## tarea2024012 ## Source details **Canonical URL:** [tarea2024012](https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024012.pdf) ## Other formats - [Markdown version](/-/media/files/publications/tar/2024/english/tarea2024012.pdf.md) - [Structured JSON version](/-/media/files/publications/tar/2024/english/tarea2024012.pdf.json) --- ### Executive summary — exposure, macro-fiscal projections, and NDC - Exposure and recent hazards: - Between 1985 and 2021, floods and epidemics represented approximately 70 percent of total events. - Agriculture accounts for about 24 percent of gross domestic product (GDP). - Rural population represents close to 73 percent of total population. - Long-term macro-fiscal impact estimates (Q-CRAFT results highlighted): - By the end of the century the loss in GDP could surpass 4 percentage points. - Debt could rise to 66 percent of GDP versus 47.5 percent of GDP in the baseline scenario. - Under a pessimistic “hot” scenario, nominal GDP is projected to be 4 percent lower by the end of the century. - Public debt rises by over 18 percent of GDP in the hot scenario compared to the baseline. - Primary deficit in the hot scenario is projected to be 0.7 percent of GDP worse than the baseline by end-century. - Uganda’s 2022 updated Nationally Determined Contribution (NDC): - Commitments to reduce greenhouse gas (GHG) emissions by 24.7 percent compared to the business-as-usual (BAU) trajectory by 2030, mostly in forestry and land use sectors. - Unconditional mitigation target: 5.9 percent reduction compared to BAU. - Conditional additional mitigation requiring external support: 18.8 percent reduction. - NDC identifies 48 adaptation actions across 13 sectors. - Estimated cost of the NDC is 28.1 billion USD (26 percent of 2022 GDP). - Budget tagging and resource estimates: - IMF staff estimate that 3.6 percent of the total budget is related to climate change interventions. - Resources tagged in the budget codes for climate change are below 0.1 percent of the budget. ### C-PIMA assessment — institutional strengths and high-priority weaknesses - Overall institutional design: - Climate-aware planning and coordination score strongly; institutional design is “strong relative to many other countries” and meets highest criteria for most dimensions in climate-aware planning and coordination. - Strengths (selected): - Climate-aware planning: comprehensive framework; NDC objectives and targets effectively integrated into strategic planning. (C1: Strength—High; Reform Priority—Low) - Coordination between entities: strong mechanisms, including climate certification of annual workplans and the overall budget before submission to parliament. (C2: Strength—High; Reform Priority—Low) - Weaknesses / high-priority reform areas: - Project appraisal and selection: - Does not reference or require consideration of climate change; current approach is ad hoc and sector-specific. - Reform priority: High. (C3: Strength—Low; Reform Priority—High) - Budgeting and portfolio management: - Climate change related projects identifiable only via manual consolidation; tagging mechanism for FY23/24 not yet reliable; ex-post reviews or audits of major investment projects for climate outcomes are not conducted; asset registers incomplete and lack climate aspects. - Reform priority: High. (C4: weaknesses highlighted) - Risk management: - DRM framework does not systematically analyze climate change fiscal risks to public infrastructure; existing budget contingency covers natural disasters but there is no comprehensive disaster financing strategy; the Fiscal Risk Statement (FRS) does not analyze climate change fiscal risks to public infrastructure assets. - Reform priority: Medium. (C5: weaknesses highlighted) ### Quantification of long-term fiscal risks (Q-CRAFT and scenarios) - Climate scenarios used and temperature projections (Table II.1 values preserved): - Paris: SSP1-2.6 - 2021-2050: Uganda 0.6; EAC 0.8 - 2021-2100: Uganda 0.6; EAC 0.7 - Moderate: SSP2-4.5 - 2021-2050: Uganda 0.9; EAC 0.9 - 2021-2100: Uganda 1.7; EAC 1.8 - High: SSP3-7.0 - 2021-2050: Uganda 1.0; EAC 1.1 - 2021-2100: Uganda 3.3; EAC 3.3 - Hot: SSP3-7.0, 90th percentile - 2021-2050: Uganda 1.2; EAC 1.4 - 2021-2100: Uganda 4.0; EAC 4.5 - Debt-to-GDP ratio under different climate scenarios (Table II.2; percent): - 2023 | 2050 | 2075 | 2099 - Baseline: 47.1 | 36.2 | 35.8 | 47.5 - Paris: | 35.8 | 34.4 | 44.9 - Moderate: | 36.2 | 35.9 | 47.6 - High: | 37.0 | 39.2 | 55.7 - Hot: | 37.9 | 43.5 | 65.9 - Debt-stabilizing primary balance, 2099 (Table II.3; percent of GDP): - Baseline: Primary Balance -1.4 | Debt-stabilizing primary balance* -0.6 | Primary balance gap** 0.8 - High: Primary Balance -1.6 | Debt-stabilizing primary balance* -0.6 | Primary balance gap** 1.0 - Hot: Primary Balance -1.8 | Debt-stabilizing primary balance* -0.6 | Primary balance gap** 1.2 - Hot with slow adaptation: Primary Balance -2.3 | Debt-stabilizing primary balance* -0.8 | Primary balance gap** 1.5 - Hot with slow adaptation and expenditure adjustment***: Primary Balance -1.8 | Debt-stabilizing primary balance* -0.7 | Primary balance gap** 1.1 - Notes in source define debt-stabilizing primary balance, primary balance gap, and expenditure adjustment (reducing primary expenditure by half of the revenue loss). ### Key channels of fiscal impact and specific fiscal risks (SCARF) - Channels affecting growth and public finances: - Gradual environmental transformation and more frequent/severe natural disasters reduce productivity and capital/labor effectiveness, especially in agriculture. - Fiscal impacts: tax revenue loss, unexpected expenditure for relief/recovery/reconstruction, and contingent liabilities (e.g., PPPs, guarantees, SOEs, subnational exposures). - SCARF workshop outcomes: - Specific fiscal risks identified across water, energy, transport, agriculture, and education; many sector risks likely correlated and mutually reinforcing. - Hazard triggers for contingent liabilities include: drought, disease epidemics, fire, flood, landslide, precipitation, storm, and temperature. - Contingent liability types: - Explicit: contractual or legal commitments that become due (example: take-or-pay PPA obligations when hydropower under-produces). - Implicit: moral or political obligations (example: ad hoc government assistance to farmers after floods). ### Disaster risk management, contingency financing, and data gaps - Contingency fund (CF) and DRM financing: - CF mandated to constitute 0.5 percent of the previous fiscal year’s appropriated government budget (Article 157 Constitution and section 26 PFMA 2015 as amended). - 2022 World Bank Disaster Risk Finance Diagnostic: annual disaster relief costs estimated at USD 30.7 million; median relief allocation USD 18.5 million. - Domestic insurance market underdeveloped; lack of insurance on public assets increases contingent liabilities. - Government lacks a comprehensive database of disaster damages and losses to public infrastructure. - Recommendations to address DRM financing and data: - Develop a DRM Bill to define roles/responsibilities and enable disaster risk financing instruments. - Compile a comprehensive disaster loss database to inform contingency sizing and financing strategies. ### Public investment management reforms — status and priorities (selected) - Progress since 2022 PIMA: - Creation of a gatekeeper role for new investment proposals; establishment of a PIM department within MoFPED; development of manuals/guidelines for project preparation and appraisal in planning. - June 2023 Guidelines for compiling multi-year commitments to record long-term commitments in a Multi-Year Project Commitment Template. - AGO consolidating asset information for FY22/23 financial statements; asset registration through IFMIS for newly procured assets initiated. - PAP upgrading IBP to include monitoring module; limited use due to inconsistent coding and lack of interfaces with PBS and IFMIS. - Selected 2022 PIMA implementation status (high-priority items): - Multi-year budgeting and disclosure: In progress (June 2023 guidelines). - Strengthen methodologies for maintenance funding: Not implemented. - Develop comprehensive asset register: In progress (AGO consolidation). - Integrate IT M&E systems: In progress but harmonization required. ### Priority recommendations and short-term actions (highlights with timelines) - Project appraisal and PPPs: - Recommendation: Update the PIM framework to ensure climate change impact assessment is included within major project appraisal documentation and project selection criteria, including for PPPs at the national government level. - Short-term actions: Update Development Committee (DC) Guidelines and National Guidelines on PPP Appraisal to require consideration of climate change and incorporate climate change assessment into DC project selection criteria. Target date: June 2024 (DC Guidelines update planned Q3 FY23/24 per Annex I). - Climate budget tagging: - Recommendation: Further develop the climate change budget tagging framework to differentiate between recurrent and development expenditures and provide training for MDAs. - Short-term actions: Review coding structure; develop detailed guidelines and training. Target date: December 2024 (Annex I timelines show review FY23/24 Q3 and coding adjustment by FY24/25 Q4). - Asset registers and vulnerability information: - Recommendation: Strengthen asset register information and compile data on vulnerability of key assets to climate-driven hazards as part of AGO-led strengthening of asset registers. - Short-term actions: Update the Asset Management Framework and Guidelines (AMFG) to include exposure and vulnerability to climate change risks; cross-map asset locations with UNMA hazard data. Target dates: Update AMFG by End of FY24/25; cross-mapping by End of FY25/26 (Annex I). - Fiscal Risk Statement (FRS) and disclosure: - Recommendation: Expand scope of the FRS to include qualitative and quantitative assessment of climate change fiscal risks, including public sector assets and long-term macroeconomic risks. - Short-term actions: Discuss Q-CRAFT results in the FRS and include qualitative discussion of asset risks. Target dates in Annex I: FY23/24 Q3 and FY23/24 Q4 for initial inclusion; develop quantitative methodologies by FY24/25 Q1. - DRM financing and contingency fund sizing: - Recommendation: Develop an estimate of resources needed in the CF and design a disaster risk financing strategy. - Short-term actions: Estimate CF needs and assess appropriate DRM financing mechanisms. Target dates: FY23/24 Q3 and FY23/24 Q4 (Annex I). ### Action plan (Annex I) — selected milestones and responsible agencies - Harmonize IBP, PBS, IFMIS coding and integrate systems: - Review outcome code structures: FY23/24 Q3 — PAP, AGO, Budget. - Update IBP coding and interfaces: Update IBP FY24/25 Q1; interface FY24/25 Q2; complete integration FY24/25 Q4. - Update DC Guidelines and PPP appraisal guidance: - Update DC Guidelines to require climate consideration: FY23/24 Q3 — PAP, DC (status: ). - Revise National Guidelines of PPP Appraisal to include climate change: FY23/24 Q4 — PPP Unit (status: ). - Climate budget tagging program: - Review coding structure: FY23/24 Q3 — Budget, AGO (status: ). - Adjust coding structure and publish guidance/training: coding adjustment by FY24/25 Q4; guidelines FY24/25 Q1; training program FY24/25 Q3; annual trainings thereafter (Annex I shows multi-year training schedule and publication milestones). - Asset vulnerability mapping and AMFG update: - Update AFMG to include exposure/vulnerability: FY24/25 Q3 — AGO. - Cross-map public assets with UNMA hazard data: FY24/25 Q4 — AGO. - Prepare report on key public assets exposed: FY25/26 Q1 — AGO. - OAG audit scope expansion: - Define methodology for climate-change perspective audits: FY23/24 Q3 — OAG. - Identify and audit major project(s): FY23/24 Q4 initial identification; biannual performance audits scheduled FY25/26 Q3 and FY26/27 End of FY. ### Capacity building, legal, and IT priorities - Capacity building: - Develop a capacity building program for MoFPED and MDAs on climate-related expenditure tagging and reporting in the FRS. Annex I timelines: training program FY23/24 Q3; training on FRS reporting FY23/24 Q4; annual training from FY24/25 Q1 onward. - Climate Change Learning Strategy and Climate Change Communication Strategy underpin ongoing capacity efforts. - Legal and regulatory: - Strengthen land use legislation to require explicit hazard risk assessments in planning and to reduce land use/right-of-way conflicts that impede public investments. - Consider DRM Bill to clarify roles (including MoFPED) and enable disaster risk financing instruments. - IT systems and data integration: - Main gap: IBP integration with IFMIS, PBS, GAMIS, and NDP monitoring systems; harmonize coding and develop interfaces to enable consolidated reporting and tagging of climate-related expenditures. *Source: IMF Technical Assistance Report — Preface, Executive Summary, C-PIMA assessment, Q-CRAFT analysis, Annex I (tarea2024012).* ### Preface ____________________________________________________________________________ 6 ### tarea2024012 - Preface ____________________________________________________________________________ 6 ### Mission and scope (Preface) - Mission requested by Mr. Ramathan Ggoobi, Permanent Secretary and Secretary of the Treasury (PS/ST), Ministry of Finance, Planning, and Economic Development (MoFPED), Uganda. - IMF Fiscal Affairs Department (FAD) mission to Uganda: September 6 to 19, 2023. - Mission team: Arturo Navarro (team leader), Tjeerd Tim, Natalia Salazar, Eivind Tandberg (all FAD), Matthew Quillinan (AFE), and Jyoti Rahman (FAD expert). - Tasks of the mission: - (i) Discuss implementation of the 2022 PIMA recommendations; - (ii) Assess sensitivity of Uganda’s public investment practices to climate objectives using the C-PIMA analytical framework and propose a prioritized action plan; - (iii) Introduce international approaches to assessing fiscal risks from climate change; - (iv) Work with authorities to identify and begin applying practical approach(es) for climate change fiscal risk assessment and quantification for Uganda; - (v) Provide guidance on including climate change fiscal risk assessment in the Ugandan fiscal risk framework and its disclosure in an annual Fiscal Risk Statement. - Key MoFPED interlocutors engaged: Mr. Joseph Enyimu; Dr. Albert Musisi; Mr. Hannington Ashaba; Mr. Moses Zziwa; Ms. Margaret Kakande; Mr. Richard Tabaro. - Other government and stakeholder meetings included representatives from: Electricity Regulatory Authority; National Planning Authority; PPP Unit; Uganda Electricity Generation Company Limited; Kampala Capital City Authority; Ministry of Works and Transportation; Ministry of Water and Environment; National Water and Sewerage Corporation; Office of the Auditor General; Uganda National Meteorological Authority (UNMA); Office of the Prime Minister. - Acknowledgements: support from Project Analysis and Public Investment Department, Macroeconomic Policy Department (notably Ms. Pheab Mukarwego and Ms. June Nyakahuma), and IMF Resident Representative Ms. Izabela Karpowicz and staff (notably Ms. Pelga Origasha). ### Executive Summary — Key findings and projections - Exposure and recent hazards: - Between 1985 and 2021, floods and epidemics represented approximately 70 percent of total events; droughts, though more sporadic, had the largest impact on the population. - Agriculture accounts for about 24 percent of gross domestic product (GDP). - Rural population represents close to 73 percent of total population. - Long-term macro-fiscal impact estimates: - By the end of the century the loss in GDP could surpass 4 percentage points. - Debt could rise to 66 percent of GDP versus 47.5 percent of GDP in the baseline scenario. - Uganda’s 2022 updated Nationally Determined Contribution (NDC): - Commitments to reduce greenhouse gas (GHG) emissions by 24.7 percent compared to the business-as-usual (BAU) trajectory by 2030, mostly in forestry and land use sectors. - Identification of 48 adaptation actions across 13 sectors. - Public investment management (PIM) reforms and gaps: - Reforms since 2022 PIMA: creation of a gatekeeper role for new investment proposals; establishment of a PIM department within MoFPED; development of manuals and guidelines for project preparation and appraisal. - Effectiveness in practice is lagging despite institutional framework. - Actions taken include updated guidelines for recording multi-year commitments and strengthened information in asset registers; plans to update Development Committee (DC) guidelines and the Manual for Project Preparation and Appraisal represent opportunities to include climate considerations. - Climate-PIM (C-PIMA) assessment results: - Strengths: - Climate-aware planning: comprehensive framework; NDC objectives and targets effectively integrated into strategic planning. - Coordination between entities: strong mechanisms, including a climate certification of annual workplans and the overall budget before submission to parliament; major projects in districts and public corporations financed by central government follow same procedures. - Weaknesses / high-priority reform areas: - Project appraisal and selection: does not reference or require consideration of climate change; current approach is ad hoc and sector-specific. Reform priority: High. - Budgeting and portfolio management: climate change related projects identifiable only via manual consolidation; tagging mechanism for FY23/24 not yet reliable; ex-post reviews or audits of major investment projects for climate outcomes are not conducted; asset registers incomplete and lack climate aspects. Reform priority: High. - Risk management: DRM framework does not systematically analyze climate change fiscal risks to public infrastructure; existing budget contingency covers natural disasters but there is no comprehensive disaster financing strategy; the Fiscal Risk Statement (FRS) does not analyze climate change fiscal risks to public infrastructure assets. Reform priority: Medium. - Overall institutional design: C-PIMA indicates Uganda’s framework is strong relative to many other countries from an institutional design perspective, meeting highest criteria for most dimensions in climate-aware planning and coordination. - Budget tagging and resource estimates: - IMF staff estimate that 3.6 percent of the total budget is related to climate change interventions. - Resources tagged in the budget codes for climate change are below 0.1 percent of the budget. - Fiscal and planning recommendations (high-priority highlights and short-term actions; target dates provided in source): - Project appraisal and PPPs: - Recommendation: Update the PIM framework to ensure climate change impact assessment is included within major project appraisal documentation and as part of project selection criteria, including for PPPs at the national government level. - Short-term actions (target date June 2024): Update Development Committee (DC) Guidelines and National Guidelines on PPP Appraisal to require consideration of climate change and incorporate climate change assessment into DC project selection criteria. Responsible: PAP; PPP Unit; DC. - Climate budget tagging: - Recommendation: Further develop the climate change budget tagging framework to differentiate between recurrent and development expenditures and provide training for Ministries, Departments, and Agencies (MDA). - Short-term actions (target date December 2024): Review coding structure to differentiate climate-related recurrent and investment expenditures; develop detailed guidelines and training to help MDAs determine which recurrent and investment expenditures are climate-related. Responsible: Budget; AGO; PAP. - Asset registers and vulnerability information: - Recommendation: Strengthen asset register information and compile data on vulnerability of key assets to climate-driven hazards as part of AGO-led strengthening of asset registers. - Short-term actions (target date June 2025): Update the Asset Management Framework and Guidelines (AMFG) to include exposure and vulnerability to climate change risks; relevant infrastructure ministries should work with UNMA to cross-map asset locations and hazards to inform appraisals and maintenance. Responsible: AGO; Key MDA responsible for infrastructure. - Additional institutional recommendations summarized: - Incorporate climate change considerations into updated DC guidelines and the Manual for Project Preparation and Appraisal. - Strengthen training and capacity across government for implementing climate tagging and climate-aware appraisal. - Improve disaster risk management framework to be more forward-looking and to pool asset, weather, vulnerability, and financial information across institutions. - Next steps and tools: - Annex I of the report proposes an indicative action plan for implementing recommendations. - The mission emphasized the importance of identifying specific fiscal risks linked to climate change to complement long-term macro-fiscal analysis and recommended decisive action and strengthening of the budgetary framework to prevent deterioration of public finances due to climate change. *Source: IMF Technical Assistance Report — Preface and Executive Summary (tarea2024012).* ### 1. This report analyzes the climate sensitivity of Uganda’s Public Financial Management ### tarea2024012 - 1. This report analyzes the climate sensitivity of Uganda’s Public Financial Management ### Purpose and analytical approach - Analyzes the climate sensitivity of Uganda’s Public Financial Management (PFM) framework, focusing on public investment management (PIM) and climate change-related fiscal risks. - Builds upon the 2022 Public Investment Management Assessment (PIMA) and updates progress on PIM reform. - Complements PIMA with the Climate Module of the PIMA (C-PIMA). - Quantifies fiscal risks using the FAD-developed Quantitative Climate Change Risk Assessment Fiscal Tool (Q-CRAFT), aligned with the Government's medium-term fiscal framework and the Debt Sustainability Analysis under the IMF program. - Q-CRAFT underlying assumptions were formulated during a 5-day workshop for government officials to build capacity for integrating climate fiscal risks into medium- and long-term fiscal planning. ### Report structure - Section 1: Progress in PIM reform since the 2022 assessment. - Section 2: Impacts of and long-term risks from climate change. - Section 3: Climate change goals and strategies, including Nationally Determined Contribution (NDC), 2019 National Environmental Act, and 2021 Climate Change Act (CCA). - Section 4: Detailed evaluation using the C-PIMA framework. - Section 5: Recommendations to strengthen Uganda’s PIM and fiscal risk practices for climate change. ### 2022 PIMA - key findings (institutional design, effectiveness, reform priority) - Overall: Uganda achieved significant improvements in public investment management; strong institutional design noted, effectiveness lagging institutional design. - Institutional scores summary (selected entries): - Planning: Fiscal targets and rules — Institutional Design: HIGH; Effectiveness: MEDIUM; Reform priority: MEDIUM - Planning: National and sectoral planning — Institutional Design: HIGH; Effectiveness: MEDIUM; Reform priority: MEDIUM - Planning: Coordination between entities — Institutional Design: MEDIUM; Effectiveness: MEDIUM; Reform priority: MEDIUM - Planning: Project appraisal — Institutional Design: HIGH; Effectiveness: MEDIUM; Reform priority: LOW - Allocation: Multi-year budgeting — Institutional Design: MEDIUM; Effectiveness: LOW; Reform priority: HIGH - Allocation: Budget comprehensiveness and unity — Institutional Design: HIGH; Effectiveness: HIGH; Reform priority: LOW - Allocation: Budgeting for investment — Institutional Design: MEDIUM; Effectiveness: LOW; Reform priority: HIGH - Allocation: Maintenance funding — Institutional Design: LOW; Effectiveness: LOW; Reform priority: HIGH - Allocation: Project selection — Institutional Design: HIGH; Effectiveness: MEDIUM; Reform priority: LOW - Implementation: Procurement — Institutional Design: HIGH; Effectiveness: MEDIUM; Reform priority: LOW - Implementation: Availability of funding — Institutional Design: MEDIUM; Effectiveness: LOW; Reform priority: HIGH - Implementation: Portfolio management and oversight — Institutional Design: HIGH; Effectiveness: LOW; Reform priority: HIGH - Implementation: Management of project implementation — Institutional Design: MEDIUM; Effectiveness: MEDIUM; Reform priority: MEDIUM - Implementation: Monitoring of public assets — Institutional Design: LOW; Effectiveness: LOW; Reform priority: HIGH ### Recent developments in Public Investment Management (PIM) - Planning phase: - An updated Manual for Project Preparation and Appraisal is planned; timetable not yet decided. - An updated PIM policy forwarded to Cabinet; expected adoption by the end of 2023. - Allocation phase: - June 2023 Guidelines for compiling multi-year commitments aim to improve medium-term budgeting, budgeting for investment, and availability of funding by recording long-term commitments in a Multi-Year Project Commitment Template. - Implementation phase: - Accountant General Office (AGO) consolidating asset information from MDAs and LG to include in FY22/23 financial statements; asset registration through IFMIS when procured is new and will take time to be comprehensive. - PAP upgrading the Integrated Bank of Projects (IBP) to include a project monitoring and evaluation module; the monitoring module is not yet used by BMAU due to inconsistent coding and lack of interfaces with PBS and IFMIS; inability to upload project implementation data directly from IFMIS; line ministries reluctant to provide data directly into the new system. - Harmonization of IBP coding with IFMIS required; alignment with NDP III 2020/21-2024/25 program approach. ### Implementation status of 2022 PIMA recommendations (selected entries) - A. Planning - Ensure costs of the 18 overarching programs are reconciled with total cost of projects within a realistic fiscal framework. - Priority: Medium - Implementation status: In progress. Following the Midterm review of NDP III, MoFPED and NPA reprioritized interventions of the Program Implementation Action Plans (PIAPs) consistent with the fiscal framework. This should be done in preparation of the NDP IV cycle to begin this year. - Update the Manual for Project Preparation and Appraisal to incorporate climate change issues; develop sector-specific manuals; strengthen financing of pre-investment studies. - Priority: Medium - Implementation status: Not implemented. PAP is planning to update the manual, incorporating this recommendation and inputs from a stakeholder survey. Work has commenced on program specific manuals and financing for pre-investment studies will be undertaken through the Project Preparation Facility (PPF) under NPA. Development of the Governance framework for the PPF is in advanced stages. - Allocate responsibility for review and analysis of PC annual financial statements and investment projects and publish an annual PC performance report. - Priority: Medium - Implementation status: Not implemented. No changes so far. - Identify and report information related to PPP-related contingent liabilities, particularly in the energy sector from contracts signed before the 2015 law. - Priority: Medium - Implementation status: Not implemented. No changes so far. - B. Allocating Investments - Publish complete project costs and multiyear projections, include cost revisions, in the budget annexes, and systemize via the IBP. - Priority: High - Implementation status: In progress. June 2023 guidelines for multi-year commitments will facilitate more comprehensive disclosure of project costs. - Integrate multi-year commitment process into mainstream budget review and expedite IT system interfaces for accuracy and recording. - Priority: High - Implementation status: In progress. June 2023 guidelines will strengthen budget review process. - Strengthen methodologies for assessing routine and capital maintenance needs and give higher priority to maintenance funding. - Priority: High - Implementation status: Not implemented. No changes so far. - C. Implementing Investments - Ensure predictable budget releases for investment projects by enhancing realism of annual Budget and MTEF and instituting active cash management. - Priority: High - Implementation status: In progress. June 2023 guidelines will help enhance realism of annual budgets and in-year cash plans. - Strengthen investment portfolio monitoring to be forward-looking, based on explicit project baselines, and identify projects at risk. - Priority: High - Implementation status: In progress. IBP is being upgraded to support more pro-active project monitoring, though limited interfaces with other IT systems will continue to undermine effectiveness. - Develop comprehensive assets register, including all infrastructure assets, starting with existing available databases. - Priority: High - Implementation status: In progress. MOFPED is consolidating asset information from MDAs and LG and will provide a full balance sheet in the FY22/23 financial statements. - D. Cross-Cutting Issues - Strengthen legal framework for effective PIM, including amendment of the PFM Act to include a chapter on PIM (or a separate PIM law) and legal reform to address land use and right-of-way challenges. - Priority: High - Implementation status: In progress. Current land policy review will provide a basis for updating land use legislation. - Integrate IT systems for monitoring and evaluation to avoid duplication and make better use of data (NPA M&E, IBP, IFMS, PBS, e-Procurement, OPM). - Priority: Medium - Implementation status: In progress. Integration pursued but requires harmonization of coding structures. ### Climate change trends in Uganda — recent observations - Climate context: - Uganda average temperature: 23.3 degrees Celsius. - Temperature range: minimum 17.2 degrees Celsius; maximum 29.4 degrees Celsius. - Northern region (making up a quarter of the country) has one rainy season from March to October; remainder has two rainy seasons. - Susceptible to El Niño, which increases likelihood of heavier rains and flooding during the rainy season. - Observed changes: - Average temperatures have increased by 1.3 degrees Celsius since the 1950s. - Annual rainfall has lessened (World Bank 2021 Uganda Climate Risk Country Profile). - No clear trend in mean 1-day precipitation, but annual number of consecutive days of rain has decreased significantly. - Data sources cited: World Bank Climate Change Knowledge Portal; Massetti, Emanuele, and Filippos Tagklis, 2023 (FAD-CP climate dataset guidance note). ### Future climate change scenarios (temperature and precipitation projections) - Overview: Temperatures projected to increase under climate scenarios; global increase may be between 0.7 and 3.5 degrees Celsius by the end of the century depending on mitigation. - Table II.1 — Temperature Change (Degrees Celsius) for Uganda and EAC (preserve values as presented) - Paris: SSP1-2.6 (aims to limit global temperature rise to below 2°C above pre-industrial levels by end of century) - 2021-2050: Uganda 0.6; EAC 0.8 - 2021-2100: Uganda 0.6; EAC 0.7 - Moderate: SSP2-4.5 (emissions follow current trends, peaking and stabilizing by end of century) - 2021-2050: Uganda 0.9; EAC 0.9 - 2021-2100: Uganda 1.7; EAC 1.8 - High: SSP3-7.0 (countries reduce current mitigation efforts; limited energy efficiency improvements; continued reliance on fossil fuels) - 2021-2050: Uganda 1.0; EAC 1.1 - 2021-2100: Uganda 3.3; EAC 3.3 - Hot: SSP3-7.0, 90th percentile (follows SSP3-7.0 emissions, but uses 90th percentile of temperature increase among climate models) - 2021-2050: Uganda 1.2; EAC 1.4 - 2021-2100: Uganda 4.0; EAC 4.5 - Precipitation projections: - Precipitation trends are highly uncertain. - Indication of likely increase in precipitation amount during the wettest days by the end of the century. - Figures presented for projected annual precipitation and precipitation amount on wettest days (World Bank Climate Change Knowledge Portal). ### Climate-related hazards and vulnerability - Disaster profile (1985 to 2021, World Bank Climate Risk Country Profile 2021): - Floodings and epidemics accounted for approximately 75 percent of recorded natural disaster events. - Four other climate-related natural disasters accounted for the remaining 25 percent. - Droughts represented 7 percent of total disasters but caused the most significant economic, social, and humanitarian effects. - Population and drought impacts: - Population growth: 22.5 million in 2002 to 48.9 million in 2021. - Between 2002 and 2010, droughts impacted over 3 million Ugandans. - The 2016/17 drought impacted more than 1 million people; according to authorities, GDP growth declined with 3.1 percent (note: number of people impacted by the 2016/17 drought not available for the referenced graph). *Source: IMF Technical Assistance Report (tarea2024012) — analysis of climate sensitivity of Uganda’s Public Financial Management framework and PIM, including C-PIMA and Q-CRAFT assessments.* ### 18. Uganda’s vulnerability makes it imperative for the country to take steps to adapt to climate ### tarea2024012 - 18. Uganda’s vulnerability makes it imperative for the country to take steps to adapt to climate ### Vulnerability and context - Uganda is highly vulnerable to climate change; ND GAIN index ranks Uganda as the 171st of 183 countries. - Relative to other SSA countries, Uganda is ranked as relatively vulnerable (37th out of 44). - Country-specific drivers of vulnerability highlighted: - High level of poverty. - Dependency on weather-sensitive sectors like agriculture and fisheries. - Non-climate factors: challenges in building infrastructure to handle a quickly increasing population and rapid urbanization. ### C. Analyzing Climate Change Fiscal Risks in Uganda - Climate change channels affecting growth and public finances: - Gradual environmental transformation (temperature increases, shifts in precipitation, more volatile weather). - More frequent and severe natural disasters (sudden-impact events such as floods; slow-onset events such as droughts). - Macroeconomic impacts include slowed productivity growth through reduced availability and effectiveness of capital and labor, especially in climate-sensitive sectors like agriculture. - Fiscal impacts include tax revenue loss, unexpected expenditure on relief/recovery/reconstruction, and triggered contingent liabilities (e.g., PPPs, guarantees). - Long-term fiscal analysis rationale: - Economic effects of climate change build slowly and may be invisible within the budget cycle or medium-term fiscal framework. - Quantitative analysis under different climate scenarios informs policymaking and helps balance long-term commitments with other fiscal pressures. - Workshop and capacity building: - A five-day technical workshop was conducted for MoFPED officials covering macroeconomic and specific risks. - Tools and outputs: - Use of Q-CRAFT to quantify macroeconomic fiscal risks over the long term (results discussed in Section II.D and Annex II). - Development of the Specific Climate Assessment Risk Framework (SCARF) to identify and qualitatively assess specific fiscal risks across the public sector (details in Section II.E and Annex III). ### D. Quantifying Fiscal Risks from Climate Change - Scenario overview: - Paris (agreement consistent) and moderate climate scenarios present limited deviations from baseline (not discussed extensively). - High and hot scenarios present materially worse outcomes; the hot scenario is emphasized as a pessimistic-yet-plausible boundary for worst-case outcomes. - Macroeconomic projection headline: - Under a pessimistic-yet-plausible ‘hot’ climate scenario, climate change negatively impacts Uganda’s economy, with a 4 percent reduction of nominal GDP by the end of the century. - Fiscal outcomes and debt dynamics: - Climate change worsens public finances as severity increases: - Public debt rises by over 18 percent of GDP in the hot scenario compared to the baseline. - In both high and hot scenarios, public debt surpasses the 50 percent of GDP fiscal rule ceiling and follows an unsustainable upward trajectory. - By the end of the century, the primary deficit in the hot scenario is projected to be 0.7 percent of GDP worse than the baseline. - Fiscal balances and interest costs: - The divergence between primary balance and overall balance is attributed to rising interest costs stemming from deficits incurred due to climate change. - Table II.2. Debt-to-GDP Ratio (percent) Under Different Climate Scenarios - 2023 | 2050 | 2075 | 2099 - Baseline: 47.1 | 36.2 | 35.8 | 47.5 - Paris: | 35.8 | 34.4 | 44.9 - Moderate: | 36.2 | 35.9 | 47.6 - High: | 37.0 | 39.2 | 55.7 - Hot: | 37.9 | 43.5 | 65.9 - Slower adaptation effects: - Slow adaptation can exacerbate macroeconomic and fiscal effects of climate change. - No country-specific econometric analysis currently links adaptation investments to macroeconomic/fiscal outcomes, but C-PIMA recommendations (e.g., inclusion of climate considerations in public investment appraisal) can reduce GDP and fiscal losses from climate-related disasters. - Simulation example: in the hot scenario, if primary expenditure is reduced annually in line with half of the lost revenue, the debt-to-GDP ratio rises by less than 10 percentage points relative to the baseline in 2099; however, this carries the risk of reducing development spending. - Table II.3. Debt-Stabilizing Primary Balance, 2099 (All in percent of GDP) - Rows: Primary Balance | Debt-stabilizing primary balance* | Primary balance gap** - Baseline: -1.4 | -0.6 | 0.8 - High: -1.6 | -0.6 | 1.0 - Hot: -1.8 | -0.6 | 1.2 - Hot with slow adaptation: -2.3 | -0.8 | 1.5 - Hot with slow adaptation and expenditure adjustment***: -1.8 | -0.7 | 1.1 - Notes: - *Debt-stabilizing primary balance: total fiscal adjustment required to maintain the debt-GDP ratio at the year’s debt-to-GDP level. A negative value indicates fiscal space available before debt starts rising. - **Primary balance gap: fiscal adjustment needed to achieve the debt-stabilizing primary balance compared to the primary balance. - ***Expenditure adjustment means reducing primary expenditure by half of the revenue loss. ### Policy implications from quantification - Early action and a robust budgetary framework are essential to prevent worsening public finances due to climate change. - The framework should allow government adjustments to spending in response to reduced revenues caused by climate change. - Projections assume spending under climate scenarios remains at baseline levels; this emphasizes the importance of early fiscal adjustments since assuming no adjustment may exaggerate fiscal impacts. - Enhancing resilience reduces the likelihood of authorities cutting spending on vital development priorities such as education and healthcare. - Methodological note: - The Q-CRAFT methodology can inform long-term fiscal planning by quantifying how climate change affects debt-to-GDP ratios and their growth rates, making debt stabilization more challenging under severe scenarios. ### E. Specific Climate Change Fiscal Risks - Nature of specific fiscal risks: - More frequent and severe natural disasters may trigger contingencies involving SOEs, sub-national government finances, and PPPs. - Realization of these specific fiscal risks can lead to revenue losses or increased primary expenditure. - SCARF framework application: - During the workshop, SCARF was used to identify and analyze specific fiscal risks from hazards such as floods, droughts, and landslides across sectors: water, energy, transport, agriculture, and education. - The framework enables classification of specific fiscal risks consistent with international good practices for fiscal risk classification. - Workshop conclusion: specific fiscal risks in several sectors are likely to be correlated and exacerbated with climate change. - Box II.2 — Key characteristics of specific climate change fiscal risks: - Climate-related hazards identified as potential contingent-liability triggers: drought, diseases epidemics, fire, flood, landslide, precipitation, storm, and temperature. - Contingent liabilities: - Explicit contingent liabilities arise from specific commitments (contracts, laws, defined policies) that become due when an event occurs (example: government obligation to buy electricity if a hydroelectric dam under-produces due to low water levels). - Implicit contingent liabilities arise from moral obligation, prior commitments, or public expectations/political pressure (example: government assistance to small farmers to rebuild after a severe flood without prior contractual obligation). - Fiscal risks can have direct impacts (natural disaster disrupts productivity leading to lost government revenue) or indirect impacts (default on an agricultural guarantee or a SOE default). ### III. Climate Change Objectives and Strategies - Nationally Determined Contribution (NDC) 2022 highlights: - Adaptation: NDC covers 13 sectors with 48 priority adaptation actions and 82 indicators with targets for 2025 and 2030. - GHG mitigation target: implement policies and measures to achieve a 24.7 percent reduction of national GHG emissions below the BAU trajectory in 2030, to 112.1 MtCO2e. - Unconditional target: 5.9 percent reduction compared to BAU. - Remaining 18.8 percent reduction is dependent on external support being available. - Emissions and sectoral emphasis: - Forestry and other land use dominate GHG emissions in Uganda’s BAU emission scenario. - AFOLU (agriculture, forestry, and other land use) will account for an equally dominating share of GHG mitigation under the NDC. - Policy and institutional framework: - The climate objectives are supported by a comprehensive framework of laws, strategies, policy documents, and technical guidelines developed over several years (starting with the National Adaptation Programme of Action in 2007). - Table III.1 highlights key strategies and institutions: - Vision 2040 (2013): identifies climate change as a key challenge and includes objectives to investigate impacts and develop adaptation/mitigation measures. - National Development Plan III (2020): objective to "Promote inclusive climate resilient and low emissions development at all levels"; identifies 69 core projects; includes measures such as capacity building, natural resource accounting, mainstreaming climate resilience in programs and budgets, developing bankable carbon projects, and introducing climate and green bonds. - Nationally Determined Contribution (2022): adaptation actions across multiple sectors; 24.7% GHG reduction target; estimated cost of the NDC is 28.1 billion USD (26 percent of 2022 GDP). - Guidelines on integrating climate change in sector plans and budgets (2014). - Climate Change Policy (2015). - Disaster risk management strategy (2022): comprehensive national DRM plan and Standard Operating procedures linked to NDP. - Sector strategies and masterplans: climate explicitly covered in agriculture, transport, water and environment, electricity, Green Growth Development Strategy, National Risk and Vulnerability Atlas. - District strategies and masterplans: examples include Kampala Climate Change Action Strategy and Kampala Capital City Multi-Hazard Risk Book. - Institutional responsibilities: - Climate Change Department, MOWE (CCD): main coordinating department as defined in the 2021 National Climate Change Act; reviews Budget Framework Papers for CCA consistency and certifies budgets. - Ministry of Finance, Planning and Economic Development (MOFPED): provides guidance on climate analysis in budget submissions; provides climate certification of the budget to Parliament. - National Planning Authority (NPA): responsible for national plans and strategies; advises MOFPED on climate certification of the budget. - DRDPM, Prime Minister’s Office: lead agency coordinating disaster risk management stakeholders. - National Environment Management Authority: provides guidance and approves ESIAs including climate impacts. - Sector ministries: per the CCA, lead agencies establish mitigation, adaptation, and compatibility standards, measures, and performance levels. *Source: IMF Technical Assistance Report* ### 31. Climate policies, national and sector strategies identify several public investments that ### tarea2024012 - 31. Climate policies, national and sector strategies identify several public investments that ### Climate-relevant projects in NDP III - Most projects in the sectors Natural Resources, Transport, and Energy have direct or indirect linkages to climate change. - Many projects currently funded by the national budget; scaling-up envisaged in NDP III is dependent on external funding. - Many NDP III core projects are identified in the NDC; some are covered by NDC quantitative targets (e.g., roads and transmission lines). - Examples of climate-relevant investment projects in NDP III (sector — project — Status — In NDC?): - Natural Resources, Environment, Climate Change, Land and Water Management - National Community Tree Planting Project — Project idea — Yes - Support to rural water supply and sanitation project. — Feasibility — Yes - Building Resilient Communities, Wetland Ecosystems and Catchments — Ongoing — Yes - Comprehensive inventory of Land — Project idea — No - Integrated Transport Infrastructure and Services - Regional Trade Roads — Project idea — No - Community Roads Improvement Project (Total 7,905 Kms) — Feasibility — Yes - Rehabilitation of the Meter Gauge Railway (Relief of Road Transport) — Feasibility — Yes - Kampala-Jinja Express Highway — Procurement — Yes - Kibuye – Busega Express Highway — Procurement — Yes - Busega – Mpigi Expressway — Ongoing — Yes - Kampala Flyover Construction and Road Upgrading Project — Ongoing — Yes - Iganga-Bulopa/Buwenge-Kaliro/Bugembe-Kakira-Bulongo — Feasibility and design — Yes - Rwenkunye-Apac-Lira — Procurement — Yes - Bukasa Inland Port (Connect to Kisumu and Mwanza ports through Victoria) — Feasibility and design — No - Bridge Project (including Karuma, Laropi, Mpondwe, and Semliki Bridges) — Feasibility and design — No - Improvement of Ferry Services Project — Ongoing — No - Energy development - LPG Infrastructure Development Project — Feasibility — Yes - Ayago (840MW), Oriang HPP (392MW), Kiba HPP (330MW) — Feasibility — Yes - Industrial Substations Upgrade — Ongoing — Yes - Masaka – Mwanza 220kV; — Concept — Yes - Nkenda – Mpondwe – Beni 220kV — Concept — Yes - Olwiyo – Nimule – Juba 400kV — Ongoing — Yes - Grid Extension in Northeast, Lira and Buvuma — Concept — Yes - Kabaale-Mirama Transmission Line — Ongoing — Yes - Masaka -Mbarara Grid Expansion Line (400kv); — Ongoing — Yes - Opuyo-Moroto 220Kv — Project idea — Yes ### Climate PIMA Framework (overview) - The Climate PIMA assesses five key public investment management practices from a climate change perspective and extends the existing PIMA framework. - Five specific institutions/issues covered: - C1. Climate-aware planning: Is public investment planned from a climate change perspective? - C2. Coordination across public sector: Is there effective coordination of decision making on climate change-related public investment across the public sector? - C3. Project appraisal and selection: Do project appraisal and selection include climate-related analysis and criteria? - C4. Budgeting and portfolio management: Is climate-related investment spending clearly identified in the budget and subject to active management and oversight? - C5. Risk management: Are fiscal risks relating to climate change and infrastructure incorporated in budgets and fiscal risk analysis and managed according to a plan? ### Detailed Assessment — Uganda - Overall observation: - The Climate PIMA framework elements described are supported by annexes: C-PIMA Questionnaire (Annex IV) and detailed C-PIMA scores (Annex V). - C1. Climate-Aware Planning (Strength—High; Reform Priority—Low) - Findings: - Uganda has a comprehensive framework for strategic planning and NDC objectives and targets are effectively integrated in this framework. - The 2022 PIMA found institutional design for national and sectoral planning was highly developed. - Climate change is well reflected in national development strategies; sector strategies give explicit consideration to climate change issues. - Sector strategy highlights (Box IV.1): - National Adaptation Plan for Agriculture 2018: vulnerability analyses and proposed adaptation actions for agriculture-related sub-sectors; coordination arrangements and resource mobilization strategies. - Water and Environment strategic sector investment plan 2018: estimates funding needed over the next 10 years for sector targets including climate change-related; indicates outcome targets for the climate change subsector are unlikely to be met under realistic funding levels. - Grid Development Plan 2018 – 2040: identifies grid investments; considers three scenarios for future power demand: the base case (extension of historic trends), the NDP III scenario, and the Vision 2040 scenario. - Green Growth Development Strategy 2018 – 2030: full implementation of the “green growth” scenario will enhance GDP by on average 1 percent beyond the BAU target each year, deliver an additional 3.4 million green jobs (about 60 percent of them permanent), and reduce greenhouse gas emissions by 28 percent relative to the conventional growth pathway. - Regulatory and data tools: - National Building Code (Section V) covers environmental protection and energy efficiency; defines four climactic zones and prescribes energy-efficient and climate-resilient building guidance. - 2019 National Risk and Vulnerability Atlas of Uganda (NRVA): detailed overview of geographic risks; used for land use planning and infrastructure exposure mapping. NRVA does not describe future changes in risks and vulnerabilities related to climate change, and there is no legal requirement to explicitly include climate aspects in land use planning. - National Building Code Environmental Objectives (Paragraph 138 of the National Building Code): - a) To achieve a rational use of the energy and natural resources required for the construction, operation, and demolition of buildings ..... - b) To guarantee the right to sustainable cities and safeguard a healthy and comfortable urban environment .... - c) To offer orientation to built environment professionals in Uganda a standard with which to deliver energy and resource efficient solutions .... - d) To provide technical tools that take account of the various climatic conditions in Uganda .... - e) To promote quality of the built environment through parameters and requirements ... - f) To incorporate criteria to reduce energy consumption and promotion of energy and resource efficiency in building .... - Guidelines and process: - 2014 Guidelines on the integration of climate change in sector plans and budgets: provide extensive strategic guidance; emphasize importance of costing but do not provide a specific costing methodology. - Figure IV.2 six steps agencies should follow (per 2014 Guidelines): - Assess climate change impact and vulnerability - Identify and analyze mitigation and adaptation options - Identify and cost programs and actions - Design and implement a plan for mainstreaming - Monitor the implementation process - Evaluate performance and assess results - Assessment and recommendations: - Strong framework for climate-aware planning but effectiveness could be enhanced by: - More targeted inclusion of projects in national and sector plans to focus scarce development resources on projects likely to be realized. - Updating land use legislation to require explicit use of natural hazards risk assessments in planning. - Updating the NRVA to reflect changes in risks and vulnerabilities due to future climate change. - Future institutional reforms in this area are a low priority relative to other reforms; however, improvements in systematic climate analysis in project appraisal (institution C3) and identification of climate-related spending in budgets are needed to strengthen effectiveness. - C2. Coordination Between Entities (Strength—High; Reform Priority—Low) - Findings: - Strong mechanisms for coordination of decision-making on climate-sensitive central government investments, including a requirement for climate certification of annual work programs and for the overall budget. - Article 30 of the CCA amends the Public Finance Act: requires the Minister of Finance, in consultation with the Chairperson of the National Planning Authority, to certify that the Budget Framework Paper is climate change responsive and contains adequate allocation for funding climate change measures and actions; certification based on evaluation of all votes of the Budget Framework Paper. Extrabudgetary entities and externally financed projects are reflected in the budget and covered by this provision. - The 2nd Budget Call Circular for FY23/24 specifies MDAs should submit their Budget Policy Papers to the Ministry of Water and Environment (MoWE) to facilitate certification; Policy Statements should include clear interventions for environmental conservation and mitigation of and adaptation to climate change effects, define workplans with clear outputs and outcome, and allocate sufficient resources. - Article 5 of the CCA: Climate Change Department in MoWE shall develop a Framework Strategy on Climate Change within one year after approval of the Act. - Article 6 of the CCA: Climate Change Department shall develop a National Climate Change Action Plan within the same timeframe. - Article 7: Lead agencies should develop their own action plans based on the Framework Strategy and the National Action Plan (no specific timeframe for lead agency action plans). - Article 8: Districts required to prepare their own climate change action plans within one year after the National Action Plan. - Local governments and public corporations: - Local governments participate in program workshops early in the budget process; LGs funded only 3 percent of public investment in FY22/23. - LG budgets are not yet subject to MoWE climate certification, but most regional investment is centrally funded and covered by certification. - Some LGs (e.g., Kampala Capital City Authority) have prepared comprehensive climate risk analyses and action plans. - Public corporations’ investments largely financed from the budget and subject to the same appraisal mechanism and coordination framework as central government investments; PCs participated in program workshops and coordinate with parent ministries. Public corporations funded 3 percent of public investment in FY22/23. - Assessment and recommendations: - Institutional design for coordination is very strong, particularly within central government, but effectiveness remains to be tested. - Need to strengthen identification of climate-related investments in the budget to provide a clear basis for climate certification and possibly issue precise guidelines on factors the climate certification should cover. - Effectiveness of the NDC (serving as the National Climate Change Action Plan) will depend critically on external financing, affecting sector and district coordination. - No urgent need for additional institutional reforms in coordination; priority is effective implementation and enhanced systematic climate analysis in project appraisal and selection (institution C3). - C3. Project Appraisal and Selection (Strength—Low; Reform Priority—High) - Finding introduced: there are weaknesses in systematic approaches to climate analysis in project appraisal and selection; many MDAs include some climate analysis elements but not based on standard methodologies and approaches (further discussion continues in the document beyond the provided excerpt). *Sources: NDP III, NDC 2022* ### 45. Assessment of climate change impacts for major investment projects, using a ### Assessment of climate change impacts for major investment projects, using a standardized methodology ### Project appraisal framework and climate inclusion - Since 2016 a strong framework for project appraisal requires all major capital projects to be subject to rigorous technical, economic, and financial analysis and review by the Development Committee (DC), but there is no specific inclusion of climate change in the assessment criteria (2022 PIMA Report). - The environment appraisal requirement in the DC Guidelines focuses on the economic effects of environmental norms and possible compensations for ecological damages but not the potential impact of the environment on the feasibility of the project. - Formalizing the requirement to consider both: - the effect of climate change on projects (vulnerability, adaptation needs), and - the climate change impacts of the projects themselves (e.g., emissions), and providing guidance on how to do this, would strengthen the appraisal process. - An update of the 2017 DC Guidelines is planned to be completed by June 2024 and builds on a review undertaken by The Makerere School of Economics; the review provides an opportunity to introduce climate change in project appraisal and to the review process led by the DC. - Recommendation: The DC should routinely review the ESIA of significant projects. Annex VI provides guidance on climate change and project appraisal. ### Public-Private Partnerships (PPPs) and climate risk - The PPP assessment framework does not consistently include explicit consideration of climate change for risk allocation or contract management. - The 2015 PPP Act, 2019 PPP Regulations, and the National PPP Guidelines define the PPP framework but do not require a climate change impact assessment. The 2023 PPP Guidelines for Local Governments include climate change considerations. - Climate change considerations are only required by regulation for local government-led projects; National Government projects at appraisal reportedly follow LG guidance as a baseline. - Legacy PPP contracts signed prior to the 2015 PPP Act can allocate climate-related risks to the government (example: take or pay arrangements under PPA contracts require government payment for generation capacity even if low water levels prevent operation). - Recommendation: Strengthen PPP appraisal to explicitly analyze climate-related risks, risk allocation, and contract management for both legacy and new PPPs. ### Environmental and Social Impact Assessment (ESIA) practices - The ESIA could be the vehicle to better assess: - project impacts on climate change (e.g., emissions), and - climate change-related impacts on the project (e.g., design requirements). - The 2019 National Environment Act makes limited mention of climate change. - Related regulation and guidelines require assessment of climate change-related impacts (vulnerability, proposed adaptation and mitigation measures), but this exists outside the DC Guidelines and stakeholders are generally unaware of the requirements. - Recommendation: Harmonize DC Guidelines and ESIA requirements; sensitize stakeholders to ensure compliance and practical application of climate analysis in ESIA. ### Ad hoc and sectoral integration of climate considerations - Climate change analysis is being introduced slowly and ad hoc into project appraisal, with larger uptake in some MDAs (notably energy) and in response to natural disasters (e.g., roads sector considering climate impacts in asset replacement designs). - Box IV.3 examples of climate considerations in project design: - Existing assets resilience: Katonga Bridge redesign after 2023 flooding included climate projections and material choices. - Project planning: oil refinery site selected to minimize climate impact; hydropower plants consider water sufficiency. - Updating regulation: Part 5 of the Building Code requires consideration of climate aspects; schedules 4 and 5 specify related assessments. - Information availability: Meteorological Department provides forecasts (rainfall, wind) to MDAs for design and standards updates. - Coordination with private partners: CCA 2021 and LG PPP Guidelines require climate mitigation/adaptation plans and compliance with adaptation/mitigation performance targets. - Climate and PPPs: climate to be considered at inception, feasibility, and implementation stages with monitoring of GHG emissions and compliance. ### Project selection criteria and budgetary linkages - There are no explicit climate change criteria used by the government for selection of projects; DC guidelines include strategic fit, project readiness, and social and environmental impact, but do not reference climate change impacts on projects (2022 PIMA). - Budget Circulars for FY23/24 and FY24/25 require MDAs to consider climate change when preparing budgets; Budget Guidelines require a minimum of 3 per cent of the budget to be spent on climate related activities. - The Climate Change Department (CCD) in MoWE reviews budgets for compliance and must certify relevant spending/projects as climate responsive, but the MoWE can only provide recommendations and cannot reject proposals. ### Budgeting, tagging, and portfolio management - Using available FY23/24 documents, mission team estimates indicate Uganda allocates 3.6 percent of its budget to major climate-related investment projects. - The MoFPED introduced climate budget tagging for the FY23/24 Budget; output codes created (PBS output codes 000089 and 000090) identify climate change mitigation and adaptation interventions but: - the output codes fail to differentiate between current and investment spending, - limited guidance led to low uptake by MDAs: only thirteen entities provided information under these codes, and key sectors such as energy, transport, and water did not complete the exercise. - The documents (NDP III, Public Investment Action Plan, PIP, annual budget) allow identification of some climate-related investment projects, but do not provide a consolidated view or a summary report of climate change-related projects. - Recommendation: Improve tagging guidance, scrutiny by MoFPED, and IT systems to enable reporting on budgeting and execution of climate-related current and development expenditures. ### Audits, asset management, and climate information - The 2008 National Audit Law requires environmental audits of projects involving public funds, but these are not undertaken systematically, focus on regulatory compliance, and do not identify climate-related impacts. - The OAG committed in the FY21-25 Strategic Plan to undertake at least one environment value-for-money audit annually; historically audits focus on compliance (EIA, environmental management plans) rather than climate impacts on infrastructure. - Asset management improvements do not yet cover climate change impacts: - All public agencies maintain asset registers, but registers lack information on exposure and vulnerability to climate change; asset cost data is unreliable. - A public asset census is planned to complement and validate decentralized registers; annual surveys required by the PFM Act should support upkeep. - Recommendation: Improve asset registers to include exposure to climate risks, update Asset Management Framework and Guidelines to include climate vulnerability, and adopt maintenance methodologies that consider climate impacts. - Recommendation: AOU should annually audit one investment project from a climate change perspective to evaluate achievements and trigger corrective actions (as with Kampala-Entebbe Expressway audit). ### Disaster risk management (DRM) and financing - Uganda has strengthened its DRM framework with the 2021 DRM Policy, the NRVA, and the 2022 DRM Plan, but a DRM Bill is needed to define DRM definitions, roles, responsibilities (including for MoFPED), and to enable disaster risk financing instruments. - The NRVA provides current exposure information to natural hazards, including exposure of public sector assets across sectors (road network, education, energy, health, police, water and environment). Future NRVA updates could incorporate forward-looking perspectives on how climate change may alter risks to public infrastructure. - Financing and contingency: - Article 157 of the Constitution and section 26 of the PFMA 2015 (as amended) mandate a Contingency Fund (CF) to finance responses to natural disasters – constituting 0.5 percent of the previous fiscal year’s appropriated government budget. - The 2022 World Bank Disaster Risk Finance Diagnostic estimates annual disaster relief costs at USD 30.7 million, which is almost twice the median relief allocation of USD 18.5 million. - The domestic insurance market is underdeveloped; lack of insurance for government assets/public infrastructure creates contingent liabilities. - The government does not have a comprehensive database of costs of damages and losses from natural disasters, including public infrastructure; such data would inform DRM financing instruments and optimize CF sizing. - Recommendation: Develop a DRM Bill, compile a comprehensive disaster loss database, and design prearranged disaster risk financing instruments informed by expected losses. *Source: IMF Technical Assistance Report — mission team estimates and stakeholder meetings with relevant MDAs.* ### 59. Whilst the FRS discusses climate fiscal risks, it does not analyze climate change risks to ### tarea2024012 - 59. Whilst the FRS discusses climate fiscal risks, it does not analyze climate change risks to ### Climate fiscal risks and the Fiscal Risk Statement (FRS) - The FRS discusses climate fiscal risks and explores the relationship between macroeconomic factors and climate change, noting potential GDP losses due to climate effects. - The FRS does not analyze climate change risks to public infrastructure assets, nor does it analyze the fiscal risks of climate change concerning public investment spending or major investment programs and projects. - Much of the necessary data for such analysis exists within various government entities. - Recommendation (text): MoFPED could collaborate with government stakeholders to collect and analyze information, aiming to identify and analyze climate change fiscal risks; following the example of the MEM mentioned in the previous section. - A comprehensive information database would enable a more thorough assessment of climate change fiscal risk, which should be included in future FRS’s. ### Disaster risk management, financing, and disclosure - Uganda should develop a comprehensive disaster risk financing strategy and disclose the exposure of the government budget to climate change fiscal risks. - Progress noted: commendable progress to strengthen DRM framework; adoption of a DRM Bill could solidify roles, responsibilities, and disaster risk financing mechanisms. - The NRVA can evolve to include a forward-looking perspective on long-term climate-related risks to public infrastructure. - By compiling data on damages and losses to public infrastructure and other fiscal costs from climate-related disasters, the government can create a more comprehensive understanding of vulnerabilities and fiscal risks to incorporate into the FRS and use as a basis to develop a disaster risk financing strategy. ### Capacity building for climate-sensitive public investment - Capacity for climate-sensitive public investment is quite high in many parts of government due to conscious efforts. - Two strategic documents demonstrate this emphasis: - Climate Change Learning Strategy (goal: strengthen Human Resources and Skills to advance low-emission and climate-resilient development in Uganda). - Climate Change Communication Strategy (2017 – 2022) (main objective: increase and improve awareness, interest, positive attitudes, behaviors and practices towards climate change adaptation and mitigation). - Climate Change Learning Strategy action plan (seven main activities): - Activity 1: Enhance the capacity of the national UNFCCC and IPCC focal institutions. - Activity 2: Integrate climate change learning in the education curricula (primary, secondary, and tertiary education). - Activity 3: Support university and research institutions as leaders of excellence in climate change education. - Activity 4: Design and deliver short-term, medium-term, and long-term training programs in climate change. - Activity 5: Undertake regular assessment of climate change impacts including economic and non-economic aspects in different ecosystems. - Activity 6: Provide fellowships, scholarships, and undergraduate / graduate assistantships to support undergraduate, graduate, diploma. and postgraduate education including existing staff in leading institutions, to improve in climate change adaptation and mitigation in Uganda. - Activity 7: Promote education, research, and outreach programs. - Climate Change Communication Strategy six specific objectives: - Provide adequate information, education, and communication services for effective management of climate change vulnerabilities and risks among the public, vulnerable communities, and stakeholders. - Increase access and utilization of climate change information, knowledge, and learning. - Establish two-way communication mechanisms that are appropriate in terms of mode, channels, and language that is locally friendly. - Provide appropriate, relevant, and accurate information, content, and materials for diverse audiences on climate. - Enhance the capacity, competences, and skills of stakeholders in Uganda in climate change communication. - Build collaborations, partnerships, and coordination mechanisms for informing, educating, and communicating about climate change adaptation and mitigation issues. - Continued training is important to mitigate high staff turnover and to fill skills gaps; Makerere University and other training institutions play an important role. ### Legal and regulatory framework - The legal framework covering climate change and public investment is generally well developed; a selection of laws and coverage includes: - The Constitution of the Republic of Uganda, 1995: promotes sustainable development and public awareness to manage land, air, water resources. - The National Forestry and Tree Planting Act, 2003: aims to create an integrated forest sector for sustainable increases in economic, social, and environmental benefits from forests and trees. - National Audit Act, 2008: mandates the OAG to undertake environmental audits of any project or activity utilizing public funds. - The Land Act, 2012: provisions and procedures for ownership, control, and management of land, including dispute resolution. - PPP Act, 2015: comprehensive framework for PPPs, but does not require climate analysis. - Development Committee Guidelines, 2017: define appraisal and selection framework for public investment projects but does not require climate analysis. - National Environment Act, 2019: establishes framework for environmental management, impact assessment, reporting and compliance. - ESIA regulation, 2020: requires assessment of climate change-related impacts associated with a project, including potential climate benefits and carbon footprints, potential vulnerability to climate change, and proposed adaptation and mitigation measures. - Climate Change Act, 2021: defines legal framework for climate change response, including strategies, actional plans and lead agencies; defines department responsible for climate change, role of Environment Policy Committee and establishes a National Advisory Committee on Climate Change. - Public Finance Management Act, 2015, amended 2021: requires that the Minister of Finance in Consultation with the Chairperson of the National Planning Authority certifies that the budget submitted to Parliament is climate change responsive and includes adequate allocations for climate change measures and actions. - Need identified: update land use legislation to ensure clear legal requirements to consider climate change impacts (especially adaptation) in land use planning and management and to reduce land use and right-of-way conflicts that impede public investments. - The 2022 PIMA indicated lack of strong legislation in land use was a significant obstacle to effective implementation of investment projects. - Policy review should provide clear proposals for amendments to land use legislation and relevant regulations. ### IT systems and data management for climate-sensitive public investment - Key functions for climate-sensitive public investment are generally well covered by IT systems, but systems are not integrated or effectively interfaced, and data exchange mechanisms are inadequate. - Main systems important for climate change and public investment management: - Integrated Financial Management System (IFMS): supports bank reconciliation, payments, accounting and reporting by MDAs and LGs (web based except for remote locations). - Performance Budgeting System (PBS): supports budget preparation and performance reporting by MDAs and LGs. - Integrated Bank of Projects (IBP): registers all project information throughout the PIMS cycle (pre-investment, investment, and ex post evaluation). - Government Asset Management Information System (GAMIS): Asset Management (currently being rolled out to MDAs). - NDP Monitoring and Evaluation System: monitoring and evaluation of NDP III indicators and core projects. - e-GP: automated procurement system, being gradually rolled out to all MDAs. - Progress noted: interfaces established between IFMIS, PBS, and NDP monitoring systems; GAMIS will also be integrated with IFMIS. - Main remaining gap: integration between IBP and the other systems; likely necessary to update the coding structure in IBP to be consistent with other systems. ### Priority recommendations (Issues and targeted actions) - Issue 1: The IBP system is not effectively integrated with the IFMIS and other key information systems, undermining project budgeting and monitoring. - Recommendation 1: Harmonize the coding structure in the IBP with the IFMIS and other key systems and establish procedures for effective data sharing. (PAP, AGO, Budget – FY26/27) - Issue 2: Project appraisal and selection framework, including for national government PPPs, does not incorporate climate change issues. - Recommendation 2: Update the PIM framework to ensure climate change impact assessment is included within major project appraisal documentation and project selection criteria, including PPPs at national government level. - Update DC Guidelines to require consideration of climate change implications in project appraisal and align with ESIA requirements. (PAP, DC – Q3 FY23/24) - Revise National Guidelines for PPP Appraisal to include climate change (consistent with Local Government PPP Guidelines 2023) and update project risk matrix to include detailed climate change risks and preferred risk holder. (PPP Unit – end of FY25/26) - Incorporate climate change assessment in the specific DC project selection criteria. (DC – Q1FY25/26) - Issue 3: Climate change budget tagging exercise for FY23/24 does not provide a realistic picture of such expenses in the budget. - Recommendation 3: Further develop climate change budget tagging framework to differentiate between current and development expenditures and provide training for MDAs. (Budget, AGO – end of Q2FY24/25) - Review existing coding structure and adjust to differentiate between climate-related current and investment expenditures. - Develop detailed guidelines to help MDAs determine what recurrent and investment expenditures can be considered climate change related. - Issue 4: Asset registers are incomplete, unreliable, and do not include climate change considerations. - Recommendation 4: As part of AGO process to strengthen asset register information, compile information on vulnerability of key assets to climate change-driven hazards (AGO). - Update the AFMG to include information on exposure and vulnerability to climate change risks in the list of requirements. (End of FY24/25) - Relevant ministries for public investment should work with UNMA to cross map public assets location and hazards to inform project appraisals and define maintenance plan. (End of FY25/26) - Include climate change considerations in methodologies for costing asset maintenance. (End of 26/27) - Issue 5: OAG does not audit climate change adaptation or mitigation outcomes of major investment projects. - Recommendation 5: Expand scope of OAG audits to include audit of climate change adaptation or mitigation outcomes of major investment projects (OAG). - Define a methodology and criteria for audits from the climate-change perspective (Q1-FY24/25). - Identify major public investment projects to be subject to audit of climate change outcomes based on assets’ strategic value and climate vulnerability parameters (FY following methodology definition, i.e., Q2-FY24/25). - Issue 6: DRM framework is not consolidating and cross-referencing information on climate change risks to public sector assets. - Recommendation 6: Enhance DRM framework to consolidate existing sources of information on climate change to better inform climate change risks to public infrastructure. - Create a database documenting historical budgetary effects (relief, recovery, and reconstruction) from natural disasters (OPM – Q1-FY24/25). - Revise the NRVA to incorporate emerging climate change risks to public infrastructure (OPM – Q2-FY24/25). - Align DRM framework and fiscal risk analysis with these changes (OPM, MEPD – FY25/26). - Use the updated NRVA to inform development of the NDP IV (OPM – end of FY24/25). - Issue 7: Resource allocation to the contingency fund (CF) is insufficient to cover estimated impacts of climate change-related hazards on public infrastructure, causing frequent supplementary budgets. - Recommendation 7: Strengthen DRM financing by ensuring appropriate funding of the CF to cover expected impacts of natural hazards on public infrastructure and develop a disaster risk financing strategy (MoFPED – by end of FY25/26). - Develop an estimate of resources needed in the CF to finance expected government expenditure on public infrastructure impacted by natural disasters. - Based on historical data and forecast impact of natural disasters, develop an assessment of appropriate mechanisms for Uganda to finance its DRM. - Issue 8: The FRS does not disclose climate change fiscal risks, including risks related to public sector assets and long-term macroeconomic risks. - Recommendation 8: Expand the scope of the FRS to include qualitative and quantitative assessment of climate change fiscal risks, including for public sector assets and macroeconomic risks. - Discuss in the FRS the impacts of the long-term fiscal risks of climate change using Q-CRAFT or similar tools. (MEPD – Q3-FY23/24) - Discuss qualitatively the specific climate change-related fiscal risks to which public assets are exposed in Uganda. (MEPD – Q3-FY24/25) - Issue 9: Limited technical capacity at MoFPED and MDAs to assess climate change-related issues in PFM undermines implementation of proposed regulation. - Recommendation 9: Develop a capacity building plan for MoFPED and MDAs on assessing climate change-related issues to implement associated regulation. - Develop a capacity building program to enhance the climate change-related expenditure tagging exercise (Budget, AGO – Q1-FY24/25). - Provide further training on budget tagging for climate change, including identifying climate change-related recurrent and investment expenditure (Budget, AGO – every FY from FY23/24). - Develop training on managing climate change-related risks and how these should be reported in the FRS (MEDP – Q2-FY24/25). *Source: Mission* ### Annex I. Draft Action Plan ### Annex I. Draft Action Plan ### Recommendation 1. Harmonize the coding structure in the IBP with the IFMIS and other key systems and establish procedures for effective data sharing - Actions: - Complete a review the structure of the outcome codes in the IBP, PBS and IFMIS to identify differences. - Timeline: FY23/24 Q3 - Responsible Agency: PAP, AGO, Budget - Status marker in source:  - Finalize an action plan to address the inconsistencies in the codes. - Timeline: FY23/24 Q4 - Responsible Agency: PAP, AGO, Budget - Status marker:  - Update the IBP with the updated coding structure. - Timeline: FY24/25 Q1 - Responsible Agency: PAP - Status marker:  - Develop an interface to achieve a better integration of the three systems. - Timeline: FY24/25 Q2 - Responsible Agency: PAP - Status marker:  - Complete the integration of the three systems that support management of capital expenditures. - Timeline: FY24/25 Q4 (End of FY) - Responsible Agency: PAP, AGO, Budget - Status marker:  ### Recommendation 2. Update the PIM framework to include climate change impact assessment in project appraisal and selection (including PPPs) - Actions: - Update DC Guidelines to require consideration of climate change implications in the project appraisal and align with ESIA requirements. - Timeline: FY23/24 Q3 - Responsible Agency: PAP, DC - Status marker:  - Revise National Guidelines of PPP Appraisal to include climate change. - Timeline: FY23/24 Q4 - Responsible Agency: PPP Unit - Status marker:  - Update the PPP project risk matrix to include detailed climate change risks and preferred risk holder. - Timeline: FY24/25 Q1 - Responsible Agency: PPP Unit - Status marker:  - Incorporate climate change assessment in DC project selection criteria. - Timeline: FY24/25 Q1 - Responsible Agency: DC - Status marker:  ### Recommendation 3. Further develop the climate change budget tagging framework to ensure differentiation between current and development expenditures and provide training for MDAs - Actions: - Review the existing coding structure to address the limitations for tagging climate change-related expenditures. - Timeline: FY23/24 Q3 - Responsible Agency: Budget, AGO - Status marker:  - Adjust coding structure in the BPS and IFMIS to better differentiate between climate-related current and investment expenditures. - Timeline: FY24/25 Q4 (End of FY) - Responsible Agency: Budget, AGO - Status marker:  - Develop detailed guidelines that help MDAs determine what recurrent and investment expenditures can be considered climate change related. - Timeline: FY24/25 Q1 - Responsible Agency: Budget, AGO - Status marker:  - Develop a training program on identifying climate-related recurrent and investment expenditure. - Timeline: FY24/25 Q3 - Responsible Agency: Budget / Makerere - Status marker:  - Annual training for MDAs on the guidelines for climate-related budget tagging. - Timeline: FY24/25 Q4; FY25/26 Q3; FY25/26 Q4; FY26/27 End of FY (source shows repeated annual ticks) - Responsible Agency: Budget - Status markers:   (multiple years as indicated) - Develop and publish reports on climate-related expenditures to accompany the budget documentation. - Timeline: FY24/25 Q4; FY25/26 Q1; FY25/26 Q2; FY25/26 Q3 (source indicates repeated publication over multiple years) - Responsible Agency: Budget - Status markers:     ### Recommendation 4. Strengthen asset register information with vulnerability data to climate change-driven hazards - Actions: - Update the AFMG to include information on exposure and vulnerability to climate change risks in the list of requirements. - Timeline: FY24/25 Q3 - Responsible Agency: AGO - Status marker:  - Relevant ministries for public investment should work with UNMA to cross map their information on public assets location and hazards to inform project appraisals and define maintenance plan. - Timeline: FY24/25 Q4 - Responsible Agency: AGO - Status marker:  - Prepare a report identifying the key public assets exposed to climate change risks. - Timeline: FY25/26 Q1 - Responsible Agency: AGO - Status marker:  - Include climate change considerations in methodologies for costing asset maintenance. - Timeline: FY25/26 Q2 (End of FY in source alignment) - Responsible Agency: AGO - Status marker:  ### Recommendation 5. Expand OAG audits to include climate change adaptation/mitigation outcomes of major investment projects - Actions: - Define a methodology and criteria for audits from the climate-change perspective. - Timeline: FY23/24 Q3 - Responsible Agency: OAG - Status marker:  - Identify at least one major public investment project that should be subject to an audit of climate change outcomes based on assets’ strategic value and climate vulnerability parameters. - Timeline: FY23/24 Q4 - Responsible Agency: OAG - Status marker:  - At least biannually, complete a performance audit of the climate change adaptation or mitigation outcomes of major investment projects. - Timeline: FY25/26 Q3 and FY26/27 End of FY (source indicates biannual audits with ticks in later years) - Responsible Agency: OAG - Status markers:   ### Recommendation 6. Enhance the DRM framework to consolidate climate change information for assessing risks to public infrastructure - Actions: - Create a database documenting historical budgetary effects (relief, recovery, and reconstruction) from natural disasters. - Timeline: FY23/24 Q3 - Responsible Agency: OPM - Status marker:  - Revise the NRVA to incorporate emerging climate change risks to public infrastructure. - Timeline: FY23/24 Q4 - Responsible Agency: OPM - Status marker:  - Align the DRM framework and fiscal risk analysis with these changes. - Timeline: FY24/25 Q1 - Responsible Agency: OPM/MEPD - Status marker:  - Use the updated NRVA to inform the development of the NDP IV. - Timeline: FY24/25 Q2 - Responsible Agency: OPM - Status marker:  ### Recommendation 7. Strengthen DRM financing: fund the CF adequately and develop a disaster risk financing strategy - Actions: - Develop an estimate of the resources needed in the CF to finance expected government expenditure on public infrastructure impacted by natural disasters. - Timeline: FY23/24 Q3 - Responsible Agency: MoFPED - Status marker:  - Based on historical data and forecast impact of natural disasters, develop an assessment of the appropriate mechanisms for Uganda to finance its DRM. - Timeline: FY23/24 Q4 - Responsible Agency: MoFPED - Status marker:  ### Recommendation 8. Expand the scope of the published FRS to include climate change fiscal risks (qualitative and quantitative) - Actions: - Discuss in the FRS the impacts of the long-term fiscal risks of climate change using Q-CRAFT or similar tools. - Timeline: FY23/24 Q3 - Responsible Agency: MEPD - Status marker:  - Discuss qualitatively the specific climate change-related fiscal risks to which public assets are exposed in Uganda in the FRS. - Timeline: FY23/24 Q4 - Responsible Agency: MEPD - Status marker:  - Develop quantitative methodologies to estimate the impact of climate change-related risks on public assets. - Timeline: FY24/25 Q1 - Responsible Agency: MEPD - Status marker:  - Discuss in the FRS the climate change-related impacts on public infrastructure. - Timeline: FY24/25 Q2 - Responsible Agency: MEPD - Status marker:  ### Recommendation 9. Develop a capacity building plan for MoFPED and MDAs on assessing climate change-related issues and implementing associated regulation - Actions: - Develop training program for the tagging of climate change-related expenditures and investments in the budget documentation. - Timeline: FY23/24 Q3 - Responsible Agency: Budget, AGO - Status marker:  - Develop a training on managing climate change-related risks and how these should be reported in the FRS. - Timeline: FY23/24 Q4 - Responsible Agency: MEPD - Status marker:  - Provide annual training on these topics to government officers. - Timeline: FY24/25 Q1 (and annually thereafter as indicated) - Responsible Agency: MEPD, Budget, AGO - Status marker:  *Source: Annex I. Draft Action Plan, tarea2024012 - Annex I. Draft Action Plan (IMF Technical Assistance Report).* ### Annex II. Setting Up Q-CRAFT (summary of key points) ### Functional overview - Q-CRAFT: a spreadsheet tool to generate long-term fiscal projections under different climate change scenarios using existing data and a systematic approach. - Worksheets and color conventions: - “Read me” (blank): user information. - Green “Dashboard”: user selects parameters (country, demography, productivity, inflation, interest rates). - Blue worksheets (MTFF, DSA, Productivity, Demography, Interest rate, Climate): contain data sources. This version pre-loaded with Uganda’s latest MTFF, latest published DSA, United Nations, World Bank, and econometric results linking climate change with GDP. - Red worksheets (Baseline, Paris, Moderate, High, Hot, Vulnerable): calculate baseline and climate scenarios; should not be changed by the user. - Yellow “Output”: output tables and charts. - Cell color meanings: blue digits = hard-coded external data; green digits = links between worksheets; black digits = calculations. ### Data and assumptions for the baseline - Dashboard choices used in the workshop: - Country: Uganda. - Demography: UN medium variety scenario. - Productivity assumptions: user-specified (workshop assumed 1.8 percent long-run). - Inflation assumption: long-run inflation of 4.8 percent (assumed in workshop). - Interest rate assumption: long-run nominal interest rate of 5.5 percent (assumed in workshop). - Macro-fiscal data loaded for 2012-41 from MTFF and the latest published DSA: - Variables: real GDP; nominal GDP; the GDP deflator; revenue; expenditure; overall balance; primary balance; gross debt. - MTFF used until 2028, DSA used for 2029-41. - Population data: - UN medium variety demographic scenario chosen; Uganda Bureau of Statistics (UBoS) projections align in growth rates and composition but differ in historical population levels. - Employment and productivity definitions: - Employment assumed to grow with working age (15-64) population. - Productivity defined as real GDP per employed person (World Bank WDI source for historical productivity 1991-2021). - Workshop numeric assumptions and implications: - Long-run productivity growth assumed in the workshop: 1.8 percent. - Real GDP growth at the end of DSA period used in workshop: 6.2 percent. - Working age population (and therefore employment) growth used in workshop: 2.8 percent. - Implied productivity growth at the beginning of the long-term projection: 3.4 percent (derived from assumptions above). - Long-run inflation assumed: 4.8 percent. - Long-run nominal interest rate assumed: 5.5 percent. - Weighted average nominal interest rate on Uganda’s public debt at end of DSA horizon in 2041: 3.8 percent. ### Baseline scenario methodology and key projections - Methodological relationships: - Nominal GDP growth is approximately the sum of employment growth, productivity growth, and inflation (source formula and explanation preserved). - Revenue is assumed to remain constant as a share of nominal GDP after the end of the DSA horizon. - Primary expenditure is assumed to grow by productivity, inflation, and total population after the end of the DSA horizon. - Debt projections: - Q-CRAFT projects debt-to-GDP ratio to 2099 using the IMF debt dynamics equation. - Baseline projection highlights: - Public debt is projected to stand at 39.1 percent in 2041 according to the DSA. - In the baseline, Uganda’s debt-to-GDP ratio remains below the 50 percent fiscal rule ceiling till the end of the century. - Debt set to decline relative to GDP for the following couple of decades due to strong employment growth and productivity growth while interest rates remain low. - After the 2060s, debt rises relative to GDP as productivity growth slows, interest rates start rising, and employment growth slows because of ageing. - Productivity evidence and considerations: - World Bank WDI productivity growth rates for Uganda: - 3 percent during 1991-2021 (full WB WDI period). - 1.8 percent during 2007-19. - 0.8 percent during 2014-19. - Q-CRAFT computes productivity level relative to OECD assuming OECD productivity grows at historical average of 1.2 percent. - With workshop assumptions, Uganda’s average productivity level rises from 6 percent of the OECD currently to about 9 percent over the DSA horizon, and to around 15 percent of OECD by the end of the century. - With a long-term productivity growth rate of 3 percent, Uganda’s relative productivity would reach 25 percent of OECD by the end of the century. - Comparative note from source: Lower-Middle Income Countries’ relative productivity level increased from below 14 percent to over 21 percent during 1991-2021 (World Bank classification). *Source: Annex I. Draft Action Plan, tarea2024012 - Annex I. Draft Action Plan (IMF Technical Assistance Report).* ### 87. Uganda is on the cusp of a potential demographic dividend, with the working age ### tarea2024012 - 87. Uganda is on the cusp of a potential demographic dividend, with the working age ### Demographic dividend and macro-fiscal mechanism - Working age defined as 15-64 population. - Q-CRAFT assumption: employment grows in line with working age (15-64) population. - Real primary expenditure per capita assumed to grow in line with productivity; nominal primary expenditure grows by inflation, productivity, and total population. - Nominal GDP grows by inflation, productivity, and working age population. - When the share of working age population rises, nominal GDP grows faster than primary expenditure, implying primary expenditure declines as percentage of GDP. - With revenue-to-GDP ratio assumed to remain constant in the long run, primary balance improves when the share of working age population rises. - Caveat: realization of the demographic dividend presupposes: - significant investment in human capital, - ongoing commitment to prudent macroeconomic and fiscal management, - microeconomic policies supporting innovation and entrepreneurship, - favorable international conditions. ### Interest rate assumptions and sensitivities - Q-CRAFT interest-rate methodology: - initial interest rate calculated from DSA data on interest expenditure and gross debt at end of DSA horizon; - an interest rate is assumed for 2100 reflecting Workshop discussion; - tool derives an interest trajectory to the end of the century from these endpoints. - MTFF projection: weighted average nominal interest rate of 6-8 percent on Uganda’s public debt (consistent with recent history). - DSA projections: inflation = 4.8 percent; nominal interest rate = 3.8 percent → implied real interest rate = -1 percent (described as not a credible long-term assumption). - Rationale for nominal interest rate rising in long run: - 4.8 percent inflation assumption considered realistic at the Workshop, implying nominal rates should rise. - Economic development may reduce access to concessional lending, putting upward pressure on interest rates. - Market borrowing could involve significant risk premia on foreign-currency debt. - Partially offsetting: more developed financial markets could increase domestic savings and lower domestic interest rates. - Long-run real interest rate tends to track productivity growth; as productivity growth slows, interest rates may slow. ### Climate scenarios used in Q-CRAFT - Five climate scenarios simulated: - Paris: based on the SSP1-2.6 IPCC scenario; keeps global temperature increase below 2°C at end of century. - Moderate: based on the SSP2-4.5 IPCC scenario; emissions continue increasing and stabilize at end of century; mitigation policies continue along observed trend but no more aggressive actions to fulfill Paris commitments. - High: based on the SSP3-7.0 IPCC scenario; countries scale back implemented policies, limited energy efficiency improvements, continued fossil fuel use. - Hot: emissions as in the high scenario, but uses the 90th percentile of temperature increase among all climate models that used SSP3-7.0 emissions (instead of the average). - Vulnerable: same emissions as the hot scenario (SSP4-7.0 90th percentile) but with slower adaptation and therefore more damaging macroeconomic impacts. - Box 1 context: - Scenarios are built from SSP storylines and radiative forcing (RF) in 2100 measured in W/m2. - Most models: with no mitigation RF would be between 6.0 and 7.0 w/m2 in 2100. - National pledges and mitigation measures align with projected global temperature rise of 2.7°C by end of century (SSP2–4.5 scenario). - SSP5-8.5 not used for Q-CRAFT (deemed increasingly implausible). ### Macroeconomic impact estimates (Kahn et al. synthesis) - Q-CRAFT uses updated estimates of Kahn et al (2021) to project GDP impacts to 2099. - Key findings summarized from Kahn et al: - Per-capita real output growth is adversely affected by persistent deviations of temperature from historical norms. - A persistent increase in average global temperature by 0.04 degrees Celsius per year, in the absence of mitigation policies, reduces world real GDP per capita by around 7 percent by 2100. - Losses would increase to 13 percent globally if country-specific variability of climate conditions were to rise commensurate with annual temperature increases of 0.04 degrees Celsius. - Abiding by the Paris Agreement goals (limiting temperature increase to 0.01 degrees Celsius per year) reduces the loss substantially to about 1 percent. - Adaptation can reduce negative long-run growth effects but is highly unlikely to fully offset them. ### Fiscal effects of climate change on Uganda (Q-CRAFT assumptions and results) - Q-CRAFT assumes climate change starts to affect fiscal projections from 2030 (to focus on long-term impacts). - Methodological assumptions in climate scenarios: - Revenue-to-GDP ratio remains the same as baseline in each scenario → revenue therefore lower than the baseline as GDP declines. - Primary expenditure initially assumed rigid at baseline level in local currency terms → as GDP declines, primary expenditure-to-GDP ratio rises. - Fiscal implications: - Reduced revenue and unchanged primary expenditure lead to worsened primary balance, higher debt, and larger overall deficits. - Debt-to-GDP ratio can become much higher than baseline over time; in high, hot, and vulnerable scenarios the 50 percent fiscal rule ceiling is breached with debt appearing to rise inexorably by end-century. - Dashboard parameterization: - Expenditure Rigidity parameter defaults to 1 (primary expenditure unchanged in local currency). - Parameter value of 0 implies government reprioritizes expenditure to maintain the same primary expenditure-to-GDP ratio as baseline. - Users can choose any value between 0 and 1. - Discrete fiscal risks: - Users can enter one-off increases in primary expenditure or losses of revenue (as percentage of GDP) in the Discrete Risks worksheet to register materialization of specific fiscal risks, including natural disasters, SOE risks, sub-national government exposures, and PPPs. - Debt-stabilizing primary balance calculations: - Q-CRAFT computes the debt-stabilizing primary balance for every year to 2099 in every scenario. - Example: fiscal consolidation required to stabilize debt: - baseline scenario: 0.8 percent of GDP required. - vulnerable scenario: 1.5 percent of GDP required. ### Annex III — examples of specific climate fiscal risks (template excerpts) - Precipitation risk example: Bujigali Dam PPA contingent explicit expenditure (current) — reduced rainfall increases risk of low power generation and need for alternative more expensive energy; PPA purchase obligations continue to [YEAR]; past generator non-production event noted. - Flood risk example: Nile flooding contingent explicit expenditure (current) — high waterflow may require shutdown of up to 7 hydro dams threatening production of 250MW which is [X] percent of Uganda's electricity production and requiring Heavy Fuel Oil; 2019 Lake Victoria rise cited; mitigation measures and responsible entity listed. - The Annex template includes fields for: sector, direct/contingent, explicit/implicit, instrument, detailed analysis, past events, risk owner, likelihood (1-5), impact (1-5), climate risk reduction measures, fiscal risk reduction measures. *Source: IMF Technical Assistance Report (selected pages).* ### Annex IV. C- PIMA Questionnaire ### Annex IV. C- PIMA Questionnaire ### Indicator scoring framework - Scoring scale: 1 = To no or a lesser extent 2 = To some extent 3 = To a greater extent - Questionnaire organized into five pillars (C1–C5) assessing climate integration into public investment management, with sub-indicators C.x.a, C.x.b, C.x.c that define score-level diagnostic statements. ### C1. Climate-aware planning: Is public investment planned from a climate change perspective? - C.1.a — National and sectoral public investment strategies and plans consistent with NDC or other overarching climate change strategy: - Score 1: Not consistent. - Score 2: Consistent for some sectors. - Score 3: Consistent for most sectors. - C.1.b — Regulations on spatial and urban planning, and construction address climate-related risks and impacts on public investment: - Score 1: Do not address climate-related risks. - Score 2: Either spatial/urban planning or construction (building codes) addresses climate-related risks. - Score 3: Both spatial/urban planning and construction (building codes) address climate-related risks. - C.1.c — Centralized guidance/support for preparation and costing of climate-aware public investment strategies: - Score 1: No centralized guidance/support. - Score 2: Centralized guidance/support for preparation only. - Score 3: Centralized guidance/support for preparation and costing. ### C2. Coordination between entities: Is decision making on climate-related public investment coordinated across the public sector? - C.2.a — Coordination across central government from a climate-change perspective: - Score 1: Not coordinated. - Score 2: Coordinated across budgetary central government. - Score 3: Coordinated across all central government, including externally financed projects, PPPs, and extra-budgetary entities. - C.2.b — Coordination of SNG capital spending with central government from a climate-change perspective: - Score 1: Not coordinated. - Score 2: Central government issues guidance and information on major SNG climate projects is shared and published alongside central projects. - Score 3: As Score 2, plus formal discussions between central government and SNGs on planning and implementation. - C.2.c — Regulatory and oversight framework for public corporations ensuring consistency with national climate policies: - Score 1: Does not promote consistency. - Score 2: Promotes consistency. - Score 3: Requires consistency. ### C3. Project appraisal and selection: Do project appraisal and selection include climate-related analysis and criteria? - C.3.a — Appraisal of major infrastructure projects requires climate-related analysis per a standard methodology with central support: - Score 1: Does not require standard methodology. - Score 2: Requires standard methodology. - Score 3: Requires standard methodology and summary of appraisals is published or externally reviewed. - C.3.b — Framework for managing longer-term public investment contracts (PPPs) explicitly addresses climate-related challenges: - Score 1: Framework does not include explicit consideration. - Score 2: Includes explicit consideration for risk allocation. - Score 3: Includes explicit consideration and contract managers are mandated to address climate-related challenges. - C.3.c — Climate-related elements included among government project selection criteria: - Score 1: No explicit criteria or climate elements not included. - Score 2: Climate elements included for all major budget-funded projects and criteria are published. - Score 3: Climate elements included for all major projects including externally financed, extra-budgetary, and PPPs, and criteria are published. ### C4. Budgeting and portfolio management: Is climate-related investment spending subject to active management and oversight? - C.4.a — Identification, monitoring, and reporting of planned climate-related investment expenditure, financing, outputs and outcomes in the budget: - Score 1: Not identified in budget documents. - Score 2: Some identified, including externally funded, extra-budgetary, and PPPs. - Score 3: Most planned climate-related expenditure, sources, outputs, and outcomes identified across funding types and monitored/reported. - C.4.b — Ex-post reviews or audits of mitigation and adaptation outcomes: - Score 1: No ex-post reviews/audits. - Score 2: Ex-post reviews/audits for selected major investments of either mitigation or adaptation outcomes. - Score 3: Ex-post reviews/audits conducted and published for selected major investments of both mitigation and adaptation outcomes. - C.4.c — Asset management policies/practices and maintenance methodologies addressing climate-related risks: - Score 1: Neither policies/practices nor methodologies address climate-related risks. - Score 2: Methodologies for estimating maintenance needs of some climate-exposed assets address climate-related risks. - Score 3: Methodologies for most climate-exposed assets address risks and asset registers include climate-related information. ### C5. Risk management: Are fiscal risks relating to climate change and infrastructure incorporated in budgets and fiscal risk analysis and managed according to a plan? - C.5.a — National disaster risk management strategy incorporating climate change impacts on public infrastructure: - Score 1: No published strategy or it does not identify key climate-related risks. - Score 2: Publishes strategy identifying key risks in terms of hazards, exposure, and vulnerability. - Score 3: Publishes strategy that identifies and analyses key risks and includes plans to mitigate and respond. - C.5.b — Ex-ante financing mechanisms to manage stock exposure of public infrastructure to climate-related risks: - Score 1: No ex-ante financing mechanisms. - Score 2: Annual contingency appropriation or other financing mechanism available. - Score 3: Annual contingency appropriation and other financing mechanisms available. - C.5.c — Fiscal risk analysis incorporating climate-related risks to public infrastructure assets: - Score 1: No fiscal risk analysis incorporating climate risks. - Score 2: Conducts and publishes fiscal risk analysis with qualitative medium-term assessment of climate risks. - Score 3: Conducts and publishes fiscal risk analysis with quantitative medium-term assessment, mitigation policies, and qualitative long-term assessment. ### Cross-cutting issues assessed - A: IT support — presence of a comprehensive computerized information system for public investment projects to support decision making and monitoring. - B: Legal Framework — legal and regulatory framework supporting institutional arrangements, mandates, coverage, standards, and accountability for effective management. - C: Staff capacity — number, skills, experience, and clarity of roles/responsibilities for effective implementation. ### Annex VI — Climate considerations in PPP project design (high-level list from CCA 2021) - PPP stages requiring climate consideration: - Inception stage: Assess impact of the project on the climate and vice-versa in accordance with the CCA 2021. - Feasibility Study: Identify climate-related risks and adaptation and resilience strategies, including environmental, climate and disaster risk concerns. - Procurement: Assess whether bidder’s climate change action and mitigation plan can meet performance targets. - Implementation: Monitor and report GHG emissions and compliance with adaptation/mitigation performance standards. - Requirement for bidders: Submit a Climate Change Mitigation and Adaptation Plan including a note on climate change risk vulnerability and mitigation/adaptation measures (structural and non-structural) to increase resilience to extreme climate events. ### Annex VII — Climate change and project appraisal (challenges, five-step approach, and appraisal options) - Key challenges for infrastructure: - Infrastructure can contribute to GHG emissions. - Infrastructure increasingly exposed to weather-related disaster damage. - Failure costs exceed rebuilding/repair costs. - Five-step approach to incorporate climate/disaster risks: 1. Identify relevant risks (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), noting historical series may be unreliable due to changing recurrence. 3. Assess cost in case of disaster (repair costs, lost benefits, human lives/injuries, environmental costs). 4. Identify actions to increase resilience and estimate their cost (location change, larger size, different technology, additional works). 5. Appraise the project using one of the following options: - Business as Usual: Evaluate NPV for baseline and for a more resilient alternative; incorporate probable cost savings from resilience into cash flows and compare NPVs. - Stress test: Identify indicators and minimum acceptable values (for example NPV>0); appraise under different disaster probabilities and determine probability that leads to minimum indicator value and compare to historical series. - Monte-Carlo: Use Monte-Carlo simulation with estimated probability distribution for disaster occurrence. - Guidance note: None of the appraisal alternatives is perfect, but they are better than omitting climate-related and other disaster considerations. *Source: IMF staff — Annex IV–VII, C-PIMA Questionnaire and supporting guidance* --- _Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024012.pdf_