To ensure successful implementation of the National Development Plans (NDPs), section 13(6), of the Public Finance Management Act, 2015 provided that the Annual Budget (AB) shall be consistent with the NDP, the Charter of Fiscal Responsibility (CFR) and the National Budget Framework Paper. It also requires the National Planning Authority under section 13(7) to issue a certificate of compliance of the annual budget of the previous financial year to accompany the annual budget for next financial year.
The overall purpose of the Certificate of compliance is to institutionalize alignment of the annual budgets to the national planning frameworks. Compliance was assessed based on consistence of the Annual Budget (AB) with the Charter of Fiscal Responsibility (CFR), the National Development Plan (NDP) and National Budget Framework Paper (NBFP)
Approach and Methodology (compliance assessment of the FY2015/16 AB)
The second National Development Plan (NDPII) was used as a benchmark against which the Annual Budget (AB) instrument was expected to be aligned. In that, the AB should have primarily implemented the NDP. Assessment was carried out at 4 levels, namely: The Macroeconomic; National Strategic; Sector; and, MDA levels.
The CoC assessment used an elaborate scoring criteria which attached weights at different stages in the planning process. At the first stage of scoring, the existence and alignment of the planning sector planning instruments with NDP was assessed. At the second stage, the alignment of budgeting instruments (the National Budget Framework Paper (NBFP) and the Annual Budget (AB)) with NDP was assessed. At the final stage, the actual absorption and release of funds in line with Budget plans was accessed. The scoring penalized for failure to comply at each of these stages and the final score was arrived at from a weighted system that provides different levels of importance of each stage. Note that at final stage a penalty was given for both low absorption and over absorption, since both indicate weak planning, budgeting and implementation processes. That is a supplementary expenditure is a sign of weaknesses in planning and leads to budget cuts elsewhere
Overall Findings (compliance assessment of the FY2015/16 AB)
Overall, the FY2015/16 AB was 68.3 percent compliant with the NDPII. At macroeconomic level it is 72 percent compliant, it is 75 percent at National Strategic level, and 58.9 percent at Sector/MDA level. Therefore, the AB is largely consistent with the NDPII in terms of macroeconomic and national strategic level priorities, nevertheless, substantial gaps remain especially at the sector and MDA levels.
Summary of Findings (Details in the Report below)
1. It will be necessary for the AB to target generation of higher growth rates over the next financial years to compensate for the low growth out-turn projected at 5.0 percent for FY2015/16, so as to remain on course in achieving the NDPII per capita income target of United States Dollars 1,000.
2. To improve compliance, the AB will have to put more effort in strategies for: promoting access to external markets especially providing for negotiation to access high value markets in high income countries; promoting mineral beneficiation by providing for investment in the value addition laboratory; promoting access to quality early childhood development under Human capital Development as well as improving road safety and strengthening efforts to safeguard cultural and natural heritage under planned and controlled urbanization.
3. The AB compliance will be strengthened if MDAs that collect Non Tax Revenue and spend it at source plan and budget without adequate scrutiny are adequately assessed in line with NDP strategic direction. These MDAs these include: CAA, UCC, UEGCL, UETCL, UEDCL, Posta Uganda among others. There is an urgent need to review the decision to allow MDAs to collect Non Tax Revenue and spend at source with a view to enhance alignment of their activities and budgets towards achievement of NDP and Uganda Vision 2040 objectives and goal.
4. The AB compliance with the NDPII Gross International Reserves target will need to be strengthened. Although the AB projected a gradual improvement of the international reserves to about 4.5 months of imports in the medium term, this is still lower than the NDPII target of 5.4 months of imports. At end December 2015, the reserves stood at 3.9 months of imports hence reducing on the ability of the central bank to intervene in the exchange market to influence or peg the exchange rate.
5. The budgeting and planning instruments are not aligned which makes alignment of sector budget priorities to the NDP a challenge. In addition, the structure of the sector budget and other respective instruments like BFPs make it difficult to monitor the implementation of the NDP. There is need to review the Budget instruments to ensure a more comprehensive alignment of the Annual Budget to the NDP.
6. Of the 17 sectors analyzed only four (4) have approved SDPs that aligned to the NDPII both in terms of content and timeframe namely: Tourism; Health; ICT and Public Administration. Another Four (4) sectors have draft SDPs (not yet approved) that are aligned to NDPII both in terms of content and timeframe namely: Trade, Industry and Cooperatives; Agriculture; Water and Environment and Social Development. Six (6) sectors have SDPs but they are not aligned to the NDPII, namely: Energy and mineral development; Lands, Housing and Urban Development; Justice Law and Order; Accountability; Legislature and Public Sector Management. For the remaining Three (3) sectors, namely: Education; Works and Transport and Defense and Security, they do not have a sector plan at all. Sectors and MDAs should develop their Development Plans that are aligned to the NDPII in terms of content and timeframe.
Sector Specific Issues that will Strengthen Compliance
7. Agriculture: The limited budget allocation and its poor performance will undermine the sector’s attainment of NDPII objectives. There is also need to strike a balance among the key priority areas for instance, institutional strengthening and infrastructural development.
8. Tourism: Key NDPII interventions are not included in the AB instruments. They include: development and diversification of new tourism products in marine and zonal clusters, development of tourism training centres of excellence, development of Local Government capacity to harness from tourism, development and skilling.
9. Health: While, significant resources are allocated to infrastructure development, insufficient allocation of funds and inadequate prioritization limit the sector to address health promotion and disease prevention interventions of communicable diseases, nutrition and other determinants of health; increasing financial risk protection of households against impoverishment due to health expenditures.
10. ICT: Key areas in the NDP II are not addressed such as Promoting production and use of low-cost locally assembled devices in collaboration with the private sector; establishing regional information access centres and; Establishing an ICT Research and Innovation fund to support ICT innovation.
11. Public Administration: There is need to prioritize improving systems, infrastructure and capacity of the sector secretariat and; increasing the human capital stock in the NDP II priority areas. Further strengthening the capacity of resident district commissioners and local governments to effectively monitor and report on the implementation of the NDP II priority areas. The sector needs to budget adequately to avoid supplementary appropriations.
12. Trade, Industry and Cooperatives: There is need to review and strengthen the National Export Development Strategy, develop, regulate and ensure sustainability of the economic free zones and negotiating better market access, governance of the co-operative movements and improve local content to increase local participation in the economy by nurturing SMEs and start-up enterprises.
13. Water and Environment: While there is remarkable progress on the management of oil and gas environment related issues; priorities such as restoration of degraded ecosystems are unfunded.
14. Social Development: There is a positive trend towards implementation of the NDPII, however, the sector should rationalize the programs and effectively mobilize the communities for effective participation, and strengthen culture and creative industries.
15. Energy and mineral development: More emphasis is required in aspects of promoting alternative sources of energy and building capacity in the energy sector and improving the policy and legal framework are not emphasized. Furthermore, more emphasis is also required on increasing monitoring and regulations in the mining activities.
16. Lands, Housing and Urban Development: There is need to prioritize the Development and implementation of a comprehensive National Housing Policy, Law and investment plan for the housing subsector; Develop real estate regulations and guidelines to guide real estate development in Uganda; Promote PPPs for investment in constructing appropriate housing estates in planned urban and rural areas to provide decent urban settlements according to priority for development of areas for mining, oil and gas and infrastructure corridors; Promote rural housing development schemes; Identify, assess, inventory and register Government land; among others. Furthermore, the Housing section of the sector requires planned activities to meet NDPII interventions in both the BFP and AB.
17. Justice Law and Order: The unfunded priorities that are critical include Defending Civil Suits in Courts of Law, facilitating Government witnesses to attend court sessions and representation of Government in international fora, Construction of a JLOS House and appellate courts, Criminal Court house and Police headquarters, Setting up the National ID disaster recovery site and operational expenses for data and personalization center.
18. Accountability: There is need for financial commitments on insurance Penetration, investment, National savings and Capital markets—the output on capital markets need to be made clearer in the BFP. The sector needs to budget adequately to avoid supplementary appropriations.
19. Legislature: The sector should in phases rationalize expanding the physical space of the existing Parliament building to improve the working environment for MPs and staff of Parliament; improving participation of Parliament in overseeing the achievement of NDPs and support all Committees to clear backlog where they exist among others. The sector needs to budget adequately to avoid supplementary appropriations.
20. Public Sector Management: More emphasis is required on development of strategies and frameworks such as coordinating with state and non-state actors for disaster response; Media Development Strategy; EAC communication Strategy among others.
21. Education: Key NDPII priorities should be considered include: Establish Centres of Excellence by region at post-secondary levels; Reinforce school inspection by re-centralizing the inspection function; Formulating and implementing a policy to rationalize fees for private primary schools; Implement the policy of a government primary school per parish is grossly underfunded; Expand community based ECD centres and attach ECD centres to primary schools for the provision of pre-primary education; Enforce laws against defilement at school level; Adopting a differentiated allocation formula for capitation grants; Revision of the capitation grants pegging them to inflation trends: Develop and implement appropriate ECD operational standards among others.
22. Works and Transport: The sector should establish a Maritime Regulatory Authority; Develop and implement mechanisms to ensure that the existing and future transport infrastructure is climate change resilient; Review the Roads Construction Designs and Standards to provide for public places of convenience and utilities; safety of workers and users, among others. The SDP should prioritize new set of projects like the SGR, The Kampala Flyovers, the LRT, the BRT and express ways are captured in the plan.
23. Defense and Security: The sector should consider establishment of a National Service System in the sector BFP yet it is one of the NDPII critical broad strategies aimed at inculcating positive ideological orientation and mind-set to foster socio-economic development. In addition, a number of NDPII projects are not prioritized e.g. Security Information Monitoring Centre; Establishment of the National Defense College (NDC); Establishment and Development of an Engineer Division at Kakoge etc. The sector needs to budget adequately to avoid supplementary appropriations.