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  • 30 August 2016

Progress on pro-poor budgeting in Uganda – highlights from a roundtable meeting in Kampala

We recently published the briefing Pro-poor orientation of budgets: The case of Uganda following Uganda’s 2016/17 annual budget, which was presented to Par

Written by Sophie Nampewo Kakembo

Pro-poor budgeting has strong implications for redistributing funds towards reducing poverty and targeting people in poverty. It emphasises the need for people in poverty to participate in planning and budgeting processes to secure both aid and government spending for basic social services such as education and health, targeted at those who need them most.

We recently published the briefing Pro-poor orientation of budgets: The case of Uganda following Uganda’s 2016/17 annual budget, which was presented to Parliament in June 2016. Our analysis explains how far Uganda’s budget is pro-poor, focusing on four components:

  1. Alignment with the national poverty strategies, examining how far budget allocations are consistent with the country’s poverty reduction strategies
  2. Revenue generation, examining the pressures revenue generation ventures, especially tax revenue, are imparting on people and households with lower incomes
  3. Debt management with clear sustainability aims and use of the funds for investment
  4. Poverty reducing spending, providing insights into performance and results.

We conclude that there has been notable progress in areas such as aligning the budget with strategic priorities, focusing majorly on infrastructure development – which is good for growth, and increasing tax revenue to surpass the fiscal year target. However, there is work to be done particularly on aligning sector development plans to the National Development Plan, broadening the tax base and not suffocating the smaller tax payers. For example the threshold for presumptive tax was increased from 50 million to 150 million Uganda shillings, and improving use of borrowed funds to increase returns on investment, especially the social returns, to better incorporate the needs of poor people.

We discussed our findings in a roundtable meeting with key people from government ministries, departments and agencies, civil society and donors. Here are the highlights.

  1. We need to strengthen citizen participation in budgeting. Involving citizens in the budget process provides first-hand information on their needs. Pro-poor budgeting thrives on continued citizen participation as it provides opportunities to raise their concerns. According to the 2015 Open Budget Index, citizens’ participation in the budget process stands at 23%, which is low compared with Rwanda (25%), Kenya (33%) and Tanzania (33%) in the region. For pro-poor budgeting to be successful, citizens’ participation should be encouraged from the grassroots, taking care to include groups that can be at risk of marginalisation such as women, young people and older people. Uganda has for years practised bottom-up planning and this now needs to be strengthened through increased sensitisation and mobilisation so more citizens take part in this process.
  1. Recurrent spending including payment for frontline workers should be a focus for funding. Government spending comprises recurrent and development spending, where recurrent spending refers to payments made for goods and services including salaries and wages, rent, fuel expenses, and interest payments. Development spending refers to expenses that promote economic growth and development – like infrastructure investments, and that generate income for the government. As the Government of Uganda increases spending on development interventions, more is needed in recurrent spending. Frontline civil servants like doctors, teachers and agricultural service providers who provide direct services such as medical assistance, education, agricultural extension, receive low pay for the services they provide. This contributes to increased cases of absenteeism, sit-down strikes and corruption. Also, facilities such as generators to power theatres at health centres, and ambulances, lack fuel to run them, especially in rural areas.People in poverty rely on social services in areas such as education and health, and therefore their absence affects the development of the poor, putting their lives at risk through increased ill health and illiteracy levels as the services are not readily available. Revising the recurrent spending, including pay for these frontline workers and the facilities they operate, is needed to increase service provision in these sectors. 
  1. A performance-based budget model is key. The Uganda government’s focus has been on output-based budgeting – providing funding to government agencies based on delivery of outputs, which according to participants, has not led to sufficient impact. The government, through the Ministry of Finance, is shifting to performance-based budgeting to enable follow-up, monitoring and implementing resources. This will improve implementation of programmes and absorption of resources, ensuring value for money. In line with this, the Ministry of Finance and the Uganda Bureau of Statistics (UBOS) are preparing a framework of performance indicators to support and guide roll out of performance-based budgeting.
  1. Uganda’s domestic revenue base should expand. Domestic revenue mobilisation increases a country’s control over domestic spending, including its allocation to poverty-reducing activities. Despite the efforts and resources put towards analysing the country’s spending, more effort is needed to increase revenue resources to meet the country’s needs. Tax collection and management are essential for development, and Uganda has good standards, shown by its increasing tax revenue – see our Development Data Hub. In the 2016/17 budget, the Uganda Revenue Authority has allocated 8 billion Uganda Shillings to enhance coordination, formalise businesses through licensing and registration, and increase taxpayer awareness and compliance. This will partly be done through the Taxpayer Registration Expansion Project, which aims to gradually formalise the informal sectorThe new ‘Buy Uganda Build Uganda’ Policy will also diversify the tax base by supporting the use and consumption of locally produced goods and services. It aims to increase the market base for Uganda’s products and the tax base, for example through introducing charges on trading licences. Such efforts should continue, although they should be closely monitored to ensure they are complementing a pro-poor agenda.
  1. Curbing illicit financial flows needs to be a priority. Like many other African countries, Uganda is losing a lot of money in illicit financial flows, especially through trade transactions where exporters under-report the value of their goods and overestimate the value of imports to avoid paying duties. This has contributed to losses in the country’s revenue, amounting to US$ 509 million a year between 2000 and 2008. More is needed to strengthen anti-money laundering laws and policies to increase transparency and reduce the flow of these resources.
  1. Improvements are needed on ‘absorptive capacity’. As well as the government’s efforts to address the problems of poor people in social sectors – especially health, education, transport, social protection and agriculture – the government needs to assess the absorptive capacity of people in poverty. Can recipients gain the maximum benefit from the projects and efforts channelled to improving their status through pro-poor budgeting while avoiding wastage?
  1. Subnational pro-poor analysis is crucial. There is crucial need for subnational pro-poor analysis to understand poverty better and accurately assess the impact of resources. Both government and non-government agencies have tried to promote this, for example, our Development Data Hub provides poverty statistics across districts, which enables comparison among districts and provides opportunity to address the respective problems based on a particular area/region. However, more needs to be done in this area, such as improving the collection and production of disaggregated data, particularly on income quintile, gender, geography, age and disability, and using more recent poverty data, like the findings from Uganda’s 2014 census.

These highlights provide a snap shot of some of the issues that will be key to improving the country’s pro-poor budgeting efforts to get poverty to zero and ensure no one is left behind. For an in-depth analysis of pro-poor budgeting in Uganda, read our full briefing.

Homepage image shows the dissemination event for the briefing.