MACROECONOMIC CHALLENGES OF MDGs SCALING UP IN UGANDA

MACROECONOMIC CHALLENGES OF MDGs SCALING UP IN UGANDA

Outline Introduction Economic growth Inadequate Resources Medium Term Expenditure Framework (MTEF) constraints Monetary policy management constraints Dutch disease fears Progress of MDG-Based Planning in Uganda Conclusion

Introduction Uganda s commitment to MDGs PEAP. 1. Economic management; 2. Peace, security, and disaster management; 3. Increasing the incomes of the poor; 4. Good governance; 5. Human development through delivery of social services Government is in the process of costing national development plan (JB)

Introduction - Continued Focus on macroeconomic stability to support private sector-led growth Focus on liberalization and regulation of markets to support economic growth Focus of improvement of people s livelihoods especially the poor Security consideration for the country

Growth Performance Impressive during the 1990; the economy grew at an average of about 7% per annum The tempo of growth declined between 2000 and 2005; The economy grew 4-5% per annum. The rate of growth is still below the 10% that is required to achieve the MDGs

Resource Performance In nominal terms resources increased As a share of GDP, domestic resources stagnated at about 12%-13%, which falls below the Sub-Saharan average of 18% The inadequate resources meant that Uganda had to rely on aid to finance the budget deficit.

MTEF Constraints vis-à-vis MDGS Uganda introduced UPE in 1997; more recently(2007) USE; Uganda received debt relief under HIPC1 (1998) and HIPC II. Established PAF, which was used for funding of UPE among other poverty reduction areas. Education budget focused on primary education (not less than 65%); Allocation to education increased from 18% of the budget (1996) to 26% (2001); However, the proportion has since come down to 20%.

MTEF Constraints vis-à-vis MDGS There was more focus on the health. However, allocation to agriculture remained at less than 4% of the national budget; this had a large bearing on poverty reduction. USE is inadequately funded no donors have come up to support USE. The constraints notwithstanding, poverty declined from 56% in 1992 to 31% in 2006

Monetary Policy Constraints The conduct of monetary policy led to high interest rates on commercial bank lending rates. It ate into budget resources due to high interest payments; There were thus direct and indirect costs of controlling inflation by one channel demand management. Causes of high interests rates not yet fully investigated. Government project accounts held in commercial banks is one of the reasons.

Dutch Diseases Fears There were expressed fears about Dutch disease" like effects of aid on the economy. Government decided to reduce the fiscal deficit over a period of time (currently at 13% of GDP). There were also concerns about dependency on foreign aid. There was the question about how aid should be packaged to minimize its potential adverse effects while maximizing its benefits; a big discussion on financing social sectors vis-a-is growth sectors.

Points for emphasis Inefficiency in resource use is one major constraints to achievement of MDGs. Insufficiency of resources is even a bigger challenge with regard to achievement of MDGs. Aid, if used appropriately could tremendously enhance both economic growth prospects and achievement of MDGs.

MDG-BASED PLANNING F/W & INITIATIVES Uganda beginning the FY 2006/07 adopted the Rural Development Strategy whose major aim is to enable each household earn incomes and access basic needs of life Key strategy for realising the Rural development vision is the implementation of the Model Subcountry Development Programme (MSDP)

THE MSDP NEEDS ASSESSMENT AND COSTING Uganda is in advanced stages of developing a costed MDG-Based Devt Strategy using the Needs Assessment Approach/Model Uganda s approach to needs assessment has focused not carrying out independent costing with view of estimating resource requirements to meet MDGs BUT mainstreaming Needs assessment approach in the overall planning & budgeting processes in the country.

Progress so far attained with MSDP needs assessment Data collection and analysis using MDG needs assessment tools is on-going. 10 pilot districts that were selected from each of the 10 ecological zones Creation of a unit in MOFPED to coordinate sector costing

Practical Challenges of costing National Development Strategies Aligning & matching resources got from the costing exercises with budget allocations to sectors & LGs Mainstreaming Needs assessment approach within the decentralized planning system - sectoral,, and LG plans Building capacity of sectoral & LG planners in use of Needs assessment approach for planning and budgeting

Practical Challenges of costing National Development Strategies Insufficient data esp. at LG level to facilitate effective deployment and use of MDG-needs assessment models Creation of new sub-national structures e.g. new districts present practical challenges

PROSPECTS FOR DEVELOPING A COSTED MDG-BASED STRATEGY Uganda has embarked on the process of developing a 5-Y 5 Y NDP The new 5-Y 5 Y NDP will be prepared based on thorough assessment and prioritization of needs (non-resource constrained planning).

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