Fiscal Rules: Challenges and Lessons During the COVID-19 Crisis in Uganda

This study assesses the implementation of fiscal rules in Uganda from the time they were adopted from 2013/14 to 2021/22. The study uses annual time series data from the Ministry of Finance, Planning, and Economic Development. It also relies on the review of the relevant government and policy documents. The results suggest that, before the pandemic, the effectiveness of fiscal rules was hampered by the complexity of the debt rule, weak incentives for compliance at the regional and national level, overreliance on debt sustainability analyses results, and the lack of commitment to deficit rule in fiscal plans, regional surveillance and coordination system and an independent national institution among others. During the pandemic, fiscal rules' effectiveness was compromised by an uncoordinated fiscal response at a regional level, delays in developing a credible timeline and procedures to revert to the rule, and unrealistic targets for the fiscal rules, among others. The study suggests that to ensure the effectiveness of fiscal rules, the government should develop a clear and robust communication strategy, develop a clear deficit and debt reduction strategy, set realistic fiscal rules, establish or support the creation of an independent institution, strengthen the budget process to ensure compliance with the rules and taking a holistic view of public debt sustainability.