Budget reprioritisation in Uganda: key issues for 2022/2023 and beyond

ABSTRACT

Background: Uganda's budget authority has faced increased fiscal pressure caused by a sudden drop in revenues from the economic slowdown and new expenditure pressures associated with COVID-19 impacts. Consequently, the country has responded by reprioritizing the budget towards 7 sectors, i.e., agriculture, health, education, trade and industry, social development, works and energy. These sectors respond to the government's objective of increasing household and firm production and productivity, providing jobs, reducing the health impacts of coronavirus, supporting poverty reduction efforts, promoting exports and enhancing economic growth. Methods and Data This paper estimates public development budget allocative and technical efficiency for 7 priority sectors that address government policy objectives. Both allocative and technical efficiency are analysed using ratio calculation. However, for some cases, technical efficiency is analysed based on the difference between target and actual outcomes. We calculate the ratios for the 7 sectors based on the votes and outputs. Furthermore, we use a threshold of 80%, which we deem sufficient to determine whether a budget output is inefficient or not. Budget outputs below 80% are considered to be underperforming. Data on allocative efficiency was provided by MoFPED directorate of budget and that on technical efficiency from budget performance reports. The study period considered for this paper runs from 2016/17 to 2020/21. Findings: While we observe high allocative efficiency in a majority of the proposed reprioritisation sectors, there is much variation in budget funds and their utilisation due to i. A missing link between policy objectives and budgets. Notably, there is a mismatch between wage and non-wage or capital expenditure (CAPEX) allocations, implying inadequate human resources are required to implement the policy objectives, consequently leading to poor outcomes despite the funding provided for CAPEX. This was endemic in the agriculture and health sectors. ii. Duplication of budget outputs reduces flexibility and accountability and increases monitoring costs. This calls for the consolidation of similar budget outputs, but this should be done with consultation from key stakeholders. iii. There are variations in utilisation of domestic relative to the external development financing with unmet outcomes. This could be a case of stringent donor monitoring requirements and delays in procurement. This calls for strict monitoring of the domestic development financing to ensure results. iv. Relatedly, health budgets exhibit an over-reliance on external financing. However, donor funds are largely not integrated into government budgets and may challenge any planned re-allocation. Hence, there is a need to open a discussion with the donors on the possibility of re-channelling financing to other key priority sectors/outputs in line with the country's short-term goals. v. Generally, as observed in the health and education sectors, budgeting is still based on the output/ institution-based system rather than service. This makes it complex to pool resources, spend and strategically purchase goods and services. There is a need to build stronger linkages between budget allocations and sector priorities. This can also enable the implementation of strategic purchasing and incentivize accountability for sector performance. vi. In addition, there is generally an absence of proper transition towards programme-based budgeting (PBB). For example, numerous budget outputs in the trade, tourism and industry sector do not have performance indicators that weaken the link between strategies, annual plans, sector policies and budgets. vii. Generally, we recommend that new road construction should be paused in the short term so that the available funds can be rechannelled to other urgent and critical areas.