Uganda has made progress on the equity of its intergovernmental fiscal transfers system in recent years. Nevertheless, large disparities in per capita allocations to local governments persist.
Per capita grants are higher in urban local governments, local governments with smaller populations, and local governments with relatively more service delivery staff and facilities per population. As a result allocations tend to be less favourable to poorer areas in per capita terms.
The overall provision for the mandates of local governments and prior policy commitments is inadequate. This constrains the space for reforms that increase equity. Despite increases in financing and recent progress on allocation practices, policy-makers are often attracted to input-based and place-based spending decisions. The shift towards needs-based allocation remains incipient in Uganda.
Focusing on the most effective investments to improve service delivery, and improving the quality and availability of data on other sources of local government financing, are two prerequisites for taking the kind of holistic perspective that is necessary for improving the equity of intergovernmental fiscal transfers.
Deeper understanding of frontline service delivery and drivers of performance and inequity, alongside the identification of widely salient policy objectives, could help to build a broader coalition of support for equity-increasing reforms of intergovernmental fiscal transfers systems in similar contexts.
