INFRASTRUCTURE AND PUBLIC INVESTMENT Presentation for the High level Growth Forum, 14th – 15th September, 2017 At Commonwealth Resort Munyonyo KAMPALA - UGANDA

Outline Introduction State of Uganda’s Public Investment Key Challenges and Solutions Uganda’s PIMS Framework Outcomes for Strengthened PIMS Conclusion

Introduction Faced with market failures, Public sector has a role to play in infrastructure investment to catalyze economic growth Infrastructure Investment requirement in Africa estimated in 2010 at $93 Bn per year (World Bank) Significantly, improving budget and project execution could increase public investment returns by 50% without necessarily increasing budgetary resources

Introduction cont’d Public Investment efficiency in Uganda stands between 0.33 and 0.36, implying that over 60% of the resources invested in public projects go to waste. With increased Fiscal policy emphasis on infrastructure to deliver economic growth since 2008, Uganda’s economic slowdown over last 5 years correlated to inefficient infrastructure investment delivery.

State of Uganda Public Investment Of total NDP II cost of Shs. 113.6 trillion, over 52% (Shs. 59.644 Trillion) is for public investment. Since the inception of NDP1 there has been increased prioritization of Capital Investments – majorly in energy and transport infrastructure At the inception of NDP1 (FY 2010/11), the biggest share of budget was on recurrent expenditures (59%), Dev’t was at 41% Between 2011/12 - 14/15, both Dev’t and Recurrent Shares averaged 50% In 2016/17, share of dev’t budget outstripped recurrent up from 47% in 2014/15 and 2015/16 to 53% indicating a major shift in prioritization as illustrated in Figs. 1 and 2

State of Uganda Public Investment NDP I midterm review concluded that projects performance was unsatisfactory. Uganda is estimated to lose up to $300M annually due to inefficiencies in spending which must be addressed for increased rate of capital accumulation and envisaged significant positive social-economic transformation (World Bank 2017).

Key Challenges Low Absorption Capacity, which requires strengthening MDA capacity to implement projects Limited options for Infrastructure Investment financing, which requires exploring all sources of infrastructure financing including PPPs, blending, bonds, etc., Supply driven projects & distortionary off- budget support; which requires harmonization with Development Partners

Key Challenges…(cont’d) Varying sources of project information leading to unreliable data for decision making; requires an integrated Bank of Projects Weak legal framework Insufficient counter part funding and budgetary allocations; requiring rigorous compliance to Multiyear commitments provision in the PFM Act, 2015

Key Challenges…. (cont’d) Poor Coordination among implementing Agencies, requiring alignment of processing such as joint planning for related projects, joint monitoring , e.t.c., Inadequate Project Implementation capacity, requiring all MDAs to prioritize specialized training for public investment management

Uganda’s PIMS Reforms PIMS framework developed in 2016 following Diagnostic Study of Public Investment Management in Uganda PIMS Framework aims to:- streamline project selection, preparation and appraisal before projects are approved for financing strengthen Institutional arrangements for project appraisal and monitoring, including migrating externally funded projects onto IFMS Build capacity for project appraisal, to improve Project Quality at Entry

Progress in strengthening PIMS A new PIMS framework was adopted in 2016 streamlining project selection, preparation and appraisal before projects are approved for financing Streamlined the Development Committee to include PPDA, OPM, NPA, Solicitor General, Office of the President & MOFPED

Progress in strengthening PIMS…Cont’d Established a Department to spearhead projects and Public Investment reforms, Projects Analysis & Public Investment Department Strengthened Budget Monitoring & Accountability Unit (BMAU) for enhanced Monitoring Migrating Externally funded projects to IFMIS Developed National Standards Indicator (NSI) framework to support National Devt

Progress in strengthening PIMS..Cont’d Developed a Manual for Project preparation and Appraisal Currently, Developing National Parameters in support of project appraisal in Uganda Also undertaking stock-taking exercise of Government Commitments in the Public Investment Plan (PIP)

Outcomes for Strengthening PIM Strengthening Uganda’s Public Investment Management System would increase efficiency and yield the following benefits: enable decision making to increase returns to public investments guide Government efforts to maximize social welfare help in ascertaining the impacts of projects and investments Introduce discipline in Government to follow through all stages of project cycle Select and implement only those Projects that yield highest economic returns

Conclusion The PIMS Reform process is faced with such challenges; highly politicized, capacity challenges across Government. Improving Public Investment Management System (PIMS) around the World will result into US$ one trillion potential efficiency gains (IMF, 2015). Governments which can efficiently deliver public infrastructure investments therefore have better guarantees to sustainable economic transformation and growth.

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