Financing Infrastructure Development In Uganda

Uganda’s progress towards achieving inclusive sustainable growth is curtailed by large deficits in infrastructure stock, particularly in the transport and energy sectors. This study explores options for financing the scaling up of infrastructure development in Uganda. The methodological approach involved a review of literature and a survey of key stakeholders whose views guided the analysis. Findings point to the opportunities and risks of scaling up domestic resource mobilization, improving efficiencies in public investments, leveraging new sources of external development financing, options in private financing and the potential role of the natural resource sectors as summarized below. Improving domestic revenue mobilisation is the primary available option for financing infrastructure development in Uganda. However, efforts in this area have been hampered by, among others, weaknesses in the legal and regulatory frameworks; the narrow tax base; a large informal sector; tax exemptions; and institutional weaknesses. The study highlights two interventions that can support improved domestic resource mobilization efforts to support infrastructure development: leveraging the contribution of non-tax revenues (NTR) and curtailment of capital flight. With respect to enhancing the contributions of NTR, the study proposes that collection of NTR by self-accounting bodies and spending it at the source should be reviewed because the practice undermines efforts to improve revenue mobilization. Innovative ways of controlling capital flight involve reviewing government public procurements and local content provisions. The study proposes reforms to strengthen the capacity of the local private sector and to develop policy and regulatory frameworks to deepen local content in government procurement.