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Is There a Place for Virtual Poverty Funds in Pro-Poor Public Spending Reform? Lessons from Uganda's PAF

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Various developing countries with weak public expenditure management systems are establishing virtual poverty funds (VPFs), drawing on the experience of Uganda's Poverty Action Fund. As a mechanism for tagging and tracking the performance of specific poverty-reducing expenditures in the budget, a VPF can be useful. However, this article argues that such devices should be treated from the outset as transitional, and as part of wider processes of strengthening public expenditure management; otherwise, they can seriously distort public expenditure allocations and management systems, potentially undermining growth. Emphasis needs to be placed on identifying the right balance of expenditures in the entire budget; improving the effectiveness and efficiency of existing allocations; and developing better public-sector policies for promoting pro-poor private sector growth.

Document Type: Research Article


Affiliations: 1: Research Officer in the Centre for Aid and Public Expenditure, Overseas Development Institute, London 2: Senior Economist, World Bank, Uganda

Publication date: July 1, 2003


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