Build roads and hydropower plants or raise teachers' salaries and invest more money in healthcare? In Uganda, the government and donors have different views on what to prioritize. But the debate about priorities and budget shares risks missing the real core question - how the state should implement its budget, writes Annie Sturesson who works at the Ministry of Finance in Uganda.
On 11 June, Uganda's Finance Minister will present next year's budget to Parliament. Budget items such as defense, energy and roads are the big winners. The losers - education and health - are once again given a reduced share of the budget cake. The budget has been met with criticism and the government is accused of prioritizing expensive mega-projects over social services to the population.
Disputes between donors and the government over budget priorities are neither new nor unique to Uganda. In the East African neighboring countries, discussions are underway on how the countries' limited resources should be distributed over a long list of budget expenditures. An equation that becomes increasingly difficult to come up with when budget support from donors has been drastically reduced. Discussion of how the budgets of developing countries are distributed is not unimportant. However, the real tough question risks being overshadowed - the state's capacity to implement its budget.
Uganda's goal - to tenfold GDP
The Ugandan government's development plan "Vision 2040" sets the bar high: go from a low-income country to higher middle-income status by 2040. This would mean more than ten times the country's gross national production (GDP) per capita in just under 25 years. The way there is clear: investments in roads and energy.
The government's shift from social sectors to infrastructure began in the early 2000s. The reprioritisation was not welcomed by donors who were concerned about the country's ability to meet the Millennium Development Goals. However, several studies show that Uganda's progress towards the Millennium Development Goals and the fight against poverty have taken place, not in spite of it but thanks to the country's investment in infrastructure.
In a country where 85 percent of the population lives in rural areas, new roads have played a crucial role in improving access to hospitals, schools and local markets. According to Ugandan government estimates, investment in infrastructure has more impact than increased spending on social sectors.
There is research that shows that they are right, but also other research that shows the opposite. A US research project points out that large and costly infrastructure projects can be of great importance for a developing country's economy in the long run, but that more resources for the health and education sector provide more and faster results at a lower cost.
Donors are skeptical
Uganda's prioritization of mega-projects has aroused little enthusiasm among the country's donors. Profitability and sustainability of the latest projects - two $ 8 billion hydropower plants and a new railroad with a price tag of at least $ 2015 billion have been questioned. Donors are concerned that these investments are being made at the expense of the social sectors. In the forthcoming budget for 2016/400, the budget share of both the health sector and the education sector will be reduced. The education sector will have to settle for around $ 900 million next fiscal year, while the energy sector's budget will triple to over $ XNUMX million.
The head of the EU delegation in Kampala asked a rhetorical question during a seminar on budget support in May:
"How will future generations be able to pay off loans for large infrastructure projects if they have not been given access to basic social services to be able to support themselves?"
Then he added:
"It is not the donor's role to fill the gap of inadequate government funding for social sectors. "
The EU and other donors consider that state support for social sectors is insufficient and not in proportion to the needs of the rapidly growing population. The needs are considered to be particularly pressing in the health sector with an acute shortage of medicines, equipment and doctors.
More money for social sectors is not the solution
The health sector in Uganda undoubtedly needs to be given more priority - but unfortunately more money is not the main solution. More money does little good if it is not used properly. Uganda's budget separates variable costs (salaries and operating costs) from investments (buildings and machinery). In recent years, only around two - thirds of the investment budget has been implemented.
The education sector is particularly bad at spending its budget. Last year, only 25 percent of the planned investments were made. The health sector is slightly better at 75 percent.
Major delays also affect the country's road and energy projects. The projects are often financed through loans, mainly from China, and delays lead to higher costs, such as higher loan fees and compensation to contractors.
Capacity building more important than more money
The fact that the budget is not used is due to several factors: protracted procurement, lack of technical competence and poor capacity to carry out the projects. Capacity building is thus a crucial issue. In line with my previous one debate article on technical assistance - I believe that technical advice and training of local staff, especially in policy work and project implementation have an important role to play in countries like Uganda.
My call to Sweden and other donors is to shift the focus from budget shares to budget implementation. Given that there is a political will in the partner countries for change, donors can contribute to solving underlying problems, above all by strengthening the capacity of government institutions. Increased budget appropriations or more aid money have little effect if there is not enough capacity to use the resources.