3.2 Development in Local Government Expenditures

102 Jesper Steffensen

service delivery.The overall system ofpublic government finance is characterized by a significant share oflocal government expenditure.However, most ofit is financed by conditional grants from the central government.

Local Government Expenditures The local government share ofthe total public sector increased significantly with the transfer ofnew tasks and responsibilities from the central to the local governments in the late 1990s.However,it has stabilized.Particularly, central government transfers to local governments as a share ofthe total public budget have increased considerably in recent years,to 36 percent in FY 2002/03 (excluding donor project funding and interest payments)—27 percent including all funding sources.6 Using only this indicator,Uganda is one ofthe most decentralized countries in Africa.7

In nominal figures local government expenditures have increased nearly threefold from 1997/98 to 2002/03.They were budgeted at U Sh 735 billion in FY 2002/03,or approximately US$17 per capita (figure 3.2).

Local Government Revenues

Local governments are heavily and increasingly dependent on transfers from the central government.Figure 3.3 illustrates the relative share ofthe grants and local governments’own-source revenues,showing the increasing dependency on central government transfers (see also table 3.1 on pages 105–8).

billion U Sh 800 700 600 500 400 300 200 100 0

FY 1997/98 FY 1998/99 FY 1999/2000 FY 2000/01 FY 2001/02budget 2002/03

Source: MoFPED, accounts collected by Macro Economic Department, 2003; Steffensen and Tidemand 2004, annex 4.2.

FIGURE 3.2 Development in Local Government Expenditures