Structured Abstract
| Document Title: | The Global Fund tracking study. Macroeconomics and sector background paper. UGANDA. Final Draft. January 2004. |
| Institution: | London School of Hygiene and Tropical medicine (LSHTM) |
| Authors: | Sally Lake |
| Study commissioned by: | A team from the Department of Public Health and Policy at the London School of Hygiene and Tropical Medicine and funded by: Development Cooperation Ireland (DCI), the Danish Agency for Development Assistance (DANIDA), the United Kingdom Department for International Development (DFID), and the Netherlands Directorate-General for International Cooperation (DGIS). |
| Objectives: |
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| Methods: | desk-based study, review of documents |
| Results: | The paper describes the macroeconomic situation in Uganda, the government budgetary framework, and details on health sector organisation, planning and financing, both generally and in relation to the Global Fund target disease-related activities. It discusses issues specifically related to the the Global Fund proposals in the country, both in terms of potential levels of funding and macroeconomic impact, and in terms of sectoral effects and their relationship to existing strategies. Key issues, and specific areas for the second phase of the tracking study to follow up are then presented. (see original Summary of key issues and areas for Phase 2 tracking) |
Summary (authors')
Uganda's past economic performance has been impressive, with both a relatively high annual average rate of growth and low inflation. This in turn has acted as a trigger for increased aid flows, which have enabled a relatively rapid expansion of public sector activity, including allocations to the health sector. However, there are now signs that this is creating some strain on the economy, both through increased deficit funding of the budget which has led to rising interest payments, and through limited capacity to expand domestic supply in some non-tradable areas (eg construction) which is putting upward pressure on unit costs and therefore inflation.A relatively strict fiscal stance has therefore been adopted by MOFPED, aimed at reducing the fiscal deficit from its current projected level of 11.3% to 9.5% over the coming 3 years. This necessitates a reduction in the growth of public expenditure in the economy, and therefore reduces the potential for the government budget to finance much needed expansion of the health sector in order for poverty reduction goals to be met.
At the same time, such macroeconomic policies need to be balanced against the acknowledged longer term benefits of additional investment in the social sectors including health, in terms of increased productivity and therefore growth.
Macroeconomic issues for follow-up
Key macroeconomic variables to be tracked over the remainder of the study include:- GDP growth - in real and per capita terms
The growth rates cited in the Global Fund proposals as the basis for a positive outlook on sustainability of sectoral resources have not been achieved in FY2002/03. Optimistic growth rates were also used in the Health Financing Strategy as the basis for a steady but slow closing of the gap between available resources and the (underestimated) costs of a health system which now apparently aims to deliver an increasing range of (relatively) high cost interventions as outlined in the Global Fund proposals.
- Domestic revenue performance as a % GDP
The political concern of the Ugandan government regarding the proportion of the budget funded from abroad is likely to continue. Improved domestic revenue performance, rather than increasing external resource inflows, is being given a key role in determining the pace of public spending increases.
- General budget support as a % of total revenues within the budget
- Budgeted cf actually disbursed
- Loans cf grants
Sector issues for follow-up
- Timing and level of the Global Fund inflows
Given the importance of predictability in aid management, monitoring of the timing of inflows of the Global Fund assistance in relation to plans and budgets, together with Uganda's capacity to absorb it effectively, will be important. Project funding is often one of the least predictable sources of government revenue, yet in the context of an MTEF which incorporates such funding into sectoral ceilings, an increased level of accuracy in this area will be critical in order not to reduce the potential for other funding to the sector.
- Share of the Global Fund funding in sectoral MTEF
With the intended incorporation of project funding into sectoral MTEF ceilings, the level of the Global Fund funding as a proportion of total sectoral funding should be monitored in order to ensure that the resources available to the sector are being used in the most efficient and equitable way to achieve stated objectives rather than being tailored to suit a broader international policy agenda.
- Additionality
Incorporation of project funding within sector MTEF ceilings means that ordinarily the Global Fund funding would not be additional. However a commitment has been made by MOFPED that an exception will be made, at least initially, that the Global Fund funding will not be offset against other funds to the health sector. This should be tracked to ensure that any earlier proposed growth path for sector funding is attained prior to the addition of the Global Fund. In addition, policy statements or changes in response to later proposals should be clearly documented in order to be able to track sector funding with and without GFATM funding over the period of the study.
- Convergence between priority interventions and stated sectoral objectives
Discussion in past JRMs has touched on the need to focus within the broad package of potential health services identified in the HSSP to identify critical interventions. As above, the extent to which the Global Fund-funded activities match such critical interventions should be monitored to ensure that the nature of the funding source is not being allowed to dictate spending in the sector in a sub-optimal manner.
- Share of tradables in the Global Fund-funded proposals
More information is required with regard to the proposed breakdown of the Global Fund spending between tradables (eg drugs, vehicles) and non-tradables (eg allowances, in-country training costs) which might be expected to have differential impact on exchange rates.
One of the key issues to be monitored will be the sustainability of increased funding for key interventions included in the proposals. While the Global Fund funds will undoubtedly contribute to scaling up some highly cost-effective interventions from which the poor can be expected to benefit, funding is limited at present to three years, with no guarantees that the Fund will be able to maintain its own (under-target) resource mobilisation efforts. In the context of the reduced growth in public expenditure for GOU as a whole, the extent to which future domestic and budget support resources can or will be channelled to these activities is uncertain. However, this is likely to be an issue beyond the time frame of the Tracking Study.
