Uganda needs to increase infrastructureinvestments if impressive growth is to continue. But theBudget is showing increasing signs of stress fromexpenditure pressures and fiscal tightening. Recentincreases in employee costs in central Government functionsof public administration, justice law and order, defense,prisons and police have deteriorated the composition of theBudget from the perspective of growth. In common with globalexperience in tight fiscal circumstances, publicinfrastructure spending is getting squeezed. Theseexpenditure trends suggest a further squeeze oninfrastructure and maintenance is inevitable, in which casegrowth could slow down. This report concerns how shouldUganda respond to these fiscal challenges? Whereas there isscope for prudent new concessional borrowing forinfrastructure, disbursement rates in infrastructureprojects are too low, making it a priority to addressconstraints to effective spending. As part of a fiscalstrategy for growth, Uganda needs in the short tomedium-term to rapidly improve revenue performance withouttaxing key growth sectors, and to shift the composition ofspending towards infrastructure. A compositional shift willrequire deep public sector reforms, early action onpostponed reforms to public administration, and a workingprogram to reduce waste and increase the efficiency ofpublic expenditures, including in Poverty Alleviation Fund(PAF) priority sectors and agencies. A reduction in wasteand an increase in public sector efficiency will ultimatelyrequire more accountability for the delivery of qualitypublic services than is evident in Uganda today. It willalso require a much more systematic effort by spendingministries and agencies: a more structured and a much morestrategic approach to public service efficiency from theministry of finance could be built into budget frameworkpapers as well as preparation of the next PovertyEradication Action Plan (PEAP).
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