EssayonDevelopmentPolicy ImplicationsofProvidingBudgetSupportforPublicExpenditure ACaseStudyfromUganda ThomasBenninger NADELMAS Cycle2008 2010 May2010
TableofContents TABLEOFCONTENTS... 2 TABLEOFFIGURES... 2 ABBREVIATIONS... 3 INTRODUCTION... 4 THEUSEOFANDTHEREACTIONTOBUDGETSUPPORT... 6 GOVERNMENTSBUDGETCONSTRAINTANDTHEFISCALRULE... 7 THETREATMENTOFBUDGETSUPPORTGRANTSBYRECIPIENTGOVERNMENTS... 9 ADEEPERLOOKATUGANDA SBUDGET... 12 EXPENDITUREANALYSIS... 14 FINANCINGANALYSIS... 16 CONCLUSIONS... 20 BIBLIOGRAPHY... 22 TableofFigures Figure1:Developingcountrybudgetconstraint...7 Figure2:TheGoldenFiscalRule...8 Figure3:BudgetsupportvolatilityinUganda...9 Figure4:TheriseofbudgetsupportinUganda...12 Figure5:AfiscalruleinUganda?...13 Figure6:Sizeofpublicexpenditure...14 Figure7:Developmentofbudgetcomponents...15 Figure8:Financinggap...17 Figure9:Financingstrategy...17 2/22
Abbreviations DFID HIPC MDGs ODA UPE USE BritishDepartmentforInternationalDevelopment HeavilyIndebtedPoorCountriesInitiative MillenniumDevelopmentGoals OfficialDevelopmentAssistance UniversalPrimaryEducation UniversalSecondaryEducation 3/22
Introduction The effectiveness of official development assistance is heavily debated in aid recipient as well as in aid providing countries. The popularity of Dambisa Moyo s book Dead Aid is a signal for the growing sense that development aid is not achieving what it is promising despitesubstantialeffortstoincreaseaideffectivenessandshowdevelopmentresults. The last decade of development assistance has been shaped by a commitment to the MillenniumDevelopmentGoals(MDGs),adebatearoundaideffectivenessthatculminated intheparisdeclarationonaideffectivenessandtheaccraagendaforaction,andfinallythe riseofprogrammeaid particularlybudgetsupport 1 asthemajoraidmodalities.ashift towards budget support has been justified by the following arguments: (1) Support of partnergovernments ownershipthroughlessintrusiveconditionalityandmorefreedomin the implementation of their poverty reduction strategies (2) more predictable and less distortiveassistanceforthebudgetprocess(3)promotionoftheuseofcountrysystemsand strengthening of partner countries capacity, and(4) high potential to scale up aid in good performingcountries. This essay provides an analysis of the impact of budget support on partner countries composition of public expenditure and the recipient countries reaction to receiving substantialamountsofbudgetsupport. Thefirstsectionwillintroduceatheoreticalframeworklookingatgovernments choiceswith regard to the use of budget support. In the second section an economic analysis will demonstrate the choices taken by the Government of Uganda. The conclusions will be focusingonrecommendationsforrecipientanddonorgovernments. 1 OECD DAC (2008): Direct budget support is defined as a method of financing a partner country s budget through a transfer of resources from a donor to the partner government s national treasury. The funds thus transferred are managed in accordance with the recipient s budgetary procedures. Funds transferred to the nationaltreasuryforfinancingprogrammesorprojectsmanagedaccordingtodifferentbudgetaryprocedures from those of the partner country, with the intention or earmarking the resources for specific uses, are thereforeexcludedfromthisdefinitionofbudgetsupport.thisdefinitionalsoincludessectorbudgetsupport providedandgeneralbudgetsupport. 4/22
This essay will leave out other areas where budget support might have intended or unintended impacts, like the balance of payments, reserves of foreign currencies or the exchangerate.althoughbudgetsupportisusedtomitigateeffectsofinternalandexternal shocks,thiswillnotbecoveredbythisessay Ugandahasbeenchosenasacasestudybecauseofitsstillhighlyaid dependenteconomy anditsreputationasagoodperformer.ithasreceivedbudgetsupportforover10yearsand has achieved an impressive reduction in poverty from 39% in 2002/03 to 31% in 2005/06. The macroeconomic and growth track records since the mid 1990s are impressive and developmentpartnersarecommittedtocontinuoussupport. Ugandahasproventobehighlyinnovativeinitsdevelopmentpoliciesresultinginhighaid allocation and the piloting of new aid modalities. The on budget aid flows received since 1998amounttoaroundUSD8billionwithasubstantial,additionalamountnotcapturedin the national financial accounting system. It became the first country to receive debt relief underhipcandisgivenlargeamountsofonlynotionallyorcompletelyunearmarkedbudget support since 1998. The contribution of budget support grants to the national budget has beenusd280minthefiscalyear2008/09equaling9%oftotalpublicexpenditure. 5/22
Theuseofandthereactiontobudgetsupport The provision of budget support is highly debated among development specialists. On the one hand, it is the aid modality that allows for the highest ownership of recipient governments and alignment of development partners, on the other hand the fungibility aspect, budget support cannot be traced and can therefore be used for any type of expenditure, makes it highly vulnerable to political and fiduciary risks. Recipient governmentshavetoplantheirbudgetswiththeknowledgeondonorbehaviorinmindin order not to get trapped in unrealistic budgetary planning. By contrast, donor countries provide budget support under the assumption that recipient governments spend their moneyonpovertyreductionrelatedareas,suchashealth,educationorinfrastructure.this essay will look at recipient governments reaction to budget support in order to develop recommendationsforrecipientanddonorcountries. Inordertoanalyzegovernments reaction,acrucialdistinctionpublicexpenditurehastobe introduced. All government spending can roughly be divided into three categories: (1) Recurrentexpenditure,(2)developmentspendingorinvestments,and(3)interests. 1. Recurrentexpenditureongoodsandservicesisexpenditure,whichdoesnotresultin thecreationoracquisitionoffixedassets.itconsistsmainlyofexpenditureonwages, salariesandsupplements,purchasesofgoodsandservicesandconsumptionoffixed capital(depreciation).inuganda scasetherecurrentexpenditurealsoincludecosts tomaintaintheassets(e.g.maintainingroads,buildings,etc). 2. Developmentexpenditurebycontrastresultsinthecreationoffixedassets.Itisnot consumed but is an investment for future production. Contrary to the current academicthinking,governmentofugandaisclassifyingexpendituressuchasteacher salaries as recurrent spending although, education is an asset that will be used for future production and creates increased returns. For the sake of this analysis, the essaywillstayascloselyalignedtothegovernmentofuganda sclassification. 3. Interestsarethefeepaidbygovernmentsforborrowingmoneyfromeitherdomestic orexternallenders. This distinction does have implications on what a recipient government can finance out of whatsourceandhenceitsreactiontobudgetsupport.thenextsectionintroducesasimple 6/22
modelthatprovidesanoverviewofadevelopingcountry sfiscalframeworkandexplainsthe constraintsitfaces. Governmentsbudgetconstraintandthefiscalrule The figure below illustrates a developing country s budget constraint. It needs to balance expendituresandrevenuesinthebudgetinordertomaintainmacroeconomicstabilityand fiscalsustainability. Figure1:Developingcountrybudgetconstraint Source:Ownillustration. Governmentshavebeenusingfiscalrulessincethe18 th century.oneofthemostimportant rules, the Golden Rule, demands that over the economic cycle, the Government will borrow only to invest and not to fund current spending. Strictly speaking recurrent costs need to be covered by recurrent revenues, creating a so called positive recurrent balance, whereas investments can also be financed through debt as the return on investment will bringthebudgetbackintobalanceinthelongrun. Ifthisruleisappliedindevelopingcountries,itisoftenalsoinfluencedbycashmanagement. As development countries mostly don t have enough reserves, a shortfall in revenue can quicklyresultintheneedforborrowing.thereforetheruleisoftennotinterpretedinaway tolookatanentireeconomiccyclebutistiedtothefiscalyear. 7/22
Inordertokeepapositiverecurrentbalance,domesticrevenueshavetoamounttocurrent expendituresplusinterestsinacountrythathasnootherrecurrentsourcesofincome.this so calledgoldenfiscalrulecanbeexpressedinthefollowingform: Figure2:TheGoldenFiscalRule Source:Ownillustration. TheGoldenFiscalRuleoriginatesfromcountrieswithnoaccesstoforeigngrantsinorderto financetheirbudgets.inadevelopingcountrywithforeignassistancesuchafiscalrulemay thereforeassumedifferentpeculiarities. Theideaoffiscalrulesraisestwoimportantquestionsfordevelopmentassistance: 1. Dogovernmentsindevelopingcountryapplyanykindoffiscalrule? 2 2. If a rule is applied, do governments treat budget support grants 3 like recurrent revenue,one timeresourcesordotheytreatthemasamixedresource? If governments strictly apply a fiscal rule similar to the Golden Fiscal Rule, it has consequencesfordevelopmentassistance.allbudgetsupportshouldautomaticallybeused forcapitalinvestmentsorareductionindebtlevels.onlyiftheassistancegivenwouldbe treatedlikerecurrentdomesticrevenue,itcouldbespentonrecurrentcostsinthebudget. Subsequently,thequestionhastobeaddressedwhetherbudgetsupportispredictableand sustainableenoughtobetreatedlikedomesticrevenue. 2 Thesequestionsareonlyrelevantforcountriesthat:(1)doreceivebudgetsupportand(2)arenotincrisis whichwouldrequirethemtofocusoncashmanagementonly. 3 Thisessaywillfocusexclusivelyongrantsalthoughdevelopingcountriescouldanticipatefuturedebtrelief andtreatconcessionalloanslikegrants. 8/22
Thetreatmentofbudgetsupportgrantsbyrecipientgovernments Fromafinancialperspectivegovernmentcanfreelydisposeofbudgetsupportfunds.They areaddingnetworthtothecountrywithoutcreatinganobligationforthefuture.theycan therefore be treated similar to recurrent revenues. However, in reality, budget support grants cannot be modeled like tax revenues and remain substantially more volatile as demonstrated by Bulir & Hamann (2003). Furthermore, budget support is also a highly politically exposed instrument that is often used for political signaling by development partners,likecuts,becauseofhigh levelcorruptionorbreachofhumanrightsobligation. ThefollowinggraphillustratesthevolatilityofbudgetsupportgrantsforUganda.Itshows howthecountryreceivedincreasinglevelsofbudgetsupportgrantsupto2003/04beforeits shareoftotalrevenuesstarteddeclining.thedifferencebetweenthehighestandthelowest shareoverthistenyearperiodismorethan15%oftotalpublicexpenditure.inlightofthese facts it is unlikely, therefore, that any government would accept excessive exposure to dependence on higher risk income, such as budget support. Indeed, it would not be responsibleforasupplierofsuchexternaltransferstoarguethatgovernmentsshouldput trustinpredictability (Penrose,2008,p.20). Figure3:BudgetsupportvolatilityinUganda 9/22
Source:IMFstaffreports1998 2009underthePRGFandPSIprogrammes. Considering the arguments, it seems more likely that budget support is treated like loans. However, a deeper analysis of the case of Uganda in the next section will provide clarification. If this argument stands after deeper analysis, it contradicts the general belief that programmegrantaidisfullyfungibleandthereforecanbeusedtofinanceallitemsinthe budget 4.Indeed,thereisashorttomediumtermfungibilitywhichallowsgovernmentsto paysalarieswithprogrammeaidforacertainamountoftime.thisisparticularlytrueifthe levelofcurrentexpenditureshasbeenbelowthelevelofdomesticrevenuewhichallowsa substantial expansion of current expenditures before the fiscal rule would kick in. But to mitigate the impact of a shortfall in donor grants on the public service, the fiscal rule describedabovepreventsoutrightfungibilityinthelongrun. Under the assumption that a fiscal rule is applied and budget support can indeed only finance capital goods, one of the major constraints in financing development is domestic revenue collection. While development assistance could for example finance the construction of schools or health facilities, teachers salaries, textbooks and school maintenance would have to be financed from domestic revenues. This bias of budget supporttowardsfinancingofpublicinvestmentposesthequestionofabsorptioncapacity.in order to provide adequate capacity, partner country governments need to finance the technicalknowledgeandthepreparationalactivitiesrequiredfortheimplementationofan infrastructureundertakingoutofthecurrentrevenues.inaddition,anyinvestmentfinanced throughbudgetsupportisresultinginhighermaintenancecostsandthushigherrecurrent expenditurethathavetobecoveredbydomesticrevenues. Inconclusion,thediscussedpossiblereactionsofgovernmentstobudgetsupportcantake thefollowingforms: 4 This argument does not address development partners concerns over fungibility between sectors. An increaseindevelopmentspendingcanbeallocatedinpro pooranddesirablesectorslikehealthoreducation orundesirablesectorslikedefence.thiscanresultinconcernsovertheuseofbudgetsupportbydevelopment partners. 10/22
1. Applyastrictfiscalrulethatdoesnotallowtheuseofbudgetsupportforspending onrecurrentexpendituresinthelongterm. 2. Applysomekindoffiscalrulewhichusesthresholdsonhowfarbudgetsupportcan beusedtofinancerecurrentspendingandtakeintoaccountshorttomediumterm deviationsfromtheruleincludingcashmanagementissues. 3. Applynofiscalruleandtreatbudgetsupportsimilartodomesticrevenues. Afterthisshorttheoreticalintroduction,thenextsectionwilllookathowtheGovernmentof Uganda reacts to the provision of budget support and what the reasons for this reaction mightbe. 11/22
AdeeperlookatUganda sbudget Ugandahasbeenarecipientofbudgetsupportsince1998.WiththeWorldBankandDFID pilotingbudgetsupportinuganda,anewperiodindevelopmentassistancehasstarted.the reducedburdenofdebtinterestpaymentsthroughthehipcdebtreliefprogrammeandthe provisionofprogrammeaidprovidedugandawithincreasedfiscalspace.theambitiousfree Primary Health Care, Universal Primary Education (UPE) and later on the Universal Secondary Education (USE) initiatives required a substantial reorientation of domestic resourcesplusadditionalexternalfunding. In the Partnership Principles in 2003, Government of Uganda stipulated its preference for programme aid and development partners like the World Bank, DFID, and the European Commission responded with higher programme aid allocations. The following table shows theincreaseofprogrammeaidoverthelastdecade.theshareofbudgetsupporttototalaid reportedon budgetwentupfrom34%in1998/99to69%in2006/07. Figure4:TheriseofbudgetsupportinUganda Source:IMFstaffreports1998 2009underthePRGFandPSIprogrammes. Whereas debt relief directly reduced current spending obligations through lower annual interest payments, the utilization of programme aid needs to be further explored. A short analysisdonebypenrose(2008)issuggestingthatgovernmentofugandaisapplyingafiscal 12/22
rule that caps recurrent expenditure at the level of domestic revenue(p.22).the following sectionsexploreifugandaisindeedapplyingsuchafiscalrule. Comparing the real domestic revenues with real recurrent spending over the last 12 fiscal years,ugandagovernmentseemsnottobeapplyingastrictfiscalruleasdescribedinthe last chapter. The following graph shows that the recurrent balance remained positive in 7 outof12years.thedeviationneverexceeded15%oftotalrecurrentdomesticrevenuewith thehighestnegativedeviationoccurringin2001/02.inthatfiscalyear,recurrentspending wasugx182bnhigherthandomesticrevenue,equaling6.8%oftotalpublicexpenditure. Figure5:AfiscalruleinUganda? Source: IMF staff reports 1998 2009 under the PRGF and PSI programmes, Government of Uganda Medium Term ExpenditureFramework1997 2009. The illustration shows how the Government prioritized recurrent spending over development spending in the period 1999 2006. The recurrent outturn not only overtook domesticrevenuebutincreaseddramaticallyinabsoluteandrelativeterms.however,after 2003,achangeinthefiscalpolicycanbeseenwithrecurrentspendingtakingasmallersize comparedtogdp. This analysis shows that the above mentioned possibility of an expansion of current expenditure before a strict fiscal rule would kick in is indeed a possibility. The current substantial lower current expenditure compared to domestic revenue would allow the 13/22
Governmenttoexpandcurrentrevenuebymorethan1.5%ofGDPbeforeastrictfiscalrule wouldbite.thisexpansioncouldbefinancedoutofbudgetsupportfunding;howeveritis onlyamediumtermoptionasafiscalrulewouldpreventanunlimitedexpansionofcurrent expenditure. The questions arising from this analysis are what drove recurrent spending up in the early 2000s and what let development spending overtake recurrent spending over the last 3 years? Are these deviations driven by spending decisions despite a fiscal rule or is the Government of Uganda applying a fiscal rule with boundaries that allow a deviation to a certainextent,orisgovernmentofugandanotapplyinganyrule?thesequestionswillbe answered in the next two chapters by analyzing public expenditures and Government s financingstrategy. Expenditureanalysis Between1997and2009,thesizeofpublicexpenditurevariedbetween10.9%and18.5%of GDP 5. The following graph shows that whereas Government of Uganda followed an expansionaryfiscalpolicyfrom1997to2003,itconsolidateditsbudgetfrom2003onward. Since2003,thepublicexpendituretoGDPratioremainedstableataround15%,excluding donorprojects. Figure6:Sizeofpublicexpenditure Source:GovernmentofUgandaMediumTermExpenditureFramework1997 2009. 5 Publicexpenditureinthisessayexcludeson budgetdonorprojects.thefinancialdataontheseprojectsis generallyfragmental,unreliableandforthepurposeofthisanalysisirrelevant. 14/22
Theexpansionaryfiscalpolicyupto2003wasfuelledbyhigherdevelopmentassistanceand a doubling in the fiscal deficit before grants. However, the Government of Uganda acknowledgedinitspovertyeradicationandactionplan(2004)that acutbackinaidwhich lastedformuchmorethanoneyear,givenuganda scurrentlevelofdependenceondonor aid, would force the Government to make severe budget cuts (p.41). And indeed, the overtakingofrecurrentspendingtodomesticrevenuefrom2000 2004representedabigrisk ifanycutbackonaidwouldhavehappenedasthegovernmentwouldhavehadtoreduceits servicesbyshrinkingtherecurrentexpenditure. The splurge of the early 2000s can be equally attributed to recurrent spending and the investmentincapitalgoods.theshareofrecurrentspendingtogdpincreasedfrom9.8%in 1997/98to14%in2001/02andtheinvestmentincapitalgoodswentupfrom1.1%to4.5% overthesameperiod.thefiscalconsolidationthenledtoareductionofthesesharesto11% and4.2%in2008/09respectively.asonecanseeinthegraphbelow,thecontractionmainly tackledtherecurrentexpenditureandleftthedevelopmentspendingessentiallyuntouched, therebyreestablishingthefiscalsustainabilityafiscalrulewoulddemand. Figure7:Developmentofbudgetcomponents Source:GovernmentofUgandaMediumTermExpenditureFramework1997 2009. Duringthefiscalexpansion,thebiggestraisewasexperiencedbythehealthandeducation sector.thesetwosectorsgrewfrom0.7%and2.8%ofgdpin1997/98to1.6%and4.4%in 15/22
2001/02.Thisindicatesthattherewasastrongpro poorlobbyingovernmentduringthese years. Thereafter, the budgets of the social sectors declined significantly and the infrastructurepushinitiatedbytheworldbanks CountryEconomicMemorandumin2007 takes off. This development concurs with an expansion of the development share in the budgetascanbeseeninthefigureabove. The excess of recurrent spending over domestic revenue in the years 2000 2004 can be associatedwiththeincreasedspendingnecessitiesforthesocialprogrammeslikeupe,use and Free Primary Health Care. None the less, the expansion of public expenditure encompassed all sectors, although to a lesser extent. It is very likely that the general electionsof2001alsoplayeditspartinthespendingsplurge. Financinganalysis InordertofullyunderstandthestrategyofUganda sgovernmenttocopewithitsresource constraintandwhatthereactionofthegovernmenttobudgetsupportis,ashortanalysisof thefinancingsideisneeded. Thefollowinggraphshowsthesizeofdomesticrevenues,budgetsupportgrantsandpublic expenditureasashareofgdp.fromtheillustrationonecanseethatugandaisnotableto entirelyfinanceitspublicexpendituredomesticallyduetoitslowrevenuecollection,which isusuallyattributedtothelowlymonetizedeconomyandthenarrowtaxbase.thefinancing gap varied between 0.2% and 6.3% of GDP in the period 1997 2009. However, budget supporthasbeenabletocoverthefiscaldeficitbeforegrantsinmostoftheyearsifprojects are not taken into account for the analysis. To smooth short term delays and shortfalls in donor funding, the Government also uses its ability to draw down on its foreign exchange reserves(brownbridgeandtumusiime Mutebile,2007,p.208).However,thismitigationcan onlybeusedintheshortterm.anysignificantreductioninaidallocationtougandaresults soonerorlaterinthewideningofthefinancinggap. 16/22
Figure8:Financinggap Source: IMF staff reports 1998 2009 under the PRGF and PSI programmes, Government of Uganda Medium Term ExpenditureFramework1997 2009. Thelargefiscaldeficitin1999/2000and2000/01whichresultedinhighborrowingfromthe domestic market must have been eye opening for the Government. As the IMF noted in 2004 theinterestrateondomesticlendingremainedhighandthegrowthofbankcreditto theprivatesectorwassluggish (p.6 7).Thefollowing2graphsbelowshowtheextentto whichthegovernmentofugandahadtorelyondomesticfinancingin1999/2000. Figure9:Financingstrategy 6 6 Thesecondillustrationusesnumbersincludingprojects.Thereforeitisnotentirlyconsistentwiththerestof theessay. 17/22
Source: IMF staff reports 1998 2009 under the PRGF and PSI programmes, Government of Uganda Medium Term ExpenditureFramework1997 2009. Additionally,thefigureclearlyshowsthefiscalconsolidationthattookplacebetween2002 and 2009. The financing gap before grants was narrowing and the Government of Uganda relied to a lesser extent on the capital market. According to Brownbridge and Tumusiime Mutebile,thiswasaclearpolicychoice toalleviatethevulnerabilityofthebudgettocutsin aid (2007,p.210). Accordingtotheaboveanalysis,budgetsupportseemstobesubstitutingfinancingfromthe capital market. However, compared to borrowing, the Government of Uganda cannot directly influence the level of budget support it receives. Programme aid is thus unable to financesubstantialdeficitsbecauseofitslowpredictabilityandthegovernment sinability toinfluencethelevelofassistanceprovided. 18/22
In conclusion, budget support is unable to finance substantial and prolonged deficits. In ordertofinancealongerperiodofexpansionaryfiscalpolicy,thegovernmentofugandahas torelyonthecapitalmarketormobilizemoredomesticrevenues.inthelongrun,onlythe latterresultsinasustainablefiscalpolicy. 19/22
Conclusions In conclusion, Government of Uganda is not strictly applying a fiscal rule. It seems more likely that in the beginning the Government saw a widening primary fiscal deficit as unproblematic as long as it could finance it with donor grants. However, with budget support grants covering more and more non discretionary expenditure, Government became concerned by the increase of aid dependency and the exposure to the risk of substantial cuts in donor funding. In consequence, it initiated a fiscal consolidation that ensured that recurrent expenditure and interest are again covered by domestic revenue, therebyreducingaiddependency. ThecaseofUgandaallowsdrawingsomelessonsforcountriesinsimilarsituations: Developmentassistanceisgenerallyvolatileandunpredictable.Budgetsupportisthe most visible and politically exposed instrument and therefore often the first choice whencutshavetobemade. Recipientgovernmentsneedtobeawarethattherelianceonahigh levelofdonor funding exposes them to significant risks. If donors reduce development assistant significantly,recipientgovernmentwillbeforcedtocuttheirpublicexpenditure.in ordertomitigatethisrisk,theapplicationofafiscalrulethatcapstheshareofdonor funding through budget support grants at the level of the development/infrastructurebudgetmakessense.however,suchafiscalrulewould need to be locally tailored in order to incorporate cash management issues and policy priorities. The recipient governments also need to take into account that investmentsfinancedthroughdevelopmentassistancewilladdrecurrentcostsinthe futureasthisinvestmentsneedtobemaintained. Recipient governments should try to reach agreements with development partners onthecircumstancesunderwhichthelevelofbudgetsupportarereduced.in year cutsshouldberuledoutanddenouncedasbadpractice.reductionstothelevelof funding provided should be phased in order to allow the recipient governments to adjust. 20/22
Inthemediumandlongterm,thebestwaytoreducetheabovedescribedrisksisto increasedomesticrevenuegeneration.recipientgovernmentshavetoacceptthatit isnecessarytoswallowthepillinordertobecomelessdependent. Developmentpartnersshouldbeawarethatitmakessensetohaveanupperlimitto theleveloffundingthatcanbeallocatedtoaspecificcountry.spendingonrecurrent expenditure such as social services in health and education cannot be expanded through higher level of budget support if the nature of budget support remains unpredictable and volatile. Development partner should therefore try harder to reducevolatilityandannouncedecisionssufficientlyinadvance. 21/22
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