How did Uganda manage to make such progress? Three factors worked together.

**Macroeconomic stability:** Starting in 1987 the government introduced macroeconomic reforms aimed at restoring and maintaining macroeconomic stability. GDP growth has averaged close to 7 percent since 1987; inflation has averaged 5 percent since 1992; domestic govemment revenue doubled from 6 percent of GDP in 1986 to close to 12 percent currently. Government has been able to increase its expenditure from 8.6 percent of GDP in 1986 to 20.6 percent in 1999.

> **Shifting public resources towards poverty reduction:** The Medium-Term Expenditure Framework (MTEF), introduced by the government in 1992, has contained aggregate spending within the resource envelope and delivered the desired composition of spending. In 1994, Government expenditures on education amounted to 20 percent of total public spending, roughly equal to expenditures on both public administration and security. By 1999, the share spent on education had risen to 26 percent, compared with 22 percent for public administration and 16 percent for security.

Improving service delivery: In 1995, school survey results had shown that only 20 percent of the public non-salary education spending reached schools. Rather than shying away from this bad news, the government instituted several measures to improve transparency: Regular publication in the main newspapers and broadcast by radio of monthly transfers of public funds to districts; all district headquarters and govermnent primary schools were required to maintain public notice boards and post monthly transfers of finds; districts were required to pay all conditional grants for primary education directly on individual accounts. The result has been dramatic. A tracking survey in 1999 showed that schools now receive more than 90% of the non-wage spending.

> As the example of Uganda makes clear, the policy environment in a country can affect not only the rate of economic growth, but also the effectiveness of public service delivery and, hence, educational and health outcomes. The effect is compounded because economic growth typically increases the demand for education and health care, which further increases the effectiveness of service delivery. The challenge in making progress toward the development goals is to provide development assistance where it will do the most good: to countries that have demonstrated their ability to use assistance effectively and to those countries that need help in changing policies to increase their opportunities for growth and human development.

# V. Estimating **the Cost of Meeting the Development Goals**

In light of the unprecedented consensus on the development goals, but the highly uneven performance across countries, a natural question to ask is: What additional effort will it take to achieve the goals by 2015? Although this effort will depend mostly on actions by the countries themselves-improvements in public policy, allocation of public expenditures, and effective service delivery--the international community can and should play an important role. How much can additional financial assistance improve the chances of reaching the development goals? And how much is required?

Any attempt to determine the aggregate costs of achieving the development goals is a highly speculative exercise. Not only do countries vary enormously in their ability to use aid effectively, but the relationship between foreign aid (or other public resources) and outcomes is a highly uncertain one. Recognizing the possible errors associated with such an exercise, we approach the problem from two different perspectives.

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