Intergovernmental Fiscal Transfer Reform Strategy

The Uganda Intergovernmental Fiscal Transfers (UgIFT) Program is a program established back in 2017 with an objective aimed at improve the adequacy and equity of fiscal transfers, and improve fiscal management of resources by Local Governments for health and education services at local levels.

It addresses three constraints that have a major adverse impact on service delivery: (a) the large-scale horizontal inequities in the per capita amounts of transfers received by the Local Governments; (b) the inadequate level of per capita social expenditures in poorer Local Governments; and (c) the poor fiscal management of resources by Local Governments.

The Intergovernmental Fiscal Transfer reform strategy is coordinated by the Ministry of Finance, Planning and Economic Development (MoFPED) in collaboration with the Local Government Finance Commission, the Ministry of Local Government, the Office of the Prime Minister and line ministries which effect transfers to LGs.

This reform has been implemented in different phases to enhance efficiency and decrease a proliferation of grant transfers from central to LG level:

(1) Interim consolidation of LGs’ transfers where a number of Sector Conditional Grants were collapsed from 58 in FY 2014/15 to 13 in Fiscal Year (FY) 2015/16;

(2) Reform of transfers for FY 2016/17 which included: (2.1) Consolidating and redesigning development discretionary transfers leading to the creation of the Discretionary Development Equalisation Grant (DDEG); (2.2) Revising the allocation formulae and principles for grants to LGs; and (2.3) Reviewing guidelines for sector transfers and establishing budgeting requirements,

(3) Reforming frameworks for accountability and strengthening incentives for performance, and (4) Fiscal Decentralization Architecture & Share of Transfers.

FINMAP, Government supported LGFC to commence fundamental reforms and diagnostics to enhance Fiscal Decentralisation Architecture & Share of Transfers. Key among the support was the Designing of a fiscal decentralization architecture (FDA) and determining the share of LG transfers out of the national budget.

LGFC focused on: Reviewing LG mandates and estimating the cost of adequately financing those mandates relative to the overall budget; and, Reviewing the overall legal and policy framework for local government revenues and expenditures and recommending changes.

Todate, GoU is implementing fully fledged programme in partnership with the World Bank – called UGiFT. The current phase of the programme.