects are often not ready for out of a sample of 371 projects in the public investment implementation, as well as weaknesses in procurement program, 245 projects (66 percent) with total project and contract management, all of which contribute to poor values of UGX643.4 trillion, did not have feasibility studies value for money in the delivery of public investments. undertaken before they were allocated financing. It is also noted that capacities would need to be enhanced in some MDAs to even understand the studies that have been done by external agents. Some externally funded projects have not followed national guidelines and aspirations when 222 project proposals were considered by undertaking feasibility studies. On top of this, other DC during FY19/20 challenges crop up during the project cycle, such as securing the right of way after projects have started implementation; inadequate counterpart funding to facilitate elements of Only 122 made it into projects that would ideally be funded by government the PIP for that year under externally funded projects; and project operation and maintenance of assets that have been created. Section 23 of the Public Finance Management Act (Amended 2015) 19 were rejected at imposes a legal requirement for multi-year commitments concept stage to support lifetime project financing that, in most cases, 29 Identifying Options For An Effective And Sustainable Fiscal Adjustment 40. The reforms over the past five years focused on the significance of its function, while other MDAs and improving quality of projects at entry, and they had oversight agencies lack the required institutional set envisioned critical success factors identified in 2015 that up and professional competence to spearhead the still need to be completed. First, government has started reform agenda and undertake prudent pre-investment working on a PIM policy to formalize the administrative planning and effective management and oversight of reforms that have already been put in place, and a the entire PIM. Project implementation lacks oversight basis for strengthening the legal framework, including and guidance and is constrained by weak contract the gatekeeping function. Before it reaches finality of management, while monitoring is highly fragmented strengthening the legal framework, the reforms that have and wasteful as the numerous reporting frameworks been undertaken remain administrative actions that could hardly influence the management of public investments. be reversed or ignored without any consequence. Second, Furthermore, there is no single entity responsible for although the capacity building effort has commenced, oversight of the entire PIM and accountable for the further work will still be required to create the pool of performance of public investment. resources needed to manage projects across the entire b) Budgeting for projects remains a problem as the PIM cycle. For instance, project preparation and appraisal allocation of resources for projects does not use the skills need to be entrenched in all programs, MDAs, and project life cycle approach, leaving gaps especially in different levels of government, and the project managers budgeting for operational and maintenance costs. The that are critical players in project implementation need ex-ante appraisal forecasts of project costs are limited to acquire modern project management skills. The PIM to the capital budget and hence do not consider the Centre of Excellence at the Makerere University will need operational expenditures, further undermining the to be nurtured to maturity to ensure a sustainable and culture of project maintenance. In addition, due to affordable mode of building these capacities. Third, the underbudgeting, the appropriations for some projects project preparation fund to ensure that priority projects persistently use supplementary funding, which must undergo feasibility and/or pre-appraisal studies while be approved by Parliament and distorts the operations awaiting inclusion to the PIP, has recently been set up in of projects. In addition, the existence of significant NPA, which is a major step. Such a fund will need to put in arrears suggests a critical mismatch between planned expenditure and available funds for public investments. place a proper implementation and governance structure The mismatch has exacerbated project delays or long- to sustainably address the funding challenges in project standing unfinished projects, and increased costs due preparation. Lastly, beyond the pre-investment stage, the to interest, penalty costs, and court judgements. rest of the PIM cycle (especially project implementation and asset management) must be improved if projects are c) Limited appreciation of the relevance and functionality of to yield the expected dividend. a streamlined PIM, among the government, civil society, 41. Beyond the critical factors of success identified in 2015, there is work to be done across the various stages of the PIM process to further strengthen the gatekeeping function, improve budgeting, and close gaps According to the Auditor General’s in implementation of projects. These areas of attention can be summarized as below: Report for FY20/21, out of a sample of 371 projects in the a) The institutional capacities and coordination framework public investment program, for PIM are being strengthened but their functionality remains weak. For instance, the gatekeeping function 245 projects (66 percent) with remains weak as it is just an administration function total project values of UGX643.4 that can be ignored without any consequences. The trillion, did not have feasibility decisions taken during the processes such as the DC, studies undertaken before they which works as the independent reviewer, do not have were allocated financing. any legal binding aspect, such as a “Seal of Quality” used in other jurisdictions to signify the completion of the appraisal stage and hence readiness of project proposals for financing. In addition, the formal authority of the PAP Department remains weak compared to Identifying Options For An Effective And Sustainable Fiscal Adjustment 30 and private sector, frustrate adoption of the reforms M&E system, and the OPM, burdening MDAs and LGs and realization of the desired objectives and practices. with separate data requests. The resultant reporting In addition, there is a low level of understanding that framework can hardly be consolidated to provide a investment projects should be tested for compliance comprehensive and relevant picture of implementation with climate related objectives and requirements. status of PIM. There is a need for compatibility, data exchange and integration between PIM related IT d) Whereas an increasing number of projects entering systems. the PIP have been subjected to a CBA (i.e., 38 percent by FY21/22), not all funded projects are subject to 42. To realize genuine improvements in management of rigorous climate responsive preliminary assessment public investments in Uganda, beyond the administrative and feasibility studies. This is largely attributed processes of the pre-investment phase, more work will to inadequate competencies to undertake the pre- have to be done in critical areas. These include project investment analysis and lack of funding for external prioritization and selection, budgeting, and implementation soliciting of the studies. In addition, political influence and monitoring to raise value for money in delivery of seems to take an upper hand in some of the projects projects and support the envisaged adjustment to a more during selection and funding, rather than project viability sustainable fiscal agenda. In addition, a sustained pursuit and ability to deliver economic value to society. Hence, of the reform agenda will be based on a good public a significant number of implementation problems service-wide understanding of the value of an efficient remain, on account of gaps defective design during PIM system and adoption of the relevant reform areas the pre-investment stage. towards realization of the efficiency in public investments. The required actions or recommendations across the key e) The information management systems for project stages of the PIM cycle are summarized in Table 3 below management and monitoring are not harmonized and categorized as to what should be done immediately and hardly facilitate evidence-based project controls (within the next 18 months) and over the medium term and adjustment. Uganda has developed a series of (2 to 3 years). information systems to support different aspects of PIM, from project inception to monitoring and evaluation. Specifically, M&E is done by the PBS, the IBP, the NDP 31 Identifying Options For An Effective And Sustainable Fiscal Adjustment Table 3: Action Plan to Improve Public Investment Management in Uganda Immediate Reform Area Recommended Actions Lead Institutions or Medium Term 1. Appreciation #1.1 Design and undertake a sensitization program MoFPED (PAP) Immediate and Ownership to enhance appreciation of the importance of an of PIM Reform efficient PIM, including the reform agenda, targeting Objectives stakeholders at all levels. #2.1 Streamline and simplify processes in the pre- MoFPED (PAP)and NPA Immediate investment planning stage to reduce the overlap, redundant stages and rationalize the efficiency in decision-making. 2. Strategic #2.2 Update the project preparation guidelines MoFPED (PAP) Immediate Guidance and for preliminary screening (pre-feasibility studies) Preliminary with elements of the project that have become Screening critical, including gender, circular economy, climate change, and intersectoral projects, that require a joint action taken by multiple government entities #2.3 Establish a capex threshold to support a MoFPED (PAP) Immediate fast-track process for projects that meet certain characteristics (less challenging projects in terms of demand analysis, technical design and low budget). #2.4 Develop internal capacities for project MoFPED Medium Term preparation, especially at a subnational level if they are to engage in project preparation and screening at the local government levels. #2.5 Strengthen the pre-screening of proposed NPA Medium Term investment ideas during the formulation of NDP IV. This would involve incorporating at the planning stage, a system for conducting a pre-appraisal analysis of investment initiates (pre-screening phase) before entering them into the NDP-03. Such a system would also generate a project code that can be traced to the rest of the project system within the IBP. #2.6 Update the project preparation guidelines for MoFPED (PAP), PPP Immediate formal appraisal (feasibility studies) with elements Unit and PPDA of the project that have become critical, including gender, circular economy, climate change, and intersectoral projects, that require joint action taken by multiple government entities. #2.7 Make budgetary provision to support rigorous MoFPED – BD Immediate feasibility studies, including out-sourcing and preparation of complex designs of PI and formulate criteria for accessing the funding. Identifying Options For An Effective And Sustainable Fiscal Adjustment 32 Immediate Reform Area Recommended Actions Lead Institutions or Medium Term 3. Formal # 3.1 Support Makerere PIM Centre of Excellence MoFPED (PAP) Immediate Project to sustainably build capacities of MDAs and public Appraisal officials in financial modelling, economic analysis, and risk analysis, critical in project preparation and appraisal to strengthen the in-house capacity in line ministries and agencies. # 3. 2 D e v e l o p s e c t o r - s p e c i f i c a p p ra i s a l MoFPED (PAP) Immediate methodologies, including updates of national parameters, and should incorporate tools for impact assessments of cross-cutting issues, such as environment and climate change. #3.3 Plan and budget dedicated resources for MoFPED (PAP) Immediate project preparation. This could include strengthening the design and operationalization of the project preparation fund. #3.4 Update the PIM manual with new critical MoFPED (PAP) Immediate issues including climate change, gender, green growth, resilient infrastructure, and social inclusion #3.5 Promote public access to IBP and an effective MoFPED Immediate feedback mechanism to allow effective engagement with stakeholders, including CSOs and the public during the pre-investment planning to seek views on the pros and cons of planned investment. 4. Independent #4.1 Define and adopt the concept and procedural MoFPED (PAP) Immediate Reviews arrangements for issuing a “Seal of Quality” to be of Project issued ahead of any project can be negotiated Proposals for financing. #4.2 Design and undertake a capacity building MoFPED (PAP)/PIM Immediate to program tailored to address the competencies CoE Medium Term needs for the members of the DC and ensure an effective independent reviewer. #4.3 Strengthen the formal authority to the PAP MoFPED – PS Medium Term Department to match it with the importance of its function. Organizationally, this could be possible if PAP Department and the PPP Unit are unified under the same umbrella. Alongside this, enhance the functionality of the PAP Department by instituting a PIM Technical Unit to continuously provide strategic thinking for the Unit including developing new technical tools and methodologies, and shadow prices for project appraisal. 33 Identifying Options For An Effective And Sustainable Fiscal Adjustment Immediate Reform Area Recommended Actions Lead Institutions or Medium Term 5. Project #5.1 Improve the credibility of the medium-term MDAs and NFPED Immediate Selection and expenditure framework (MTEF) by formulating Budgeting realistic and affordable expenditure estimates for the budget year and two outer years of the MTEF. This would entail improving the process of allocating resources for operational and maintenance costs. Projects should not be separated into capital budgeting independent from their current budgeting. The ex-ante appraisal forecasts for each project should encompass both the project’s CAPEX and its OPEX. This also promotes the culture of project maintenance. #5.2 Undertake an effective budget challenge MoFPED (PAP) Medium term function or verification of the proposed estimates by MDAs to enhance efficiency in during the annual budgeting process. #5.3 Ensure the IBP and TSA work together MoFPED (BD) Immediate efficiently - solutions worked on how well various systems for efficiency improvement can support each other. Allocation of resources for projects must use the project life cycle approach and provide adequate resources for project preparation and close the gaps in budgeting for operational and maintenance costs. The medium-term budget framework must be more efficient in providing resources for project implementation over the entire project life cycle, rather than from one budget year to another. Relatedly, at the operational level, while Treasury Single Account calls for unused balances to be returned to the Consolidated Account, which is a good accounting practice, there must be a mechanism for ensuring availability of funding for continuing projects especially during the first few months of the financial year to allow for a smooth execution of projects. #5.4 Institute a system for continuous re- MoFPED and Sector Immediate assessment of the GoU project portfolio (PIP MDAs Immediate pipeline) to ensure they remain up to date and ready for financing 6. Project #6.1 Formulation of harmonised and sector MoFPED-BD Immediate Implementation specific standards for project management with +PAP+BMAU a project management body of knowledge (e.g., the PMI®’s PMBoK® Project Management Body of Knowledge standard for project Implementation). Identifying Options For An Effective And Sustainable Fiscal Adjustment 34 Immediate Reform Area Recommended Actions Lead Institutions or Medium Term 6. Project #6.3 Adopt and enforce standardization for project MoFPED and MPS Medium Term Implementation execution. If for instance PMI® and PMBOK® are selected, these standards to be formalized and required by the GoU in project implementation, with increased effort to train to increase the pool of public officials with a PMP certification to support project implementation; and requirement for PMP certification included in biddings to incentivize contractors with PMP certified personnel and build demand for those professionals. #6.4 Introduce and enforce sanctions to public MoFPED Immediate officials’ incompetence or outright corruption in project preparation and execution #6.5 Expedite the development of a sustainable MoFPED/ Immediate procurement framework to mainstream climate Procurement Policy change and other cross-cutting issues in the procurement system, to identify potential bottlenecks and timely corrective measures to mitigate adversary implications on project execution. #6.6 Build capacity across government to support MoFPED Immediate the procurement function to manage not only the process to the point of award of contract, but also contract management and supervisions #6.7 Explore technology to improve project MoFPED /President’s Medium Term implementation (e.g. The Building Information Office Modelling (BIM) – leading the digital transformation of the architecture, engineering, and construction (AEC) industry). #6.8 Integrate the e-governmental procurement MoFPED/PPDA/ Immediate system with the IBP, and other relevant data Procurement Policy and information system, to link procurements contracts (currently only identified as contract numbers) to IBP project codes – track all the procurement issues to their corresponding projects. 35 Identifying Options For An Effective And Sustainable Fiscal Adjustment Immediate Reform Area Recommended Actions Lead Institutions or Medium Term 7. Project #7.1 Review existing data and information MoFPED, OPM & Medium Term Monitoring and systems to guide the streamlining of their NITAU Adjustments functionality, relevance, interface within Government, and leverage synergies for evidence-based decision making. #7.3 Systematically assess the annual MoFPED Immediate performance of the PI portfolio to identify BD+PAP+BMAU emerging policy or efficiency issues and submit recommendations to address them. #7.4 Publish public investments portfolio MoFPED Immediate performance report at mid-year and end of BD+PAP+BMAU fiscal year #7.5 Review and streamline the current MoFPED Immediate annual monitoring frameworks to improve coordination(interface), a avoid overlap, and redundancies and ensure usefulness in decision- making. #7.6 Preparation and submission of a MoFPED Immediate Memorandum for creation of a Formal Authority with proposed legal and regulatory framework for consideration and approval by Cabinet. # 7. 7 S u p p o r t a g r a d u a l s e t - u p a n d MoFPED Immediate operationalization of a formal authority using Medium Term the approved Road Map in a well prioritized and sequenced manner. 8. Facility #8.1 Enforce an effective institutional MoFPED Medium Term Operation arrangements and process for handover and and Asset effective facility operation or assets management. Maintenance #8.2 Strengthen Assets Register, currently MoFPED & ??? coordinated by Accountant General’s Office to Accountant General support the facility management, maximising Office. the return from the assets and preservation of value. #8.3 Improvement of the annual budgeting MoFPED ??? for maintenance and repairs of assets to allow building realistic baseline expenditures which can form the basis for the outer year of the MTEF. Identifying Options For An Effective And Sustainable Fiscal Adjustment 36 Immediate Reform Area Recommended Actions Lead Institutions or Medium Term 9. Project #9.1 Formulate ex-post evaluation guidelines MoFPED Medium Term Evaluation and tools to inform harmonized institutional and Impact responsibilities and ensure evaluation outcomes Assessments influence the decision making under PIM. #9.2 Provide financial support to facilitate an MoFPED Medium Term enforcement of mandatory requirement for an immediate ex-post evaluation, and a standard project completion report (close-out) #9.3 Formulate guidelines to support MoFPED Medium Term enforcement of mandatory requirement for ideally mid-term ex-post evaluation and (ii) the long-term evaluation, focused on project impacts 10: Oversight #10.1: Review the functionality of existing MoFPED and OPM Immediate institutions, oversight entities and make recommendations systems, and to promote harmonized or coherent and relevant coordination oversight functions. framework #10.2 Review of existing data and information MoFPED and OPM Immediate systems to guide the streamlining of their functionality, relevance, interface within Government, and leverage synergies for evidence-based decision-making #10.3 Design and deliver the training program MoFPED and OPM Immediate tailor-made to address the competency gaps in the oversight function in a most cost-effective manner at all levels of government. #10.4 Preparation and submission of a MoFPED -BD Medium Term Memorandum for creation of a Formal Authority with proposed legal and regulatory framework for consideration and approval by Cabinet. # 1 0. 5 S u p p o r t a g ra d u a l s e t -u p a n d MoFPED Medium Term operationalization of a formal Authority using the approved Road Map in a well prioritized and sequenced manner. 37 Identifying Options For An Effective And Sustainable Fiscal Adjustment Identifying Options For An Effective And Sustainable Fiscal Adjustment 38 39 Identifying Options For An Effective And Sustainable Fiscal Adjustment 4. IDENTIFYING OPTIONS FOR ENHANCING SPENDING FOR HUMAN CAPITAL DEVELOPMENT 43. In line with the recommendations under the macro-fiscal chapter, this module explored the options for improving the effectiveness and efficiency and equity of spending through two critical areas. This module assessed the efficiency, effectiveness, and equity of spending within the key human development (HD) sectors of education and health. The COVID-19 pandemic itself, combined with responses to the pandemic, have seriously undermined Ugandans’ health and skill development in ways that risk threatening long-term economic development. Even before the crisis, HD outcomes were deteriorating over the last two decades as both sectors faced serious funding challenges. This module analyzed the overall level of expenditures, including government and donor funding, as well as the allocative and technical efficiency of spending benchmarked against a consistent group of peer and regional countries. Technical efficiency was used to identify potential fiscal savings that could be re-allocated within the sector to boost service delivery or re-allocated to other critical sectors. Identifying Options For An Effective And Sustainable Fiscal Adjustment 40 4.1. Options for Enhancing Effectiveness, Efficiency, and Equity in Public Spending on Health 44. Over the past two decades, Uganda has made significant 45. Service availability and readiness at health facilities progress towards the attainment of Universal Health are still very low in Uganda. According to the 2022 Coverage (UHC). The UHC service coverage index score Harmonized Health Facility Assessment, the general service for Uganda increased from 22 in 2000 to 49 in 2021 which readiness index is 0.59. This means that only 60 percent implies that investments in the health sector in Uganda of the facilities are ready to provide services. These gaps are bearing fruit. Consequently, this has contributed to are symptomatic of a poorly financed or managed health improved health and nutrition outcomes. For example, system. Thus, Uganda requires additional investments between 2011 and 2022, the Under-5 Mortality Rate in the health sector to improve the quality of health reduced from 90 to 52 deaths per 1,000 live births, while service delivery. Considering these issues, Uganda must the Maternal Mortality Ratio reduced from 438 to 189 do much more to achieve the health-related Sustainable deaths per 100,000 live births over the same period. The Development Goals (SDGs). prevalence of stunting among children below the age 46. At the sub-national level, where local government of 5 years also reduced from 33 percent to 26 percent manages the delivery of health services, the challenges between 2011 and 2022. are profound. The governance and management functions Despite these improvements, fertility levels among the at district level are weakened by inadequate funding and adolescents and women in general, are higher in Uganda staffing and weak capacities in the management of health than the averages for low-income countries. This contributes facilities, especially medicines and financial management. to the high teenage pregnancy rate in Uganda which is estimated at 24 percent among women aged 15-19. In Adequacy of Spending on Health in Uganda addition, the percentage of children aged 12-23 months 47. The overall level of spending on health in Uganda is with all basic vaccinations estimated at 54 percent in 2022 inadequate. At US$50.5 per capita, Uganda’s total current is very low. Furthermore, Uganda is vulnerable to disease health expenditure (CHE) per capita is significantly less than outbreaks given its location and faces a growing incidence the average spending of US$75.6 per capita in aspirational and prevalence of non-communicable diseases, for which peer countries, and the recommended US$86 per capita its health system is inadequately prepared. in low-income countries to provide basic health services. 41 Identifying Options For An Effective And Sustainable Fiscal Adjustment 48. Households and external development partners 51. In general, health expenditures from the primary contribute 85 percent of the total CHE in Uganda. In sources of financing in Uganda are aligned to the disease FY20/21, expenditure by external development partners burden. Focusing health expenditures on the leading was the highest at 55 percent of total CHE, followed by causes of mortality and disability has enabled Uganda to households at 30 percent, government at 13 percent, and substantially reduce the prevalence of its most common corporations (employers) at 1.8 percent. Households’ diseases and conditions. contribution to the total CHE is mostly through out-of- pocket (OOP) payments on medicines and stands at a Composition of Public Expenditure on Health whopping 49 percent. This high level of OOP spending 52. There are variations in the level and growth in per on health is one of the leading causes of catastrophic capita public expenditure on health across the sub-regions expenditure on health, forgone care, and impoverishment. in the country. This suggests that the existing formula for allocating financial resources from the center to the 49. There is low prioritization of health by the Government local government level has not been fully effective at of Uganda (GoU). General government health expenditure adjusting the variations across the sub-regions. However, from domestic sources (GGHE-D) as a share of the total variations in funding by sub-regions can also be affected government expenditure (TGE) has declined from 6.5 percent by differences in the number and type/size of the health in FY14/15 to 3.9 percent in FY20/21. Declining GGHE-D as facilities, and the number and mixture of health workers’ a share of TGE implies that the GoU is not adequately skills in each sub-region. prioritizing funding to the health sector. Consequently, funding of health services in Uganda is dependent on 53. Uganda prioritizes funding higher-level health care households and external development partners who than primary health care (PHC). Government-owned provide 85 percent of the total CHE. Uganda’s GGHE-D per regional, specialized, and national referral hospitals get capita estimated at US$6.8 in FY20/21 is also below the 83 percent of all public spending at government health average level of spending in peer countries. When the facilities, even though they only make up one percent GGHE-D is adjusted for inflation, the results show that the of all government health facilities. On the other hand, real value of GGHE-D was almost half the nominal value district-level government health facilities receive only over the period FY14/15–FY20/21. 17 percent of all public spending at government health facilities despite making up 99 percent of all government 50. External development partners are still the largest health facilities. While PHC services can be provided at all source of funding to the health sector in Uganda. In levels of the health system, the problem then is that higher- nominal terms, external funding to the health sector was level facilities are not being used as intended. Therefore, relatively the same over the period FY14/15–FY18/19 but the government must examine the functionality of health increased substantially by 56 and 26 percent in FY19/20 facilities in the country and rationalize expenditures at and FY20/21, respectively. However, 84 percent of the total different levels. external spending in the health sector over the period FY14/15–FY20/21 was off-budget. Off-budget funding 54. Spending on salaries and wages as a share of the reduces government’s flexibility in resource allocation, public expenditure on health in Uganda has been growing its ability to re-prioritize funding to emergent needs, and over the years and is within the historical spending is a missed opportunity to improve the public financial patterns in Eastern Africa. Uganda’s health workforce management system in the country. The large share of wage bill as a share of the total public expenditure on external funding and off-budget support poses a huge health increased from 24 percent in FY16/17 to 37 percent risk of making health financing unsustainable. in FY20/21. However, the health wage bill in the health sector in Uganda is still below the recommended range of 45 to 60 percent for low-income countries in Africa. 55. Despite the increase in the volume of public expenditure UHC Coverage IndexScore Fascilities on drugs and medical commodities in nominal terms, the level of spending in Uganda is still significantly below The UHC service coverage Only 60 percent expected norms. At 29 percent, the share of expenditure index score for Uganda of the facilities are ready to on drugs and medical commodities is lower than the increased from 22 in 2000 to 49 in 2021 provide services. African regional average of 33 percent (Bennett et al Identifying Options For An Effective And Sustainable Fiscal Adjustment 42 1997). Secondly, the per capita spending on drugs and 59. Uganda is also more effective at using the existing medical commodities – estimated at US$3.2 in FY20/21 in health services to produce better maternal health outcomes Uganda – is significantly below the recommendation by than aspirational peer countries, Congo Republic, Kenya, the Lancet’s Commission on Essential Medicines for low- Sudan, and Cameroon. However, there are substantial income countries to finance a basic package of 201 essential disparities in maternal mortality rates within the country, medicines at US$13 to US$25 per capita. Inadequate particularly across the sub-regions. spending on drugs and medical commodities in Uganda 60. Some sub-regions are more efficient or productive is one of the factors contributing to the low availability in translating resources into outputs than others. Sub- of tracer drugs and commodities at health facilities in the regions like Karamoja and Kigezi have relatively lower country. Only 46 percent of the health facilities had over institutional deliveries than other sub-regions even though 95 percent of the tracer drugs and medical commodities they have more skilled health providers. This could be in FY19/20 and FY20/21. explained by other limitations to service delivery such as 56. There are some discrepancies between spending on physical and economic access, and social acceptability of drugs and medical products and their availability due to the services provided. lack of a system to link the electronic procurement system 61. Countrywide, maternal deaths at public facilities are at the National Medical Stores (NMS) to the Integrated higher in sub-regions which have higher numbers of skilled Financial Management Information System (IFMIS) at the health providers. The only exceptions are Bukedi, Tooro, Ministry of Finance, Planning and Economic Development and Kigezi sub-regions. These results are very concerning (MoFPED). Thus, multi-year framework contracts for drugs and suggest that there are huge implementation gaps and medical products are signed outside the IFMIS. Because including poor quality of maternal healthcare services contract management is entirely out of the system, the in almost all the sub-regions in Uganda. IFMIS internal budgetary controls do not apply as each contract has to be checked manually to ensure compliance 62. Despite an increase in the health workforce in the with available budgetary allotments. public sector from 59,105 in FY16/17 to 64,808 in FY19/20, the number of skilled health providers in Uganda is Efficiency and Effectiveness of Spending in the critically low and the distribution is skewed towards some Health Sector sub-regions. In 2022, the highest number of skilled health 57. Government budget performance in the health sector providers per 10,000 population was in Kampala at 13.6, over the period FY16/17–FY20/21 was good. On average, which was more than twice the national level (Uganda) about 97 percent of the budgeted funds were released, estimate of 5.9. This means that none of the sub-regions 97 percent of which were used. However, given the need – nor Uganda as a whole – had met the required standard for additional funding in the health sector, it is expected of 23 skilled health providers per 10,000 population. that 100 percent of the budgeted funds are released and However, the data only includes skilled health providers used each year. in the public sector, suggesting that the density of these providers could increase if private sector data is included. 58. Despite having a lower total CHE per capita, Uganda’s Nevertheless, the national target of 23 skilled health 2020/21 score on the health access and quality (HAQ) providers per 10,000 population will remain unachieved index was comparatively the same as the score for its given that the government is the largest employer in the aspirational peers, Rwanda, and Kenya. This suggests that health sector. Furthermore, given Uganda’s desire to reach Uganda is more efficient than its aspirational peers and the health-related SDGs, the SDG target of 44.5 physicians, some countries in East Africa (Rwanda and Kenya) at using nurses, and midwives per 10,000 people is a long way off. its limited resources to produce quality health services. However, this analysis doesn’t take into consideration 63. Recruitment and deployment of health workers to rural differences in the cost-of-service provision. Considering areas is a challenge and grossly affects the provision of that health service provision in Uganda is generally less quality health care. While the annual number of health expensive, this could be the reason why Uganda is relatively cadres graduating from health training institutions in more efficient than peer countries. For example, salaries Uganda is still low, most of them are not absorbed into and wages for health workers in Uganda are much lower the system. This could be attributed to: (i) the inefficient than in Kenya and Rwanda. decentralized system of recruiting health workers with 43 Identifying Options For An Effective And Sustainable Fiscal Adjustment several districts failing to fully absorb their wage budgets study estimates direct annual losses from absenteeism at each year; (ii) continued training of health workers that about UGX292 billion (US$78.5 million) through “wasted” the health sector does not need; (iii) a weak system for payments for salaries to absentee health care workers. A redistributing existing health workers across the districts study by the Uganda Inspectorate of Government estimated to optimize the numbers; and (iv) ineffective Human the total annual direct losses due to corruption in the Resources for Health (HRH) retention and management health sector at US$180.2 million, which is equivalent to strategies for staff working in rural areas. 25 percent of the annual government spending on health. 64. Sub-regions with higher levels of per capita public A multi-pronged case study on health service delivery in spending on health generally have higher levels of skilled three districts (Ntungamo, Mukono, and Nwoya) revealed health providers. This means that the distribution of health the following: workers is a key factor in how financial resources are a) Gaps in expenditure tracking at the health facilities distributed in the public health sector in Uganda. It also and a disconnect between the level of financing, implies that geographical allocation of public funds in the expenditure on drugs and medical supplies, patient health sector could be improved by redistributing health data and results; workers. However, as provided above and in more detail in the main report, a high number of skilled health providers b) Significant deficiencies in the management of the payroll in a sub-region is not necessarily associated with more for health workers. A number of health workers were institutional deliveries and low institutional maternal being paid through non-health facility cost centers and deaths. Health workers in some sub-regions are more non-existent health centers. The underlying problem is efficient in translating available resources into outputs; the inconsistency across key government documents and more effective at translating the services into better and databases, namely: the master facility list, staff outcomes. This means that there are implementation gaps list, payroll register, and the NMS database; across the sub-regions in Uganda and this leads to the provision of poor-quality maternal healthcare services. c) ‘Non-existent’ health centers in Ntungamo district are being used to pay health workers’ salaries. Though the 65. The low productivity of health workers and poor health workers exist, and they are serving at other maternal health outcomes in Uganda can also be attributed health centers, it was not clear why their pay points to the high level of absenteeism. In Uganda, absenteeism are under non-existent health centers; is estimated at 46 percent, which implies that almost half of the health workers are absent from duty most of the d) Health facility managers have limited control of their time. Having half of the health workforce absent on any budgets for drugs and medical supplies. This leads to given day creates a significant challenge for providing limited transparency on procurements and deliveries, timely, efficient, high-quality health services. The absentee and it contributes to the expiry of drugs and medical staff place a heavy workload on the staff on duty which commodities. It was revealed that NMS often delivered could lead to the provision of poor-quality health care and some commodities that are not needed and/or ordered ‘burn-out’. Ultimately, there is wastage of resources, and by the health facilities; and this contributes to poor health outcomes. Given the high e) The online system for making orders for drugs and proportion of the public expenditure on HRH in Uganda, this medical supplies at NMS is commendable but the system does not allow the health facilities to retain a copy of their requisitions. Furthermore, NMS was reported to be undermining the oversight role of health facility None of the sub-regions – nor managers, district authorities, and community leaders Uganda as a whole – had met the because they rendered very little time for a thorough required standard of 23 skilled health inspection of the deliveries. providers per 10,000 population Identifying Options For An Effective And Sustainable Fiscal Adjustment 44 Equity in Financing and Access to Health Services the context of a “free healthcare” policy. Therefore, lower incidence of CatHE among the poor may not be because a) Do the Poor Benefit from Public Healthcare Services there is a protection mechanism for them, but likely in Uganda? because they are too poor to seek care when they need it. 66. Health services provided at public health centers in 70. The incidence of CatHE varies across the sub-regions both rural and urban settings are accessed by the poor of Uganda, with the highest incidence in Teso and West more than the non-poor. This implies that the GoU’s free Nile sub-regions and the lowest incidence in Kigezi and healthcare policy and other UHC reforms have been positive. Acholi sub-regions. CatHE was also higher in rural than However, some parts of the country still do not have access urban areas. The main factors associated with CatHE were to quality health services because: (i) the distribution of gender and age (having children below the age of five and health facilities is still skewed towards the urban areas; households headed by old people (>60yrs)). (ii) public health centers are underrepresented in urban areas; (iii) there are accessibility challenges, especially 71. The number of households falling into poverty due to for people living in remote and marginalized communities healthcare expenditures reduced during the period under (Batwa, Ik, islands, etc.); and (iv) the quality of health review. The percentage of households that fell below services offered at public health centers is still below par. the national poverty line due to healthcare expenditures decreased from 4.6 percent in FY05/06 to 2.3 percent in 67. Poor and non-poor households accessed private FY19/20. Despite this reduction, about 206,405 households health centers almost equally. This means that both the (949,464 people) were pushed into poverty. Using the poor and the non-poor are exposed to OOP payments for international poverty line, the percentage of households health services. For the private health centers in urban that have been impoverished due to healthcare expenditures settings, results show that they were mostly accessed reduced from 5.2 percent in FY05/06 to 2.6 percent in by the poor. This raises concern on the exposure of the FY19/20, which translates into about 233,328 households urban poor to OOP payments on health in urban areas. (1.1 million people). 68. The trend in the health benefits received compared to 72. Although there has been a decline in impoverishment the health need has progressed in favor of households due to healthcare expenditures, households in rural areas in the poorest, poorer, and middle-class income groups. remain more prone to impoverishment. The incidence Over the period FY12/13–FY19/20, the health benefits of impoverishment among households in rural areas and needs of the households in the poorest, poorer, and declined from 5.6 percent in FY05/06 to 2.9 percent in middle-income groups increased. In addition, households FY19/20, which is 181,374 households (870,597 people). On in these three income groups benefited more than their the other hand, the incidence of impoverishment among health needs in FY12/13 and FY19/20. households in urban areas declined from 2.9 percent in b) Catastrophic Health Spending and Impoverishment FY05/06 to 1.9 percent in FY19/20 which is equivalent to due to Health Spending 51,677 households (206,709 people). Key Recommendations 69. The incidence of catastrophic health spending (CatHE) at the 10 percent threshold has declined from 22.4 percent Key Recommendations in FY05/06 to 11.9 percent in FY19/20. Furthermore, the 73. Based on the findings from the analysis above, key incidence of CatHE is higher among the non-poor than the recommendations to address the challenges in the health poor households. Moreover, 11.9 percent of the 8.93 million sector have been summarized in Table 4. households in Uganda in FY19/20 has 4.9 million people, implying that millions of Ugandans are still experiencing CatHE. Furthermore, the relatively low incidence of CatHE among the poor could also mean that some poor households have forgone health care and not necessarily that there is increased financial protection for the poor. Thus, it is possible that their health needs are not met, even within 45 Identifying Options For An Effective And Sustainable Fiscal Adjustment Table 4: Recommendations to Improve Spending Adequacy, Efficiency, Effectiveness, Equity, and Outcomes in the Health Sector Recommendations Issue/Theme Key Findings Short Term (0-2 Medium Term (3-5 Long Term (6 years) years) years plus) 1. Health Uganda has made significant Strengthen Strengthen primary Strengthen outcomes and achievements in health and primary healthcare healthcare including primary readiness of nutrition outcomes. Despite including at the at the community healthcare the health these improvements, service community levels, levels, health including at the system availability readiness at health health promotion promotion and community levels, to deliver facilities is low with an average and disease disease prevention. health promotion services of 59 percent. Key readiness prevention. and disease challenges include low staffing Cautiously scale up prevention. levels, diagnostics capacity, Cautiously scale up priority specialized perennial medicine stock outs, priority specialized healthcare programs Cautiously and inadequate amenities healthcare while taming the cost scale up priority (water and electricity). programs while of such. specialized taming the cost of healthcare While there have been such. Implement, monitor, programs while significant public investments and regularly adapt taming the cost of in the health sector, these Establish and/ service delivery such. investments have been skewed or update performance towards curative, hospital- service delivery agreements with Implement, based care. performance private health monitor, and agreements with providers. regularly adapt Private sector involvement in private health service delivery Uganda is high and MoH has providers. Implement, monitor, performance long-term service agreements and regularly adapt agreements with with the private-not-for-profit Establish and patient-focused private health sector. strengthen feedback and providers. patient-focused grievance redress feedback and mechanisms across Implement, grievance redress the health system. monitor, and mechanisms regularly adapt across the health patient-focused system to monitor feedback and patient-reported grievance redress experiences and mechanisms outcomes. across the health system. Identifying Options For An Effective And Sustainable Fiscal Adjustment 46 Recommendations Issue/Theme Key Findings Short Term (0-2 Medium Term (3-5 Long Term (6 years) years) years plus) 2. Adequacy The overall level of spending Increase and ring- Increase and ring- Increase and ring- of total on health in Uganda is fence government fence government fence government spending inadequate, with per capita spending on spending on health to spending on health in expenditure at US$50.5. This is health to (i) reduce (i) reduce dependence on health to Uganda less than the average spending dependence on on dwindling and (i) reduce in aspirational peer countries dwindling and uncertain external dependence on (US$75.6 per capita) and the uncertain external funding amid global dwindling and recommended US$86 per funding amid global crises threatening uncertain external capita for low-income countries crises threatening further cuts in funding; (ii) to provide basic services. further cuts in development reduce the risk development assistance for health; of catastrophic assistance; (ii) (ii) reduce the risk of spending on reduce the risk catastrophic spending health and of catastrophic on health and impoverishment. spending on impoverishment. health and impoverishment due to high OOP. 19 Key caveats to consider in designing the national SHI are: (i) need to create a single benefit package/large enough risk pool that combines general tax income with payroll, group, and informal payment. Examples of countries that have been successful in such a design are Philippines, Vietnam, Mongolia, and Ghana; (ii) continuing with the free healthcare policy which has been pro-poor for PHC and target the SHI to hospital level care as has been successful in Zambia; (iii) leveraging lessons from the implementation of RBF; and (iv) integrating robust learning and evaluation agenda in the SHI program including study tours, local and international expert advice, actuary assessment, and stakeholder engagement. 47 Identifying Options For An Effective And Sustainable Fiscal Adjustment Recommendations Issue/Theme Key Findings Short Term (0-2 Medium Term (3-5 Long Term (6 years) years) years plus) The overall level of spending Develop a Implement the Increase and ring- on health in Uganda is health financing health financing fence government inadequate, with per capita sustainability sustainability plan spending expenditure at US$50.5. This is plan aimed at with an increasing on health to less than the average spending sustaining the share of domestic (i) reduce in aspirational peer countries financing of health resource allocation to dependence on (US$75.6 per capita) and the services in the face health. dwindling and recommended US$86 per of dwindling and uncertain external capita for low-income countries uncertain external Implement, monitor, funding; (ii) to provide basic services. funding. and adapt the SHI reduce the risk scheme. of catastrophic GoU is not adequately Establish the spending on prioritizing funding to the national social Engage development health and health sector; GGHE-D as a health insurance partners and impoverishment. share of TGE has declined (SHI) scheme with ensure alignment from 6.5 percent in FY14/15 the primary focus of development Implement the to 3.9 percent in FY20/21; and on enhancing assistance to national health financing development partners and strategic health policy priorities sustainability households provide 85 percent purchasing, plan with an of the total CHE (55 and 30 protecting people increasing share percent, respectively). from catastrophic of domestic spending on health, resource While development partners and to some extent, allocation to are still the main source of raising revenues health. funding to the health sector, as experienced has 84 percent of the total external shown elsewhere. Implement, spending in the health sector monitor, and over the period FY14/15–FY20/21 Engage adapt the SHI was off-budget. Off-budget development scheme. funding reduces government’s partners and flexibility in resource allocation ensure alignment Engage and is unsustainable. of development development assistance to partners and national health ensure alignment policy priorities of development through signing assistance to compacts and national health strengthening policy priorities the existing accountability systems Identifying Options For An Effective And Sustainable Fiscal Adjustment 48 Recommendations Issue/Theme Key Findings Short Term (0-2 Medium Term (3-5 Long Term (6 years) years) years plus) 3. Public spending on health Prioritize spending Prioritize spending Prioritize Composition is skewed towards higher on PHC, disease on PHC, disease spending on of health level health facilities (i.e., prevention and prevention and health PHC, disease spending in regional, specialized, and health promotion to promotion. prevention and the public national referral hospitals). reduce the higher health promotion. sector Comparatively, these facilities risks and costs Adequately resource make up one percent of all the associated with PHC facilities and Adequately government health facilities curative care. improve availability resource whereas district-level facilities of inputs, leadership PHC facilities make up 99 percent of all the Adequately and governance, and improve government health facilities. resource functionality of availability of However, only 17 percent of PHC facilities facilities, and quality inputs, leadership the total public spending at and improve of care at PHC and governance, government health facilities availability of facilities. functionality of goes to district-level facilities. inputs, leadership facilities, and and governance, quality of care at Spending on salaries and functionality of PHC facilities. wages increased from 24 facilities, and to 37 percent of total public quality of care. expenditure between FY16/17 This will help to to FY20/21 mainly due to decongest referral increases in staff recruitments. facilities and allow The level of spending is them to execute similar in Kenya and Tanzania, their primary role but below Southern African at lesser costs. countries and the expected range for African countries (45- 60 percent). In nominal terms, there has been a 65 percent increase in spending on medicines and medical commodities between FY16/17 and FY20/21. In per capita terms, the increase was from US$2.2 in FY16/17 to US$3.2 in FY20/21. This is still lower than the recommended spending of US$13-US$25 per capita on medicines and medical commodities for low- income countries. 49 Identifying Options For An Effective And Sustainable Fiscal Adjustment Recommendations Issue/Theme Key Findings Short Term (0-2 Medium Term (3-5 Long Term (6 years) years) years plus) 4. Efficiency Government budget Increase the Increase the Increase the and performance is good with 97 availability and availability and availability and effectiveness percent of allocated funds productivity of the productivity of the productivity of spending released and 97 percent of health workers by: health workers by: of the health in the health released funds used. (i) improving the (i) improving the workers by: (i) sector recruitment and recruitment and improving the Aggregated results at retention in local retention in local recruitment and national level shows that governments; (ii) governments; (ii) retention in local Uganda is more effective than re-distributing the re-distributing the governments; (ii) aspirational peer countries available health available health re-distributing the at using the existing health workforce across workforce across available health services to produce better the sub-regions the sub-regions workforce across maternal health outcomes. and districts; (iii) and districts; (iii) the sub-regions However, within the country at scaling-up RBF scaling-up RBF with and districts; (iii) sub-regional level, availability with the potential the potential; (iv) scaling-up RBF of skilled health providers to address staff enhancing mentorship with the potential; doesn’t necessarily translate absenteeism; and supervision, (iv) enhancing into better maternal health (iv) enhancing accreditation, and mentorship and outcomes. mentorship and regular competence- supervision, supervision, based training of accreditation, The number of skilled health accreditation, health workers; and regular workers in service is critically and regular (v) developing and competence- low (5.9 skilled health workers competence-based institutionalizing based training per 10,000 population) and training of health a performance of health their distribution is skewed workers to match management system workers; (v) towards a few sub-regions. the evolving that promotes developing and However, presence of a high disease burden; accountability; and institutionalizing number of skilled health (v) developing and (vi) leveraging local a performance providers in a sub-region is not institutionalizing community groups management necessarily associated with a performance and users of health system that more institutional deliveries management promotes and low institutional maternal system that accountability; deaths. promotes and (vi) accountability; and leveraging local (vi) leveraging community local community groups and users groups and users of of health health services to monitor and report on health facility performance supported by effective enforcement of standards. Identifying Options For An Effective And Sustainable Fiscal Adjustment 50 Recommendations Issue/Theme Key Findings Short Term (0-2 Medium Term (3-5 Long Term (6 years) years) years plus) This means that there are Implement the services to monitor and services to monitor implementation gaps across the recommendations report on health facility and report on health sub-regions in Uganda and this from the human performance. facility performance. leads to the provision of poor- resource audit by the quality maternal healthcare Office of the Auditor Implement the Implement the services. General to address recommendations from recommendations discrepancies in the human resource from the human Provision of quality healthcare staffing, employment audit report by the Office resource audit is hindered by ineffective status, renumeration of the Auditor General to report by the Office management of health inputs of health workers, address discrepancies of the Auditor (financial and human resources, cost centers, and in staffing, employment General to address medicines, and medical supplies); inconsistencies in status, renumeration discrepancies in fraud/corruption; and absenteeism HRH data across of health workers, staffing, employment of health workers. databases (master cost centers, and status, renumeration facility list, payroll inconsistencies in HRH of health workers, The annual direct losses due to data across databases. cost centers, and register, cost centers, corruption in the health sector inconsistencies in staffing list). Ensure is estimated at US$180.2 million, Strengthen forecasting, HRH data across that every health which is equivalent to 25 percent quantification, databases. worker is allocated of the annual government procurement, storage to a cost center of spending on health. Meanwhile, and distribution of Strengthen their workstation and the annual cost of absenteeism is medicines and medical forecasting, “non-existent” health estimated at US$78.5 million. commodities. Key quantification, centers are removed actions to achieve this procurement, There are significant deficiencies from the payroll. include this include (i) storage and in payroll management in some linking the electronic distribution Strengthen districts with discrepancies in procurement system at of medicines forecasting, data between budgets, payroll the NMS to the IFMIS at and medical quantification, registers, health facilities and cost MoFPED; (ii) adopting commodities. Key procurement, storage centers. electronic systems actions include this and distribution of medicines and medical that link medicines include (i) linking Access to medicines and medical commodities. consumption and/or the electronic products in the country is low with issuance to patient data; procurement system only 46 percent of facilities having Key actions to achieve and (iii) procuring and at the NMS to the 95 percent of tracer medicines in this include (i) delivering medicines IFMIS at MoFPED; FY20/21. Furthermore, there are linking the electronic according to facility (ii) adopting discrepancies between spending procurement system needs. electronic systems on medicines and their availability at the NMS to the that link medicines at facilities partly because the Enhance transparency IFMIS at MoFPED; consumption and/or IFMIS and the procurement system and accountability (ii) adopting issuance to patient at the NMS are not linked. through (i) strengthening electronic systems data; (iii) procuring that link medicines financial reporting and and delivering While development partners consumption and/or tracking of health inputs; medicines according contribute significantly to the issuance to patient (ii) displaying financing to facility needs. health sector, the overall impact of data; (iii) procuring and performance data at their investments is not optimized and delivering notice boards; and (iii) Enhance because of fragmentation in medicines according ensuring interoperability transparency and financing, implementation, and to facility needs; between the various accountability reporting. Use of parallel systems and (iv) providing resources management through (i) also compromise government full access to health and service delivery strengthening ownership, and accountability. facilities for their information systems. financial reporting and tracking of 51 Identifying Options For An Effective And Sustainable Fiscal Adjustment Recommendations Issue/Theme Key Findings Short Term (0-2 Medium Term (3-5 Long Term (6 years) years) years plus) This means that there online NMS health inputs; are implementation gaps requisitions; and (ii) displaying across the sub-regions (iv) providing financing and in Uganda and this leads sufficient time for performance data to the provision of poor- inspecting and at notice boards; quality maternal healthcare signing-off the and (iii) ensuring services. Provision of quality deliveries. interoperability healthcare is hindered by ineffective management of between the Enhance various resources health inputs (financial and transparency and management and human resources, medicines, accountability service delivery and medical supplies); fraud/ corruption; and absenteeism of through (i) information health workers. strengthening systems. financial reporting The annual direct losses due and tracking of Implement and to corruption in the health health inputs; update the sector is estimated at US$180.2 (ii) displaying virtual pooling million, which is equivalent financing and mechanisms to 25 percent of the annual performance data for alignment government spending on health. Meanwhile, the at notice boards; of development annual cost of absenteeism is partner support. and (iii) upgrading estimated at US$78.5 million. connectedness and There are significant interoperability deficiencies in payroll between the management in some districts electronic with discrepancies in data information between budgets, payroll systems for better registers, health facilities and alignment e.g., cost centers. alignment of the Access to medicines and MoH master facility medical products in the list to the IFMIS, country is low with only 46 payroll register, percent of facilities having 95 and the NMS percent of tracer medicines in database. FY20/21. Furthermore, there are discrepancies between Develop virtual spending on medicines and pooling mechanism their availability at facilities for development partly because the IFMIS partner financing in and the procurement system line with Compact at the NMS are not linked. (s) between GoU While development partners and development contribute significantly to the health sector, the overall partners. impact of their investments is not optimized because of fragmentation in financing, implementation, and reporting. Use of parallel systems also compromise government stewardship, ownership, and accountability Identifying Options For An Effective And Sustainable Fiscal Adjustment 52 Recommendations Issue/Theme Key Findings Short Term (0-2 Medium Term (3-5 Long Term (6 years) years) years plus) 5. Equity There are variations in the MoH and MoFPED MoH and MoFPED MoH and MoFPED of health level and growth in per capita to fully apply to update the RAF to fully implement spending and public expenditure on health and monitor the ensuring that the the updated use across the sub-regions in resource allocation other health systems RAF covering the country. Over the period formula (RAF) for inputs (such as all key inputs 2012/13-2019/20, the health non-wage PHC human resources, and monitor its benefits and needs of the recurrent grants to drugs, infrastructure, performance households in the poorest, assure equity. and medical in terms of poorer, and middle-income equipment) too are promoting equity. groups increased. In addition, allocated equitably. households in these three Expand social income groups benefited more Expand social protection for than their health needs in protection for the the poor and 2012/13 and 2019/20. poor and vulnerable vulnerable linked through cash to the SHI scheme. CatHE has declined from 22.4 transfers, vouchers, percent in 2005/06 to 11.9 cash for work, Adopt service percent in 2019/20; and is community-level level agreement higher among the non-poor pre-payment and/or with the private than the poor households. micro-financing linked providers in Despite this significant to the SHI scheme. areas focusing on reduction, about 1.1 million hospital level care households (4.9 million Adopt service level which are less people) across the country still agreements with the pro-poor. experience CatHE. Furthermore, private providers with the relatively low incidence of a focus on both PHC CatHE among the poor could service and hospital also mean that some poor level care, which households have forgone is less pro-poor. health care and not necessarily The social health that there is increased financial protection system protection for the poor. could be linked to the SHI scheme. Similar to the results on CatHE, there has been a declining trend in the incidence of impoverishment due to OOP expenditure on health. The percentage of households that fell below the national poverty line due to OOP expenditures decreased from 4.6 percent in 2005/6 to 2.3 percent in 2019/20. Despite this reduction, about 206,405 households (949,464 people) were pushed into poverty (fell below the national poverty line) due to OOP expenditures. 53 Identifying Options For An Effective And Sustainable Fiscal Adjustment 4.2. Options for Enhancing Effectiveness, Efficiency, and Equity in Public Spending on Education With a tax gap of almost 5 percentage points As infrastructure spending increased over of GDP, Uganda has trailed other sub-Saha- the last decade, per capita spending on ran countries that collect taxes averaging 20 education and health has been declining. percent of their GDP 03 04 Public capital formation grew Population pressure pushes 02 05 at an average of 19 percent education and health per annum during NDPII, but spending need to more than private capital formation was double even before growing at 6 percent consideration for improved quality for better outcomes. 01 06 More balanced spending towards human capital accelerates growth and 06 05 yields better social outcomes compared to current stance. 74.Human capital has increasingly contributed to the she grows up as she could be if she enjoyed complete wealth generation in Uganda, but its current level is education and full health. This is close to the averages for insufficient to boost growth and ensure sustainable sub-Saharan African countries and low-income countries, development. Human capital refers to the combination and Uganda ranks 154th out of 174 economies on the HCI. of the “knowledge, skills, and health that people invest Low levels of human capital primarily derive from poor in and accumulate throughout their lives, enabling them outcomes in education. Uganda has one of the lowest to realize their potential as productive members of expected years of school among all economies in the society”.20 In Uganda, the share of wealth derived from HCI. Ugandan children can expect to complete 6.8 years human capital has increased from 48.2 percent in 1995 to of pre-primary, primary and secondary school by age 73.0 percent in 2018, whereas the share of natural capital 18. However, when years of schooling are adjusted for in total wealth declined from 45.1 percent to 13.4 percent quality of learning based on the results of internationally during the same period.21 Nevertheless, according to the comparable assessments, this is only equivalent to 4.3 World Bank’s Human Capital Index (HCI),22 a child born years – a learning gap of 2.5 years. in Uganda today will be 38 percent as productive when 20 World Bank’s definition. For details see https://www.worldbank.org/en/publication/human-capital 21 The Changing Wealth of Nations (CWON) 2021. https://www.worldbank.org/en/publication/changing-wealth-of-nations/data 22 The HCI quantifies the contribution of health and education to the productivity of the next generation of workers. The index is designed to capture the amount of knowledge, skills, and health a child born today could attain by age 18. For definition and methodology see https://www.worldbank.org/en/publication/human-capital 23 The gross attendance ratio (GAR) is the total number of students attending primary school, regardless of age, expressed as a percentage of the official primary school-age population. It is based on household surveys or census, versus enrollment rates which are based on official administrative records, such as EMIS. 24 Source: Ministry of Education Fact Sheet 2016. 25 The ongoing upgrade of EMIS will enable more precise computation of official enrollment rates. Identifying Options For An Effective And Sustainable Fiscal Adjustment 54 75. Uganda has the potential to realize demographic rapid population growth, insufficient infrastructure, and dividend by expanding education opportunities now. cultural factors (e.g., early marriage). In 2019, the GAR With a population of 44 million, Uganda has one of the in secondary education stood at 39 percent,25 compared fastest-growing populations in Africa and the second to 49 percent in the region. In pre-primary, enrollment youngest population in the world. These demographic rates lagged those in selected regional peer countries in trends signal a shift in the population’s age structure 2019, most notably Kenya. Even though participation in where the share of school age population declines, while pre-primary education is not mandatory, it is critical to the share of the most productive age groups steadily grow. help children develop the cognitive and socioemotional Consequently, Uganda is positioned at a critical moment skills they need to succeed in school. where policy actions aiming at improving educational 77. The primary education system is characterized by low attainment and equipping Ugandans with relevant skills internal efficiency, evidenced by late entry, high grade could boost productivity and income growth and support repetition and high dropout rates. In 2017, only 60 percent socio-economic transformation. Various studies suggest of children who started primary education remained in that a substantial portion of the demographic dividend school at the end of P7. Late entry and grade repetition is an education dividend (Crespo-Cuaresma, Lutz, and are identified as key factors, with about one third of P1 Sanderson 2014). students being overage and 18 percent repeating that Status of the Education System and Outcomes grade. These issues lead to overcrowded classrooms in Uganda and pressure on limited learning resources. The cost of education is identified as the most dominant reason for 76. Uganda has made significant progress towards its goal leaving primary education, with “no funding” and “too of ensuring universal education at the primary level, but expensive” being the most cited reasons, particularly enrollments are lagging in subsequent levels. Following in higher primary grades. Poor academic performance, the introduction of the Universal Primary Education (UPE) discouragement, and pregnancy also contribute to dropouts, policy in 1997, Uganda witnessed a significant increase with COVID-19 exacerbating the problem of teenage in primary education enrollment. In 2019, the gross pregnancy. In 2019/20, the inefficient public spending on attendance ratio (GAR)23 stood at 123 percent, which is students who drop out and repeat a grade amounted to higher than the rate in other East African countries and UGX284 billion or 24 percent of the overall public spending reflects that a sizable share of children attending primary in primary education. school are outside of the official age range. Conversely, despite the introduction of the Universal Secondary 78. Low completion of primary education contributes to Education and Universal Post O Level Education (USE/ a low transition rate to secondary education, while cost- UPOLET) programs, the Gross Enrollment Rate (GER) in related factors lead to permanent dropouts in secondary secondary education has remained comparatively low at grades. The transition rate to S1 was 61 percent in 2017, which a steady plateau, from 25 percent in 2007 to 27 percent is low by peer-country and global standards. In Kenya, for in 2016.24 The lack of progress in secondary enrollment instance, the transition rate is 98 percent for males and 100 rates may be attributed to various factors including percent for females, and the global average is 91 percent. According to the UNESCO Institute for Statistics (UIS), public spending in education represented 2.7% of the GDP in 2021, about 50% of average spending in East African region. 26 Progression through the various levels of education depends on performance in national learning assessments. 27 The National Assessment of Progress in Education (NAPE) is administered by the Uganda National Examinations Board. The NAPE assesses Grade 3 and Grade 6 (ISCED 1) students since 1996 and started assessing Grade 9 (ISCED 2) students in 2008. It targets students in public and private schools. 28 It only includes allocations to the education sector through the Human Capital Development Program. 29 National Budget Performance Reports FY2021/22. 30 Education 2030 Framework for Action aims to mobilize all countries and partners towards achieving the Sustainable Development Goal (SDG) on education and its targets. It urges adherence to benchmarks established in the Addis Ababa Action Agenda of the Third International Conference on Financing for Development. As a member of the United Nations, Uganda is party to all conventions, resolutions, and commitments to sustainable development. 55 Identifying Options For An Effective And Sustainable Fiscal Adjustment The low pass rate in the Primary Leaving Examination However, there is low enrollment in TVET programs due (PLE) 26 and inadequate supply of secondary schools to barriers including high fees, limited career guidance, that cannot absorb the growing demand for education and inadequate integration with industry. Low enrollment contribute to the low transition rate. Cost-related factors rates in STEM/STEI programs in Ugandan universities are the most common reasons for permanent dropouts in further hinder the development of a skilled workforce secondary education, while pregnancy is still a significant for technological innovation. Despite recognizing the barrier for girls’ persistence in school. Inefficiencies in significance of skills development in Uganda’s ambitious secondary education from students dropping out and Vision 2040, challenges persist in implementing the repeating grades amounted to UGX96 billion in 2019/20, “Skilling Uganda” strategy, such as limited financing, skill 23 percent of the overall spending in that level. gaps, and mismatches. 79. Uganda’s education system is not delivering basic Effectiveness of public spending in education skills for most students. Despite remarkable progress in in Uganda enrollment in primary education, Uganda has not met its 81. Uganda’s public expenditure on education is far below goal of equipping the population with basic competencies that of other East African countries and international in literacy and numeracy. According to the most recent benchmarks. The Education sector budget is primarily results of the National Assessment of Progress in Education financed through domestic resources of the Government (NAPE),27 at the end of primary education, only 52 percent of Uganda. In FY21/22, the expenditure through the of students meet proficiency standards in English literacy, national budget totaled UGX 3,629 billion, 28 while and 39 percent meet proficiency standards in Mathematics. development partners contributed with UGX 83 billion.29 Learning poverty indicators produced by World Bank also Local governments are encouraged to top off transfers reveal poor learning outcomes in Uganda. About 83 percent from the central government with locally raised resources, of 10-year-olds cannot read and understand a simple but these revenues represent a small fraction of the text by the end of primary school. This is consistent with consolidated budget. According to the UNESCO Institute for recent results from the Early Grade Reading Assessment Statistics (UIS), public spending in education represented administered by USAID, in which most P2 students are rated 2.7 of the GDP in 2021, about fifty percent below the average as “non-readers” in their local language. Different school- spending in selected East African countries (4.2 percent) related factors, such as teacher absenteeism, inadequacy and far below the minimum recommended level by the of educational resources, and violence, contribute to low Education 2030 Framework for Action (at least 4 percent quality of education. There is also inadequate school of GDP).30 As a share of total government expenditure, inspection, monitoring, and support supervision, and education represented 11.3 percent in 2021 (UNESCO UIS), poor management of primary and secondary schools. also the lowest among regional peers, and below the The COVID-19 pandemic exacerbated the learning crisis. benchmark encouraged by the Education 2030 Framework 80. Uganda’s labor market needs TVET skills for economic for Action – which is at least 15 percent to 20 percent. transformation, but progress in the sector is affected by Private contribution of 3.9% of high fees and low enrollment. Uganda’s labor market faces a shortage of job opportunities, emphasizing the importance of Technical and Vocational Education and GDP in health spending in FY19/20, Training (TVET) skills for industrialization and economic almost double the global average of transformation. Future job projections highlight the increasing demand for entry-level and mid-level TVET 1.9% of the GDP, and well above skills, crucial for transitioning from an agriculture-based regional peers – Ethiopia (0.3%) economy to a modern, industrialized economy. and Tanzania (1.4%). 31 Unesco (2022): https://www.education-progress.org/en/articles/finance 32 It is not clear from the survey instruments which items are included in “expenses that cannot be broken down.” It may include school meals, but also behaviors identified in the National Integrity Survey Report 2020, such as bribing an education provider (teacher, examiner etc.) for the delivery of a service that should be free. Motivations for bribe-paying in public education may include: to ensure good grades, secure a place for a child, or pass a test or exam (Fazekas et al 2021). Identifying Options For An Effective And Sustainable Fiscal Adjustment 56 82. Even as primary education takes the largest share of growth, resulting in a worsening pupil-to-school ratio. total spending, per-student spending declined for both Additionally, about 26 percent of the existing classrooms primary and secondary levels, leaving higher education for primary education are still in temporary structures. with the highest public funding per student. Primary 85. Despite a high share of staff compensation in total education consumes 36 percent of public education expenditure, teacher salaries are relatively low. Teacher funding in Uganda, followed by tertiary education with 25 salaries are below the national average salary of other percent, secondary education at 20 percent, and BTVET/ professionals. Salaries for teachers with a university skills development with 6 percent. All levels of education degree is 37-42 percent lower than the national average in Uganda seem to be underfunded, with per-student of other professionals. While primary teachers do not all government expenditure below the regional average currently have a university degree, teacher compensation as a share of GDP per capita. Per-student spending has will be an important consideration as Uganda moves declined in primary and secondary education, while it toward requiring all pre-primary and primary teachers has increased in tertiary education. These trends have to have a degree under the 2019 Teachers Policy. While unfavorable implications for equity, as tertiary education raising teacher salaries without implementing other is more likely to benefit better-off youth. reforms to increase professionalism and accountability 83. Public spending on education in Uganda has increased has no impact on learning, the competitiveness of salaries over the past decade, mostly directed towards tertiary is an important lever for the government to attract the education and expenses not classified by levels of best candidates into teaching (Béteille and Evans 2019). education. Between FY10/11 and FY21/22 fiscal years, the education public spending financed through domestic Contribution to education spending by the resources increased nominally at an average annual private sector rate of 6.9 percent. Around 43 percent of the additional 86. Private spending in education is high, with households resources were directed towards tertiary education and spending more on education than government. In FY19/20, 24 percent of total to expenditures not classified by levels. private spending in education amounted to 3.2 percent Expenses not classified by level of education include of the GDP. This indicates that private investment is at resources to support national policies and programs least one percentage point above the historical average under central agencies such as the Ministry of Education, for government of 2.2 percent. Likewise, the private Uganda National Examinations Board, Kampala Capital contribution in Uganda exceeds the global average of 1.9 City Authority, National Curriculum Development Centre percent of the GDP and surpasses that of other regional and Education Service Commission. peers such as Ethiopia (0.3 percent) and Tanzania (1.4 percent).31 Compared to other countries in the region, 84. Public education expenditure in Uganda is dominated a smaller percentage of students in Uganda attend by wages, with non-wage expenses increasing in recent government-aided institutions. years. Development and capital expenditures have also increased, but still fall short of what is needed to meet 87. Despite the GoU’s funding of UPE/USE policies, infrastructure requirements. The composition of education households still contribute with school fees in government- spending reflects the low public expenditure on education. aided schools. With the introduction of the UPE policy, the Most of the public education spending in Uganda goes Government of Uganda (GoU) committed to the payment of towards wages. Non-wage expenses have increased in school tuition, Parents and Teachers Association fees and recent years, but Uganda invests less in other items that textbook fees. In primary education, households should enhance learning compared to regional peers. Investing in not pay tuition and fees at government-aided schools, but teachers and complementary areas such as infrastructure, schools still charge them. School fees make up a sizable materials, and training is crucial to improving the quality of share of the household expenditure across all levels, education. Additionally, Development/capital expenditure even in government-aided schools. Books and school has increased, but not at a pace to keep up with enrollment supplies and “expenses that cannot be broken down” 32 33 It is assumed that a school has an adequate number of teachers if the STR is exactly 53:1 (national standards). A school has a deficit of teachers if there is at least one teacher fewer than expected given the standard of 53 students per teacher, while a school has a surplus of teachers if there is at least one teacher more than expected given the standard of 53 students per teacher. 57 Identifying Options For An Effective And Sustainable Fiscal Adjustment constitute the second and the third largest categories of 2018). Uganda also invests relatively little in effective expenditures. The next largest household funding is on “demand-side” interventions to help students succeed in uniforms and sport clothes, followed by others (pocket terms of progression and learning, including school fees, money) and exam fees. school feeding programs, and information campaigns. Uganda has not been able to implement school feeding Adequacy of Spending on Education in Uganda programs due to lack of funds. The responsibility for 88. Population growth will continue to jeopardize the providing meals has been delegated to parents due to achievement of universal primary and secondary education the unaffordability and unsustainability of government and requires increased resources for the sector. As the financing. In skills development, demographic trends population grows, the demand for education is expected to and increased completion rates drive skill demand in increase across all levels. In only eight years (2022-2030), medium term, require TVET sector expansion, while public the school-age population (ages 3-24) will increase by universities face staffing and financial challenges. 4.6 million. Current public education spending does not a) Efficiency of spending in education match the demands of a youthful demographic profile. 91. A better use of current educational and financial 89. The education budget for Uganda needs to increase to resources could result in better educational outcomes in achieve Universal Primary and Secondary Education. To Uganda. When level of development, education expenditure at least maintain the current enrollment rates in primary and percentage of population aged 24 and below are and secondary education, recurrent expenses would jointly considered, LAYS in Uganda are 11 percent below have to increase by 12.3 percent by 2030 – around UGX what would be expected from international comparisons. 445 billion in current prices (Scenario 1). Additionally, to However, the scope for efficiency gains is even much meet the development goal of increasing average years higher, as this comparison is with the “average country” of schooling to 11 years, the country will have to both with Uganda’s characteristics and not with those in the absorb the influx of new students due to the population efficiency frontier. growth and attain universal (lower) secondary education, which would cost UGX 1,299 billion in current prices by b) Efficiency in distribution of funds 2030 – a 35.8 percentage increase in the current education 92. The inadequate public funding of Early Childhood budget (Scenario 2). Large-scale investments will also be Education (ECE) services negatively impacts primary required in the construction of new classrooms. To finance education efficiency and leads to increased expenditure the inputs needed to substantially increase quality, an at later stages. The Government White paper (1992) additional 12 percent increase in the education budget and Education Act of 2008 established that ECE should would be needed by 2030. be financed by parents or guardians. The role of MoES 90. Uganda’s education system faces several other concentrates on creating enabling environments (i.e. policy challenges that demand an increase in resources. Uganda development, standards’ setting and quality assurance). aspires to increase access to quality Early Childhood The lack of direct provision of early childhood education Development (ECD) to achieve equitable access to relevant (ECE) services has resulted in inequitable access to this and quality education and training. However, challenges level and inefficiencies in primary education. A UNICEF study affecting quality of pre-primary education persist, such indicates that for every UGX 1,000 invested in Universal as inappropriate learning materials, poor quality of Primary Education (UPE), the government loses UGX 600 infrastructure and shortage of qualified pre-school because many children have not accessed pre-primary teachers. Public universities in Uganda are understaffed, education. This is because most Primary One classes are there are salary disparities among staff and the welfare crowded (most of whom are underage) and there are high allowance for government sponsored students are not repetition rates, yet government continues to provide commensurate with the current cost of living (MoFPED capitation grants for these children (MoFPED 2016). 34 In calculations, only teachers in government-aided students were considered. Identifying Options For An Effective And Sustainable Fiscal Adjustment 58 93. Therefore, Uganda can better allocate its education time (Wane & Martin 2016). Therefore, the inefficient budget by prioritizing pre-primary and primary levels public spending in Uganda could amount to 449.5 billion over further increases for tertiary education. In recent in 2019/20, representing 12 percent of the total public years, Uganda has notably increased the spending in education spending.34 tertiary education, which absorbs the second highest d) Accountability and school inspection shares of the education budget, after primary education. Amid the scarcity of public resources, the GoU can better 96. The Education Sector in Uganda faces challenges allocate the education budget to prioritize programs that related to corruption, “ghost” schools, students and produce high social and private benefits and have a large teachers, and inadequate management systems. Corruption multiplicative effect. Empirical studies show a positive practices, such as paying bribes and diverting funds, correlation between early education attendance and reduce the effectiveness of public spending in the sector. better later school performance. Investing in pre-primary The elimination of these practices could result in annual education has also a high benefit-to-cost ratio. savings of nearly UGX 299.7 billion. This is equal to 10 percent of annual government spending on the sector in c) Efficiency in teacher distribution 2019. Additionally, it is estimated that over UGX50 billion is 94. The teacher allocation system in Uganda is inefficient, lost annually due to “ghosts” (i.e., schools and teachers that as there are disparities in teacher allocation between and receive payments but do not exist, are duplicates, or are not within districts. Although the government-aided schools providing services). The lack of a sustainable, accountable, have an average student-teacher ratio (STR) of 53, which and efficient Education Management Information System complies with national standards, there are significant (EMIS) has also hindered the improvement of education variations in STRs between districts with similar numbers service delivery. Currently, the EMIS is being upgraded of students. Additionally, some districts have a surplus to include functions for tracking enrolment, drop-out, of teachers, while others have a deficit, indicating the retention, and unique identification of learners, teachers, possibility of teacher reallocation.33 Meeting standards and institutions. The implementation of unique identifiers for student-teacher ratios is important, but not sufficient, for students, teachers, and schools can help further address for quality and efficiency. International evidence indicates the problem of “ghost” issue. that in most contexts, reducing class sizes alone does 97. School inspection, monitoring, and support supervision not improve learning outcomes in the absence of other are also inadequate in enforcing education standards reforms, in particular pedagogy and aligning instruction and delivering quality education. Local governments more closely with students’ learning levels. (LGs) have a statutory responsibility to provide support 95. Teacher absenteeism and poor classroom management supervision, monitoring, and inspection of education are additional factors compromising spending efficiency. service provision, but various barriers weaken this function. There is inefficient public spending resulting from the For example, there are weaknesses in institutional and government expenses on salaries to teachers who are legal frameworks, and there is no legal requirement for chronically absent from school. Inefficient public spending LGs to share inspection reports with the central agency could be estimated by multiplying the average primary responsible for school inspection. Moreover, the Directorate teacher salary by the number of teachers chronically of Education Standards (DES) and LGs are underfinanced absent from their classrooms. The 2013 Service Delivery and understaffed. As a result, the quality of inspection Indicators (SDI) Report for Uganda had approximated that and reports produced is poor, and they are not used one in four (23.3 percent) public school teachers were to inform School Improvement Planning. The ongoing absent from work and 52.3 percent were not teaching Intergovernmental Fiscal Transfer reform will need to in the classroom. In other words, 47.7 percent of public- be supported as it addresses some of these challenges. school teachers were not actively teaching at any given Finally, under the Teacher Development and Management Systems (TDMS), Uganda is divided into 539 Coordinating Centers, which are managed by Coordinating Center Tutors 35 The methodology of the learning poverty indicator, produced by the World Bank, can be found here: https://www.worldbank.org/en/topic/education/brief/what- is-learning-poverty. 36 The results cannot be directly compared with the learning poverty indicator developed by the World Bank because the learning outcomes are from different sources, with varying thresholds for proficiency and age groups of students. 59 Identifying Options For An Effective And Sustainable Fiscal Adjustment (CCTs). The CCTs are responsible for providing instructional 100. Education spending is largely decentralized, with support to teachers in consultation with school leaders. local governments and higher education institutions Unfortunately, many of these centers are understaffed, executing about 80 percent of the national education resulting in infrequent classroom visits for most teachers. budget. During FY21/22, about 20 percent of the education Moreover, some zones do not have a CCT at all. spending was executed by central level agencies (MoE, KCCA, other agencies), 24 percent by universities (which Equity of spending are autonomous spending units), and 56 percent by higher 98. Education opportunities in Uganda highly depend on local governments. The national budget represents the students’ socioeconomic level and place of residence, predominant source of revenue for local governments. suggesting that the public education spending does not Therefore, fiscal decentralization in Uganda consists fully compensate for disadvantages. Across all levels mainly of expenditure decentralization than revenue of education, school attendance is the highest for the decentralization. Local Governments are mainly responsible better-off children and those living in urban areas. The for the provision of pre-primary, primary and secondary net attendance rate for three to five-year-old children is education. 57 percent for those who come from socioeconomically 101. The current fiscal decentralization framework and advantaged backgrounds, but access is only about 17 percent systems for primary and secondary education in Uganda for the poorest. In primary education, the attendance is are not delivering the expected results. Despite political relatively high, but enrollment rates remain higher for and nominal fiscal decentralization, this PER shows that the richest students compared to their poorest peers (72 there is a sustained learning crisis, low access to education, percent vs 88 percent). In lower secondary education, inefficient distribution of primary school teachers and the equity gap by income level and place of residence classrooms, and inadequate levels of funding for nonwage widens, while upper secondary and higher education expenditures. Fiscal decentralization is largely nominal, remain mostly inaccessible to students from rural and and LGs have few discretionary fiscal resources and little the poorest backgrounds. ability to raise them. Although recent increases have 99. Overall, public spending in primary and post-primary started to reverse the impact of a decade of decline, the vocational education is pro-poor, regressive in secondary, level of financing for education services is inadequate, but very regressive in post-secondary. The distribution and capacity to implement education decentralization of public spending on education is analyzed using benefit policies is weak due to insufficient funding for routine LG incidence analysis (BIA). This analysis categorizes management and oversight of service delivery, inadequate expenditures as either progressive or “pro-poor,” which capacity development and technical support, and a lack of disproportionately benefit poorer citizens, or regressive or effective data and accountability mechanisms (Al-Samarrai, “pro- rich,” which provide greater benefits to households S. and Lewis, B. 2021). with higher wealth or income. The BIA analysis suggests 102. The learning poverty indicator, which covers both that the public spending in Uganda is largely pro-poor access and quality aspects of schooling highly correlates in primary and post-primary vocational education, but with poverty at the subregional level, even for primary it becomes increasingly regressive with higher levels of education. The World Bank developed the learning poverty education. Particularity, public spending in lower and upper indicator, a synthetic index which combines the shares of secondary education tends to benefit better-off students, children who are out of school, unable to read a simple while public spending in post-secondary education is text, or both.35 Figure 12 presents a version of this index highly regressive. The regressivity of public spending in using the share of students that do not meet the minimum tertiary education is also common across most education level of proficiency in NAPE P6.36 The poverty level across systems in the world. sub-regions explains most of the variation in learning Intergovernmental transfers and spending at local poverty, and indeed poverty is a better predictor of governments level learning poverty than it is of access alone, indicating that poorer regions suffer from lower quality of education in Identifying Options For An Effective And Sustainable Fiscal Adjustment 60 addition to lower access. Addressing imbalances in access 2018 amounting to UGX 63,546 in urban schools and UGX to quality education is fundamental to the objective of 59,503 in rural schools. In FY22/23, capitation unit costs narrowing regional disparities and accomplishing greater decreased for all non-wage recurrent grants. socio-economic prosperity for all Ugandans. 106. Inadequacy of non-wage recurrent grants, which 103. Uganda’s public spending has historically been are designed to cover school operation costs and distributed inequitably, which has tended to reinforce instructional materials, also have a negative incidence patterns of poverty and disadvantage. In many countries, on equity, affecting the most disadvantaged students. per capita education spending is significantly lower in The effectiveness of decentralization in education may poorer regions than in wealthier regions (Al-Samarrai, be limited by inadequate funding. In Uganda, low funding S. and Lewis, B. 2021). In Uganda, poorer regions are not has led some schools to collect additional fees, which necessarily more likely to benefit from public resources, exacerbates economic inequalities. Although the UPE whereas instructional costs of disadvantaged students capitation grant is designed to account for differences tend to be higher. In Uganda particularly, there has been in student needs, it is not clear whether the additional an inequitable distribution of teachers (and consequently resources are being used to improve learning outcomes in wages), and in the per-pupil direct school transfers for the most disadvantaged. Instead, these funds may (non-wage expenses). This ultimately leads to inequities be used to cover operational costs of running schools. in access to quality of education. Resource allocation Theoretically, the additional resources are intended to criteria have traditionally been input-based, following provide additional teaching time, specialized learning students, staffing and infrastructure, which tend to be material, and smaller classes for pupils. higher in better-off local governments. 107. Formulae allocation in non-wage recurrent and 104. To address the challenges mentioned above, the GoU has development grants led to a slight decrease in inequality been implementing the Intergovernmental Fiscal Transfer of the total education allocation. The new non-wage Reform since FY18/19. The Uganda Intergovernmental Fiscal recurrent allocation formula was fully adopted in FY19/20. Transfers Program, also supported by the World Bank, The changes include adding variables such as a performance originally aimed to enhance the adequacy and equity of index, share of hard-to-reach population, total land areas, distribution of LG transfers across districts by providing and refugee populations to direct more funds towards additional resources and targeting the least-funded LGs. The less performing districts. Non-wage recurrent grants in program also focused on strengthening the management primary education are no longer favoring better-performing of education and health services at LG level. In 2020/21, districts, but the secondary education non-wage recurrent the program extended its original scope. Some of the allocation per capita remains significantly more unequal. interventions relevant for the education sector include Additionally, development grants are being allocated the introduction of a results-based financing mechanism, based on formulae that consider the size of the targeted operationalized in a school performance assessment and population of beneficiaries to close the service delivery improvement framework; the reduction of understaffing gap progressively (ODI 2022). in LGs and schools; strengthening the core oversight and 108. Under the UGIFT program, the GoU has been support functions of central government to local service addressing the marked disparities across LGs in terms delivery; and delivery of Performance Improvement of the availability of critical staff. However, further Support (ODI 2022). improvements will be needed beyond the UGIFT program. 105. The adequacy of the non-wage recurrent grant has The UGIFT program aims to address staffing disparities improved recently, but the per-student allocation is across local governments (LGs) in Uganda, with the goal of insufficient to deliver quality of education. The allocation increasing teacher staffing levels to a minimum standard. formula for UPE and USE capitation grant include two The program estimates staffing gaps at the LG level and components: minimum allocations per student to cover sets minimum requirements for pupil-to-teacher ratios school capitation (nearly 90 percent of the grant for in primary and secondary education. LGs falling below UPE) and additional allocations based on variables and the minimum threshold are required to recruit additional weightings (remaining 10 percent). Since implementation staff to reach the target. However, the available resources of UGIFT, capitation rates have increased. However, the provided by the program are insufficient to meet national per student allocation for UPE is still far below that standards. Therefore, Uganda must create additional recommended by the National Planning Authority in fiscal space and introduce sustainable mechanisms to 61 Identifying Options For An Effective And Sustainable Fiscal Adjustment encourage the reduction in teacher distribution disparities. The UGIFT program also targets enhancing the management of services by LGs, such as recruitment, deployment, and teacher management (ODI 2022). 109. To improve the effectiveness and efficiency of service delivery, MoES has designed a School Performance Assessment (SPA) and Performance Improvement (SPI) Framework. The SPA system is designed to link performance improvement support provided to schools with the size of the capitation/non-wage recurrent grant allocation. Its purpose is to enhance the impact of school inspections, provide incentives for school performance improvements, and strengthen oversight and monitoring functions. The SPA will be conducted annually, and international experiences show promising results of this approach. Recommendations 110. Education spending in Uganda is low, inefficient, and inequitable. In the short and medium term, the country will have to massively increase the public expenditure on education to meet long-term development goals, respond to the accelerating school-age population growth and expand equitable access to high quality education. Alongside this increase, it is crucial to implement measures and reforms to improve the efficiency and equity of education spending, thereby maximizing the impact of both current and increased resources. The recommendations have been summarized in Table 5. Identifying Options For An Effective And Sustainable Fiscal Adjustment 62 Table 5: Main Findings and Recommendations to Improve Adequacy, Efficiency, Effectiveveness, and Outcomes of Education Spending in Uganda Key Theme Key Findings/ Issues of Concern Recommendations Time frame 1. Adequacy of Early Childhood Education is Recommendation 1: Revisit policy on Early Short term (0-2 spending underfunded, with its provision is Childhood Education (ECE) as part of years) predominately private. The current Education Policy Review Commission. legal and policy framework that guides the provision of ECE devolves Uganda could significantly benefit from this function to parents. Some revisiting current policies. One option is measures to increase ECE provision to pilot one year of government-funded have been attempted, such as pre-primary education meeting quality attaching pre-primary classrooms standards (which is listed as a “Project to primary schools; but lack of Idea” in NDP III) and moving towards funding has resulted in poor quality universal implementation of one year of and inequitable access to pre- ECE with quality. Another alternative within primary education and in significant the current policy context is to increase inefficiencies in primary and the ability of poor families to access secondary education. pre-primary education through private providers, whether through public-private partnerships or subsidies. Public education spending is notably Recommendation 2: Prioritize education Short term (0-2 low. Access to primary and secondary expenditures to reflect an “Expansion years) education has increased significantly, with Quality” scenario as the population but the rapid population growth increases. will put additional pressure on the education budget to accommodate To absorb the increasing demand for the influx of new students. Additional education and deliver universal primary resources are needed to hire more and secondary education by 2030, the teachers, cover non-salary recurring education recurrent expenses will have expenses, and expand school to increase by about 36 percent, from the infrastructure. (Universal Primary FT22/23 level of per-student expenditure. Education) capitation grants to the An additional 12 percent increase will be level recommended by the National required to adequately finance schools and Planning Authority, but does not provide for quality in primary education. allocate funds, for example, to This is probably a lower bound for what will increase the number of teachers in be required to ensure quality education for already understaffed districts, which all; as additional spending will be required is also essential for quality to expand the UPE. Demographic trends, along with Massive investment should also be made higher completion rates, are expected in the construction of new classrooms. to result in a significant increase in More importantly, increasing the amount the demand for skills development. of money the government spends on education is unlikely to result in improved The Global Review of Training Funds outcomes, unless they also prioritize (UNESCO 2022) found that, in 2020, 75 improving technical and allocative different countries operated levy- efficiencies. financed training funds of various types. Sub-Saharan Africa alone Recommendation 3: Mobilize resources accounted for over one-third of all from the private sector through levy- countries with such training funds. financed training funds for skills development to increase financing and link Currently, TVET financing allocations of funds to rewarding reforms predominantly relies on inputs and results. without considering outcomes or reform efforts. However, financing can Attract private contributions, to expand be a potent tool to enhance outcomes, sources of funding to address the low public reduce inefficiencies, and encourage spending on TVET. innovation in service delivery (UNESCO 2022; World Bank, UNESCO and ILO 2023). 63 Identifying Options For An Effective And Sustainable Fiscal Adjustment Key Theme Key Findings/ Issues of Concern Recommendations Time frame Strategically use levy-financed training Short term (0-2 funds to address inadequacy of skills. years) To align TVET with national priorities and address skill shortages, Uganda can simultaneously realign the financing of TVET to reward reforms and results. Encourage employer training levies to pool resources and support public financing, active labor market programs, and training for the informal economy. Combine resource mobilization with reforms to improve efficiency and effectiveness 2. Efficiency of Between FY10/11 and FY21/22, public Recommendation 4: Re-prioritize the Short term (0-2 spending education spending financed through education budget to provide for pre-primary years) domestic resources increased 6.9 and primary over further increases in percent annually on average, but tertiary education. the bulk (around 43 percent) of the additional resources was directed The various challenges in tertiary education towards tertiary education. Per capita notwithstanding, the GoU must re-prioritize spending in primary and secondary spending towards programs that produce has been declining, with detrimental high social and private benefits. Adequate effects on access and quality in these financing of pre-primary and primary layers of education. education will increase the efficiency of the overall education sector and consequently Uganda can learn from Singapore’s have a significant positive on the welfare of approach where building strong Uganda’s society. foundations in basic education was the first step to becoming relatively quickly one of the most successful education systems in the world. This is in addition to the lesson about the importance of investing in human capital, aligning education with economic needs, and promoting a culture of innovation and lifelong learning. The use of information- Recommendation 5: Leverage technology Short-teem (0-2 communication technology (ICT) is – including EMIS, TELA, and e-inspection years one way to increase transparency and systems – and enhance local capacity for accountability in public spending. It improved school inspection, monitoring, and offers cost-effective tools that allow support supervision to reduce absenteeism, accurate and timely data, which improve accountability, and improve quality is critical for informed decision- of instruction. making, identify possible risks, and ensure that resources and time are An upgraded EMIS and the “Teachers placed where they are most needed. Effectiveness and Learner Achievement” Accessibility to timely data provides (TELA) tool, a mobile-based inspection evidence that decision makers require mechanism will help government improve to strive for effectiveness, efficiency, teacher management by tracking teacher and equity. (Abdul-Hamid, Saraogi, absenteeism at school through a facial and Mintz 2017; World Bank 2015) recognition system. The teacher allocation system is inefficient, with an uneven distribution of teachers within and across districts. Identifying Options For An Effective And Sustainable Fiscal Adjustment 64 Key Theme Key Findings/ Issues of Concern Recommendations Time frame While the Planning, Budgeting and Recommendation 6: Adopt a more Medium to long Implementation Guidelines for transparent and formula-based approach to term (2-5-7 years) Local Governments establish that allocate teachers. school and BTVET allocations should follow the MoES staffing norms, Adopt an approach that encourages the the allocation remains input-based, efficient use of staff resources and mitigates depending on the number of teachers inequities in available resources by linking hired in the district. the budget for local governments with the number of staff that can be contracted based on standards and the payroll that can be paid for (OECD 2019a). 3. Equity in Higher education remains mostly Recommendation 7: Revise the financing Medium term (2-5 spending inaccessible to students from rural mechanism in tertiary education to improve years) and the poorest backgrounds. Most adequacy, equity, and efficiency. disadvantaged students are under- represented among those students GoU could consider offering loans, rather who are eligible to access tertiary than sponsorships. This would entail level. redirecting the current sponsorships to benefit academically outstanding students The government awards 4,000 from disadvantaged backgrounds, while the scholarships to students every year, rest could increase the funds to expand the to those who perform academically loan scheme. based on their performance in the Uganda Advanced Certificate of Education (UACE). The progression through the various Recommendation 8: Take steps to levels of education depends on deescalate high-stakes examination culture performance in national learning and revisit role and importance of PLE. assessments. The Primary Leaving Examination (PLE) certifies completion Uganda could revise the role of PLE in of primary education and determines the transition to secondary education to continuity into O-level or lower mitigate existing inequities in education secondary education; but the low and provide more equal opportunity to all. pass rate is a contributing factor to low transition rate to secondary education, Demand-side interventions, which Recommendation 9: Implement low-cost Medium term (2-5 aim to alleviate financial constraints and demand-side interventions to reduce years) on households, are highly effective dropouts taking gender-specific barriers in reducing household costs and into account e.g., pregnancy for girls. providing students with incentives to continue attending school. Uganda must invest relatively more in These interventions help overcome demand-side interventions to reduce barriers that hinder households from dropouts including school fees (still being investing in education, thus promoting paid despite UPE), school feeding programs, increased school participation. information campaigns. Additionally, gender considerations should be considered However, the most important in these demand-side interventions. Teen determinants of school dropouts pregnancy is the most important reason for are money related - Primary and girls, after money-related reasons secondary students in Uganda cite the high cost of education as one of the main reasons to drop out. 65 Identifying Options For An Effective And Sustainable Fiscal Adjustment Key Theme Key Findings/ Issues of Concern Recommendations Time frame Effectiveness Teacher salaries in Uganda are Recommendation 10: Increase teacher Medium to Long of spending not competitive and do not attract salaries as part of a comprehensive reform term (2-5-7 years) highly skilled individuals to the of the teaching profession including teaching profession. However, recruitment, career incentives, and support. increasing teacher salaries alone cannot guarantee improved To enhance teacher effectiveness, it is also educational outcomes important to improve the prestige and compensation policies, and to establish better career progression structures. Pre-service education must also include a robust practicum component to ensure that teachers are equipped to transition and perform well in the classroom. The selection process for teachers should be based on merit and followed by a probationary period to ensure that the quality of the teaching force is enhanced. To motivate teachers, continuous support in the form of high-quality in-service training and effective school leadership is essential for ongoing improvement. Technology should be used intelligently to augment the ability of teachers to reach every student, considering their areas of strength and development (Béteille and Evans 2019). The expected outcomes of fiscal Recommendation 11: Tackle the factors Short term (0-2 decentralization and primary and that are affecting the effectiveness of years) secondary education systems in decentralization. Uganda are not being achieved due to: insufficient level of financing Different approaches can be adopted to for education services at the local address these challenges (OECD 2019b), level, weak capacity to implement including: education decentralization policies, • Ensure adequate financial resources such as inspections and oversight at each level of government to fulfil of service delivery, insufficient responsibilities, avoiding unfunded capacity development and technical mandates that weaken accountability support, and ineffective data and and service delivery. Consider increasing accountability mechanisms. allocations to districts and schools to improve school inspections, oversight, and school fees, linking them to performance improvement support and equity considerations. • Support capacity building for local governments through regular assessments, mandatory training, guidance documents, open competitive hiring, and special agencies to provide technical expertise. • Enhance transparency, improve data collection, and strengthen performance monitoring. Identifying Options For An Effective And Sustainable Fiscal Adjustment 66 5. CONCLUDING REMARKS 111. Uganda’s recent infrastructure drive, aimed at 112. Overall, while Uganda has embarked on a fiscal addressing binding constraints to growth, has reduced consolidation, adjustments in budgeting and spending spending on human development priorities, raised its fiscal – alongside revenue enhancements and efficiency and debt vulnerabilities, contributed to crowding out of improvements – are required for the country to realize private sector credit, and threatens the country’s hard- faster and more sustainable growth and improvements earned macroeconomic stability. Whereas Government in socio-economic outcomes. Efficiency improvements can has recently cut some expenditures and reduced the be realized from further reforms in the intergovernmental fiscal deficit, it requires deeper and more strategic fiscal transfer systems, as well as public investment management. adjustment to address these macro-fiscal challenges both Whereas efficiency improvements in education and health at the macro level, within key service delivery systems are critical, additional resources are required to ensure and across key human development sectors. The current a meaningful human capital development out of a fast- fiscal stance is not sufficient to raise incomes substantially, growing and young population. reduce poverty significantly or improve socio-indicators, partly because spending in key sectors is too low, while inefficiencies abound. 67 Identifying Options For An Effective And Sustainable Fiscal Adjustment Identifying Options For An Effective And Sustainable Fiscal Adjustment 68 References 69 Identifying Options For An Effective And Sustainable Fiscal Adjustment REFERENCES Abdul-Hamid, H.; Saraogi, N.; and Mintz, S. 2017. “Lessons Learned from World Bank Education Management Information System Operations” Portfolio Review, 1998–2014. Washington, DC: World Bank. Al-Samarrai , S. and Lewis, B. 2021. “The Role of Intergovernmental Fiscal Transfers in Improving Education Outcomes.” Washington, DC: World Bank. 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