This report is a further response to the call from Uganda's leaders for 'value for money' in public spending. The report is the second in a series of three sector-oriented public expenditure reviews (PER) for the Government of Uganda (GOU) prepared by the World Bank as input into the Government of Uganda's budget reform initiatives. The focus of this report is efficiency and efficacy of spending by the Government of Uganda with a specific focus on the health sector. The first report in the series was 'Uganda fiscal policy for growth', published in 2007, with a focus on the education sector. This report comes in two volumes. Volume one is the main report with conclusions and policy recommendations which analyses composition of overall spending and budget implementation, budgetary consequences of ongoing pay reforms, and efficiency and effectiveness of spending in Uganda's health sector. Volume two contains a full report on the health sector, and includes the background papers prepared.