Case analysis on poverty in Uganda and Ethiopia
Case Title: The Implications of Public expenditure
management on poverty trap
By Dut Lual Anei M
This paper represents a preliminary step toward defining a new development model for reaching a goal
consistent with the assumption that “poverty reduction” means “sustainable poverty reduction based on the
promotion of growth of the two African countries of Uganda and Ethiopia.” This comprises an effective
development model that indicates the set of development and aid policies by which the primary goal of poverty
reduction in low income countries can be achieved.
As a means for attaining the poverty reduction goal, the World Bank devised the Poverty Reduction Strategy
Paper (PRSP) process. The PRSP process fails to recognize the decisive importance of measures for nurturing
modern industries, including complete product and factor markets, in essence measures to encourage growth
and the building of modern industries necessary for sustainable poverty reduction. One consequence of this has
been a strong tendency in low-income countries towards the crowding out of investment expenditure
fundamental to growth, commonly when countries with low savings rates try to meet high donor demand for
poverty reduction measures.
This case analysis tries to unearth the relationship between the various components of Public Expenditure
Management (PEM) of policy making, planning, budgeting and performance monitoring in particular and the
linkages between PEM and poverty reduction as reforms of macro-economic management by governments. The
three domains of gender inequality which includes capabilities,economic opportunities and lack of
empowerment of women to political and civil government positions will be discussed whether they are the
factors for the high rate of poverty or not. A comparison of the World Bank qualitative research on the poor
using the methodology of the Participatory Poverty Assessment (PPA) of mid- 1990 will be analyze together
with the concept of public expenditure management. The objectives of this case are;
(a) To launch a reconsideration of the development model created by two new methodological concepts of, PPA
(b) To uncover ways to improve the model and compare the resolution of the development model with PRSP
system for improvement and more effectively to facilitate both growth and poverty reduction,
(c) To determine the success of each country in linking PEM reforms with poverty reduction policy goals.
Analysis of the case
Participatory Poverty Assessment (PPA) is a methodology developed by the World Bank in the early 1990s to
examine and analyze poverty. It can be characterized in a nutshell as “an instrument for including the
perspectives of the poor in the analysis of poverty and the formulation of strategies to reduce it.” PPA surveys
and PEM reform are important new development aid policy instruments initiated by the World Bank and the
IMF in parallel with the PRSP system. Findings from PPA surveys strongly suggest that in the poor regions of
low-income countries, the considerable number of households that are at the threshold of poverty constitute a
group vulnerable to serious shocks, both internal and external.Poverty as an interlocking multidimensional
phenomenon, the bottom line is always hunger, the lack of food. Poverty also has important psychological
dimensions such as powerlessness, voiceless-ness, dependency, shame, and humiliation. Poor people lack
access to basic infrastructure, roads (particularly in rural areas), transportation, and clean water. The illiteracy
rate among poor people is high. Poor people suffer from poor health and illness. Finally, poor people lack
income, not only money but also, and especially, physical, human, social and environmental assets. In many
areas, this vulnerability has a gender dimension.
Public Expenditure management (PEM) refers to the management of public resource expenditures
encompassing fiscal and other spending channels. To explain the literature on PEM reform, there are three
major contexts inwhich it occurs: (1) “aggregate fiscal discipline,” (2) “strategic prioritization (allocative
efficiency)” and (3) “operational performance (technical efficiency).” These are done though the New Public
Management, an attempt to reform the public sector using private sector management method. This model
recommends the introduction of the “Medium Term Expenditure Framework (MTEF)” (estimates of sustainable
budgetary expenditure over the medium term beyond annual balanced budgets) as a necessary precondition for
“strategic prioritization. Strengthening linkages among policy making,planning, budgeting and performance
monitoring in connection with PEM; and the Medium Term Expenditure Framework (MTEF)The MTEF
approach is used in each of the two countries but the results differ.
The influential World Bank Public Expenditure Management Handbook defines an MTEF as consisting of ‘a
top-down resource envelope, a bottom-up estimation of the current and medium-term costs of existing policy
and, ultimately, the matching of these costs with available resources in the context of an annual budget.’ This
provides a ‘linking framework’ that ensures that expenditures are ‘driven by policy priorities and disciplined by
budget realities’ (World Bank 1998: 32, 46).
Ugandaby 1992, after initial rejection and then reluctant acquiescence, the Museveni Government came to
accept the basic principle of market-based approaches to poverty reduction, and to pursue them on their own
terms. A July 1995 forum on poverty, with Presidential participation, moved poverty policy beyond a ‘social
dimensions of structural adjustment’ approach, and established a Task Force which in 1997 produced the first
Poverty Eradication Action Plan (PEAP). Strategy prioritized rural roads, free primary education, and the
modernization of agriculture. The 2000 PEAP, developed in a consultative manner and widely disseminated, is
identified as Uganda’s ‘over-arching national planning document’. The four ‘pillars’ of the PEAP (creation of
an enabling environment for rapid and sustainable economic growth; good governance and security; targeted
actions to help the poor raise their incomes; and actions in education and literacy, health care, water and
sanitation which directly improve quality of life for the poor) are complemented by action on cross-cutting
issues of public expenditure management, environmental management, attention to gender equity and
disadvantaged groups, and attention to geographical disparities. In Uganda, the Ministry of Finance, Planning
and Development was established in the central government to oversee the entire process from policy decision
making, to planning to budgeting, ensuring that the priorities which emerge from the Poverty Eradication
Action Plan (PEAP) are reflected in the proposed expenditure allocations for the MTEF.The ministry took
positive steps to establish priorities within available public investment resources, a determinant for the success
of the medium term expenditure framework (MTEF).
Even in Uganda, after ten years of sound policy and the building of capacity within the Ministry of Finance,
Planning and Economic Development, the achievements remain vulnerable. They have rested heavily on
political support from the President, and on the competence of a small group of technocrats. There has been a
continuous struggle against pressures to expand the deficit, accede to spending requests that would undermine
the priority given to poverty, or turn a blind eye to corruption and misuse of public resources. Uganda is rightly
looked to as a model for others to copy, but it should be remembered that the policies being implemented in
Uganda are still recent and still contested, and there can be no guarantees that they will be sustained.The
Poverty Reduction Strategy Paper (PRSP) process has helped to reinforce the position of reformers wishing to
enhance and preserve allocations important to the poor. The virtual Poverty Reduction Fund in Uganda has
proved an especially useful model for ensuring that additional funds flow into additional spending benefiting
the poor, and for helping to contain pressures from other spending priorities.Though an MTEF is in principle
distributional and neutral, Uganda has shown that the MTEF can be an extremely useful tool for turning poverty
rhetoric into meaningful shifts in spending priorities. Sector-wide approaches have similarly shown themselves
to be capable of giving effect to poverty objectives at the sector level, especially when nested within the
financial framework of an MTEF.
Comparison of poverty with Ethiopian context
Poverty eradication is the major development objective of the Ethiopian government.To this effect, the
government has formulated a Poverty Reduction Strategy Paper (PRSP). The first phase of the PRSP (i.e.
the Sustainable Development and Poverty Reduction Program) was carried out for the period 2002/03-
2004/5. Plan for Accelerated and Sustained Development to End Poverty (PASDEP).PASDEP is the
second phase of the PRSP for the five year period 2005/6-2009/10, which indicates not only the
development targets in the major economic and social sectors, but also encourages and requires the
participation of the community and civil society organizations in the country’s poverty eradication
endeavors.The Civil Service Reform Program also aims to help the implementation of government
policies and programs in a more transparent, efficient, effective and accountable manner. The newly
introduced system of Business Process Re-engineering (BPR) is also designed to improve the service
delivery system in government institutions.
Among the more specific causes of rural poverty in Ethiopia are; An ineffective and inefficient agricultural
marketing system; Underdeveloped transport and communications networks; Underdeveloped production
technologies; Limited access of rural households to support services; Environmental degradation; Lack of
participation by rural poor people in decisions that affect their livelihoods.
Approaches to address rural poverty in Ethiopia
The Government of Ethiopia has made and continues to make significant efforts to address poverty in rural
areas. Its five-year Growth and Transformation Plan (GTP) for 2010- 2011 through 2014-2015 carries forward
the successful strategies of the previous Plan for Accelerated and Sustained Development to End Poverty. The
GTP emphasizes the importance of promoting rapid and broad-based economic growth through seven strategic
objectives;Sustaining equitable economic growth, Maintaining growth focused on agriculture and rural areas;
Developing industry, Expanding infrastructure; Enhancing the expansion and quality of social development;
Building capacity and promoting good governance; Promoting empowerment of women and young people.
Protection of Basic Services (PBS) project
An agreement between the Ethiopian government donor governments and agencies was signed on the
implementation of PBS project through the Multi-Donors Trust Fund.The project emphasizes improved
governance, including greater civic participation and protection of critical services such as health,
education and access to water. The PBS aims to air the voices and consider the concerns of the poor
regarding the quality, effectiveness, efficiency and access to basic services through dialogue between
ordinary citizens, governmental bodies and public service providers
Implementation of the Millennium Development Goals (MDGs)
The implementation of the Millennium Development Goals is seen within the framework of the
government’s poverty reduction strategy.The MDGs encompass eight goals:halving poverty and
eradicating hunger; achieving universal primary education; promoting gender equality and empowerment;
reducing child mortality; improvingmaternal health system; combatingHIV/AIDS, malaria and other
diseases; ensuring environmental sustainability, and developing a global partnership for development.
Each country has high levels of institutional aid dependency with corresponding low domestic accountability,
Public expenditure and revenue management systems have been driven by public policy only in few instances,
at least until recently, the administrative systems are similarly characterized by low morale and weak
performance incentives. This is lack of institutional and organizational reforms to the fiscal expenditure system
including the modernization of political and administrative systems and organizations are indispensable steps
for the development model.Finally, as some of the countries succeed in enacting the fundamental reforms
necessary for efficient and effective outcome-oriented public expenditure management, there will be a need to
pay more attention to institutionalizing a poverty focus.
There has to be a comprehensive policy by the Ethiopian government to create enabling policy frameworks,
build capacity and strengthen monitoring mechanisms to support accountability, building capacity and
promoting good governance.
Independent monitoring by civil societies, NGOs and think tanks so that Public expenditures is monitored
hierarchically and consistently in the administrative institutions to reduce inequality.
To close gender gaps, the government through its budget allocations has to redress inequalities and
discrimination in the households, in assets ownership and labor and credit markets by enhancing the expansion
and quality of social development, Promoting empowerment of women and young people.
To designate Treasury within the two counties’ Ministry of Finance as the supervising agency directly
responsible for maintaining comprehensive public accounts (including expenditures from aid) and
implementing the completely integrated Public Financial Management System with treasury’s integrated
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A., Naschold, F. and T. Conway (2002), How, When and Why Does Poverty Get Budget Priority?
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Get Budget Priority?
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International in Ethiopia
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