Remarks by the Local Development Partners Group at 5th National Partnership Forum

1. On behalf of the LDPG, we would like to thank you Right Honourable Prime Minister for inviting us today to discuss the priorities of government for financial year 2023/24.

2. This is an important event, which will provide an opportunity for strategic and policy engagement on the priorities over the next year and beyond. We hope that it is not a one-off event, but instead marks the first of many meetings – a constructive genuine dialogue between Development Partners and the Government of Uganda.

3. In 2013, our predecessors, both in Government and among the Development Partners, developed the Uganda Partnership Policy as they recognised to achieve Vision 2040 we must harness the synergies and align the goals of external development assistance and the Government’s development agenda. Uganda’s Partnership Policy was designed with two overarching objectives, firstly, increasing the effectiveness of development assistance to support the national goals of Uganda, and secondly to ensure transparency and accountability on the management of development cooperation, not only between Government and Development Partners, but importantly to the Ugandan people. These objectives are perhaps even more important now, given the economic constraints being faced globally, and the need to work more closely together to ensure aid effectiveness here in Uganda.

4. The Policy set out 5 principles which are relevant in our discussions today: a strategic focus on development outcomes, an inclusive dialogue recognising the different modalities of external support, alignment to the National Development Plan, strengthening mutual accountability and building government systems.

5. I will focus on two of the most pertinent areas in these brief remarks, firstly, alignment to the National Development Plan and secondly, strengthening mutual accountability.

6. In the foreword to the Third National Development Plan, His Excellency President Museveni urges ‘a collective dedication to the realisation’ of the plan. This collective realisation is vital, government, civil society and Development Partners working together to achieve what His Excellency further describes as ‘noble objectives for the benefit of the people of Uganda’. Final I am pleased to say that Development Partners are contributing significantly to the goals of the Third National Development Plan. Development Assistance in Uganda is fully aligned to the National Development Plan III and achieves tangible results. Development Assistance was USD 3.2bn in 2020 – 9% of Uganda’s GNI - increasing incomes and improving the quality of life for Ugandans. I speak on behalf of all my colleagues here when I say, we are committed to Uganda, the development of Uganda and continued support towards Uganda’s internationally acclaimed, progressive refugee policy.

7. The Uganda Partnership Policy sets out that ‘confidence, reciprocal trust and partnership around shared agendas enhance mutual accountability and transparency in the use of development resources’. Development Partners are fully behind this. Transparency and dialogue lead to trust, and this, in turn fosters partnership. As Development Partners we report our Development Assistance spend through the OECD International Aid Transparency Initiative and the majority of Development Partners report through the Government of Uganda’s AMP. But it is here, at the National Partnership Forum, where transparency and dialogue come together to build trust to ensure our partnership is delivering for the people of Uganda.

8. As Development Partners we are often asked about budget support. Between 1998 and 2012 Development Partners provided over $5 billion dollars of aid through budget support. The vast majority of this support ended in 2012 when development partners’ trust was lost due to significant diversion of funds. However, a significant amount of development partner funding - USD 1.7bn in 2020 - remains on-budget, channeled through the public sector in the form of project financing. This supports the Government of Uganda to deliver its own objectives. The joint effort of Government, Civil Society, the Private sector and Development Partners is key to effective development.

9. As Development Partners we are proud of our support to governance initiatives, for example work to end violence against women and girls, supporting the rule of law and vital improvements in service delivery. Though only 4% of our overall spend, this work is important to our values – and to the values of tax payers who fund our development assistance budgets. It is also important that we continue to strive for a shared understanding of governance as what it meansto Development Partners may be different from what it means to Government. We welcome opportunities to discuss this work which is often focused on how to lock in development gains.

10. Right Honourable Prime Minister, three final points before I conclude.

11. Firstly, recalling that one of the goals of the Uganda’s Partnership Policy, is on the effectiveness of development assistance, Development Partners would welcome a technical level discussion with Government on improving and clarifying the process for agreeing development assistance ahead of the next National Partnership Forum.

12. Secondly, we want to commend the Government of Uganda’s fiscal consolidation efforts. While no one wants to raise taxes or cut spending, we believe this consolidation was the only responsible policy response to the global economic challenges of high inflation, slow economic growth and tight financial conditions. Many other countries have not shown the same level of discipline in monetary and fiscal policy, and we therefore praise the Government’s strong leadership and encourage sustained efforts on economic management.

13. And third, Human Capital Development and in response to your request for Development Partners’ views on the Budget Framework Paper for FY2023/24. Uganda’s population is projected to increase by 60 percent in the next twenty years to around 74 million from an estimated 44 million in 2022. Close to two thirds of population will be of working age and about half will reside in urban centers. This presents an enormous opportunity and necessity to invest in the human capital. We welcome the trend towards increasing Government of Uganda budget allocations in this area. To achieve the 2040 vision, it is important to further increase Government’s investments in education, health and social protection as well as financing of human resources in these sectors to ensure access to quality basic services for all. It is worth noting that enhanced domestic spending on human capital is likely to lead to higher donor contributions such as under the Global Partnership for Education.

14. Right Honourable Prime Minister let me conclude by thanking you again on behalf of the Development Partners, for inviting us to participate in this important forum. A welcome outcome from today’s discussion would be a commitment to return to holding this important forum regularly. We look forward to further discussions on how we, the Development Partners, can best engage to support Government in achieving its objectives of sustainable and inclusive growth in Uganda.

Annex

Included here as information to be drawn upon as responses to specific issues:

I. Green Growth including renewable energy and Climate change adaption and mitigation. In this area there is need to accelerate support to Green Industrial Growth including the expansion of renewable energy to places where the grid will not reach in the foreseeable future, implementation of climate change adaptation in the designs of infrastructure projects, and safeguarding water resources. While there is a need to make more investments in green industry and renewable energy, recent experience underlies the importance of ensuring any new infrastructure is climate resilient, so production is not disrupted by extreme weather events. More investments are still needed to ensure all Ugandans have access to electricity (transmission and distribution), while manufacturing and other large industry has access to stable electricity and competitive electricity pricing. Since public funds are limited (i.e. there is a decline in budget allocations towards sustainable energy development in the coming FY), mobilization of private investment and finance will be crucial to achieving the above. We thus encourage the government to work together with DPs and involve financial institutions to leverage additional investments.

II. Domestic value addition. We welcome the proposed 3 percent increase in budget allocations on the agro-industrialization programme in next FY. If possible, we would encourage to increase further GoU investments on the programme. There are number of challenges to expanding value addition which need to be addressed through, among other things: improving access to agricultural finance; supporting research and extension (including drought and disease resistant seeds varieties and promoting good agricultural and climatesmart farming practices); identifying the most appropriate support to be provided for agricultural transformation under the Parish Development Model; and ensuring product quality through certification. Development Partners look forward to deepening their engagement with the GoU through the proposed Agricultural Policy and Projects' Forum, as well as further discussion and analysis of issues raised during the Economic Growth Forum.

III. Trade and Exports: We believe Uganda can greatly benefit from the regional trade arrangements and African Continental Free Trade Area (AfCFTA), if the country is able to improve on quantity and Final quality of exports, especially agricultural products on which the country has competitive advantage. The recent World Bank economic update estimated that Uganda’s income will increase by 3.3 percent by 2035 upon the full implementation of the AfCFTA. For this to happen, we encourage Ugandan government to improve the country’s competitiveness by continuing to invest in infrastructure, deepen the dialogue with the private sector to improve the business environment, reduce red tape and simplify customs procedures to reduce trade costs. Uganda needs to also work with the EAC countries to reduce ad hoc tariff increases through stay of application at the EAC level.

IV. Domestic Resource Mobilization. We commend government of Uganda on the implementation of the Domestic Revenue Mobilization Strategy 2019/20 - 2023/24, which aims to achieve taxto-GDP ratio growth of 0.5% every financial year. We also welcome the government’s ambitious target of increasing domestic revenues by 13 percent in the coming FY, as set out in the budget framework paper. We believe this can partly be achieved by reducing tax expenditures by 0.2 percent of GDP each year, in line with the IMF-supported programme. This will raise revenue while also improving tax system’s fairness, efficiency and simplicity. In addition, government can also raise revenue through effective implementation of the VAT reform bill, expanding the tax base through taxing digital transactions, and introduction of rules to clarify non-taxed special cases. V. Parish Development Model (PDM). We commend Government on the scaling-up the implementing the PDM beyond the financial inclusion pillar especially fast tracking of interventions for effective value chain development. However, we are concerned by claims of corruption under the financial inclusion pillar rollout and urge government to strengthen Public Finance Management Systems, monitoring and feedback mechanisms and introduce performance-based disbursements building on the proposed criteria, to avoid loss and wastage of resources. Development partners are willing to review and propose systems for boosting outcomes of the PDM.