## 1ugaea2022003 ## Source details **Canonical URL:** [1ugaea2022003](https://www.imf.org/-/media/files/publications/cr/2022/english/1ugaea2022003.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1ugaea2022003.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1ugaea2022003.pdf.json) --- ### Mission, scope, and assessment framework - IMF Fiscal Affairs Department (FAD) conducted a Public Investment Management Assessment (PIMA) in Uganda during June 16 to 29, 2022. - Mission team: Eivind Tandberg (FAD, head), Imran Aziz (Afritac East PFM Advisor), Eduardo Aldunate, Suzanne Flynn, Willie Du Preez (FAD experts). - PIMA framework: evaluates 15 institutions across three stages of the public investment cycle (planning, allocation, delivery). Each institution scored on institutional design, effectiveness, and reform priority (scores: HIGH / MEDIUM / LOW). ### Executive summary — context and long-run trends - Post-1986: infrastructure investment rose in phases; recent high public investment driven by major road corridors and large hydropower projects. - Medium-term plans: significant expansion of oil-related infrastructure, road and rail networks. - Relative positions: - Public investment recently surpassed SSA and LIDC averages but remains below Kenya, Rwanda, and Tanzania by approximately 2 percentage points of GDP. - Capital stock is significantly lower than LIDC, SSA averages and peer comparators. - Financing shift: domestic resources ~60 percent; foreign support ~40 percent (mix of grants and concessional loans), with a recent shift toward non-concessional loans, notably China Exim Bank. - Capital budget execution (average 2015−16 to 2020−21): approximately two-thirds of the capital budget executed on average; domestically financed projects execution rate 107 percent; externally financed projects execution rate 44 percent. ### Major findings on PIM institutional performance (selected) - General pattern: Institutional design generally stronger than effectiveness; several institutions rated HIGH on design but MEDIUM/LOW on effectiveness. - Notable institutional strength areas: budget comprehensiveness and unity (Institution: HIGH design; HIGH effectiveness), project selection (HIGH design; MEDIUM effectiveness), procurement (HIGH design; MEDIUM effectiveness). - Notable weak effectiveness areas and high reform priorities: - Multi-year budgeting — Institutional Strength: MEDIUM; Effectiveness: LOW; Reform priority: High. - Budgeting for investment — Institutional Strength: MEDIUM; Effectiveness: LOW; Reform priority: High. - Maintenance funding — Institutional Strength: LOW; Effectiveness: LOW; Reform priority: High. - Availability of funding — Institutional Strength: MEDIUM; Effectiveness: LOW; Reform priority: High. - Portfolio management and oversight — Institutional Strength: HIGH; Effectiveness: LOW; Reform priority: High. - Monitoring of public assets — Institutional Strength: LOW; Effectiveness: LOW; Reform priority: High. ### Capital budget execution, composition, and fiscal context - Average execution over last six years: approximately two-thirds. - Execution by financing: - Domestically financed projects: average execution rate 107 percent. - Externally financed projects: spent only 44 percent of allocated budgets. - By government level (FY2022-23 current budget year): - Central government: 92 percent of total investment. - Local government: around 5 percent. - Public corporations (PCs): around 3 percent. - By funding source (last six years): - Domestic resources: around 60 percent. - Foreign support: around 40 percent. - Sectoral composition: Economic infrastructure accounts for over two thirds of total public investment. - Fiscal indicators: - Domestic revenues: flat at 11 percent of GDP since 2007. - Interest payments rose to 2.6 percent of GDP (from 2015−16), reflecting more non-concessional borrowing. - NDP III total cost: Ush. 202,633 trillion plus Ush. 74,244 trillion in interest payments due (on average 27.5 percent of GDP annually). - NDP III projects included: 917 projects (203 ongoing; 557 new; 157 project ideas). ### Infrastructure access, quality, and efficiency - Access deficits: education, health, water, electricity access significantly below regional peers and SSA averages. - Perceptions of infrastructure quality: - Improved steadily to 2011 (electricity sector after blackouts eliminated 2007−10; roads after UNRA 2008); stagnated since 2011. - World Economic Forum survey scale: 1 lowest, 7 highest. - Public investment efficiency: - Uganda is at the very low end of the IMF efficiency frontier for converting investment into outcomes. - Implication: as capital stock grows (including oil investments), Uganda must improve quality and access and address PIM weaknesses to raise efficiency. ### Project selection, appraisal, and pipeline - Project selection: - Institutional Strength: HIGH; Effectiveness: MEDIUM. - All new projects must be registered in the IBP at concept stage, reviewed by PAP and DC subcommittee; final decision by the Development Committee (DC). - PIP is reviewed yearly and projects removed if no longer priorities. - Project appraisal framework: - DC Guidelines (2016) and Public Investment Manual for Project Preparation and Appraisal implemented; national parameters include Economic Opportunity Cost of Capital (11%), Foreign Exchange Premium (7.25%), Premium on Non-tradable Outlays (1%), VAT 18%. - Challenges: pre-investment studies not published; insufficient trained staff to prepare/appraise projects; some appraisal parameters (value of time, value of life) pending; climate change integration needed. - PPPs and PCs: - Legislation supports private sector participation (PPP law 2015), but no PPPs under current law are operational; legacy PPPs pre-2015 remain. - Pipeline: 44 potential PPP projects, 16 at different stages, total project value 7 percent of GDP. - Recommendation: publish consolidated PC performance report covering largest PCs or 75 percent of PC infrastructure investments. ### Multi-year budgeting and budgeting for investment - Multi-year budgeting: - Projections of total capital spending published over a three to five-year horizon, but no binding multiyear ceilings by ministry/sector. - Project total costs not broken down annually; MTEF not an effective anchor (approved budgets exceeded development ceiling by average 15 percent in pre-pandemic three years). - Example table: Uganda: Variance Between MTFF and the Approved Development Budget (Ush. Billion) - FY2016-17: MTFF 10,176; Approved development budget 10,732; Absolute percentage change 5 - FY2017-18: MTFF 10,167; Approved development budget 11,349; Absolute percentage change 12 - FY2018-19: MTFF 10,178; Approved development budget 12,963; Absolute percentage change 27 - Average 2016-19: 15 - Recommendation: publish complete project costs and multiyear projections, integrate MYC process into mainstream budget review, and expedite IT system interfaces. - Budgeting for investment / Multiyear commitments: - Legal multiyear commitment statement (MYCS) required (Article 23 PFMA (2015)) but recording and verification weak. - Evidence of arrears and unpaid interim payment certificates: UNRA unpaid interim payment certificates averaged around 400 billion Ush. per year and rose to 700 billion in FY2020-21; UEGCL noted they are $5m USD behind in contractor payments for Nyagak III. - PIP funding sufficiency (FY2020-21) — Table 3.5: - Funds released less than allocation: 57 percent; 196 projects - Sufficient funds: 30 percent; 104 projects - Funds released more than allocation: 9 percent; 41 projects - Reform priority: high — improve recording, verification, and integration of multiyear commitments. ### Maintenance funding - No standard methodology for estimating routine maintenance needs; routine maintenance funding low and not easily identifiable in budget. - Road maintenance funding (UNRA) — Table 3.6: Funding Requirement Versus Provisions for Road Maintenance (Ush. billion) - 2015-16: Budget required 582; Amount provided 261; Percentage of amount required 45 - 2016-17: Budget required 400; Amount provided 217; Percentage of amount required 54 - 2017-18: Budget required 596; Amount provided 268; Percentage of amount required 45 - 2018-19: Budget required 596; Amount provided 313; Percentage of amount required 52 - 2019-20: Budget required 596; Amount provided 282; Percentage of amount required 47 - 2021-22: Budget required 596; Amount provided 310; Percentage of amount required 52 - Average funded share 2015 to 2021: 49 percent. - Reform priority: High — develop methodologies and manuals for routine and capital maintenance and prioritize maintenance funding to reduce costly rehabilitation. ### Availability of funding, arrears, and cash management - Legal framework: Secretary to the Treasury responsible for annual cash plan (Section 34 PFMA); quarterly warrants/budget releases; cash management committee specified. - Operational gaps: cash-flow forecasts updated quarterly only; cash management based on execution data rather than actual cash needs; donors not required to operate through central bank accounts. - Verified expenditure arrears (Ush. billion and percent of stock) — Table 3.7 - Salaries and pensions: Arrears end June 2019 621 (15% of stock); Arrears end June 2020 130 (8% of stock) - Utilities: Arrears end June 2019 130 (3%); Arrears end June 2020 31 (2%) - Rent: Arrears end June 2019 20 (0%); Arrears end June 2020 19 (1%) - International organizations: Arrears end June 2019 197 (5%); Arrears end June 2020 106 (6%) - Legal judgments: Arrears end June 2019 915 (23%); Arrears end June 2020 439 (26%) - Compensation: Arrears end June 2019 407 (10%); Arrears end June 2020 302 (18%) - Taxes: Arrears end June 2019 493 (12%); Arrears end June 2020 46 (3%) - Other recurrent costs: Arrears end June 2019 797 (20%); Arrears end June 2020 381 (23%) - Development: Arrears end June 2019 409 (10%); Arrears end June 2020 210 (13%) - Due to UCF: Arrears end June 2019 21 (1%); Arrears end June 2020 - - Total: Arrears end June 2019 4,010; Arrears end June 2020 1,664 - Conclusion: improved arrangements and practice for funding investments is a high reform priority. ### Portfolio management, implementation, and asset monitoring - Portfolio management and oversight: - BMAU monitors the full public investment portfolio and issues semiannual reports to Parliament; re-allocation of funds allowed (limit 10 percent) but uncommon. - Monitoring reports lack critical summary tables and baselines; ex-post reviews are seldom conducted for GoU funded projects. - Reform priority: High — strengthen forward-looking portfolio monitoring with baselines, risk identification, and automatic reporting triggers. - Management of project implementation: - PIMS requires project management teams; contract amendment rules: single adjustment <=15 percent; cumulative amendments <=25 percent before re-tendering. - OAG audits highlight poor project management causing delays and abandoned projects (Box 3.4 summary and UNRA delays: 35 projects delayed between 64 and 1,072 days). - Example: Hoima International Airport — contractual period 48 months; contractual completion date February 2023; airside 80 percent complete; construction works cost Euro 264 million; cost escalation approximately 10 percent; main additional time claim reason: replacement of planned mobile control tower with permanent structure. - Reform priority: Medium — strengthen senior project management, contract management, ex-post reviews. - Monitoring of public assets: - Legal requirements exist for asset registers and balance sheet compilation, but practice gaps are large: asset values not consolidated; depreciation not charged; land ownership legal ambiguity prevents registration. - Example: UNRA holds road asset data (estimated value 6bn USD) not on government balance sheet. - Recommendation: High priority to develop a comprehensive asset register, valuation, integrated asset management information system, and related capacity building (Accountant General’s reform program actions listed). ### IT systems, data integration, and capacity building - Multiple systems exist and need integration to reduce duplication: IFMS; PBS; IBP; DMFAS; GAMIS; AMP; NDP M&E; PIMIS; Budget Portal; eGP; Road monitoring and Management System; Unit cost model system; UNRA ERP. - Finding: M&E and reporting burdened by multiple systems; lack of interoperability impedes use of data across IBP, NPA M&E, IFMS, PBS, e-Procurement, and OPM systems. - Staff capacity: - MoFPED partnered with Makerere University to establish a Public Investment Management Center of Excellence; training delivered (project preparation 1 week; financial/economic analysis 2 weeks); further courses planned including a Masters’ program. - Staffing snapshots: Budget Monitoring and Accountability Unit 40 technical personnel; NPA 100 technical staff, 50 support staff, 7 M&E staff; UNRA 1393 staff with a gap of 87; PAP 19 technical staff; PPDA 104 total staff; NWSC 4244 total staff; Accountant General 200 total staff with 13 in Asset Department. - Capacity gaps: insufficient staff for feasibility appraisal (UNRA: 6 persons), valuation, land identification, and advanced procurement/project management. ### Cross-cutting legal and climate considerations - Legal framework: several Acts underpin PIM (PFMA 2015; PPP Act 2015; PPD Act 2003; NPA Act 2002; Public Audit Act 2008; Local Governments Act 1997; PFMA Regulations 2016; Development Committee Guidelines 2016). Identified legal gap: no clear law for project preparation, appraisal, selection, monitoring, ex-post evaluation, and maintenance; MoFPED draft National Public Investment Policy (February 2022) not yet approved. - Land acquisition and right-of-way legal constraints frequently delay projects; recommended legal reform to speed acquisition while ensuring compensation and protections for displaced populations. - Climate change integration: - Annex 5: Five-step appraisal approach for resilient projects (identify risks; estimate recurrence period; assess disaster cost; identify resilience actions and costs; appraise resilient alternative using NPV comparison, stress tests, or Monte-Carlo simulation). - Recommendation: update appraisal manual to incorporate climate change and use C-PIMA approach. ### Priority recommendations (excerpted and consolidated) - Planning / sustainable investment levels: - Reconcile costs of 18 NDP III programs with total cost of included projects within a realistic fiscal framework. Priority: Medium - Update Manual for Project Preparation and Appraisal to include climate change, sector-specific manuals, and strengthen pre-investment financing. Priority: Medium - Publish annual PC performance report and allocate responsibility for PC financial statement review. Priority: Medium - Identify and report PPP-related contingent liabilities (notably energy sector legacy contracts). Priority: Medium - Allocating investments: - Publish complete project costs and multiyear projections, include cost revisions in budget annexes via IBP. Priority: High - Integrate multiyear commitment process into mainstream budget review and interface IT systems to record commitments accurately. Priority: High - Strengthen methodologies for routine and capital maintenance; prioritize maintenance funding in budget. Priority: High - Implementing investments: - Ensure predictable budget releases by enhancing realism of Budget and MTEF and instituting active cash management. Priority: High - Strengthen forward-looking investment portfolio monitoring with explicit baselines and focus on major projects. Priority: High - Develop comprehensive assets register including infrastructure assets, starting from existing databases. Priority: High - Cross-cutting: - Strengthen legal framework for PIM (amend PFMA or adopt separate PIM law) and reform expropriation/land laws to reduce right-of-way delays. Priority: High - Integrate IT systems (NPA M&E, IBP, IFMS, PBS, e-Procurement, OPM) to avoid duplication and improve data use. Priority: Medium - Build staff capacity (appraisal, procurement, asset valuation, project management) through targeted training programs. Timing: 2022–2024 per action plan items. ### Selected medium-term action plan timelines (examples) - Support and design actions marked for 2022–2024, e.g.: - Update Manual for Project Preparation and Appraisal — MoFPED: PAP with line ministries — 2023 - 2024. - Publish PC performance report — MOFPED — 2023 (to cover 2022/2023 Financial Statements). - Integrate MYC module and expedite IBP phase II review — MoFPED: PAP with Budget Directorate and AGO — 2023. - Compile consolidated asset register — MOFPED Accountant General’s Office — 2024. - Integrate IT systems for M&E — MOFPED, NPA, OPM, PPDA — 2024. - Strengthen investment portfolio monitoring and staff training — MOFPED: BMAU — 2023. *Source: PREFACE, EXECUTIVE SUMMARY, and selected chapters and annexes from the PIMA mission report for Uganda (IMF FAD, June 16 to 29, 2022).* ### PREFACE __________________________________________________________________________________________ 5 ### PREFACE ### Mission and team - IMF Fiscal Affairs Department (FAD) staff undertook a Public Investment Management Assessment (PIMA) in Uganda during June 16 to 29, 2022. - Mission team: Eivind Tandberg (FAD, head), Imran Aziz (Afritac East PFM Advisor), Eduardo Aldunate, Suzanne Flynn, and Willie Du Preez (FAD experts). ### Principal government and stakeholder engagements - Meetings at the Ministry of Finance, Planning and Economic Development (MoFPED) with: Mr. Ramathan Ggoobi, Permanent Secretary and Secretary to the Treasury; Mr. Hannington Ashaba, Commissioner Projects Analysis and Public Investment Department; and senior staff of the Budget Monitoring and Accountability Unit; Public Administration Department; Budget Policy and Execution Department; Infrastructure and Social Services Department; Economic Development Research Policy Department and Chair of the Development Committee; Debt Policy and Issuance Department; Development Assistance and Regional Cooperation Department; Macro Economic Policy Department; Cash Flow Committee; Fiscal Decentralization Unit; PPP Unit; Accountant General’s Office; Department of Procurement Policy and Management; Directorate of Treasury Services and Asset Management; and Directorate of Debt and Cash Policy. - Meetings with senior staff of other government entities including: Office of the President; Office of the Prime Minister; National Planning Authority; Ministry of Works and Transport; Ministry of Energy and Mineral Development; Uganda National Roads Authority; Uganda Road Fund; Ministry of Water and Environment; Ministry of Local Government; Local Government Finance Commission; Makerere University, School of Economics, PIMS Centre of Excellence; Public Procurement and Disposal of Public Assets Authority; Kampala Capital City Authority; Parliamentary Budget Office; Hoima District Local Government; Uganda Electricity Transmission Company; Uganda Electricity Generation Company Ltd; Uganda Electricity Distribution Company Ltd; Electricity Regulatory Authority; and National Water and Sewerage Company Ltd. - The mission briefed members of the donor community during a video conference at the end of the mission. ### Acknowledgements - The mission expressed gratitude to the authorities for organizing the mission work and facilitating frank discussions. - Special thanks to Ms. Esther Ayebare for coordinating the meeting schedule and her staff. - The mission also thanked the IMF resident representative in Kampala, Ms. Izabela Karpowicz, and her staff for their help in preparing the mission. --- ### EXECUTIVE SUMMARY ### Context and long-run trends - Since the end of the Uganda civil war in 1986, infrastructure investment increased significantly and has been driven by spurts of both private and public investment. - Recent high levels of public investment reflect large public sector projects, including major road corridors and large hydropower projects. - Significant expansion of oil related infrastructure, and road and rail networks are planned for the medium term. - Uganda’s level of public investment recently surpassed the Sub Sahara Africa (SSA) and Low-Income Developing Country (LIDC) averages but remains below regional comparators. - Uganda’s capital stock is still significantly lower than LIDC, SSA averages and peer comparators. ### Capital budget execution and financing - Capital budget execution rates have been low, particularly for externally financed projects. - On average, approximately two-thirds of the capital budget was executed from 2015−16 to 2020−21. - Externally financed projects were the main contributor to low absorption. - Over the last six years, domestic resources have accounted for around 60 percent of budgeted resources, with 40 percent financed through foreign support. - Foreign support has largely been through a mixture of grants and concessional loans, with a recent shift towards non-concessional loans, in particular heavy borrowing from the China Exim Bank. ### Infrastructure access, quality, and efficiency - Access to infrastructure for education, health, water, and electricity are significantly below both regional peers and SSA. - The perceived quality of Uganda’s infrastructure improved steadily from 2007 to 2011 but has stagnated since then. - Uganda scores relatively well against the IMF methodology that assesses public investment efficiency, but there remains significant room to improve. - As Uganda’s capital stock grows, it will need to improve both the quality and access to its infrastructure. ### Public investment management reforms and assessment - Uganda has achieved significant improvements in public investment management since 2016. - Measures undertaken include: - Giving the Development Committee a strong role as a gatekeeper for new investment proposals. - Establishment of the Projects Analysis and Public Investment Department (PAP). - Development of a draft policy, guidelines and manuals to improve the quality of project preparation and appraisal. - The IMF and other development partners have been active partners to the government in pursuing these reforms. - As a result of the reform process, Uganda is well ahead of its comparators in many aspects of public investment management, particularly in institutional design. - Effectiveness of institutions is generally lagging significantly behind design. - The report summarizes Uganda’s performance against the 15 institutions in the IMF’s PIMA, with scores from 1 (low) to 3 (high). *Source: PREFACE and EXECUTIVE SUMMARY, PIMA mission report for Uganda, IMF FAD (June 16 to 29, 2022).* ### 10. Project selection ### 10. Project selection ### Summary assessment of institutions and effectiveness - Overall finding: Institutional design generally scores higher than effectiveness; notable strengths include budget comprehensiveness and project selection, while effectiveness is low for multi-year budgeting, maintenance, availability of funding, and portfolio oversight. - Project delays are common, particularly for externally-funded projects, driven by weak project planning and development practices and the lack of a clear legal framework for resolving land use issues. - Key institutional assessments (excerpted from Table 0.1): - Fiscal targets and rules - Institutional Strength: HIGH. - Effectiveness: MEDIUM. "The fiscal deficit has consistently exceeded targets and the MTFF does not effectively constrain the approved budget." - Reform priority: Medium - National and sectoral planning - Institutional Strength: HIGH. - Effectiveness: MEDIUM. "Alignment of NDP III with the budget is weak and achievement of targets has been poor." - Reform priority: Medium - Coordination between entities - Institutional Strength: MEDIUM. - Effectiveness: MEDIUM. "Delays occur in providing feedback on LG plans and contingent liabilities of legacy PPP contracts are not reported." - Reform priority: Medium - Project appraisal - Institutional Strength: HIGH. "A project appraisal manual exists and it includes risk analysis." - Effectiveness: MEDIUM. "Compliance is enforced by the DC and all MDAs and LGs prepare pre-investment studies for new projects. But neither studies nor reviews are published." - Reform priority: Low - Alternative infrastructure financing - Institutional Strength: HIGH. "Legislation and policies provide strong support to private sector involvement in major infrastructure markets." - Effectiveness: MEDIUM. "There are no PPPs under the 2015 law, and the oversight of PC financial performance is fragmented." - Reform priority: Medium - Multi-year budgeting - Institutional Strength: MEDIUM. "Medium term capital projections and indicative ceilings are disaggregated and total project construction costs are published." - Effectiveness: LOW. "There is a weak relationship between forecasts, ceilings and capital spending." - Reform priority: High - Budget comprehensiveness and unity - Institutional Strength: HIGH. - Effectiveness: HIGH. "EBUs undertake very little capital spending and there is strong coordination between planning and budgeting functions." - Reform priority: Low - Budgeting for investment - Institutional Strength: MEDIUM. "The legal and regulatory framework does not provide full protection of investment projects during budget implementation." - Effectiveness: LOW. "Projects not being fully protected from budget cuts, which is compounded by the absence of accurate information on multiyear project costs." - Reform priority: High - Maintenance funding - Institutional Strength: LOW. "There are no standard methodologies for estimating maintenance needs." - Effectiveness: LOW. "Routine maintenance is not a priority in Uganda and maintenance funding is very low." - Reform priority: High - Project selection - Institutional Strength: HIGH. "All new projects must be reviewed at the central level following a standard process, are registered in the IBP, and if approved as budget candidates also in the PIP." - Effectiveness: MEDIUM. "Review of new projects is done by PAP and the DC subcommittee, and the final decision is taken by the DC. The PIP is reviewed on a yearly basis to remove projects that no longer are priorities." - Reform priority: Low - Procurement - Institutional Strength: HIGH. "Uganda has an open and transparent procurement system in place and is monitored adequately and analysis are done. Complaints tribunal is in place." - Effectiveness: MEDIUM. "All tender information is publicly available, statistics are available, bid results are published, and complaints process is functional. E-procurement not fully deployed." - Reform priority: Low - Availability of funding - Institutional Strength: MEDIUM. "Cash management policy requires cash forecasting, and donors are encouraged but not required to include funds within the TSA." - Effectiveness: LOW. "Stalled and abandoned projects reported as a result of cash flow shortages, and cash rationing. Limited information on external funding." - Reform priority: High - Portfolio management and oversight - Institutional Strength: HIGH. "Oversight over the entire public investment portfolio by the BMAU. Re-allocation of funds guided by Treasury Instruction, ex-post reviews required." - Effectiveness: LOW. "Reports are not receiving adequate high level attention. Re-allocation of funds is uncommon and ex-post reviews are seldom done." - Reform priority: High - Management of project implementation - Institutional Strength: MEDIUM. "PIMS framework requires project management teams, but not implementation plans." - Effectiveness: MEDIUM. "Project management is not fully effective according to OAG. Project cost adjustments are conducted. External audit is done for certain projects." - Reform priority: Medium - Monitoring of public assets - Institutional Strength: LOW. "Large infrastructure assets are not surveyed systematically, nonfinancial assets are not required to be on balance sheet, nor depreciation used." - Effectiveness: LOW. "Surveys focus on low value items, only land appears on the balance sheet and no depreciation policy is applied." - Reform priority: High ### Priority recommendations for strengthening public investment (excerpted from Table 0.2) - A. Planning — Sustainable Levels of Investment - Ensure that the costs of the 18 overarching programs are reconciled with the total cost of projects included in each, within a realistic fiscal framework. Priority: Medium - Update the Manual for Project Preparation and Appraisal to provide more detailed guidance and incorporate climate change issues, develop sector specific project preparation and appraisal manuals, and strengthen financing of pre-investment studies. Priority: Medium - Allocate responsibility for review and analysis of PC annual financial statements and investment projects and publish an annual PC performance report. Priority: Medium - Identify and report information related to PPP-related contingent liabilities, particularly in the energy sector emanating from contracts signed before the 2015 law was enacted. Priority: Medium - B. Allocating Investments - Publish complete project costs and multiyear projections, include cost revisions, in the budget annexes, and systemize this process through the IBP. Priority: High - Integrate the multi-year commitment process into the mainstream budget review process and expedite the interface of different IT systems to improve the accuracy and recording of multi-year commitments. Priority: High - Strengthen methodologies for assessing routine and capital maintenance needs and give higher priority to require attention to enhance maintenance funding in the budget process. Priority: High - C. Implementing Investments - Ensure predictable budget releases for investment projects, by enhancing the realism of the annual Budget and MTEF and instituting active cash management arrangements. Priority: High - Strengthen investment portfolio monitoring to become more forward-looking and based on explicit project baselines, clearly identifying projects at risk and which actions will be required to resolve the risk. Focus this monitoring on major projects. Priority: High - Develop comprehensive assets register, including all types of assets, particularly infrastructure assets, starting with existing available databases. Priority: High - D. Cross-Cutting Issues - Strengthen the legal framework for effective public investment management, including amendment of the PFM Act to include a chapter on PIM (or a separate PIM law) and a legal reform to address land use and right-of-way challenges (expropriation law). Priority: High - Integrate IT systems for monitoring and evaluation to avoid duplication of data requests and make better use of data (NPA M&E systems, the IBP, the IFMS, the PBS, the e-Procurement system, and the system of the OPM). Priority: Medium ### Trends in public investment and capital stock - Historical and structural trends: - Since 1986, total investment rose in three phases; private investment drove the initial post-war rise, then from 2012 private investment declined and was offset by rising public investment as policy shifted toward infrastructure expansion (including large roads corridors and hydropower). - Investments in the oil sector are expected to increase sharply, primarily funded from the private sector. - Relative levels and gaps: - Uganda’s level of public investment has only recently surpassed the sub-Sahara Africa (SSA) and Low-Income Developing Country (LIDC) averages but remains below regional comparators (Kenya, Rwanda, and Tanzania) by approximately 2 percentage points of GDP. - Uganda’s capital stock is significantly lower than LIDC, SSA averages and peer comparators. Public investment remained flat at approximately 4 percent of GDP prior to 2007, with capital stock declining before picking up significantly from 2007 onwards. - Note on methodology: "Consistent with the IMF methodology for deriving capital stock, for the ratio of capital stock to GDP to increase, new public investment must first cover depreciation." - Fiscal context: - Domestic revenues have remained flat at 11 percent of GDP in the decade since the start of the investment drive in 2007; this is lower than regional peers (Tanzania 15 percent, Kenya 17 percent, Rwanda 23 percent). - From 2015−16 interest payments have increased by a percentage point of GDP to 2.6 percent of GDP, reflecting a shift towards non-concessional loans. - Fiscal space has tightened: "total debt and the fiscal deficit have grown significantly"; debt distress remains moderate per the most recent Debt Sustainability Analysis (DSA) cited as part of Article IV (March 2022), but certain stress tests push indicators above thresholds. - Capital budget execution: - Average execution over the last six years: approximately two-thirds of the annual capital budget was spent. - Domestically financed projects: average execution rate of 107 percent (supplementary budgets used). - Externally financed projects: spent only 44 percent of allocated budgets; main reasons: delays in procurement, challenges meeting conditionality, and acquiring land rights. - Sectors most affected: energy, public works and transport. ### Composition and financing of public investments - By level of government (FY2022-23 current budget year): - Central government: accounted for 92 percent of total investment. - Local government: around 5 percent. - Public corporations (PCs): around 3 percent. - By funding source (last six years): - Domestic resources: around 60 percent of total resources. - Foreign support: around 40 percent (mix of grants and concessional loans). - Sectoral composition: - Economic infrastructure accounts for over two thirds of total public investment, significantly higher than the SSA average; emphasis on transportation and energy. - Public-Private Partnerships (PPPs): - PPP capital stock derived from legacy projects prior to the 2015 PPP Act; no new operational PPP projects since 2015. - From a pipeline of 44 potential PPP projects, 16 are under different stages of development across roads, ICT, logistics, rural water, waste management, cultural, sporting venues and university infrastructure, with a total project value of 7 percent of GDP. ### Efficiency and access to infrastructure services - Access outcomes: - Access to services generated by infrastructure (education, health, water, electricity) lags behind regional peers and sub-Saharan Africa averages. - Reduction in real per capita allocations for capital investment in health, education and water, and delays in energy transmission infrastructure are cited as potential reasons. - Demographic concern: "60 percent of Uganda’s population is school age" — lack of education infrastructure access is especially problematic. - Sector-specific inefficiencies: - Energy and transport have seen increases in installed energy capacity and paved road stock, but face: - Persistent energy losses. - Fluctuating road condition quality. - Comparatively high road mortalities within the region. - Causes cited: transmission challenges (e.g., transferring power from mini-hydropower stations) and shortfalls in road maintenance budget provision (example cited: Lira-Gulu-Agago 132KV transmission project). - Performance indicators referenced (figures in source): - Energy installed capacity (Megawatts) and Total paved road stock (Km) show improvements but quality metrics (energy losses percent, perception of road quality, mortality per 100,000 population) indicate remaining value-for-money concerns. *Source: 1ugaea2022003 - 10. Project selection (chapter content).* ### 12. The perception of the quality of Uganda’s infrastructure showed steady ### 12. The perception of the quality of Uganda’s infrastructure showed steady improvements in the period to 2011 but has stagnated since then ### Perceptions of infrastructure quality - Improvements in perceptions over the past ten years were driven by the electricity sub-sector, particularly after blackouts and loadshedding were eliminated between 2007−10. - Perceptions of the road subsector have steadily increased since the establishment of UNRA in 2008 and the subsequent upgrade of major roads corridors. - Ports and air subsectors reduced overall perception scores: - Ports: notable delays to the Jinja and Port Bell ports stalling regional trade connections. - Air: delayed expansion of Entebbe airport. - Data source and scale: - World Economic Forum surveys business leaders’ impressions of the quality of key infrastructure services. - Scale: 1 indicates the lowest score and 7 the highest. - Note: indicator affected by individual perception biases. ### Public investment efficiency and frontier position - IMF methodology: an efficiency frontier assesses the efficiency of public investment in converting investment into infrastructure outcomes (Box 2.1). - The vertical distance below the frontier represents the efficiency gap. - Uganda’s position: - Uganda is at the very low end of the efficiency frontier (Figure 2.5). - Implication: - As Uganda’s capital stock grows, it needs to improve both the quality and access to its infrastructure. - High rates of investment anticipated over the next several years, including to scale up oil related infrastructure. - Addressing weaknesses and gaps in public investment management would help increase the efficiency of capital spending. ### PIMA framework and assessment approach - The Public Investment Management Assessment (PIMA) framework: - Assesses the quality of public investment management, identifying strengths and weaknesses and providing practical recommendations. - Evaluates 15 institutions across three major stages of the public investment cycle: (i) planning of investment levels; (ii) allocation of investments to sectors and projects; (iii) delivering productive and durable public assets. - Scoring for each institution: - Three indicators analyzed and scored (institutional design, effectiveness, reform priority). - Institutional design: whether organizations, policies, rules, procedures are in place (aggregate may be high, medium, or low). - Effectiveness: degree to which intended purpose is achieved (aggregate may be high, medium, or low). - Reform priority: importance of improving the issues given Uganda’s specific conditions. - Annex reference: - PIMA Questionnaire described in Annex 2. ### Overall PIM assessment highlights - Improvements since 2016: - Strengthened Development Committee role as a gatekeeper for new investment proposals. - Establishment of the PAP. - Development of regulations and guidelines to improve project preparation and appraisal. - IMF and development partners active in supporting reforms. - Institutional design vs effectiveness: - Institutional design: particularly strong (legal and institutional frameworks for fiscal sustainability, project appraisal, private sector provision of public infrastructure, budget comprehensiveness, project selection, procurement, and portfolio oversight are well designed). - Effectiveness: markedly lower than design. - Weakest effectiveness areas: multiyear budgeting, maintenance, availability of funding, portfolio oversight and asset monitoring. - These weaknesses have significant negative impacts on public investment access and quality. ### Planning sustainable levels of public investment (selected institutions) 1. Fiscal principles or rules (Strength—High; Effectiveness—Medium; Reform Priority—Medium) - Charter for Fiscal Responsibility (CFR) commitments: - Government deficit rule: no more than 3 percent of GDP. - Present value of debt ceiling: 50 percent of GDP for both central and local government. - MTFF prepared semiannually but does not differentiate between new and ongoing investment projects. - MTFF and budget practice: - MTFF provides an anchor for budget preparation but other targets and rules are generally not adhered to. - The deficit target has been continually missed though the debt-to-GDP rule was maintained before and during the pandemic (Figure 3.3). - During the three years pre-pandemic, the approved budget was on average 15 percent higher than the development ceiling in the MTFF (Table 3.1). - Reasons cited for not complying with the deficit target included the urgent need to “address and bridge the infrastructure gap” and “the need for infrastructure required for extracting Uganda’s first oil.” - Fiscal position and reform priority: - Uganda categorized as at a medium risk of debt distress. - The updated CFR accounts for oil revenue volatility and has annual deficit targets inbuilt. - Recommendation: build on reform efforts to better bind fiscal outcomes with investment needs and improve comparability between the MTFF and the budget (for example, tables directly comparable in both documents, breakdown of capital spending into ongoing and new projects). - Table 3.1. Uganda: Variance Between MTFF and the Approved Development Budget (Ush. Billion) - FY2016-17: MTFF 10,176; Approved development budget 10,732; Absolute percentage change 5 - FY2017-18: MTFF 10,167; Approved development budget 11,349; Absolute percentage change 12 - FY2018-19: MTFF 10,178; Approved development budget 12,963; Absolute percentage change 27 - Average 2016-19: 15 2. National and sectoral planning (Strength—High; Effectiveness—Medium; Reform Priority—Medium) - NDP III framework: - 18 overarching programs in NDP III costed by year with output and outcome targets for each year. - Total cost of the 18 programs in NDP III is estimated at Ush. 202,633 trillion, plus Ush. 74,244 trillion in interest payments due (on average 27.5 percent of GDP annually). - Nine hundred and seventeen projects are included in these programs. - Number of projects by stage (from NDP III PIP): - 203 ongoing projects. - 557 new projects. - some of the 159 project ideas. - Footnote elsewhere: Of the 917 programs and projects included in the NDP III PIP 203 are ongoing, 557 are new (at the concept, profile, pre-feasibility or feasibility stage) and 157 are project ideas. - Issues identified: - 158 measurable targets for outputs and outcomes exist for the 18 programs with yearly values and baselines, but these targets are not linked to specific projects. - Cost estimates for many projects are preliminary or not available given many projects at idea or concept stages. - Alignment between the budget and NDP I and II was lower than expected but improved in NDP III because projects not included in NDP III are not approved by the Development Committee. - Alignment between the budget and NDPII was estimated at only 60 percent in 2020; increasing it to 85 percent by 2025 is a key target of NDP III. - NDP II attainment was low in part due to poor alignment between the NDP, national budgets and ministerial annual work-plans. - Some NDP III targets: units for measuring indicators are unspecified or ambiguous and sources of data for assessing progress are not identified. - Recommendations: - More precise costing of major investment projects and linking program targets to specific projects at the planning stage. - Use better and more detailed cost estimates to re-estimate the cost of the 18 NDP III programs and check against estimated resources available for investment. - Prioritize projects for budget inclusion; link targets to specific investment projects with clear units of measurement and identified data sources. 3. Coordination between entities (Strength—Medium; Effectiveness—Medium; Reform Priority—Medium) - Coordination framework: - Guidelines and budget call circulars specify mechanisms between levels of government, including fiscal transfers and disclosure of contingent liabilities. - National Planning Authority (NPA) ensures NDP development coordinated with MDAs, SOEs and local governments (LGs). - Fiscal transfer formulae for discretionary development equalization grants and sector grants specified by MOFPED since 2017 and published in budget documents annually. - Around three percent of sectoral development transfers are discretionary and allocated to selected local governments outside the formulae. - Contingent liabilities required to be reported to MOFPED for PPPs, legal claims and guarantees on at least a semiannual basis, per the Guidelines for the Management of Contingent Liabilities (June 2020). - Development transfers (Table 3.2. Uganda: Development Transfers to Local Governments, Ush. million): - 2020-21: - Discretionary Development Equalization Grant (DDEG) 552,454 - Sector Development Grants: - Production and Marketing 55,806 - Works and Transport 24,767 - Education 162,193 - Health 87,196 - Water and Environment 79,400 - Public Sector Management 10,800 - Total Development Transfers 972,616 - Total Development Transfers (percent of GDP) 6.56 - 2021-22: - Discretionary Development Equalization Grant (DDEG) 515,679 - Sector Development Grants: - Production and Marketing 77,790 - Works and Transport 33,717 - Education 178,772 - Health 138,811 - Water and Environment 79,750 - Public Sector Management 15,195 - Total Development Transfers 1,039,714 - Total Development Transfers (percent of GDP) 6.41 - Source: Government Budget Documents, MOFPED. - LG planning and reporting: - NDP III development involved local governments; NPA receives LG and PC plans for review to ensure consistency with NDP III. - LGs represented in program working groups; annual meetings occur between MOFPED, MOLG, NPA and LGs regionally to discuss NDP and annual budget priorities. - Individual projects at LG level are not subject to the PIM framework at concept and appraisal stages. - Rules for transfer of development funds to 176 local governments for Education, Health, Agriculture, Water and Environment and Works and Transport are published in annual budget documents; based on approved guidelines but not explicitly enshrined in legislation or regulation. - Distribution formulae incorporate variables such as population and results of local government performance assessment. - Local governments are given indicative planning figures in the first budget call circular in September (9 months before the beginning of the fiscal year), with a revised figure in February/March. - Annual reports on contingent liabilities are disclosed in the Annual Report on Public Debt, Guarantees, Other Financial Liabilities and Grants. - Remaining challenges: - Important challenges for public investment at LG level remain (illustrated in Box 3.1). ### Box 3.1 — Hoima District: Issues in Public Investment (summary) - Hoima District context: - Located in the mid-western part of Uganda. - In 2006, deposits of around 2.6bn barrels of oil were discovered; 1.2bn barrels were deemed extractable in the Albertine Rift basin in Hoima District. - Investments relating to oil development: - Several large capital investments undertaken and ongoing to enhance infrastructure for extraction, processing, and transmission of oil. - Investments involve both central government and Hoima District, including Ministry of Energy investments to develop an international airport, with an oil refinery and industrial park on site and access road rehabilitation. - Hoima District finances its capital spending mostly through central government transfers: district development grants 58.2 percent, and sector conditional grants 37.6 percent (text truncated). *Source: IMF staff estimates and mission documents extracted from the provided PDF content.* ### 2.7 percent from local revenues and the remainder from local development partners. ### 2.7 percent from local revenues and the remainder from local development partners. ### Hoima District: challenges in implementing investment projects at District level - Inadequate resources for operating and maintaining assets such as schools, district roads, water, and health facilities. - Insufficient facilities for community involvement in planning, such as technical capacity, logistical support, and community fatigue, leading to limited understanding by community members of their role in the projects. - Limited skill base at the local level through the entire PIM cycle, particularly registered civil engineers. - Superficial understanding at the local level of how to align planned outputs of NDP III with the District Development plan and weak capacity in identifying understanding impact and trade-offs among investments, exacerbated by the limited involvement of LG in designing the assessment system. - Limited evidence bases for strategic planning and delays in feedback on plans from the NPA. - Project specific problems, particularly with Uganda Intergovernmental Fiscal Transfer Program (UGIFT) related to procurement delays, coordination with the center, systems issues, and limited roles of the district in project implementation. *Source: IMF staff* ### Contingent liabilities, PPPs, and fiscal reporting - Some significant known contingent liabilities related to public-private partnerships are not disclosed in the annual report on public debt, other financial liabilities. - Reported contingent liabilities largely relate to guaranteed loans. - Contingent liabilities related to PPP contracts entered into before the enactment of the 2015 PPP law, including Bujagali Hydropower Generation project, Eskom Generation Concession, and Umeme Power Distribution Concession are not included in the annual report. - Recent experience: material contingent liabilities embedded in contracts with 13 independent power producers resulted in deemed energy costs to the government of Ush. 87.7 billion due to inadequate investment in power distribution; the power produced could not reach the national grid, resulting in significant costs for UETCL and ultimately public finances and consumers through the tariff. - Contingent liabilities related to delayed implementation of public investment projects, and potential related costs such as delays related to the Karuma Dam opening, should also be reported. - Since the enactment of the PFMA, reporting of contingent liabilities has improved but further enhancements of reporting are needed. - Recommendation in text: analyze and report contingent liabilities related to PPP contracts in the energy sector (e.g., potential fiscal costs of deemed energy contractual clauses) in future reports. - Recommendation in text: include significant projects at an early stage in the PIM framework, particularly at the concept and appraisal stage, to enhance coordination at the project level. Table (reported contingent liabilities; USD, millions) - PC on-lending — Beneficiary: UEGCL, UETCL and others — Maximum Exposure December 2019: 2400 — Maximum Exposure Dec 2020: 2800 - Guarantees — Beneficiary: IDB Islamic University in Uganda — Maximum Exposure December 2019: 3 — Maximum Exposure Dec 2020: 3 - Guarantees — Beneficiary: IDB Uganda Development Bank — Maximum Exposure December 2019: 3 — Maximum Exposure Dec 2020: 2 - Guarantees — Beneficiary: BADEA Uganda Development Bank — Maximum Exposure December 2019: 16 — Maximum Exposure Dec 2020: 5 - Guarantees — Beneficiary: AfDB Uganda Development Bank — Maximum Exposure December 2019: 7 — Maximum Exposure Dec 2020: 15 - Guarantees — Beneficiary: Exim India Uganda Development Bank — Maximum Exposure December 2019: 0 — Maximum Exposure Dec 2020: 3 - PPPs — Beneficiary: Not disclosed — Creditor: Not disclosed - Total maximum Exposure December 2019: 2,429 - Total maximum Exposure Dec 2020: 2,828 - Total Exposure (percent GDP) December 2019: 6.4 - Total Exposure (percent GDP) Dec 2020: 7.5 ### Project appraisal: framework, strengths, and remaining gaps - Since 2016 a strong framework for project appraisal has been implemented requiring all major capital projects, regardless of financing source, to be subject to rigorous technical, economic, and financial analysis. - MoFPED published in 2016 the “Development Committee Guidelines for the Approval and Review of the Public Investment Plan (PIP) Projects” (DC Guidelines), which apply to all projects within the Public Sector. - MoFPED developed the “Public Investment Manual for Project Preparation and Appraisal.” The manual was disseminated and MoFPED provides support on project appraisal to MDAs. - National Parameters for project appraisal and a database with Commodity-Specific Conversion Factors were developed. - National parameters include: Economic Opportunity Cost of Capital (11%), Foreign Exchange Premium (7.25%), Premium on Non-tradable Outlays (1%) and a VAT of 18%. An update is ongoing to include EOCL, SVT and EVNER. - The guidelines established Project Preparation Committees (PPCs) at Vote and Sector Working Group level; Project pre-investment studies are reviewed and approved by the Development Committee (DC). - The Manual includes quantitative and qualitative risk analysis and aligns with the DC guidelines’ analytical modules. Operational realities and weaknesses - All major projects are systematically subject to technical, economic, and financial analysis following the DC Guidelines, and compliance is enforced by the DC. - Pre-investment studies are not published; DC analysis is only available on request based on the Transparency Act. - Project concepts and profiles are usually prepared in-house by MDAs; pre-feasibility and feasibility studies are outsourced; some MDAs claim insufficient budget to outsource them; feasibility studies for large projects sometimes done by development partners. - The mission could not review feasibility studies to assess guideline application, though summaries of DC discussions indicate ample analytical information is available. Challenges to consolidate progress - Need to train more public servants in project preparation and appraisal; most institutions mentioned insufficient duly trained staff. - Developing sector specific methodologies would facilitate project appraisal and selection, especially in social sectors, improving quality and standardization. - A couple of national parameters for project appraisal, namely the value of time and the value of life, still need to be determined. - Climate change issues need to be included in the Manual and Guidelines (see Annex 5). - Creation of a Project Development Fund to finance feasibility studies was mentioned and could contribute to more and better feasibility studies. - Suggestion: prepare a new version of the manual providing more detailed guidance in many aspects. ### Alternative infrastructure financing and public corporations (PCs) - Legislation and policies provide strong support to private sector involvement in major infrastructure markets; NPD III places emphasis on encouraging private sector involvement. - Private companies, including international companies, are generally allowed to enter infrastructure markets, with a few exceptions. - Markets: telecommunications, electricity generation and off-grid electricity distribution are competitive. UETCL (state-owned transmission) purchases all power; amendments to the Electricity Act are expected to enable private sector participation in electricity transmission in the coming year. - Water supply and sanitation infrastructure is owned by state-owned NWSC and regional water authorities. - Government published a PPP policy in 2010, enacted a PPP law in 2015, and approved detailed national PPP guidelines in 2019. - Most PC investments are financed from the budget and are covered by regular planning and budgeting processes. MOFPED receives annual statements of all PCs but there is no legal requirement for a published report assessing their financial position beyond Auditor General analysis. Table: Competition and Regulation in Infrastructure Markets (summary) - Electricity — Generation: Competitive; Transmission: Monopoly; Distribution: Competitive — Regulator: Electricity Regulatory Authority (2000) — Number of private sector operators: Generation: 28 Independent Power Producers; Transmission: 0; Distribution: 8 - Telecoms — Competitive — Regulator: Uganda Communications Commission (2013) — Number of private sector operators: 35 - Water — Monopoly — Regulator: Water Utility Regulation Department, Ministry of Water (2003) — Number of private sector operators: None Issues and recommendations on PCs - Uganda is open to private investment but slow progress in finalizing new PPPs and no consolidated report on performance of its PCs. - Legacy PPPs exist (approved before 2015 Act); no PPP contracts awarded under current legal regime. - Recommendation: MOFPED should allocate responsibility for producing a consolidated ownership report on PCs and their investments, covering at least the 10 largest PCs measured by assets or 75 percent of total PC infrastructure investments. The report would assess performance and provide an overview of investment plans and strategy. ### Investment planning: identified issues and recommendations (as presented) - Issue 1: There are significant differences between the estimated cost of programs in NDP III and the total cost of projects included in each program. - Recommendation 1: Revise costing of programs based on the cost of projects in NDP III and include only those that can be financed within the medium term fiscal framework. - Issue 2: The current methodological tools for project preparation and appraisal need some improvements to incorporate emerging issues like climate change and provide specific guidance for sectors to facilitate work by MDAs and LGs. - Recommendation 2: Update the Manual for Project Preparation and Appraisal to provide more detailed guidance and incorporate climate change issues, develop sector specific project preparation and appraisal manuals, and strengthen financing of pre-investment studies. - Issue 3: There is no published consolidated report on the financial performance of PCs. - Recommendation 3: Allocate responsibility for review and analysis of PC annual financial statements and ongoing and planned investment projects and publish an annual PC performance report. - Issue 4: Contingent liabilities related to PPP contracts entered into prior to the 2015 law are not reported. - Recommendation 4: Identify and report information related to PPP-related contingent liabilities, particularly in the energy sector emanating from contracts signed before the 2015 law was enacted. ### Ensuring public investment is allocated to the right sectors and projects Multi-year budgeting (Strength— Medium; Effectiveness— Low; Reform Priority— High) - Medium term projections of capital spending are published by MDA, but multiyear capital budget ceilings are highly indicative and project costs are not broken down for each year. - Projections of capital spending for the general government are forecast by MDAs and aggregated for local governments as part of the MTEF, which is published twice a year as ceilings to the Budget Call Circulars. - The ceilings are indicative and comprise domestic and externally financed components for the development budget and recurrent spending for MDAs and local governments. - Multiyear project level budget allocations are reflected in a rolling public investment plan, which includes total project costs, but cost requirements are not broken down on an annual basis, nor are any cost revisions or adjustments explained between years. - The MTEF is well-established and closely aligned to Uganda’s fiscal strategy, but it is not a reliable anchor for projecting capital spending over the medium term. - In the previous three financial years prior to COVID-19, spending exceeded the MTEF development budget ceiling with an average deviation of 20 percent. - There was a 15 percent variation between the ceilings in the second Budget Call Circular (BCC) and the approved budget in the three years period prior to the pandemic. - Lack of publication of multiyear project costs implies no visibility on revisions or explanations for changes in annual project costs. - Example: Hoima airport reported a doubling of prices estimates of major inputs of bitumen, diesel, and steel. - Suggested remedy: capture and publish annual project costs and cost revisions in the Integrated Bank of Projects (IBP) database as systems development is being finalized; project costs could be added to the existing PIP or presented as a supplementary medium-term strategic investment plan (Annex 6 offers a potential format). Budget comprehensiveness and unity (Strength— High; Effectiveness— High; Reform Priority— Low) - Most capital spending is channeled through the budget process; recurrent and development budgets are prepared, coordinated, and presented together by program. - Extra Budgetary Units (EBUs) have been reduced from 70 to one vote; EBUs are part of budget appropriation and required to disclose how they plan to spend their retained revenues. - The PIP covers central government projects, including capital transfers to PCs; approved budget estimates volumes II (local governments) and III (public corporations) cover development allocations at a more aggregated level. - Capital and recurrent budgets are prepared and presented in the budget on the basis of a fully integrated program classification by each Ministry, Department and Agency. - Investments undertaken by EBUs account for less than 1 percent of total capital spending (based on the FY2021-22 budget). - PPP projects are not reflected as none of the current portfolio is operational; different departments coordinate recurrent and development budgets and collective decisions are made through combined Program Implementation Action Plans (PIAPs). - Recommendation: To promote full disclosure, all future operational PPP projects should be included for information as part of budget documentation, presented as one comprehensive investment portfolio as part of the Public Investment Plan (PIP). _Italic source attribution: Source: IMF staff_ ### 8. Budgeting for Investment (Strength— Medium; Effectiveness— Low; Reform ### 8. Budgeting for Investment (Strength— Medium; Effectiveness— Low; Reform Priority—High) ### Protection of investment projects and multiyear commitments - Framework and legal provisions: - Total project costs are included in the PIP. - Multiyear commitments are legally required each financial year as a multiyear commitment statement (MYCS), submitted to Parliament (Article 23 of the PFMA (2015)). - Transfer of funds between capital and current spending permitted up to ten percent of an item or activity of a Vote (Article 22 of the PFMA (2015)). - First BCC prioritizes completion of on-going projects ahead of new ones. - Implementation challenges and evidence: - Timely and accurate recording of multiyear commitments has been a challenge. - Lack of a verification process has undermined the effectiveness of the MYCS. - Large infrastructure agencies reported repeated accumulation of arrears due to unpaid contracts (UNRA unpaid interim payment certificates averaged around 400 billion Ush. per year and rose to 700 billion in FY2020-21; UEGCL noted they are $5m USD behind in contractor payments for Nyagak III). - Net virements from the development budget have been minimal (referenced Figure 3.6a). - Aggregate release performance of GOU funded projects has improved over the past ten years (referenced Figure 3.7a), but more than half of projects in the PIP received insufficient funds (referenced Figure 3.7b and Table 3.5). - FY2020-21 Auditor General’s report: delays amounted to 5 percent of total capital spending; delayed progress for 58 works projects worth 649 Bn. and 13 cases of abandoned works of 21.3 Bn. ### Key statistics on PIP funding sufficiency (FY2020-21) — Table 3.5 - Funds released less than allocation: 57 percent; 196 projects - Sufficient funds: 30 percent; 104 projects - Funds released more than allocation: 9 percent; 41 projects ### Reform priorities for multiyear commitments - Improving the quality, recording and verification of multiyear commitments is a high reform priority. - Actions recommended: - Expedite interfacing different IT systems. - Integrate the MYCS process into the mainstream budget review process. - Expected benefit: more stringent mechanisms to protect ongoing projects and ensure required funding for timely completion. ### Maintenance funding (Strength—Low; Effectiveness—Low; Reform Priority—High) - Current state and methodologies: - Few and limited methodologies for assessing routine and capital maintenance needs. - Routine maintenance cannot be clearly identified in the budget. - Ministry of Health has a routine maintenance manual for medical equipment, but not for facilities. - Routine road maintenance limited to pothole repairs, slushing of roads and desilting of culverts; other periodic road maintenance not done. - Only critical maintenance on strategic bridges and ferries. - Electricity sector: generation licensing requires a maintenance plan and outage plan; routine maintenance of transmission coordinated with generation; hydro plant routine maintenance planned in dry season. - Capital maintenance identifiable in NDPIII but not in all program or sector strategies. - Funding shortfalls and consequences: - Periodic and routine maintenance are neglected; rehabilitation and upgrades done but with inadequate funding. - Lack of methodologies results in poor budgeting and increases future rehabilitation and asset replacement costs. - Annual Budget Monitoring Report 2018-19 recommends balancing upgrading and maintenance/rehabilitation to reduce maintenance backlog. - Road maintenance funding (UNRA data) — Table 3.6: Funding Requirement Versus Provisions for Road Maintenance (Ush. billion) - 2015-16: Budget required 582; Amount provided 261; Percentage of amount required 45 - 2016-17: Budget required 400; Amount provided 217; Percentage of amount required 54 - 2017-18: Budget required 596; Amount provided 268; Percentage of amount required 45 - 2018-19: Budget required 596; Amount provided 313; Percentage of amount required 52 - 2019-20: Budget required 596; Amount provided 282; Percentage of amount required 47 - 2021-22: Budget required 596; Amount provided 310; Percentage of amount required 52 - On average 49 percent of the annual road maintenance needs were funded from 2015 to 2021. - Reform priority and expected savings: - High priority: compile routine and capital maintenance methodologies and manuals; accelerate routine maintenance. - Expected medium- and long-term savings by avoiding expensive rehabilitation. - Example (Box 3.2, Rwanda): rehabilitation cost RWF 140,000,000; yearly routine/preventative maintenance 3 percent = RWF 4,200,00 per annum; after 8 years maintenance cost RWF 33,600,000; rehabilitation without maintenance after 8 years estimated at RWF 70,000,000; preventative maintenance roughly 50 percent lower than rehabilitation; actual savings over 8 years RWF 36,400,000 or more. ### Project Selection (Strength— High; Effectiveness— Medium; Reform priority— Low) - Review and approval framework: - DC Guidelines establish four levels: project concept, project profile, pre-feasibility, feasibility. - All new projects must be registered in the IBP at concept stage; reviewed by PAP and DC subcommittee; final decision by the DC. - After feasibility approval, project can be included in the PIP. - Standard selection criteria established for analysis by the DC (Box 3.3). - Project readiness and being included in NDP III are key criteria for assigning budget funding. - Performance and process: - Nearly all new public sector projects comply with review before inclusion in the PIP. - Each year only 2 or 3 new projects (less than 5 percent of the total) “jump the line”; profiles are prepared even if ex-post. - The four-step process is lengthy and has been criticized by some MDAs. - DC holds quarterly meetings; annual review of all PIP projects to decide exits based on criteria. - FY2017/2018: out of 441 projects 118 exited the PIP; FY2018/2019: out of 431 projects 129 exited the PIP. - Box 3.3 — Project Review and Selection Criteria (selected items) - Ongoing review criteria include: Percentage physical completion; Time progress; Funding profile/Adequacy of budgetary allocations; Project Budget performance; Average Project life Absorption Rate; Capital recurrent ratio; Project delay against schedule; Project challenges. - Possible DC decisions: Exit; Retain; Transfer to the recurrent Budget; Downgrade to pipeline; Re-scope; Postpone (for limited financing/non-COVID). - Criteria for stalled projects: Current Policy Relevance; Financial Consequences of Suspension; Legal Consequences of Suspension; Social Consequences of Suspension; Environmental Consequences. - Criteria to enter the budget after appraisal (piloted): Strategic fit; Readiness of the project intervention; Budget availability and affordability; Economic and financial viability; Social and environmental impact. - Recommendations to improve selection: - Continue enforcing compliance and improve selection process. - Reduce time for approval of projects and shorten time to be included in the PIP. - Improve project preparation and appraisal to provide better data. - Pilot project selection criteria could increase effectiveness. ### Recommendations for Allocation of Investment Funds (Issues and Recommendations) - Issue 5: Information on project costs, their revisions, and multiyear planned expenditures are not published at the time of appropriation. - Recommendation 5: Publish complete project costs and multiyear projections, include, and explain cost revisions, in the budget annexes, and systemize this process through the IBP. - Issue 6: The recording of multiyear commitments is inaccurate and not supporting budget choices. - Recommendation 6: Integrate the multi-year commitment process into the mainstream budget review process and improve the accuracy and recording of multi-year commitments. - Issue 7: Lack of maintenance methodologies for routine and capital maintenance and insufficient budget allocations for maintenance. - Recommendation 7: Strengthen methodologies for assessing routine and capital maintenance needs, give higher priority to require attention to enhance maintenance funding in the budget process and report actual versus planned maintenance in budget documents. ### Procurement (Strength— High; Effectiveness— Medium; Reform Priority— Low) - Systems and transparency: - Procurement of major capital projects is open and transparent; procurement database and monitoring in place; complaints review process present. - All bids available on public notice boards, websites and e-procurement system; new bidders can register on-line. - PPDA monitors bidding process and issues an annual report; Independent Complaints Tribunal investigates complaints with responses expected within 15 days. - Section 94 of the Procurement Act allows suspension of service providers who breach the Code of Ethics. - Performance and reforms: - E-procurement commenced on 1 July 2021, with 24 entities using the system; another 50 entities to commence from June 2022. - Improvement in submission of procurement plans from 80.5 percent to 91.3 percent since 2016−17. - Open bidding constitutes 60.4 percent. - Follow-up indicates 69 percent of recommendations were implemented. - Complaints process is monitored effectively and timelines generally met. - Reforms to address procurement constraints are low priority; capacity constraints exist for complex bids (oil-related facilities, high-end road construction). - Merging of previous paper-based system and E-Procurement system needs completion without delay. ### Availability of Funding (Strength— Medium; Effectiveness—Low; Reform Priority— High) - Legal and operational framework: - PFMA and regulations assign responsibility to the Secretary to the Treasury for annual cash plan (Section 34 of the PFMA). - Accounting officers must produce annual work and procurement plans; annual cash plan broken into quarters; warrants/budget releases issued quarterly (PFMR Article 14 specifies warrants by 10th day of first month of the quarter). - Cash management guidelines specify a cash management committee chaired by the Deputy Secretary to the Treasury; committee should meet monthly to reconcile data and review progress. - No legal framework requiring donors to maintain bank accounts in the Central Bank; accounts depend on donor agreements. - In-year funding performance and arrears: - Current arrangements for in-year funding are not effective. - Cash flow forecasts prepared, but only inflows are updated quarterly; no systematic monthly updating based on up-to-date planned spending from spending units. - Cash management based on budget execution data rather than actual cash needs. - Evidence of significant arrears indicating cash is not available to honor commitments; Auditor General has raised this issue. - Some projects receive less, the required amount, or more budget release than budgeted; project accounts held in commercial banks or the Bank of Uganda depending on financiers. - Verified expenditure arrears (Ush. billion and percent of stock) — Table 3.7 - Salaries and pensions: Arrears end June 2019 621 (15% of stock); Arrears end June 2020 130 (8% of stock) - Utilities: Arrears end June 2019 130 (3%); Arrears end June 2020 31 (2%) - Rent: Arrears end June 2019 20 (0%); Arrears end June 2020 19 (1%) - International organizations: Arrears end June 2019 197 (5%); Arrears end June 2020 106 (6%) - Legal judgments: Arrears end June 2019 915 (23%); Arrears end June 2020 439 (26%) - Compensation: Arrears end June 2019 407 (10%); Arrears end June 2020 302 (18%) - Taxes: Arrears end June 2019 493 (12%); Arrears end June 2020 46 (3%) - Other recurrent costs: Arrears end June 2019 797 (20%); Arrears end June 2020 381 (23%) - Development: Arrears end June 2019 409 (10%); Arrears end June 2020 210 (13%) - Due to UCF: Arrears end June 2019 21 (1%); Arrears end June 2020 - - Total: Arrears end June 2019 4,010; Arrears end June 2020 1,664 - Sources cited: Strategy to clear and prevent arrears (2019 data) MOFPED June 2021; Copy of domestic arrears report, Internal Auditor General, MOFPED (May 2021). *Source: IMF staff; MoFPED; UNRA; MOFPED internal reports* ### 57. Improved arrangements and practice for funding of investments is a high reform ### 57. Improved arrangements and practice for funding of investments is a high reform priority ### Reform priority and problem statement - The mismatch between planned expenditure and available funds, evidenced by significant expenditure arrears, points to critical failings in the public financial management system supporting PIM. - Arrears in payments for public investments have had serious implications for implementation of projects and costs to the government, including: - delayed or unfinished projects; - increased costs due to interest, penalty costs, court judgements; - serious impediments to the efficiency of public investment management. ### Portfolio Management and Oversight (Strength— High; Effectiveness—Low; Reform Priority— High) - Current arrangements and practices: - Major projects are centrally monitored during project implementation. - Funds can be re-allocated between projects during implementation, but only for GoU funded projects. - Treasury Instruction 8.4 and PFMA section 22 regulate re-allocation, with a limit of 10 percent of the original budget. - The total portfolio of projects is monitored by the BMAU, which issues a semiannual report submitted to Parliament. - The Public Investment Management Framework and the UNRA Programme Management Framework require ex-post reviews after project completion. - Key shortcomings identified: - Serious issues such as land compensation disputes remain unresolved and require high level, legal intervention. - Monitoring reports lack: - summary tables of projects with delays; - summary tables of projects with cost overruns; - counts of projects delayed due to compensation disputes; - baselines against which percentage completion is measured; - base dates against which delays can be measured. - Re-allocation of funds occurs very seldom and there is no evidence it has accelerated projects. - Ex-post reviews are sometimes conducted for externally funded projects, but not for GoU funded projects; UNRA has not conducted ex-post reviews to date. - Priority reform: - Improvements in the portfolio monitoring process are a high priority. - The lack of coordination and duplication of data requests between MoFPED, BMAU, NPA and the OP APEX system requires attention. - The APEX Platform aims to address functional ambiguities and mandate overlaps. - Systems such as APEX and IBP should automatically generate reports to upper management when substantial deviations are detected. - A detailed summary table of critical information is required to enable top management to identify and act urgently on critical major projects (Annex 9 contains an example). ### Management of Project Implementation (Strength— Medium; Effectiveness—Medium; Reform Priority— Medium) - Arrangements and controls: - PIMS Framework requires establishment of project management teams. - UNRA Programme and Management Framework requires a project management committee with a senior management member in charge. - Project adjustments are guided by Public Procurement and Disposal of Public Assets (Contracts) Regulations, Clause 55, 2014: - A single contract adjustment shall not increase the total contract price by more than 15 percent. - Where the contract price is amended more than once, the cumulative value of all contract amendments should not increase the total contract price by more than 25 percent; if so, the balance should be re-tendered. - Ex-post audits are conducted yearly by the OAG; reports are scrutinized by Parliament and published. - Performance issues and examples: - OAG and PPDA reports identify poor project management as a cause of delayed progress and abandoned projects. - Some projects are not closed off duly. - Annex 10 lists upstream underlying factors causing cost- and time-overruns beyond the Project Manager’s control. - Box 3.4 (OAG performance audit dated 30 June 2021) findings summarized: - Health: Delayed construction of the Laboratory Tower – lack of project management. - Health: Delayed construction of 150 housing units, halfway into the contract only the foundations of one block was completed – lack of project management. - Education: over payment of quantities certified; contractors did not fully mobilize equipment required; irregular payment for services relocation. - Roads Projects: 35 Projects from UNRA with a total value of USD 398,427,063.99 and UGX 149,739,813,845 had been delayed within a range of between 64 and 1,072 days. - Box 3.5 (Hoima International Airport) illustrative example: - Project purpose: facilitate construction of the oil refinery and pipeline system. - Contractual construction period: 48 months, with a contractual completion date of February 2023. - Current status reported: Airport airside is currently 80 percent complete; final layer works on the main runway in progress. - Freight hardstand: 600 m by 130 m concrete completed. - Earth works: 7,000,000 cubic meters of material. - Construction works cost: Euro 264 million. - Cost escalation: approximately 10 percent due to global increase in steel, diesel and bitumen; this escalation is contractual. - Main additional time claim reason: replacement of planned mobile control tower with a permanent structure. - Conclusion: effective management of a strategically important project is possible with necessary priority. - Priority reform: - Resolving upstream factors of cost and time overrun is a medium priority. - Senior project managers with adequate experience in contracts management are required for major projects. - Works Contracts must be managed diligently to ensure correct calculation and certification of payment certificates. ### Monitoring of public assets (Strength— Low; Effectiveness—Low; Reform Priority— High) - Legal and accounting framework: - PFMA provides a strong framework requiring each accounting officer to maintain an asset register and the Accountant General to prepare a balance sheet with all assets and liabilities. - Treasury Instructions and guidelines support asset registers and annual Boards of Survey. - Current gaps and problems: - Asset values are not fully accounted for nor reported in the government’s financial statements; depreciation is not charged. - Asset registers are not consolidated and many do not include asset values; historic cost information is incomplete. - UNRA has detailed asset information on all national road assets (estimated value 6bn USD) not on the government’s balance sheet. - Lack of legal clarity around land ownership prevents registration of land and buildings, particularly at local government levels. - Current accounting policies (except land assets) expense assets in the year of acquisition, fully depreciating them in that year rather than expensing over expected life. - Guidelines for annual survey are silent on verification procedures for large infrastructure and land/building assets. - PCs are required to apply international financial reporting standards and therefore maintain up-to-date asset registers. - Priority reform and planned actions: - There is no data available on the total value of Uganda’s public sector assets; improvements in this area are a high reform priority. - First step: compilation of a comprehensive asset register, incorporating all property assets. - Better data would strengthen accountability, support assessment of maintenance spending (Institution 9), and aid prioritization of capital maintenance decisions. - Government plans via the Accountant General to address weaknesses; Box 3.6 outlines the MOFPED’s Asset Management Reform Plans. - Box 3.6: Identified issues and reform program highlights - Issues identified include: - Legal and Regulatory Framework not harmonized; no policy framework; weak compliance and enforcement. - Institutional arrangements unclear and overlapping; weak capacity and inadequate staffing. - Contract Management problems: delayed/non-delivery, payments for incomplete work, poor workmanship, abandoned projects, acceptance of defective works/items. - Operation and maintenance: underutilization, lack of adequate funding, poor condition and obsolescence, ownership ambiguity. - Asset Management Systems inadequate with limited integration and parallel systems. - Disposals: continuing non-disposal of obsolete items leading to high storage costs. - Asset Records and Reporting: lack of complete and up-to-date registers with correct values. - Current accounting framework: cash basis does not give a complete picture. - Integrated approach lacking: Accounting Officers focus on GoU funded assets and ignore donor funded assets; need for consolidation of all assets of a vote. - Accountant General’s reform program includes: 1) Updating the Asset Management Policy and Framework; 2) Follow up action and implementation of Board of Survey and audit recommendations relating to asset management by each MDA and LG; 3) Addressing data gaps in financial assets (Government Investments/on-lent funds) register; 4) Development and implementation of a comprehensive and fully integrated asset management information system; 5) Capacity Building, training, and change management; 6) Valuation of government assets; 7) Ongoing coordination of asset management reform initiatives through collaboration with all key stakeholders. - Source of plans: GoU Asset Management Strategy & Work Plan (2021 – 2025), Accountant General’s Department, April 2021. ### Recommendations for public investment implementation (explicit issues and recommendations) - Issue 8: Budgeted funds for project implementation are not released in a timely and predictable manner. - Recommendation 8: Ensure predictable budget releases for investment projects, by enhancing the realism of the annual Budget and MTEF and instituting active cash management arrangements. - Issue 9: The BMAU report does not summarize the major projects in distress, inclusive of the high levels risks that require immediate attention at the required level. - Recommendation 9: Strengthen investment portfolio monitoring to become more forward-looking and based on explicit baselines for financial and physical execution, clearly identifying projects at risk and which actions will be required to resolve the risk. Focus this monitoring on major projects, based on a clear definition of major projects in regulations. - Issue 10: There is no comprehensive asset register to enable monitoring and effective management of the government’s entire asset stock and to enable compliance with the government’s accounting policies. - Recommendation 10: Develop comprehensive assets register, including all types of assets, particularly infrastructure assets, starting with existing available databases held by line ministries and agencies. ### Cross-cutting issues - Legal Framework - The existing legal framework related to PIM is described as quite comprehensive and has been amended and strengthened in the last 20 years. - Key Acts include: - Public Finance Management Act 2015; - Public Private Partnership Act 2015; - Public Procurement and Disposal of Public Assets Act 2003; - National Planning Authority Act 2002; - National Audit Act 2008; - Public Enterprises Reform and Divestiture Act 1993 (Amended in 2005); - The Electricity Act 1999; - Local Governments Act 1997 (Amended in 2000); - The Public Finance Management Regulation 2016; - The Local Governments (Financial and Accounting) Regulations 2007; - The Development Committee Guidelines for the Approval and Review of the Public Investment Plan (PIP) Projects 2016. - The Public Finance Management Act of 2015 is the main law regulating PIM; Parts II, III, IV, and V relate to various PIMA institutions and functions. - Identified legal gap: lack of a clear legal basis (act) for project preparation, appraisal, review, selection, monitoring and evaluation, portfolio management and ex post evaluation, as well as for maintenance. The DC guidelines help but a higher-level legal framework (law) would be desirable. - MoFPED prepared (February 2022) a “Draft for a National Public Investment Policy” to strengthen PIM, but it is not yet approved by Cabinet and a policy lacks the legal standing of a law. - Land acquisition issues frequently delay projects; recommendation to review legal framework for acquisition of land to speed up acquisition while considering compensation and support for displaced populations. - IT Systems and Data Management - Uganda has developed a series of information systems to support PIM from project inception to monitoring and evaluation; governance of IT systems falls under the National Information Technology Authority. - Key systems supporting PIM include: - NDP Monitoring and Evaluation System (integrated with PBS, IFMS, PIMIS, and other data warehouses; can produce customized dashboards); - IBP (tracks project data from concept to feasibility and implementation; web based; registers DC guideline data and allows upload of supporting studies); - PBS (used for planning, preparation and approval of the budget and for quarterly reporting by all MDAs and LGs, SOEs and Public Corporations); - IFMS (Expenditure Management Systems: Accounting and Reporting, Budgeting, Purchasing and Commitment Accounting, Payments, Cash Management and Revenue Receipting/Accounts Receivable). *Source: 1ugaea2022003 - 57. Improved arrangements and practice for funding of investments is a high reform priority* ### 73. There is a need for compatibility, data exchange and integration between PIM ### 73. There is a need for compatibility, data exchange and integration between PIM ### Compatibility, data exchange, and IT systems for PIM - Finding: M&E is done by the PBS, the IBP, the NDP M&E system and by the OPM, burdening MDAs and LGs with separate data requests. - Finding: Lack of integration impedes the potential use of data, for example by combining data in the IBP with targets for programs and projects in the NPA M&E system. - Table of IT systems useful for PIM (system — responsible institution — purpose): - Integrated Financial Management System (IFMS) — Accountant General’s Department — Supports bank reconciliation, payments, accounting and reporting by MDAs and LGs (web based except for remote locations). - Performance Budgeting System (PBS) — MoFPED/ Budget — Supports budget preparation and performance reporting by MDAs and LGs. - Integrated Bank of Projects (IBP) — MoFPED / PAP — Registering and managing the pipeline of projects proposed by MDAs and LGs. - Debt Management and Financial Analysis System (DMFAS) — MoFPED — Management of debt and other financial instruments throughout their life cycle. - Government Asset Management Information System (GAMIS) — Accountant General’s Department — Asset Management (currently being rolled out to MDAs). - Aid Management Platform (AMP) — MOFPED — Capture data on external grant and loan management for recording and tracking external financing commitments and disbursements. - NDP Monitoring and Evaluation System — NPA — Monitoring and Evaluation of NDP III indicators and core projects. - Prime Minister’s Integrated Management Information System (PIMIS) — OPM — Monitoring of targets of key projects. - Budget Portal — MOFPED — Presents budget data from MDAs and LGs to the general public. Allows downloading of data in Excel. - Electronic government procurement (eGP) — PPDA, Procurement policy MOFPED — End to end online government procurement. - Government evaluation facility system — OPM — Government evaluations repository. - Road monitoring and Management System — Ministry of Works and Transport — Support designated agencies to submit their work plans and accountability reports of works performed. - Unit cost model system — Uganda Roads Fund — Describes the unit cost rate of materials. - Project management solution (IFMS ERP) — UNRA — Enterprise Resource Planning system. ### Staff capacity for PIM - Finding: MoFPED identified a lack of requisite skills for project preparation and appraisal across government. - Initiative: MoFPED partnered with the University of Makerere to establish a Public Investment Management Center of Excellence. - Training delivered so far: - Project preparation: One week course. - Financial- and Economic Analysis: Two weeks course. - Planned future training: - Basic level course in appraisal: duration of 7 days. - Intermediate level course in appraisal: duration of 4 weeks. - Masters’ program: duration of 1 year. - Entity staff component highlights (from Table 4.3): - Budget Monitoring and Accountability Unit — 40 technical personnel. - National Planning Authority — 100 technical staff, 50 support staff and 7 monitoring and evaluation staff. - Uganda National Roads Authority — 1393 total staff with an existing gap of 87 staff. - PAP — 19 technical staff. - PPDA — 104 total staff, of which 40 are auditors, plus 12 staff in the 3 Regions. - National Water and Sewage Authority — 4244 total staff responsible for all water facilities in Uganda. - Accountant General — 200 total staff, with 13 staff in the Asset Department. - Capacity gaps noted: - UNRA reported only 6 persons evaluating pre-feasibility and feasibility studies. - Need for additional training of project managers and procurement staff to manage advanced technical projects (e.g., oil refineries and large roads projects). - Project Managers require capacity strengthening in compilation of terms of references, specifications, and tender documents for high technical level projects. - Need for capacity building in using the new e-Procurement system for officials and prospective bidders. - Possible staff number shortages: Office of the Valuer (inadequate staff to verify value of Government assets and update asset register); Ministry of Land (cannot assist Accountant General with identification of ownership of land portions for inclusion and update of National asset register). - Accountant General’s Office lacks experts to verify technical elements of projects and asset registers. ### Cross-cutting findings and recommendations - Issue 11: The legal framework supporting project preparation, appraisal, and selection hinges on a resolution of MoFPED, which does not provide a strong legal support, and there is no law that ensures effective resolution of land-use conflicts. - Recommendation 11: Strengthen the legal framework for effective public investment management, including amendment of the PFM Act to include a chapter on PIM (or a separate PIM law) and a legal reform to address land use and right-of-way challenges (expropriation law). - Issue 12: Lack of integration of M&E systems results in burdening MDAs and LGs with similar data requests. - Recommendation 12: Integrate IT systems for monitoring and evaluation to avoid duplication of data requests and make better use of data (NPA M&E systems, the IBP, the IFMS, the PBS, the e-Procurement system, and the system of the OPM). ### Selected medium-term action plan items related to integration, data, and capacity - Planning Sustainable Levels of Public Investments — Key actions, responsibilities, and timing: - Develop project profiles for all major investment projects in NDP III, link each project to the targets of NDP III and ensure that all plans and strategies, including the Public Investment Policy, are reconciled within a realistic fiscal framework. - Support for designing the templates — NPA and MoFPED: PAP — 2023. - Update the Manual for Project Preparation and Appraisal to provide more detailed guidance and incorporate climate change issues, develop sector specific project preparation and appraisal manuals, and strengthen financing of pre-investment studies. - Support in updating the manual and methodologies — MoFPED: PAP with line ministries — 2023 - 2024. - Allocate responsibility for review and analysis of PC annual financial statements and planned and ongoing investment projects and publish an annual PC performance report. - Support for design of the report — MOFPED — 2023 — To cover 2022/2023 Financial Statements. - Identify and report information related to PPP-related contingent liabilities, particularly in the energy sector emanating from contracts signed before the 2015 law was enacted. - Support for analysis of PPP contracts — MOFPED Directorate of Debt and Cash Policy — 2023 — For 2023 Annual Report on Public Debt and Guarantees. - Publish complete project costs and multiyear projections, include cost revisions, in the budget annexes, and systemize this process through the IBP. - Design of formats for cost estimates — MoFPED: PAP with Budget Directorate and input from MDAs — 2023 - 2024. - Integrate the multi-year commitment process into the mainstream budget review process and expedite the interface of different IT systems to improve the accuracy and recording of multi-year commitments. - Backstopping support to review phase II of the IBP to assess the design of MYC module — MoFPED: PAP with Budget Directorate and AGO — 2023. - Strengthen methodologies for assessing routine and capital maintenance and give higher priority to maintenance funding. - Working sessions — Line ministries — 2023 - 2024. - Ensure predictable budget releases for investment projects by enhancing realism of the annual Budget and MTEF and instituting active cash management arrangements. - Support for developing an action plan — MOFPED Senior Management — 2022-2023. - Strengthen investment portfolio monitoring to become more forward-looking and based on explicit project baselines, clearly identifying projects at risk and which actions will be required to resolve the risk. Focus monitoring on major projects. - Staff training to analyze reports and identify major risk projects through working sessions — MOFPED: BMAU — 2023. - Develop comprehensive assets register, including all types of assets, particularly infrastructure assets, starting with existing available databases. - Support to compile the consolidated database, develop detailed procedures — MOFPED Accountant General’s Office — 2024. - Legal framework reform to strengthen PIM and address land use and right-of-way challenges. - Support drafting specific sections based on international examples — MoFPED PAP, with Line Ministries, Land valuer and Attorney General — 2023. - Integrate IT systems for monitoring and evaluation to avoid duplication of data requests and make better use of data (NPA M&E systems, the IBP, the IFMS, the PBS, the e-Procurement system, and the system of the OPM). - Responsible entities: MOFPED (BPED, PAP, FMS, PPMD); NPA; OPM; PPDA — 2024. - Strengthen staff capacities (skills rather than numbers) for effective public investment management, including through systematic training programs. - Develop and provide capacity building programs — Min of Land; Valuer; PPDA; Accountant General; UNRA — 2022-2024. *Source: Excerpt from IMF country report content unit 1ugaea2022003, section 73 and related tables and annexes.* ### 6. Multi-Year Budgeting: Does the government prepare medium-term projections of capital spending on a full cost bas ### 6. Multi-Year Budgeting: Does the government prepare medium-term projections of capital spending on a full cost bas ### Multi-Year Budgeting (Section 6) - 6.a. Is capital spending by ministry or sector forecasted over a multiyear horizon? - No projections of capital spending are published beyond the budget year. - Projections of total capital spending are published over a three to five-year horizon. - Projections of capital spending disaggregated by ministry or sector are published over a three to five-year horizon. - 6.b. Are there multiyear ceilings on capital expenditure by ministry, sector, or program? - There are no multiyear ceilings on capital expenditure by ministry, sector, or program. - There are indicative multiyear ceilings on capital expenditure by ministry, sector, or program. - There are binding multiyear ceilings on capital expenditure by ministry, sector, or program. - 6.c. Are projections of the total construction cost of major capital projects published? - Projections of the total construction cost of major capital projects are not published. - Projections of the total construction cost of major capital projects are published. - Projections of the total construction cost of major capital projects are published, together with the annual breakdown of these cost over a three-five-year horizon. ### Budget Comprehensiveness and Unity (Section 7) - 7.a. Is capital spending mostly undertaken through the budget? - Significant capital spending is undertaken by extra-budgetary entities with no legislative authorization or disclosure in the budget documentation. - Significant capital spending is undertaken by extra-budgetary entities, but with legislative authorization and disclosure in the budget documentation. - Little or no capital spending is undertaken by extra-budgetary entities. - 7.b. Are all capital projects, regardless of financing source, shown in the budget documentation? - Capital projects are not comprehensively presented in the budget documentation, including PPPs, externally financed, and PCs’ projects. - Most capital projects are included in the budget documentation, but either PPPs, externally financed, or PCs’ projects are not shown. - All capital projects, regardless of financing sources, are included in the budget documentation. - 7.c. Are capital and recurrent budgets prepared and presented together in the budget? - Capital and recurrent budgets are prepared by separate ministries, and/or presented in separate budget documents. - Capital and recurrent budgets are prepared by a single ministry and presented together in the budget documents, but without using a program or functional classification. - Capital and recurrent budgets are prepared by a single ministry and presented together in the budget documents, using a program or functional classification. ### Budgeting for Investment (Section 8) - 8.a. Are total project outlays appropriated by the legislature at the time of a project’s commencement? - Outlays are appropriated on an annual basis, but information on total project costs is not included in the budget documentation. - Outlays are appropriated on an annual basis, and information on total project costs is included in the budget documentation. - Outlays are appropriated on an annual basis and information on total project costs, and multiyear commitments is included in the budget documentation. - 8.b. Are in-year transfers of appropriations (virement) from capital to current spending prevented? - There are no limitations on virement from capital to current spending. - The finance ministry may approve virement from capital to current spending. - Virement from capital to current spending requires the approval of the legislature. - Indicator scoring guidance: 1 = To no or a lesser extent 2 = To some extent 3 = To a greater extent - 8.c. Is the completion of ongoing projects given priority over starting new projects? - There is no mechanism in place to protect funding of ongoing projects. - There is a mechanism to protect funding for ongoing projects in the annual budget. - There is a mechanism to protect funding for ongoing projects in the annual budget and over the medium term. ### Maintenance Funding (Section 9) - 9.a. Is there a standard methodology for estimating routine maintenance needs and budget funding? - There is no standard methodology for determining the needs for routine maintenance. - There is a standard methodology for determining the needs for routine maintenance and its cost. - There is a standard methodology for determining the needs for routine maintenance and its cost, and the appropriate amounts are generally allocated in the budget. - 9.b. Is there a standard methodology for determining major improvements (e.g. renovations, reconstructions, enlargements) to existing assets, and are they included in national and sectoral investment plans? - There is no standard methodology for determining major improvements, and they are not included in national or sectoral plans. - There is a standard methodology for determining major improvements, but they are not included in national or sectoral plans. - There is a standard methodology for determining major improvements, and they are included in national or sectoral plans. - 9.c. Can expenditures relating to routine maintenance and major improvements be identified in the budget? - Routine maintenance and major improvements are not systematically identified in the budget. - Routine maintenance and major improvements are systematically identified in the budget. - Routine maintenance and major improvements are systematically identified in the budget, and are reported. ### Project Selection (Section 10) - 10.a. Does the government undertake a central review of major project appraisals before decisions are taken to include projects in the budget? - Major projects (including donor- or PPP-funded) are not reviewed by a central ministry prior to inclusion in the budget. - Major projects (including donor- or PPP-funded) are reviewed by a central ministry prior to inclusion in the budget. - All major projects (including donor- or PPP-funded) are scrutinized by a central ministry, with input from an independent agency or experts prior to inclusion in the budget. - 10.b. Does the government publish and adhere to standard criteria, and stipulate a required process for project selection? - There are no published criteria or a required process for project selection. - There are published criteria for project selection, but projects can be selected without going through the required process. - There are published criteria for project selection, and generally projects are selected through the required process. - 10.c. Does the government maintain a pipeline of appraised investment projects for inclusion in the annual budget? - The government does not maintain a pipeline of appraised investment projects. - The government maintains a pipeline of appraised investment projects but other projects may be selected for financing through the annual budget. - The government maintains a comprehensive pipeline of appraised investment projects, which is used for selecting projects for inclusion in the annual budget, and over the medium term. ### Delivering Productive and Durable Public Assets (Sections 11–15) - Procurement (11) - 11.a. Is the procurement process for major capital projects open and transparent? - Few major projects are tendered in a competitive process, and the public has limited access to procurement information. - Many major projects are tendered in a competitive process, but the public has only limited access to procurement information. - Most major projects are tendered in a competitive process, and the public has access to complete, reliable and timely procurement information. - 11.b. Is there a system in place to ensure that procurement is monitored adequately? - There is no procurement database, or the information is incomplete or not timely for most phases of the procurement process. - There is a procurement database with reasonably complete information, but no standard analytical reports are produced from the database. - There is a procurement database with reasonably complete information, and standard analytical reports are produced to support a formal monitoring system. - 11.c. Are procurement complaints review process conducted in a fair and timely manner? - Procurement complaints are not reviewed by an independent body. - Procurement complaints are reviewed by an independent body, but the recommendations of this body are not produced on a timely basis, nor published, nor rigorously enforced. - Procurement complaints are reviewed by an independent body whose recommendations are timely, published, and rigorously enforced. - Availability of Funding (12) - 12.a. Are ministries/agencies able to plan and commit expenditure on capital projects in advance on the basis of reliable cash-flow forecasts? - Cash-flow forecasts are not prepared or updated regularly, and ministries/agencies are not provided with commitment ceilings in a timely manner. - Cash-flow forecasts are prepared or updated quarterly, and ministries/agencies are provided with commitment ceilings at least a quarter in advance. - Cash-flow forecasts are prepared or updated monthly, and ministries/agencies are provided with commitment ceilings for the full fiscal year. - 12.b. Is cash for project outlays released in a timely manner? - The financing of project outlays is frequently subject to cash rationing. - Cash for project outlays is sometimes released with delays. - Cash for project outlays is normally released in a timely manner, based on the appropriation. - 12.c. Is external (donor) funding of capital projects fully integrated into the main government bank account structure? - External financing is largely held in commercial bank accounts outside the central bank. - External financing is held at the central bank, but is not part of the main government bank account structure. - External financing is fully integrated into the main government bank account structure. - Portfolio Management and Oversight (13) - 13.a. Are major capital projects subject to monitoring during project implementation? - Most major capital projects are not monitored during project implementation. - For most major projects, annual project costs, as well as physical progress, are monitored during project implementation. - For all major projects, total project costs, as well as physical progress, are centrally monitored during project implementation. - 13.b. Can funds be re-allocated between investment projects during implementation? - Funds cannot be re-allocated between projects during implementation. - Funds can be reallocated between projects during implementation, but not using systematic monitoring and transparent procedures. - Funds can be re-allocated between projects during implementation, using systematic monitoring and transparent procedures. - 13.c. Does the government adjust project implementation policies and procedures by systematically conducting ex post reviews of projects that have completed their construction phase? - Ex post reviews of major projects are neither systematically required, nor frequently conducted. - Ex post reviews of major projects, focusing on project costs, deliverables and outputs, are sometimes conducted. - Ex post reviews of major projects focusing on project costs, deliverables, and outputs are conducted regularly by an independent entity or experts, and are used to adjust project implementation policies and procedures. - Management of Project Implementation (14) - 14.a. Do ministries/agencies have effective project management arrangements in place? - Ministries/agencies do not systematically identify senior responsible officers for major investment projects, and implementation plans are not prepared prior to budget approval. - Ministries/agencies systematically identify senior responsible officers for major investment projects, but implementation plans are not prepared prior to budget approval. - Ministries/agencies systematically identify senior responsible officers for major investment projects, and implementation plans are prepared prior to budget approval. - 14.b. Has the government issued rules, procedures and guidelines for project adjustments that are applied systematically across all major projects? - There are no standardized rules and procedures for project adjustments. - For major projects, there are standardized rules and procedures for project adjustments, but do not include, if required, a fundamental review and reappraisal of a project’s rationale, costs, and expected outputs. - For all projects, there are standardized rules and procedures for project adjustments and, if required, include a fundamental review of the project’s rationale, costs, and expected outputs. - 14.c. Are ex post audits of capital projects routinely undertaken? - Major capital projects are usually not subject to ex post external audits. - Some major capital projects are subject to ex post external audit, information on which is published by the external auditor. - Most major capital projects are subject to ex post external audit information on which is regularly published and scrutinized by the legislature. - Monitoring of Public Assets (15) - 15.a. Are asset registers updated by surveys of the stocks, values, and conditions of public assets regularly? - Asset registers are neither comprehensive nor updated regularly. - Asset registers are either comprehensive or updated regularly at reasonable intervals. - Asset registers are comprehensive and updated regularly at reasonable intervals. - 15.b. Are nonfinancial asset values recorded in the government financial accounts? - Government financial accounts do not include the value of non- financial assets. - Government financial accounts include the value of some non- financial assets, which are revalued irregularly. - Government financial accounts include the value of most nonfinancial assets, which are revalued regularly. - 15.c. Is the depreciation of fixed assets captured in the government’s operating statements? - The depreciation of fixed assets is not recorded in operating statements. - The depreciation of fixed assets is recorded in operating statements, based on statistical estimates. - The depreciation of fixed assets is recorded in operating expenditures, based on asset-specific assumptions. ### Cross-cutting issues - A. IT support. Is there a comprehensive computerized information system for public investment projects to support decision making and monitoring? - B. Legal Framework. Is there a legal and regulatory framework that supports institutional arrangements, mandates, coverage, standards and accountability for effective PIM? - C. Staff capacity. Does staff capacity (number of staff and/or their knowledge, skills, and experience) and clarity of roles and responsibilities support effective institutions? ### Annexes (Selected content) - ANNEX 3. DETAILED PIMA SCORES - Institutional Design / Effectiveness scores table (selected cells shown in source). - ANNEX 4. STATUS OF PREVIOUS IMF RECOMMENDATIONS ON PUBLIC INVESTMENT MANAGEMENT - "Enhancing the Performance of Public Investment Management (May 2017)" — list of 12 recommendations with Timelines (e.g., September 2017, December 2018, December 2017, etc.) and Status entries including "In progress", "On track", "Not done", "Done". - "Public investment management reforms – next steps (May 2018)" — list of 11 recommendations with Timelines (e.g., October 2018, May 2018 and continuous, April/May 2018, etc.) and Status entries including "Done", "On track", "In progress", "Not done". - "Strengthening the Performance of Public Investment Management – Next Phase (August 2019)" — list of 11 recommendations with Timelines (e.g., November 2019, June 2020, March 2020, June 2022) and Status entries including "Done", "On track", "In progress". - Examples of specific recommendation statuses (verbatim as in source): - "September 2017 In progress" - "December 2018 On track" - "December 2017 Not done" - "June 2017 On track" - "October 2018 Done" - "March 2019 for FY19/20 Not done" - "June 2022 Done" - "March 2020 In progress" *Source: 1ugaea2022003 - 6. Multi-Year Budgeting: Does the government prepare medium-term projections of capital spending on a full cost bas* ### ANNEX 5. CLIMATE CHANGE AND PROJECT APPRAISAL ### ANNEX 5. CLIMATE CHANGE AND PROJECT APPRAISAL ### Climate risks and implications for public infrastructure - Public infrastructure can contribute to Greenhouse Gas (GHG) emissions and therefore to climate change. - Infrastructure is increasingly exposed to the risk of damage from weather-related disasters. - In case of failure the cost will exceed the cost of rebuilding or repair alone. - The challenge: design, select and implement infrastructure prepared to face disasters. This requires: - changes in infrastructure design and construction standards; and - better processes for project preparation, evaluation, selection, monitoring and maintenance. - The IMF has developed the C-PIMA framework to help governments identify potential improvements in public investment institutions and processes to build low-carbon and climate-resilient infrastructure. ### Justifying more resilient (and costlier) projects — five-step appraisal approach - Context: More resilient infrastructure is usually costlier while traditional appraisal selects the option with the highest NPV or the lowest Cost/Beneficiary. The following five-step approach can be used to justify higher upfront costs for resilience: 1. Identify relevant risks for a project. Examples: Earthquake, Volcanism, Hurricane, Tsunami, Landslide, Flood, Wind, Tornado, Erosion, Drought. 2. Estimate the recurrence period (number of occurrences in a certain number of years). Note: This is challenging because recurrence period of many disasters have changed in the last decades due to climate change and therefore historical series are not reliable. 3. Assess cost in case of disaster. Costs depend on: - damage that the event causes to the project; and - consequences that the failure of the project generates, which may include: cost of repairs, cost due to lost benefits, cost in human lives or injuries and environmental costs. 4. Identify actions to increase resilience and estimate their cost. Cost increases may be due to change of project location, larger project size, use of a different technology and additional works. 5. Appraise the project using one of the following options: - Evaluate the project as usual and calculate the NPV. Then reevaluate the project for a more resilient alternative and considering the event and its probability of occurrence. Consider the additional investment cost required for the project to be resilient to the disaster and incorporate to the cash flow each year as a benefit the probable cost savings that would be generated by the project resisting the occurrence of the event. Then calculate the NPV for the most resilient project and see if the extra investment is justified. - Stress test. Identify indicators to use and minimum acceptable values (for example NPV>0). Appraise considering different probabilities of occurrence of the disaster and determine the probability that leads to the minimum value of the indicators. Then compare that probability with the historical series and decide if the minimum value will ever be reached. - Use Monte-Carlo simulation considering the estimated probability distribution for the occurrence of the disaster. ### Practical notes on appraisal methods - None of the appraisal alternatives is perfect, but they are better than forgetting about climate related and other disasters. - Key methodological caution: historical series may not be reliable for estimating recurrence periods because climate change has altered disaster frequencies and intensities. *Source: IMF staff* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1ugaea2022003.pdf_