Return on investment of public projects low - IMF
What you need to know:
- The International Monetary Fund says the low effectiveness of public investments has a significant negative impact on the economy.
A report by the International Monetary Fund (IMF) has revealed that the effectiveness of public investment in Uganda is markedly lower than institutional design.
The report prepared by Eivind Tandberg, Eduardo Aldunate, Imran Aziz, Suzanne Flynn, and Willie Du Preez, all staff of the IMF, indicates that the low effectiveness has a significant negative impact on public investment, quality and the economy at large.
“Given that effectiveness is lagging considerably behind the institutional design, there is a clear need to continue and to further strengthen public investment management in Uganda. The high level of public investment and the plans for continued, rapid expansion of public infrastructure exacerbates the importance of effective and efficient investments,” the report, titled Uganda Public Investment Management Assessment Report, reads in part.
The report, which was commissioned by the Ministry of Finance, found that in terms of access to services generated by government infrastructure, Uganda lags behind regional peers, especially in the area of education, health, water, and electricity, which IMF indicated was all below both regional peers and sub-Saharan Africa.
For instance, the report notes that since 60 percent of Uganda’s population falls within the school age bracket, the lack of access to education infrastructure is a particular concern, which, therefore calls for several interventions, particularly in education, energy and transport.
The report highlights persistent energy losses and fluctuation in the quality of roads as some of the concerns that must be addressed to bring down the cost of electricity as well as address the increasing mortality on roads.
“Perceptions of the road subsector has steadily increased since the establishment of UNRA in 2008 and the subsequent upgrade of major roads corridors,” the report indicates but notes that failings in other sub-sectors such as ports (with notable delays to the Jinja and Port Bell ports) and air (delayed expansion of Entebbe airport), continue to be drag downs.
The report also highlights Uganda’s debt sustainability, which it noted places the country in the category of being at a medium risk of debt distress.
Impact of debt
Uganda’s public debt has been growing, increasing to close to Shs80 trillion, according to Ministry of Finance.
However, government has previously indicated that debt to gross domestic debt, which the Finance Ministry says has surpassed the 50 percent ceiling, remains sustainable even as there has been admission of being a serous burden on revenue mobilisation. The largest portion of tax revenue currently goes to debt repayment and loan servicing.