National Medical Stores (NMS) is the Government Body with the statutory mandate of Warehousing and distributing Essential Medicines and Health Supplies (EMHS). NMS has in the past, amidst numerous challenges, delivered EMHS in time and in accordance with a predetermined delivery schedule. Delivery to Hospitals is effected every month, while delivery to lower health facilities is effected every two months, in six (6) cycles.

The current non-adherence to the delivery schedules, and hence the stocks outs of EMHS in Government Health Facilities is a result of the following factors: –

a. Failure by NMS to timely receive funds for delivery of these EMHS.
b. Inadequate budget amidst increase in distribution costs as a direct result of increase in fuel prices.
c. Erosion of the available resources as a result of the Ebola Distribution activities for which no additional funds were provided.

The issue of timely availability of funds for distribution of Essential Medicines and Health Supplies ((EMHS) has been raised by National Medical Stores (NMS) a number of times. Distribution of EMHS is a continuous activity which is based on a pre-determined schedule. For this to be achieved, it presupposes that funds for the distribution are readily available. This has not been the case, most especially at the beginning of the Financial Year.

Hon. Colleagues, Prior to FY 2009/10, Funds for Medicines and Medical Supplies once appropriated by Parliament, would be sent directly to the Health Facilities and Districts. NMS would then use its privately generated funds to procure, store and distribute Medicines and Medical Supplies to these facilities. It was later established, that the funds sent to the districts and health facilities for procurement of Medicines and Medical Supplies were in actual fact used for other purposes, leading to perennial stock outs of Medicines and Medical Supplies in Health Facilities. The few Medicines and Medical Supplies that were actually procured were easily stolen because they could not easilv be differentiated from others in the private sector.

As a solution to the above two problems it was agreed that:

i.)  All funds appropriated by Parliament for procurement of Medicines and Medical Supplies in Government Health Facilities should be recentralized at NMS,
ii.) NMS should ensure that all Medicines and Medical Supplies are uniquely Embossed to differentiate them from those in the private sector, to minimize theft of these medicines.

To implement the above solutions, it was agreed that the Recentralized funds be made available by Parliament to NMS through a Recurrent Non- Wage Vote (Vote 116), effective the FY 2009/10. This would ensure that NMS maintains its flexibility and the Business Mode of operation given to ti under the NMS Act, and ultimately be able to effectively procure, store and distribute Medicines and Medical Supplies to Government Health Facilities.

Thus from FY 2009/10 all funds for Health Facilities under Ministry of Health and Ministry of Local Government were recentralized under Vote 116 and provided to NMS as a Recurrent Non-Wage Vote. Under this arrangement NMS operated Vote 116 as a Recurrent Non-Wage Vote. Funds provided and appropriated by Parliament were all received on this Vote, and accessed through IFMS. Operational Funds would then be transferred to an NMS Operational Account, while funds for payment to Suppliers of Medicines and Medical Supplies were
transacted directly on IFMS.

As a result of the achievements made under this system, and having met the expectations of Government, H.E. the President, directed effective FY 2012/13, that in addition all funds for Medicines and Medical Supplies for the UPDF, Uganda Police and Uganda Prisons Services be recentralized at NMS. This was also done as a recurrent Non-Wage Vote (Vote 116).

NMS operations were maintained on business principles, allowing flexibility to timely deliver Medicines and Medical Supplies to Government Health Facilities and also attracting more resources from Development Partners (Donors).

Effective FY 2019/20 the Ministry of Finance, Planning and Economic Development directed that all financial transactions of NMS (procurements and distributions) must be effected through IFMS.
This new system was a radical departure from the then prevailing, negotiated position of a Recurrent Non-Wage Vote.

It forced NMS to operate on non-business principles, taking away NMS flexibilities and fundamentally affecting the operations of NMS as envisaged under the NMS Act.

Under the Current system NMS is unable to have funds required for delivery of Medicines and Medical Supplies available on the first day of every quarter, yet delivery of Medicines and Medical Supplies is a continuous process that must not stop. With specific reference to this Financial Year 2022/23, actual funds for the First Quarter were not available to NMS until August 2022. In the Second Quarter Funds were not available until First week of November 2022. The table below shows the actual dates of approval of Warrants to date.

Table 1: Showing NMS Warrant Summary FY 2022/2023

Otr.	Cash Limit Releasedat	ApprovalDate by MOPED
Qtr 1	09/07/2022	25/07/2022
Qtr 2	05/10/2022	18/10/2022
Qtr 3	30/12/2022	12/01/2023

The above table means that for the whole of Julv 2022 there were no funds available for distribution of EMHS. After approval of Quarter 1 Warrant, NMS sent instructions to the Ministry of Finance, for payment of Suppliers and Providers ofservices

However most of these instruction to pay Suppliers, including for Distribution Related Services, were not honored until end of September 2022. Concern on this matter was raised bythe General Manager ofNMS, in a letter dated 3rd October 2022, addressed to the Permanent Secretary Ministry of Finance Planning and Economic Development. The said letter was copied to myself and the Minister of Finance, Planning and Economic Development.

A copy of the said letter is attached as Annex A for ease ofreference. At that time, over two months had passed since the commencement of the Financial Year.

Such a delay of over two months in the distribution ofEMHS is a very long time, whose spiral effects are being experienced in the current stock outs. The said letter clearly shows that, whereas NMS had given payment instructions through Integrated Financial Management Information System (IFMIS) of the Ministry of Finance, the Ministry of Finance did not effect those payments for over a month. NMS was thus not able to timely disburse funds for distribution of EMHS and this negatively impacted its ability to timely deliver EMHS to Health Facilities, mainly because:-

a. The Providers of Fuel for Motor Vehicles were not paid on time and on several occasions they cut off service due to late payments. Vehicles could not move and others would be stuck in the field.

b. The Last Mile Delivery Provider was not paid on time. These delayed payments affected the ability of the Provider to continue delivering the EMHS.

c. Distribution Allowances, which are now paid through E-Cash, have not been promptly paid. Instructions to replenish the E-Cash Accounts take long to be honored. Sending delivery staff in the field without allowances is a risk, and not possible given the value of the Commodities they carry.

d. In respect to this quarter Instructions for e-cash for delivery staff sent on 3rd January 2023 were not honored until 27th January 2023. See Annex B.

It should be noted that the mere release of Cash Limits and Approval of Warrant by Ministry of Finance does not in itself avail fund to NMS for disbursement. This must be accompanied by the actual honoring of payment instructions. Honoring Payment Instructions ni IFMS si a responsibility of the Officers in the Ministry of Finance for which the NMS Accounting Officer has no control. It has also been noted that MoFPED, in honoring payments, usually picks out some payments and leaves out others. In most cases those left have a direct effect on delivery of EMHS. This frustrates service delivery.

Related to the availability of funds is the issue of Funds made available by Development Partners that are deposited on the NMS Operations Account with Bank of Uganda. Since FY 2019/20 NMS cannot access these funds as and when needed.

The Ministry of Finance, Planning and Economic Development insists that these funds should first be deposited into the Consolidated Fund. This has created a challenge since NMS cannot deliver Medicines and Medical Supplies received from Development Partners (including ARV Drugs and Antimalarials), even when their funds have been received by NMS!

Insisting that these funds be deposited into the Consolidated fund has contributed to the current crisis, since NMS does not have funds to deliver Donor Medicines and Medical Supplies already in its Warehouse. Furthermore, once such funds are deposited in the Consolidated fund at the end of the Financial Year, the funds are forfeited to the Consolidated Fund instead of continuing to deliver the EMHS which are already in the Warehouse.

The other contributory factor to the current stock outs is the inadequate budget amidst increased distribution costs as a direct result of increase in fuel prices.

During the budgeting process for the FY 2022/23, NMS indicated and presented the challenges associated with increasing prices of fuel. The associated deficit was presented but not honored. As a result, the current distribution budget of NMS has a deficit estimated at sh. 7billion.

The other contributory factor to the current stock outs is the Erosion of the available resources as a result ofthe Ebola Distribution activities for which no additional funds were provided.

In September 2022, Uganda was hit by the Ebola Outbreak. NMS was required to prioritize distribution of Supplies that were needed in the fight against this outbreak. No additional funds were provided to NMS for this additional work. NMS, therefore, had to use the resources that were otherwise meant for the distribution of the routine EMHS to distribute Ebola supplies. This eroded the already meagre and late resources. To date, NMS has not been provided with additional resources to alleviate this challenge.

As a wayforward and as part of the short term remedy to alleviate the current stock outs, NMS has started on delivering combined Cycles. Each Cycle has medicines that are supposed to last a facility two months. Thus the facilities will be getting Deliveries for four months. (Please See a Communicationfrom NMSt o all Facilities attached as Annex C).

In the Long term however, NMS made recommendations to the Permanent Secretary Ministry of Finance Planning and Economic Development in the letter of 3rd October 2022 (Annex A). We await the implementation of these recommendations that we know will solve the current problem of accessibility of funds.

As I conclude, allow me to appreciate you and the August House for your enormous support to the Health Sector. The current is something that we all donot want and must never happen. Working together we shall solve the current situation.