The provision of debt relief to Heavily Indebted Poor Country (HIPCs) commencing in the late 1990s, and the growing interest among donors in providing direct budget support, increased donor focus on national budget systems. Given that debt relief and aid resources are fungible, donors were concerned that such debt relief be verifiably used to benefit the poor in the recipient country. In effect, the World Bank and the International Monetary Fund (IMF), acting on behalf of donors, asked that HIPC governments put in place systems to track the use of resources freed up by debt relief and show that these were in fact used to finance pro-poor programs. This required governments to have the capacity to identify policies and programs that would benefit the poor and to effectively channel and track resources to such programs. This note considers the Uganda Virtual Poverty Fund (VPF) to understand how well it served to allocate resources to pro-poor programs and what weaknesses were observed that may need to be corrected as other countries employ mechanisms similar to the VPF.
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