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Broad-based participation: Uganda is first country to receive assistance under Poverty Reduction and Growth Facility

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2000
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On November 22, 1999, the IMF transformed its Enhanced Structural Adjustment Facility (ESAF) into the Poverty Reduction and Growth Facility (PRGF) and expanded the facility’s objectives to support programs that substantially strengthen balance of payments positions and make them sustainable, while fostering durable growth. Uganda became the first recipient of assistance under the new facility on December 10, 1999, when the IMF approved the country’s third-year program to support the government’s economic program. Uganda’s three-year arrangement was approved under the ESAF in an original amount of SDR 100.4 million (about $138 million), of which SDR 73.6 million (about $100.8 million) has been disbursed (see Press Release No. 97/52, IMF Survey, November 17, 1997, page 365). The latest decision provides Uganda with another SDR 26.8 million (about $36.7 million) to be disbursed during the third year, with SDR 8.9 million (about $12.2 million) available immediately. Following are excerpts from IMF Deputy Managing Director Shigemitsu Sugisaki’s statement after the IMF Executive Board’s discussion.

“Directors welcomed the significant progress made in the recent past in strengthening the poverty-reduction focus of Uganda’s economic policies and the steps already taken to produce a poverty-reduction strategy paper [see page 3] next year. These steps include a comprehensive review of Uganda’s poverty characteristics; the institution of a broad-based participatory process for the development, implementation, and monitoring of poverty eradication programs—involving civil society, local governments, and the donor community; a marked increase in outlays on key social areas; and the establishment of a decentralized machinery for the delivery of essential services. These actions have been underpinned by prudent macroeconomic policies and a wide range of structural reforms that have helped to achieve broad-based economic growth. Directors stressed the importance of continued implementation of sound policies and maintenance of an open foreign exchange system to strengthen the environment for private investment and to help maintain high economic growth, which they considered vital for the achievement of the authorities’ poverty-reduction objectives.

“Notwithstanding this impressive start, Directors expressed concern at Uganda’s welfare indicators, which remain among the lowest in Africa, and at the severe regional disparities in the incidence of poverty. They therefore called for early concerted actions to build an effective public service delivery system at the district level.

“While noting the importance of increased external resources for the implementation of Uganda’s poverty-reduction strategy, Directors welcomed the authorities’ actions to improve domestic resource mobilization, which they considered to be crucial for the long-run viability of the strategy. Directors supported steps to strengthen revenue, including improved tax administration—especially in view of the recent shortfall—and steps to restructure expenditure. Directors expressed concern, however, about the delays in implementing the Commitment Control System and urged the authorities to press ahead with actions to improve the reporting, monitoring, and enforcement of expenditure commitments. They also underlined the importance of strict adherence to the budgetary limits for defense spending.

“Directors welcomed the authorities’ commitment to promote transparency and good governance, which are crucial for improving the delivery of social services and for high economic growth.”

Program summary

The authorities’ medium-term economic objectives aim at maintaining the progress that has been achieved thus far. Revenues are projected to increase to 12.5 percent of GDP in 1999/2000, reflecting the impact of the more depreciated exchange rate, despite lower-than-expected revenues in the first quarter. Total expenditures are programmed to rise by 2.0 percent of GDP to 20.6 percent, resulting from higher social and development spending and the cost of the referendum scheduled for June 2000. The authorities are committed to containing defense expenditures, but outlays for defense-related wages will be higher than earlier projected.

Poverty-reduction strategy

The government has taken the key steps required for the production of its poverty-reduction strategy paper (PRSP). The national policy framework for poverty eradication is set out in Uganda’s Poverty Eradication Action Plan, which was announced in 1997. The plan’s principal goal is to reduce the incidence of absolute poverty to 10 percent or less by 2017. In addition, the plan sets forth goals for achieving universal access to primary education, primary health care, and safe drinking water; guaranteeing political freedom and human rights; and establishing an effective disaster relief system targeted principally at the poor.

Government expenditures on social programs increased substantially in 1998/99. Expenditures in seven key budget areas covering the vast majority of social services increased to 6.1 percent of GDP from 5.1 percent in 1997/98.

Uganda joined the IMF on September 27, 1963. Its quota is SDR 180.5 million (about $247.1 million). Its outstanding use of IMF financing currently totals SDR 265.9 million (about $364 million).

The text of Press Release No. 99/59 is available on the IMF’s website (www.imf.org).

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