Linking Processes of Decentralization and Service Delivery with the Poverty Reduction Strategy A Potential to Maximize Synergies Presentation at the Course for Senior Policy Staff in Donor and Governments on the Effective Involvement in the Poverty Reduction Strategies 6 th – 9 th June 2006 By Richard Ssewakiryanga Team Leader Uganda Participatory Poverty Assessment Process Ministry of Finance, Planning and Economic Development P.O.Box 8147, Kampala, Uganda Tel:

2 Early Decentralization Decentralization was introduced gradually, initially as political decentralization in 1986, followed by administrative decentralization 1993 and finally fiscal decentralization in 1995 The LG Act 1997 transformed the Resistance Councils formed during the early 1980s Luwero Triangle bush war into Local Councils The Resistance Councils were a concept of revolutionary democracy that emphasized local participation and people’s power in the management of public life

3 Decentralization Timeline 1986: First decentralization study 1992: Decentralization Secretariat established 1993: Resistance Councils Statute developed 1994/ districts received block grants 1995/ districts 1996/ districts 1995: Promulgation of 1995 Constitution in Uganda 1995 Enactment of Local Government Act

4 The Structure of Decentralization There are 6 types of LGs comprising: 1City 5 City divisions 79 District Councils by July Sub County Councils, 13 Municipal Councils, 92 Town Councils Administrative units are: 150 counties, 5225 parishes and 45,000 villages LGs are body corporate, they develop, approve and execute their budget, implement their development plans, hire, manage and fire their staff and implement a broad range of policies

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6 Linking Decentralization to the PEAP Decentralization is hypothetically intended to improve service delivery In response to the political concerns the first PEAP by a taskforce identified a number of priority programme areas The Poverty Action Fund was therefore set up in 1998 in response to the HIPC financing for poverty programmes and to protect poverty spending from in-year budgetary cuts

7 Linking Decentralization to the PEAP Decentralization is hypothetically intended to improve service delivery because:  Local Governments are better able to make decisions over the provision of local public goods  LGs have an informational advantage with regard to local needs and preferences  Poverty can be reduced quickly and at less cost in a decentralised government system

8 Decentralisation and the PEAP Early economic reforms in Uganda did not address poverty – they were aimed at stabilizing the economy and promoting growth The political campaigns for the Constituent Assembly elections of April 1994 and Presidential and Parliamentary elections of May and June 1996 were seedbeds for a sharper focus on poverty In response to the political concerns the first PEAP by a taskforce identified a number of priority programme areas. These areas included; Primary health care Rural feeder roads Primary Education Provision of Safe Water Modernization of Agriculture

9 Decentralisation and the PEAP The PEAP 1997 indicated that in all Local Governments there were emerging differences in the implementation of the priority areas It was necessary to refocus some of the issues in the PEAP 1997 so that PEAP financing could deliver more effectively The Poverty Action Fund was therefore set up in 1998 in response to the HIPC financing for poverty programmes and to protect poverty spending from in-year budgetary cuts

10 Poverty Action Fund After the revision of the PEAP 1997 and the introduction of HIPC, the volume of funding in the PAF grew By FY 2000/01, the PAF accounted for 30% of the total Government budget, of which 75 % was transferred to the districts and PAF has increased from 98 bn in 1998/99 to 692 bn in 2002/03 The PAF was also supplementing Constitutional financial grants classified as Unconditional, Conditional and Equalisation Grants The figures show the growth of the PAF and different volumes of LG grants…

11 Sources of PAF funds 1997/8 to 2002/3

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13 Transfers to LGs In 2005/6 the conditional grant had increased to 79% of revenues to LGs Local generated revenue has fallen to about 1% with the abolition of Graduated tax Donor financing now makes up about 16% of local revenue All this shows that LGs are becoming more dependant to the central govt which is a major concern for the LGs In the revision of the PEAP 2000 the LG did raised the following issues:…

14 Issues raised for the PEAP Revision Low Revenue generation Delays in Grant releases Outdated and inconsistent Legislation Corruption in LG institutions and systems Uncoordinated Central Government operations Inadequate participation of communities in the planning processes Absence of LG sector standards Poor LG Compliance, Accountability and Transparency Insecurity Low Household income In response to the above issues these are some of the selected interventions undertaken as part of the process of delivering the PEAP

15 PRS & decentralisation: selected interventions Increased discretion through the Fiscal Decentralization Strategy Enhanced planning (HPPG) Decentralisation support Interventions e.g LGDP II Review Legislation Expedite process of restructuring Enhanced Monitoring and Evaluation systems (LOGICS & LGFIAS)

16 Selected Interventions to Improve Service Delivery under the PEAP Increased discretion through the Fiscal Decentralization Strategy  FDS sets out a framework for increasing LGs’ flexibility in the use of their funds by allowing them to reallocate 10% of non-wage funds within a particular sector and another 10% between sectors. Yet, evidence from the pilot phase reveals that very few of the LGs has made use of this flexibility

17 Selected Interventions to Improve Service Delivery under the PEAP Enhanced planning (HPPG)  It is intended that local people together with all stakeholders contribute to the elaboration of development plans. However, there is evidence that often planning is done exclusively by LG officials Decentralisation support Interventions e.g LGDP II  LGDP has provided funding that has improved compliance to the LG Act but there is a challenge of tracking service delivery results under LGDP and even those funded thru the grants system

18 Selected Interventions to Improve Service Delivery under the PEAP Review Legislation  Several laws are under review e.g. property rates tax, centralization of the CAOs, physical planning regulations and sections of the LG Act. The inconsistency in laws at the LG level is still a challenge for PRS implementation. Expedite process of restructuring  The restructuring of LGs is now over with LGs being graded in classes. This has meant that some officials have lost jobs. It is also not clear how restructuring will impact service delivery especially in LGs both in the new and old LGs

19 Selected Interventions to Improve Service Delivery under the PEAP Enhanced Monitoring and Evaluation systems (LOGICS & LGFIAS)  These tools are mostly computer based, requiring good data collection systems that can feed into the system. These systems are currently underdeveloped and how their data is used to inform policy decision is still an area worth exploring

20 Lessons Learnt Aligning political and administrative decentralisation is not a simple issue and it affects devt results at the local level Increasing local revenue and fiscal autonomy of LGs is key to the success of PRS at the local level In situations of scarce national resources, the role of donors is crucial Decentralisation and poverty eradication works best when LGs as front line institutions are well equipped and fully supported Discretionary funding to LGs can create poverty impacts

21 Thank you for listening!