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Poverty Reduction and Public Sector Reform in Uganda

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Poverty Reduction and Public Sector Reform in Uganda Powered By Docstoc
					         Poverty Reduction and Public Sector Reform in Uganda

               The Roles of Institutions in Past Experience

                                   and

                    Challenges for the Way Forward




                          Charles Byaruhanga
                           Consulting Africa




                          Paper presented to
                             Seminar on
Modernising Government: Integrating Structural and Budget Reforms for a
                   Better Performing Public Sector

                           18th April 2002
                     Adam Smith Institute, London
                                                            Table of Contents

1. Introduction .......................................................................................................................................... 3
2. Background........................................................................................................................................... 3
3. Organisation ......................................................................................................................................... 5
4. Recent Poverty Outcomes ............................................................................................................... 5
5.”First Generation” Reforms ............................................................................................................. 8
6. Public Expenditure Management Reforms................................................................................ 9
  a) The Poverty Eradication Action Plan (PEAP) ................................................................... 10
  b) The Medium Term Expenditure Framework ..................................................................... 11
  b) The Poverty Action Fund .......................................................................................................... 13
  c) Sector Working Groups ............................................................................................................. 14
7. Improving the Effectiveness of Public Sector Management. ........................................... 15
  a) Developing Effective Monitoring and Evaluation ........................................................... 15
  b) Developing and Integrating Output Oriented Budgeting and Results Oriented
  Management ........................................................................................................................................ 15
  c) Reforming Public Procurement and Financial Management ........................................ 16
  d) Improving Pay and Public Service Management.............................................................. 16
  e) Decentralisation ............................................................................................................................ 17




                                                                             2
1. Introduction
Remarkable progress at reducing poverty in Uganda has been registered over the last
decade with the poverty headcount declining from 56% in 1992 to 44% in 1997 and
more recently, according to the latest household survey conducted in 2000, to
approximately 35%. What has been responsible for this remarkable progress? What
have been the institutional arrangements in the public sector institutional
arrangements and consequently the quality of public policy in achieving this progress?
What bearing is needed for the public sector to deliver poverty outcomes targeted for
in Uganda's poverty reduction strategy blueprint, the Poverty Eradication Action Plan
(PEAP)? These are the questions that this paper attempts to answer as it traces
Uganda's experience with reducing poverty, while seeking to also explore some
challenges for the public sector in charting the way forward for sustained delivery of
the poverty outcomes targeted in the long term.

2. Background
Uganda's experience with reducing poverty has evolved from the need to re-build the
country's economy from the abyss it had sunk to, following two decades of
catastrophe characterised by a state of anarchy and mismanagement. With virtual
statelessness prevailing, political and socio-economic institutions – reflecting the
capacity to govern – collapsed with the emergence of state machinery characterised by
exploitation and predation (Reinikka & Collier, 2001). The collapse of Ugandan‟s
economy should be understood within this setting. The size of the economy, in output
terms, shrunk; per capita output falling to almost half of the size it was at the
beginning of the 1970s decade. The period was characterised by the retreat into
subsistence, the destruction of assets, strong incentives for dis-saving and capital
flight. The period was further characterised by the weak enforcement of contracts and
the diversion of public expenditure from productive areas to support exploitative state
machinery.

The paper confirms that Uganda‟s experience with reducing poverty is in concurrence
with the more recent views regarding the importance that institutional arrangements
play in determining policy outcomes. As the erstwhile IMF Managing Director
Michelle Camdessus stated “… few would now dispute that sound social, political,
and economic institutions are a necessary, if not sufficient, condition for the
sustained implementation of sound macro-economic policies.” (Camdessus, 1999). Of


                                           3
course, the importance of frameworks and institutions in delivering whatever policy
outcomes across the board, cannot be underestimated. In the public expenditure
management context, significant strategic reallocation of public spending to poverty
reducing activities in Uganda has occurred buttressed by the reform of the policy,
planning and budget processes. Concerted efforts to reduce poverty have, therefore
proceeded hand in hand with the restoration of Ugandan institutions that suffered with
the virtual collapse of Ugandan society.

As shall be shown in the paper, rapid and sustained economic growth was responsible
much of the poverty reduction in Uganda immediately after the post-conflict
reconstruction era1. Economic growth was responsible for 95% of the decline of
poverty observed (Appleton, 2001), which growth in large part was due to the
institution of “first generation” reforms. “First generation” reforms refer to policies
that help the transition to market-led growth, commonly employed in previously
closed (and developing) economies. These reforms encompassed policies that were
referred to in the early 1990s as the “Washington Consensus” on what poor countries
had to do to get out of poverty (Naim, 1999)2. There is little doubt that while they
were introduced in some countries with mixed results, they provided substantial
benefit to economies like Uganda that were emerging from a post conflict situation.
Uganda's experience is illuminating in that it underscores the importance that the
ownership of a reform agenda contributes to institutional change and effective public
policy.

A further point to note at the outset is that the term "institution", as is now widely
held, is a broad reference to the constraints or frameworks within which governments
operate, be they formal-constitutions, laws, or regulations-or informal, such as norms
of behavior, conventions, and codes of conduct, and not merely to organizations
(Wolfensohn, 1999). Institutions are " the 'rules of the game' that emerge from formal
laws, informal norms and practices, and organizational structures in a given setting"
(World Bank, 2000). As the paper will attempt to show, institutional arrangements or
1
  The period after 1986 through to 1989 is assumed as the reconstruction period, when emphasis was placed on the
restoration of basic infrastructure.
2
  The reforms commonly encompassed implementation of ten policy objectives: a) fiscal discipline, b) redirection of
public expenditure to social programmes, c) tax reform, d) financial liberalization, e) a single, competitive exchange
rate, f) trade liberalization, g) elimination of barriers to foreign direct investment, h) privatisation of state owned
enterprises, i) deregulation of market entry and competition, and j) ensuring secure property rights .




                                                            4
„rules of the game‟ during the recovery period in Uganda played a significant part in
determining the positive poverty outcomes observed over the period 1992 to 2000.

3. Organisation
Given this background, Section 4 traces the remarkable changes in poverty outcomes
in the immediate period after the restoration of order and the initial reconstruction of
the Ugandan economy, with highlights of where the poverty impact occurred by
economic sector. This enables us to establish the linkage between policy and impact
under the "first generation" reforms that were responsible for the accelerated growth
of the economy. Section 5 reviews institutional arrangements under “first generation”
reforms responsible for the public policy that delivered the poverty outcomes
observed in the preceding section

Section 6 explores the institutional arrangements introduced to enhance the
effectiveness of Public Expenditure Management. In many aspects this represents
Uganda‟s transition to implementation of “second generation” reforms. “Second
generation” reforms focus on “ ... the questions of the structure of the right
institutions, of the improvement of the administrative, legal, and regulatory functions
of the state, addressing the incentives and actions that are required to have private
sector development and to develop the institutional capacity for reforms”
(Wolfensohn, 1999). These are some of the questions that Uganda's public policy
process started to address with the introduction of the Medium Term Expenditure
Framework (MTEF), Sector Wide Approaches (SWAps) and the Poverty Eradication
Action Plan (PEAP). The paper explores current institutional arrangements underlying
these policy, planning and budget processes, including the roles of Sector Working
Groups (SWGs), and the Poverty Action Fund (PAF).

Finally Section 7 summarises the remaining agenda for public sector institutional
reform needed to ensure that the nation's goal of reducing the poverty headcount to
10% by 2017 is achieved. This section of the paper highlights the challenges that
public expenditure management in Uganda needs to address in order to improve the
effectiveness of service delivery.

4. Recent Poverty Outcomes
The poverty profile of Uganda has changed remarkably since the restoration of
internal peace and stability and the initial reconstruction period after 1986. Income

                                           5
poverty registered marked decline from 56% in 1992 to 35% in 2000 (Republic of
Uganda, 2001). This assessment was made from the analysis of surveys of living
standards of 10,000 households in the then 45 districts of Uganda undertaken in 1992,
1996 and 2000.

Additional insight to poverty outcomes is provided by four other monitoring surveys
conducted between the first two surveys of household living standards, enabling the
assessment of changes in poverty on a yearly basis. These monitoring surveys show
that incomes grew by at least 5% across the board in the first (1992) and third (1994)
years and only by 2.8% in the second year (1993). In this year, it is also observed that
the poorest 20% of the population " did not experience noticeable improvements in
living standards and the poorest got poorer" (Appleton, 2001, p. 100). The poverty
outcomes observed also tell an interesting story about the changes in inequality over
the five-year period. The poorer people (lowest deciles) experienced greater rises in
living standards at 27% for the bottom decile, 23% for the second decile, and 21% for
the third poorest. Disaggregation of relative gains into the urban and rural divide
shows that consumption per capita rose by 20% in urban areas, substantially more
than the 13% observed in rural areas over the period. Overall, urban living standards
rose faster than rural ones. Most of the gains against poverty were however accounted
for by growth in incomes rather than the reduction of inequality.

Against this overall positive picture, the Uganda Participatory Poverty Assessment
(UPPA) undertaken in seven districts in 1999 reported that "through analysis of long-
term trends in poverty, many local people felt that poverty was worsening in their
communities ... Local people reported more movement into poverty than out of it."
(Republic of Uganda, 1999, p.10). The UPPA assessed the communities‟ relative
quantification of eight factors3 by thirty-six communities from nine of Ugandan‟s
districts, in five-year intervals from 1970. Clearly, the participatory poverty
assessment needs rigorous analysis regarding the sources of the poverty changes
reported.

The latest household survey, the 2000 Uganda National Household Survey (UNHS)
that while poverty has continued to decline since 1997, there is growing inequality
between rich and poor, between urban and rural areas, and regionally. The richest
3
 Food Security, access to clean water sources, arable land availability, access to health care, education, availability of
credit, agricultural and veterinary extension services, road infrastructure (check).



                                                             6
decile has experienced the largest rise in living standards, reflected as a 20% increase
in real consumption, compared with an 8% increase for the poorest. The North and
East have the largest proportion of the poor, with the former slipping deeper into
poverty in light of increased insecurity.

In the Uganda the case, questions as to what happened to poverty can be addressed
from both the quantitative (measuring income poverty) and qualitative (peoples
perceptions on poverty trends) points of view. While these different approaches
provide apparently different pictures of what happened to poverty in the last decade,
the problems emanate from differing coverage, conceptualisation and approach, for
which deeper analysis may actually yield a better understanding of what happened to
poverty broadly defined. Income poverty, estimated using consumption per capita and
estimates of non-food requirements, was the measure analysed in the household
surveys while participatory assessment considered poverty more broadly to include
issues of security and public service delivery. Coverage was clearly higher and more
representative in the household surveys than in the participatory assessments. The
participatory assessment took much longer time horizon stretching three decades
while the household surveys looked at the shorter time period within the decade.
Indeed, while more work needs to be undertaken in reconciling the seemingly
differing findings, it is recognised that the extent to which genuine contradiction
between the two approaches exists, remains unclear (Appleton, 2001). Both
approaches, however, enable a greater understanding of how poverty evolved in
whatever time horizon under review once reconciliation of the approaches is done.
Indeed synchronizing approaches in future institutional arrangements for assessing
poverty outcomes will certainly yield a more wholesome understanding of changes in
poverty.

What were the sources of this remarkable progress in poverty reduction?
Dissaggregation of poverty statistics enables the break down of the source of growth
by economic sector and comparison to national (macro-economic) accounts and
linkage to public policy. The dissaggregation of statistics into economic sectors helps,
for instance, in assessing the impact of the liberalization of the coffee market on
households producing coffee, as part of the cash crop sector. The household survey




                                           7
statistics was classified into thirteen sectors4. In the period between the baseline
household survey and the third annual monitoring survey, poverty declined in all
sectors, except mining and the households headed by non-working individuals, where
(as would be expected) all poverty indicators worsened. The cash crop sector
(including coffee) was the second poorest sector in the baseline household survey
(1992), though it experienced the most dramatic declines in poverty in the period.
Reduction in poverty for the sector was more than twice as large as for the country as
a whole, reflecting the impact of improved world price for coffee and the lagged
response to the liberalization of the coffee market in 1990. Households in the
manufacturing and trade sectors also showed remarkable growth higher than the
national average. Households in the hotel, construction and transport and
communication sector also exhibited strong growth, reflecting what had been
observed in the macro-economic statistics (national) accounts.

The sectoral decomposition of the growth in incomes in the period between the two
household surveys enables the understanding of the linkage between policies adopted
and the ex-post assessment of their impact verified by beneficiaries. The following
section reviews the institutional arrangements that were in place that enabled policy
that delivered the poverty outcomes observed in the previous section.

5.”First Generation” Reforms
“First generation” reforms were instituted in Uganda following initial programmes
that aimed at restoring some functioning to Uganda's economy emerging from
decades of disorder and mismanagement. These reforms are responsible for the
attainment of macro-economic stability and its maintenance over the decade.
Sustained macro-economic stability forms the bedrock on which public expenditure
management reform in Uganda is based.

Economic programmes during Uganda‟s reconstruction era had bordered on command
style economic management with rationing and price controls being enforced across
the board. While “first generation” reforms were obviously part of the menu of
discussion between the Ugandan authorities and international financial institutions,
4
 Mutual Classification of Households was done dependant on the occupation of the household held, into Food Crop,
Cash Crop, Non-crop Agriculture, Mining, Manufacturing, Public Utilities, Construction, Trade, Hotels, Transport and
Communications, Miscellaneous Services, Government Services, Not working.




                                                         8
the ownership and resolute implementation of these reforms over the years reflect a
major re-alignment in thought on the role of the public sector.

Debate on the implementation of "first generation" reforms were in the most part
situate in the President's Economic Council (PEC), where over the years proponents
for reform towards market-led growth gradually convinced the highest authority of the
need to recast the role of the public sector. While the political leadership had taken
power with a command style economic management agenda, initial false starts
convinced the leadership that the market was the most efficient mechanism in the
management of the economy. It is during this period that the liberalisation of the
economy occurred, with the liberalisation of trade and the exchange rate regime, the
liberalisation of the coffee and other commodity markets, the privatisation of state-
owned enterprises, the downsizing of the public sector and the drive to increase
private investment.

As has been noted, “first generation” reforms involve few people at the top echelons
of government without that much need for building the capacity of institutions (World
Bank, 2001). Indeed, most of the public policy content was macro-economic with
minimal stakeholder consultation and involvement.

6. Public Expenditure Management Reforms
With the attainment of macro-economic stability in Uganda, public expenditure
management reform began in earnest. The institutional developments that followed in
the next decade reflected in large part the arrangements that government was putting
in place along the lines of the principles of good public expenditure management
(World Bank, 1998). The three principles hold that good practice in public
expenditure management need to ensure aggregate fiscal discipline, strategic
allocative efficiency, and technical (operational) efficiency.

Fiscal discipline became the hallmark of economic management in the early 1990s
following runaway inflation caused by excessive financing of the fiscal deficit through
excessive recourse to the banking system. Again, it is important to recognise the
critical role played by the political leadership in this and subsequent moves towards
good practise in expenditure management. Following an inflationary spiral in 1991,
and the consequent sacking of the finance minister, the President publicly declared
“... Let us walk or close down ministries, but there will be no inflation.” (The New

                                           9
Vision, 1992). The impact of this policy, resolutely followed over the decade in the
absence of effective monetary policy instruments, has consistently delivered low
annual inflation in the 5-6% range.

The emphasis placed on fiscal discipline and, subsequently, to shifts of public
expenditures to more productive social areas, was significant in institutional terms. It
marked the increasing role being played by technocrats in determining policy options
and institutional arrangements for effective public expenditure management. As
Robert Bates asserts "Qualitative evidence, at least, suggests that the reform of
economic policies--the reduction of budget deficits, the promotion of market forces,
and so forth-- is accompanied by the empowerment of technocrats and the
depoliticization of economic policy making ... (through) the making of economic
policies by independent agencies, such as a central bank, within which economists
debate and choose policies, free from interference of politicians, private interests, or
partisan political forces (Bates, 1999). This was certainly true in Uganda‟s case,
though, as must be expected, the political leadership vetted strategic allocation of
public spending.

The ceding of responsibility for policy formulation to the technocracy permitted
institutional developments without undue influence from politicians, and the
devolution of decision making to diverse points throughout the bureaucracy of
government. The operations of the cash flow committee, the balance of payments
group, the multilateral debt fund, and the more informal groups such as the weekly
“friday prayer breakfast” between central bank and finance ministry economists are
examples of these developments. Subsequently sector working groups have became
the focal point of government policy formulation, planning and budgeting.


a) The Poverty Eradication Action Plan (PEAP)
The Poverty Eradication Action Plan (PEAP) serves as Uganda‟s national planning
framework and was launched in 1997 following two years of extensive stakeholder
consultation nationwide. It is the Government of Uganda's blueprint for achieving its
central objective of reducing poverty (Republic of Uganda, 2001). On the basis of
poverty outcomes revealed in the 2000 UNHS and the Poverty Status Report (PSR), it
was revised in 20001. The PEAP has four major policy objectives:-



                                           10
      Creating a framework for fast and sustainable economic growth and structural
       transformation;
      ensuring good governance and security,
      directly increasing the ability of the poor to raise their incomes,
      directly improving the quality of life

The PEAP sets the framework for sectoral and district plans and their relationship is
iterative. The PEAP is revised on the basis of sector policy statements and intentions,
while the PEAP informs sector policy of the national priorities. The PEAP specifies
national and sectoral targets and monitoring indicators for assessing progress in
implementation. While the poverty outcome target for 2017 has been clearly stated,
intermediate targets for poverty outcomes are absent and difficulty remains in clearly
linking most sectoral targets to poverty outcomes. Government has also developed a
Poverty Monitoring and Evaluation Strategy (PMES) aimed at improving
accountability, information flow between policy makers and service and beneficiaries,
with a view to improving policy design (Republic of Uganda, 2002).

b) The Medium Term Expenditure Framework
The Medium Term Expenditure Framework (MTEF) was instituted in the early
nineties to improve strategic resource allocation, through a sound and direct linkage of
the policy, planning and budget processes. The MTEF provides the nexus between
policy objectives embodied in the PEAP, sectoral planning undertaken through
various sector strategic initiatives, and the annual budget process.

It attempted to bring together all sources of public revenues, and then allow the
allocation of expenditures on the basis of policy priorities agreed at the highest level
of government, within a three-year rolling framework. Sector expenditures, having
been contested for transparently, would then be programmed over the period,
providing predictability to the likely resources that a sector would get over the period.
Theoretically, whatever other re-prioritization cum re-allocation that would occur
would need to be sanctioned through the same process. Subsequently the entire budget
process in Uganda has evolved around the MTEF with sectors contesting for
resources at the margin, through this mechanism.




                                           11
Consistent with the MTEF, the Budget Framework Paper (BFP) spells out the priority
actions that underlie the annual budget, representing the first year of the MTEF. The
significance of the BFP is that it is government‟s policy statement, encompassing
priorities in the first year of the MTEF, which Cabinet approves before the budget is
laid before parliament. It thus serves as the nexus between policy, planning and
budgeting in the short-term horizon. BFPs, like the MTEF, are now prepared for
sectors and local governments as well. The MTEF and the BFP have now been
institutionalized at both the central and sectoral levels and is being initiated at the
local government level as well.

The MTEF as an institutional device, has been credited with ensuring the following
“rules of the game” (World Bank, 2000):

               an aggregate budget constraint, inclusive of all resources available
               contestability between policy options for priority and funding
               costed policy options over the medium term
               resource allocation influenced by evaluation of policy outcomes and
                information on service delivery

Assessing Uganda‟s experience against the above “rules of the game” reveals that
while substantial progress has been achieved on the first two, more work still remains
to be done on the others. While contestability between policy options does occur,
certain sector expenditures, particularly in the public administration and defence
areas, are not entirely subjected to this contestability, and are the source of “political
raids” for supplementary resources during budget execution. An institutional response
to this has been the development of the Poverty Action Fund (PAF), reviewed in the
following sub-section, aimed at ring-fencing expenditures to priority programmes.
The last two points reflect the need for the Uganda planning and budget processes to
begin focusing on the ultimate purpose of their very own, through introducing
meaningful output and outcome orientation. Attempts to introduce output orientation
in planning and budgeting and results oriented management still need to be fully
institutionalized beyond statements of intent. These are issues for public sector
management reform that government needs to take forward.




                                            12
b) The Poverty Action Fund
The Poverty Action Fund (PAF) has become the major vehicle for directing both ex
ante and ex post, resources to the poverty specific priority programmes of government
(Bevan, 2001). While it represent a successful institutional device at earmarking
resources to priorities and ensuring that resources are actually spent on the priorities,
its existence represents a second best scenario giving the existence of the MTEF. The
importance of the PAF can be seen from its share of the total budget since its
inception in 1997. Initially, its share was only 17% and rose to 30% in 2001. The
share of the PAF is projected to increase to 33% of total budget resources in the
2002/03 financial year (Republic of Uganda, 2001).

The PAF has its origins in the Multilateral Debt Fund (MDF) and the Priority
Programme Areas5 (PPAs) agreed on in the Public Expenditure Review (PER) of
1990. The MDF had previously been a mechanism through which bi-lateral donors
provided debt relief. Uganda‟s qualification for the Highly Indebted Poor Countries
(HIPC) initiative necessitated the transformation of the MDF into the PAF, as HIPC
resources were channelled to poverty programmes. Subsequently the PAF has become
the forum where additional donor resources to poverty programmes are applied. The
PPAs formed the initial areas that would benefit from the HIPC Initiative.

The PAF mechanism has, therefore, developed into an institution of enhanced budget
resource allocation, execution and monitoring because of the need to meet monitoring
and accountability requirements with donors. Work plans for each PAF programme
are developed and resources are released at least 95% in full, and on a quarterly basis
to ensure that programme activities are not constrained. PAF resources are channeled
to local governments via thirteen conditional grants, implemented through guidelines
provided by the ministries of finance, local government and respective line ministries.
5% of the entire PAF is earmarked for monitoring and accountability of PAF
programmes and monitoring is undertaken quarterly, by both government and non-
governmental institutions. The PAF Monitoring committee bringing together donor,
civil society and government meets quarterly to review operations.

5
 Priority Programme Areas (PPAs) identified in the 1990 Public Expenditure Review (PER) were Primary Education,
Primary Health, Rural Feeder Roads, Agricultural Extension, and Law and Order.




                                                       13
While the PAF mechanism has been successful in additional resource allocation,
protection and implementation of poverty activities, its existence represents an
institutional duplication of the MTEF, thus defeating good practise in public
expenditure management. Indeed programmes in the PAF have been known to receive
more resources than they can absorb in view of the capacity constraints. Non-PAF
activities are also engaged in lobbying for “PAF membership” without clearly
establishing how their programmes influence poverty outcomes. While the PAF has
grown as a share of the budget it is important for the future developments of the PAF
to be harmonized with the MTEF and other public financial management systems to
enable greater use of PAF practise across the board.


c) Sector Working Groups
Sector Working Groups (SWGs) have been institutionalized in Uganda‟s planning and
budgeting process since 1996 and represent the fora where central (finance, public
service, local government) and line ministries (e.g. health, education) and external
stakeholders, including donors and civil society coordinate sectoral planning and
budgeting. In the 2001/02 budget cycle, 16 SWGs were active, of essentially three
generic types (Fölscher, 2001). Advanced SWGs, involving health, education and
roads, were characterized by their focus on further sectoral prioritization and
additional in-depth work on pay reform in addition to issues standard SWGs
considered covering analysis of past sector policy performance, and planned policy,
outputs and activities. Third generic SWGs were policy advisory in nature and
included poverty eradication and private sector working groups. These SWGs
assessed all other SWGs outputs, reviewing each in terms issues of concern (poverty
of private sector ).

Generic terms of reference for SWGs require that they undertake a comprehensive
overview of the sector‟s plan, funding, and operational constraints within the budget
cycle. They thus operate in close tandem with the budget cycle and seek to enable the
prioritisation of sector policy and activity within the resource envelope provided by
the finance ministry. Some sectors have been actively engaged in the contesting for
resources at the margin.




                                         14
7. Improving the Effectiveness of Public Sector Management.
While progress has been made in development mechanisms that improve aggregate
fiscal disciple and strategic resource allocation, the remaining reform agenda requires
that government address issues concerning the third principle of good public
expenditure management - operational efficiency. Various initiatives have been
undertaken in this regard and need to be sustained in order to improve service
delivery.

This paper summarises developments of the following cross-cutting areas where
progress would positively impact on service delivery:

           Developing Effective Monitoring and Evaluation
           Developing and Integrating Output Oriented Budgeting and Results
            Oriented Management
           Public Procurement and Financial Management Reform
           Pay and Public Service Management
           Decentralisation


a) Developing Effective Monitoring and Evaluation
Monitoring and Evaluation (M&E) in Uganda remain fragmented with a variety of
reporting arrangements characteristic of projectised support from donor partners.
Increasing movement towards the budget support mode has necessitated the review of
M&E arrangements with a view to build effective, government based M&E
arrangements that streamline reporting requirements across the board (Republic of
Uganda, 2001). Beyond emphasis on compliance with government and donor rules
and regulations, M&E arrangements need to ensure that relevant data and information
collected and are used for effective policy formulation and decision-making
throughout government. Furthermore, M&E arrangements need to support
accountability for public actions by policy makers and service providers through
beneficiary assessments

b) Developing and Integrating Output Oriented Budgeting and Results Oriented
Management
Sector plans and the budget have over the years focused on inputs rather that
outcomes and outputs. Government is seeking to establish output and outcome goals



                                          15
and targets at the sectoral and district levels within the MTEF. Government has stated
the need to re-align output-oriented budgeting (OOB) and results oriented
management (ROM). The introduction of OOB is an attempt to strengthen results
orientation within the sector planning and budget process.

c) Reforming Public Procurement and Financial Management
Mis-procurement in Uganda‟s public sector represents upto 90% of all complaints of
corruption to the Government‟s ombudsman, the Inspector General of Government
(IGG). Public Procurement has been founded on out-dated, dispersed and legally
ineffective procurement procedure. Public procurement reform has been initiated,
providing for the devolution of responsibility for contract award, management and
evaluation, and external regulatory oversight. A new all-encompassing generic
procurement bill, incorporating good practise in procurement, has been drafted for
consideration of parliament. While these developments in regulation and devolution
of the procurement function have occurred, inadequacies in capacity abound both at
the centre and local government levels.

While a relatively good budgeting system has been developed over the last decade,
Financial Management remains weak both at the central and local government level.
The Financial Management system remains manual, with attendant delays in
recording, inadequate controls and discipline. Public Accounts contain large un-
reconciled balances and audit findings are regularly followed up. An acute shortage of
qualified accountants exists both at the centre and local government levels. A recent
World Bank Country Financial Accountability Assessment characterised Uganda‟s
financial management system as high risk. While government is preparing to
introduce an integrated financial management information system (IFMIS) at the
centre with a planned future roll-out to local government, has undertaken public
expenditure tracking studies (PETS) in the education and health sectors. Qualified
accountants are being recruited at both central and local government levels.


d) Improving Pay and Public Service Management
Public sector pay has improved over the last decade though pay reform remains on the
public sector institutional agenda. Pay for managerial, technical and professional civil
service remains un-competitive, leading to difficulties in recruiting and retaining
competent staff and also negatively impacting on public service delivery. Pay reform


                                           16
needs to be undertaken with a view to improve the effectiveness of public service
delivery, rather than the achievement of equity through reducing pay differentials
within levels of the service. Government has committed itself to linking pay reform to
improved effectiveness of service delivery.

While pay issues are centre stage, Human resource management, especially for front
line service delivery in education health and water are constrained through difficulties
in recruitment and deployment. There are inadequate qualified applicants, and the
system is plagued with delays in getting new staff onto government‟s payroll. Human
resource management capacity at the lower levels is lacking and is further constrained
by inadequacy in resources and flexibility.

e) Decentralisation
Government initiated fiscal decentralisation in 1993, which process has, since 1995
been enshrined in the constitution. While local government have been made
responsible for service delivery, inadequate incentives and capacity exist for local
governments to meet their obligations. This has been exacerbated further through the
creation of new districts with attendant administrative structures and costs. Planning
and implementation therefore, remain ineffective and central government dictates
activity through operation of conditional grants. 27 conditional grants each with
separate accounting and reporting requirements exist, increasing the capacity
constraints at the local government level. With low revenue effort and few tax handles
at these levels, conditional grants constitute upto 80% of resources for local
governments and 90% of all transfers to local governments.




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