1. Reforms to Budget Formulation in Uganda
The challenges of building and maintaining and a credible process
Tim Williamson

2. Why Uganda?
Successful Reforms to Public Expenditure Management since 1990s built a credible budget process
Especially in terms of establishing Fiscal Discipline and in Budget Formulation
More Recently, some emerging challenges in maintaining credibility
Institutional and Governance related

3. 3 Parts Part 1: Reforms to Public Financial Management
Part 2: The Budget Formulation Process
Part 3: Successes, Failures and Challenges

4. Part 1: Reforms to Public Financial Management
Sequencing, Instruments and Institutions

5. Sequencing of Reforms Establishing Fiscal Discipline 1995
- Introduction of Macroeconomic Framework
- Cash budgeting, commitment control to reduce arrears
Improving Strategic Resource Allocation
- PEAP (pre PRS), MTEF, Poverty Action Fund
- Sector Working Groups, Budget Framework Paper
Improving Operational Efficiency
- Internal Controls & Accounting systems, institutions and capacity
- Sector level diagnostics (e.g. Traking Studies, Value for Money Studies etc)
Strengthening Legal Framework - Budgeting, Accounting, Procurement
1995
1997
2000

6. Reforms Linked to all elements of the budget cycle
Policy Based Budgeting
- Stronger policy processes PRS, sector policies and strategies and associated review processes
- Stronger budget formulation The MTEF and Budget Framework Papers
External Scrutiny and Audit
- Independence & Strengthening of external audit
- Support to Parliament Committees
Budget Execution and Accounting
Computerising PFM (IFMS)
Professionalising Accounts Cadre in Gov’t,
Procurement Reforms
Budget, Sector Reporting

7. Part 2: The Budget Formulation Process
The MTEF, Performance Focus

8. Detailed Spending Agency
1. Framework for linking policies & strategies to the budget using sectors
National
PEAP
(PRSP)
MTEF + National BFP
ANNUAL
BUDGET
Short Term
(An nual)
Long Term
Medium Term
BFP = Budget Framework Paper
Sector
Sector BFP
Sector
Strategic
Plans
Detailed Spending Agency
Budgets

9. 2. A simple sector policy & results focus
Focus on agencies and inputs
Sector Focus, with Output & Outcome Orientation
Performance Focus
Line item and administrative budget
Spending agency budgets grouped by sector (e.g. Health, Education) where policies made
Allocations linked to the achievement of high level sector policies & objectives in BFP
NB: Formal performance / programme budgeting has not been used

10. 3. The MTEF marries a Top Down and Bottom Up Process
Top-down MT resource envelope
Total and sector resources consistent with macroeconomic stability and broad policy priorities
Reconciling costs with resources
An decision-making process that reconciles these costs and new policy ideas with available resource envelop
Bottom-up cost estimate of policy
The current and medium term cost of achieving national (sector) policy objectives in line with resources envelope

11. 3. The MTEF marries a Top Down and Bottom Up Process
Macroeconomic Framework:
MT projections of available domestic and donor resources over the medium term
MTEF Ceilings:
3-year sector budget ceilings consistent with macroeconomic framework & PRS/PEAP priorities.
Ceilings presented by sector and spending agencies within that sector
Top-down MT resource envelope
Macroeconomic Framework & MTEF Ceilings - MoF

12. 3. The MTEF marries a Top Down and Bottom Up Process
The Sector Budget Framework Paper sets out sector MT spending plans in detail
Reviews of past performance;
sets out sector MT policy objectives outputs and planned activities and
corresponding expenditures for the medium term in line with MTEF ceilings
Bottom-up cost estimate of policy
Sector Budget Framework - Sector Working Groups
Macroeconomic Framework: Medium Term projections of available domestic, donor
MTEF Ceilings: 3-year ceilings for groups of agencies with
Sector Budget Framework Paper:

13. 3. The MTEF marries a Top Down and Bottom Up Process
National Budget Framework Paper sets out the overall medium term budget strategy for the government
Sets out the justification for MT macroeconomic projections; sector expenditure proposals and policy options.
Synthesis Macro framework and sector BFPs
Reconciling costs with resources
The national budget framework paper
MoF, Cabinet & Parliament
Macroeconomic Framework: Medium Term projections of available domestic, donor
MTEF Ceilings: 3-year ceilings for groups of agencies with
Sector Budget Framework Paper:

14. 4. An Inclusive & Consultative Process
Engagement of Cabinet and Parliament in Decision making
Making it Political
4. An Inclusive & Consultative Process
Reforms led by a strong, unified Ministry of Finance & Planning
Top down establishment & enforcement of systems and rules
Delegation to Sector Working Groups and Local Governments
Making Spending Agencies Responsible

15. 4. An Inclusive & Consultative Process
Ministry of Finance, Planning and Economic Development
Macroeconomic Policy Dep’t prepares Macro Framework
Budget Directorate
Budget Policy & Evaluation Dep’t, manages budget process and Compiles BFP & Budget
Two Departments made up of sector “Desk Officers” who are primary liaison with sector ministries on planning & budgeting process and review sector BFP & budget submissions
4. An Inclusive & Consultative Process
Reforms led by a strong, unified Ministry of Finance & Planning
Top down establishment & enforcement of systems and rules

16. 4. An Inclusive & Consultative Process
Sector Working Groups
Coordinate the development of the Sector BFP including
Review budget implementation and performance
Agree sector objectives & intra sector budget allocations
Made up of representatives from:
Central line ministries and agencies, local gov’ts; civil society; donors; & Ministry of finance officials working on sector
4. An Inclusive & Consultative Process
Delegation to Sector Working Groups and Local Governments
Making Spending Agencies Responsible

17. 4. An Inclusive & Consultative Process
Engagement of Cabinet and Parliament in Decision making
Making it Political
4. An Inclusive & Consultative Process
Cabinet & Parliament
Cabinet
Reviews the BFP and Annual Budget Proposal before they are submitted to parliament
Parliament
Budget Committee Reviews & Comments on Sector Allocations in National Budget Framework Paper
Detailed sectoral discussions of annual budget proposals
Parliamentary budget office supports deliberations

18. 4. An Inclusive & Consultative Process

19. Integrating the local government dimension
Districts are the main implementers of basic services in Uganda.
The BFP process is replicated through Local Government Budget Framework Papers, prepared by districts
National policy priorities are funded at local governments via earmarked conditional grants which appear in sector MTEF’s
Large increases in allocations to local governments, in line with their functions
National priorities vs local discretion - getting the balance right
¾ of increases in local funding have come in the form of conditional grants, which led to fragmented budgets & undermined discretion
Since 2000 efforts to consolidate the grant system, by increasing focus on the budget, introducing discretionary development grants, and introducing flexibility in the recurrent grants system.

20. 6. Integrating aid into the process and encouraging budget support
Aid and Donors integrated into MTEF
Aid to spending agencies reflected in MTEF since 1997
Donors part of sector working groups from the start, which has improved information sharing
Project Aid now included in Integrated Sector Budget Ceilings from 2003 (intention is that sectors can switch from projects to the budget without resources)
Donor Shifts towards sector and general budget support
Increased on-budget funding and attention paid to the budget process
Poverty Action Fund helped give credibility through protection of budget disbursements to PRS priority areas

21. Part 3 – Successes, Failures and Challenges
Factors behind Success, and Emerging Challenges

22. A Credible Process The MTEF is the Only Game in Town
The first year of the MTEF is the budget
A unified calendar for the MTEF and budget
Overall credibility of the macroeconomic framework
Fiscal aggregates have now been reliable for over a decade (+/- 3%)
Budgetary resources are made available during the financial year
E.g. in 2005/06 only one sector had disbursements < 95%, although there are variations by spending agency and budget type (recurrent, development)

23. Factors Behind Early Success
Strong leadership from MFPED, and willingness to manage a transparent, consultative process:
Engagement of Cabinet;
delegation to Sectors and Sector Working Groups; and
allowed civil society and donors to take part
Political support to:
fiscal discipline;
reallocation of resources to poverty priority areas,
sticking to the budget
The process was demanding but kept simple
I.e. no complicated programme/performance budgeting

24. Yet, there have been gaps
Across the board, there has not been enough focus on operationally efficiency of sector budget allocations
Sector budget submissions are of variable quality, and some have remained weak:
Costing is not comprehensive across sectors
Weak link of allocations with policy objectives
Harder PFM reforms started late in the reform process
Budget reporting has been on the basis of disbursements and not expenditures
The budget is approved after the beginning of the financial year, leading to some uncertainty

25. … and are emerging challenges
Emerging Issues
Increasingly difficult to adhere to budget calendar, and maintain consultations
Budget formulation becoming more routine, technical, and less strategic
MoF is finding it increasingly difficult to maintain the rules of the game, especially during budget implementation
Fragmentation in policies/plans (National Planning Authority, Manifesto, “Prosperity for All”, Rural Dev. Strategy)
Underlying factors
Changes in Leadership in the MoF (political and tech.)
Change in political environment, (shift from no-party to multi party democracy, changing policy agenda).

26. Thank You