Budget Reforms in Uganda: From Vision to Reality - A Personal Account

Posted by Florence Kuteesa[1]

When the Ugandan ministries of Finance (MoF) and Planning and Economic Development (MPED) were merged in 1998, a new department, Budget Policy and Evaluation, was created within the Budget Directorate. The department was mandated to coordinate the budget preparation process, and also introduce output-oriented budgeting within a medium-term perspective. I was appointed as the head and charged with the onerous tasks of establishing the new department and coordinating the desired reforms. Coming from the former MPED and with limited knowledge of the operations of the MoF, I was initially skeptical about the assignment. However, I chose to take “the bull by the horns” and enthusiastically took up the assignment.

I started from a humble beginning with a team of eight reform-minded staff, deployed from both ministries. This “dream team” (as it was later called) was comprised of individuals who had extensive technical competence and exposure in budget matters. The team was therefore eager to deal with the numerous challenges, including: inadequate coordination of budget processes within MoF and line ministries, and overly lengthy line-item based budget discussions. More often than not these processes complicated the decision-making process.

Driven by our desire to overhaul the budget preparation process and fulfill the President’s aspiration for better public financial management, we formulated a reform strategy and agenda. The President had publicly declared his commitment to “fight fiscal indiscipline and poverty.” Accordingly, the reform agenda set out a government strategy for redirecting public expenditure towards poverty reduction and introducing a medium-term perspective in budgeting. The reform agenda was no doubt ambitious and overloaded with wide ranging objectives, namely: introduction of output-informed budgeting, a medium-term expenditure framework (MTEF), introduction of the sector-wide approach, public expenditure reviews, local government planning and budgeting, and enhanced communication and transparency in budgeting.

Overhauling the budget preparation looked like an insurmountable task constrained by a number of problems in the early stages.  These included:

· Resistance to adopt the necessary reforms, especially those which lacked a legal underpinning. For example, the MTEF was perceived as a non-legitimate instrument which could not guide budgetary decisions.

· Inadequate institutional mechanisms and weak capacity for planning and budgeting in line ministries would undermine policy-driven budgeting and strategic allocation of resources.

· Some sectors, with large number of line ministries and agencies, could not formulate nor agree on a shared vision and thus did not function effectively as institutions for determining intra-sectoral allocations. This undermined the usefulness of sector MTEF ceilings as an instrument for strategic decision making and expenditure prioritization.

· Existence of separate institutional arrangements for handling recurrent and development budgets was a major constraint to a comprehensive approach to budgeting. Managing various modalities and systems for handling development projects—as required by individual donors—was problematic. These inefficiencies posed serious bottlenecks to reform efforts aimed at enhancing political involvement and consensus building in the strategic allocation of resources within and across sectors and line ministries.

The reform agenda was also costly and could not be afforded within available government resources. This, while presenting a serious challenge, did not deter the team from pursuing its aspiration. To our surprise, donors overwhelmed us with a spot-on positive response. They were impressed by the objectives of the reforms as well as the high degree of MoF ownership.  External resources were thus shifted from non-performing projects to support the new budget preparation initiatives. The donors’ commitment was a great motivation to my team and a timely intervention that steered our aspirations into a sustained reality.

The initial phases of reform implementation gave priority to sensitization (to raise awareness on the reform objectives), capacity building and streamlining of institutional arrangements and procedures.  An intensive sensitization and capacity-building program, supported by donors, was designed and launched to enhance the understanding and adoption of the reforms among the key stakeholders, including donors, policy makers, and line ministries. Importantly, key sectors identified as having severe capacity constraints received specialized training and technical support. For example, sector retreats, targeting two or three sectors, were organized to sensitize and train technical heads of departments in line ministries. Care was taken to ensure that new reform activities, such as enhanced budget consultations and expenditure reviews, provided strategic guidance and influenced budget decisions. Effective implementation of budget reforms required clarification and harmonization of institutional arrangements and responsibilities, including roles of stakeholders, especially donors, private sector and civil society-perceived as “partners” in pursuit of poverty reduction. Partnership Principles for Implementation of the Poverty Eradication Action Plan was published  to spell out  principles, procedures, as well as institutional mechanisms for the new planning and budgeting practices, including programming and approval of externally funded projects.

To sustain the budget reforms, capacity needs for strengthening the budget directorate in the merged ministry, had to be clearly defined and addressed. This was critical because the directorate, in particular, the sector units within the directorate, had two unique and challenging responsibilities; supporting the reform initiatives within the sectors, and reviewing or challenging their budget submissions. MoF adopted a multi-pronged capacity-building strategy that included: (i) numerous in-house training or brain storming sessions to enhance understanding of the reforms, and provide guidance on how to deal with implementation issues; and (ii) staff were encouraged to undertake advanced studies such as a master's program in economic policy and management or any other equivalent program offered in local universities. The study program was popular because it had no claims for bonding and offered an evening course which was convenient and well liked. A master’s degree in a relevant area was made mandatory for a head of department in the merged ministry in an effort to strengthen capacity for budget policy analysis and policy-driven budgeting.

Two years down the road, my initial skepticism disappeared along with growing appreciation of reforms demonstrated by the spending agencies. A very positive development was the recognition across the entire public service of the benefits of the reforms and in particular, the MTEF, thus encouraging better expenditure prioritization and more realistic budgeting. In practice, with the gradual development of a credible MTEF, the framework proved to be crucial input into the opening remarks or statement in budget discussions at all levels including cabinet. Use of the MTEF enhanced understanding of the hard budget constraint faced by government and provided a context for discussion on resource allocations. The majority of spending agencies were voluntarily seeking technical support to improve their plans, prioritization, and costing of the budget. This was very inspiring. The drive for reform was such that we did not have to adopt a pilot-based approach. Most ministries and agencies, with exception of Health, Education, and Roads, developed largely at the same pace.

My six-year reform experience was like driving a reform bus on a long journey, eliciting passengers along the way to a shared destination. Political buy-in and commitment paved way for the bus and assured us protection. We were certain of the destination but not necessarily of the road map. Effective use of technical assistance resources greatly assisted the reform design by bringing in best practice experience and providing resources for the required sensitization and capacity building. Passengers, though initially reluctant, were brought on board through persuasion and persistence. A sensitization campaign was launched to balance capacity enhancement with attitudinal change towards the budget process. Promoting transparency, especially listening to, respecting, and prompting response to our passengers' concerns, was a great virtue that enabled us understand their challenges and needs and thus align our expectations with institutional and capacity realities on ground. The Partnership Principles had to be honored to retain passengers on board and in harmony. This was further reinforced by incentives and rewards for compliance with reform principles and objectives. These included predictability in funding over the medium term and certainty in cash flows during budget execution.

While the reforms had not fully delivered on all desired reform objectives by the time I retired from government in 2004, a strong foundation had been put in place to sustain the reform agenda. The medium-term thinking, embedded in the MTEF, reinforced a culture of medium-term fiscal risk analysis, provision of robust fiscal projections, and ensuring that medium-term budgets are planned within a fiscal framework fully consistent with macro-economic and fiscal realities.

The Ugandan experience provides key lessons that can be relevant for budget directors charged with similar responsibility. One crucial lesson is the importance of clarity, consistency and realism of the reform strategy—a critical responsibility of the budget director—that should neither be delegated nor relegated but underpinned by a dedicated reform team. Most important, the experience cautions that the MTEF is not a panacea for the many deep-rooted structural problems in budgeting. Some aspects of the framework, like realistic budgeting and mainstreaming project aid into the MTEF, proved difficult to implement. Tackling these problems is essential if the MTEF is to serve as an effective tool in both preparation and execution of the budget.  A detailed synopsis of the reform experience and lessons learned in Uganda can be found in a recent publication on Uganda’s Economic Reforms.  


[1] Florence Kuteesa recently joined the Public Financial Management Division I (“M1”) in the IMF’s Fiscal Affairs Department (FAD) as Technical Assistance Advisor. Previously she worked at the IMF’s East Africa Technical Assistance Center (2007-2009) in Dar es Salaam and with PricewaterhouseCoopers (2005-2006) based in Nairobi. Prior, she had served 21 years in the Ugandan Ministry of Finance, Planning, and Economic Development, rising from the level of economist to Budget Director. She is a one of founding members of the Collaborative African Budget Reform Initiative (CABRI), a network of senior budget officials in Africa.

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