Uganda - Education Sector Adjustment Operation Project

Document of the International Development Association FOR OFFICIAL USE ONLY Report No. P7185-UG REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT OF SDR 59.2 MILLION AND A PROPOSED GRANT IN AN AMOUNT OF SDR 55.5 MILLION TO THE REPUBLIC OF UGANDA FOR AN EDUCATION SECTOR ADJUSTMENT OPERATION February 27, 1998 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  GOVERNMENT FISCAL YEAR July 1 - June 30 (FY98 = July 1, 1997 to June 30, 1998) CURRENCY EQUIVALENTS Currency Unit = Ugandan shilling (U Sh) Interbank Market mid-rate: US$1.00 = U Sh 1,025 ACRONYMS AND ABBREVIATIONS AfDB African Development Bank DANIDA Danish International Development Agency DFID Department for International Development (United Kingdom) EFMP Economic and Financial Management Project ESIP Education Strategic Investment Plan GDP Gross Domestic Product GER Gross Enrollment Ratio GOU Government of Uganda GTZ German Agency for Technical Cooperation HIPC Heavily Indebted Poor Countries Initiative IDA International Development Association JICA Japanese International Development Agency MOE Ministry of Education MOF Ministry of Finance MOLG Ministry of Local Government MPS Ministry of Public Service NGO Nongovernmental Organization PETDP Primary Education and Teacher Development Project SAC Structural Adjustment Credit SSA Sub-Saharan Africa TDMS Teacher Development and Management System UNDP United Nations Development Program UNEB Uganda National Examinations Board UNESCO United Nations Education, Scientific and Cultural Organization UNICEF United Nations Children's Education Fund UPE Universal Primary Education USAID United States Agency for International Development Vice President Callisto E. Madavo Country Director James W. Adams Sector Manager Ruth Kagia Task Team Leader Eduardo Velez  FOR OFFICIAL USE ONLY THE REPUBLIC OF UGANDA EDUCATION SECTOR ADJUSTMENT OPERATION TABLE OF CONTENTS SUMMARY ................................................................................................................i I. INTRODUCTION .1 II. THE MACROECONOMIC CONTEXT AND THE RATIONALE FOR THE PROPOSED OPERATION .2 A. Economic Performance .2 B. Project Rationale .2 III. THE EDUCATION SECTOR .3 A. Issues ............. ,.3 B. Bank Strategy in Education .5 C. Policy Framework .6 IV. THE PROPOSED OPERATION .8 A. Objectives of the Proposed Credit .8 B. Conditions of Tranche Release .10 C. Supervision Plan. .11 Borrower's Leading Role IDA Supervision D. Credit Administration .13 Institutional and Implementation Arrangements E. Environmental Aspects .14 V. BENEFITS AND RISKS .15 VI. RECOMMENDATION .16 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ANNEXES ANNEX 1: LETTER OF EDUCATION SECTOR POLICY ANNEX 2: POLICY MATRIX ANNEX 3: STATISTICAL APPENDIX UGANDA AT A GLANCE STATUS OF BANK GROUP OPERATIONS IN UGANDA STATEMENT OF IFC'S COMMITTED AND DISBURSED PORTFOLIO ANNEX 4: ECONOMIC ANALYSIS OF UGANDA-ESAC ANNEX 5: TECHNICAL NOTES NOTE 1: PROJECTIONS FOR PUBLIC FUNDING OF THE EDUCATION SECTOR NOTE 2: FINANCING OF PRIMARY EDUCATION AND ACCOUNTABILITY IN UGANDA The project preparation team includes E. Velez, C. Abelmann (AFTH1); R. Reinikka (AFTM2); H. Nannyonjo (AFMUG); A. Ojoo (Consultant). Peer Reviewers: R. Prouty (AFTH2); G. Psacharopoulos (HDD). Project Quality Review Team includes S. Agarwal (AFTSI); A. Zerabruk (LEGAF); P. Wijesinghe (LOAAF), and N. Burnett (AFTH2). Sector Manager is R. Kagia (AFTH1) and Country Director is James Adams (AFC04).  THE R1EPUBLIC OF UGANDA EDUCATION SECTOR ADJUSTMENT OPERATION Summary Beneficiary: The Republic of Uganda Project Task ID: UG-PE-2972 Implementing Agency: Ministry of Finance and Ministry of Education Amount: SDR 59.2 million (US$75 million equivalent), IDA Grant in the context of the HIPC Debt Initiative, and SDR 55.5 million (US$80 million equivalent) IDA Credit. Terms: IDA Grant - Is not repayable. The IDA Credit, standard IDA terms with 40 years maturity Disbursement: The proposed operation will be disbursed through the Bank of Uganda. The initial tranche of US$75 million equivalent, 100 % of the IDA Development Grant, will be available upon the effectiveness of the IDA Development Grant Agreement. The Second and Third tranches will be released out of the IDA Development Credit upon fulfillment of the relevant tranche release conditions. Background: The Education Sector Adjustment Operation will provide budget support for the implementation of the Government's Universal Primary Education Policy (UPE) which started during the 1997 academic year. This policy aims at supporting universal primary education by opening up access to education to all children of primary education age, but specially to those of poor families who traditionally have not been able to attend school. Although UPE addresses a very critical education issue, it is highly unlikely that without substantial external assistance the policy intent can be achieved. Description: The proposed program will support UPE. In addition to providing the budgetary support required for the Government to implement its education program, the operation will work to improve the allocation of resources, the efficiency in the use of resources, the provision of key  ii educational inputs, and the strengthening of overall sector management. Rational for IDA Involvement: A primary objective of the Bank's assistance strategy to Uganda is to reduce poverty by generating employment and income opportunities through accelerated economic growth and by increasing the provision and effectiveness of public services, especially health and education. Primary education enrollment had stagnated in the 1990s. The implementation of the UPE policy is a major effort undertaken by the Government to improve primary education achievement. IDA's budget support will be key to allow initial implementation of the policy. Government Commitment: During the 1 990s the Government has established a record of solid economic reform and sustained growth. As a result of this achievement and because Uganda still remains in the lower tier of low income developing countries and carries a debt above sustainable levels, Uganda has been recommended to be the first country to benefit from the Heavily Indebted Poor Countries Initiative (HIPC). The Government has given priority to primary education with the implementation of the UPE policy, and families have responded with a strong enthusiasm by increasing enrollment in primary education, from about 2.7 million to about 5.3 million students. Benefits: Because the policy is expanding access to children who traditionally did not have the opportunity to enroll, the poor are now benefiting. Because social rates of return for primary education are about 16 percent, this investment will be beneficial to the society at large. But more importantly, primary education is strongly associated with agricultural productivity. Farmers with complete primary education have crop output 13 percent higher than farmers without education. Risks: The main risk lies in the Central Government's ability to allocate the resources for the education sector. To minimize this risk, budget monitoring will be carried out in cooperation with IDA to guarantee that resources provided are in fact allocated to the education sector and spent on the agreed inputs.  REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT AND A PROPOSED GRANT TO THE REPUBLIC OF UGANDA FOR AN EDUCATION SECTOR ADJUSTMENT OPERATION L INTRODUCTION 1. I submit for your approval the following report and recommendation on a proposed development credit to the Republic of Uganda in the amount of SDR 59.2 million (US$ 80 million equivalent), and a proposed development grant in the amount of SDR 55.5 million (US$75 million equivalent), to help finance an Education Sector Adjustment Operation (ESAC). IDA resources under the proposed operation would be disbursed over a three-year period. The operation would help provide support for the Government's Universal Primary Education Policy (UPE) which started during the 1997 academic year. This policy aims at supporting universal primary education by offering all families free access to primary education for up to four children. Although UPE addresses a very critical education issue, it is highly unlikely that without substantial external assistance the policy intent can be achieved. This operation is consistent with the Bank's assistance strategy and its main goal, poverty reduction, as spelled out in the Country Assistance Strategy (CAS) that was discussed by the Board on May 20, 1997, and with the Policy Framework Paper (PFP) distributed to the Board on October 31, 1997. The policy supported by this operation also follows the recommendations of the recent Poverty Eradication Action Plan prepared by the Government of Uganda last year. 2. The operation, whose timing and agenda were fully determined by the Ugandan authorities, would have two parts. One would be an IDA grant of US$75 million authorized by the Board when Uganda was declared eligible to benefit under the Heavily Indebted Poor Countries Initiative (HIPC); and, the second, an IDA credit of US$80 million, would be on standard IDA terms with a maturity of 40 years. Part II of the document discusses the Borrower's recent economic performance and the rationale for using adjustment lending in the education sector. Part III describes issues of importance within the sector. Part IV discusses the proposed operation. Part V discusses benefits and risks and, finally, Part VI provides the recommendation.  2 II. THE MACROECONOMIC CONTEXT AND THE RATIONALE FOR THE PROPOSED OPERATION A. Economic Performance 3. During the 1990s the Government of Uganda (GOU) has established a record of solid economic reform and sustained growth. GDP growth has averaged 6.4 percent during President Museveni's tenure and 8.1 percent over the past three years. Inflation has declined and the annual average inflation is in single digits. Economic policy has been disciplined and the impact on most performance indicators has been positive. The most important structural and institutional reforms include import, export and foreign exchange liberalization, privatization, public enterprises, tax administration, the financial sector, and the civil service. As a result of these achievements and because Uganda still remains in the lower tier of low income developing countries and carries a debt above sustainable levels, the country has been the first to qualify as a recipient of the HIPC Initiative. 4. Social indicators, however, show a poor picture. In the case of education, much ground was lost during the political turmoil and economic decline of the 1970s and early 1980s. Although significant improvements have been recorded recently, stagnation in enrollment and decline in quality continued during the 1990s. Because of the need for continued progress and because the GOU believes that community financial support for primary education can only increase over time, there is a strong basis for IDA support to the education sector. B. Project Rationale 5. A primary objective of IDA's assistance strategy to Uganda is to reduce poverty by generating employment and income opportunities through accelerated economic growth and by increasing the provision and effectiveness of public services, especially health and education. The proposed operation is linked with the following reform objectives supported by the CAS: (i) poverty reduction (the main aim of the operation is to improve the education status of the population, particularly in high poverty areas); (ii) strengthen budgetary process (the operation will coordinate with the actions underway through the recently approved Third Structural Adjustment Credit, SACIII, and the forthcoming Second Economic and Financial Management project, EFMPII); (iii) accelerated human development by improving access and quality of education; and (iv) revitalization of rural development by improving public investment in infrastructure (rural schools) and reducing regional disparities. The use of adjustment lending in the sector represents IDA's interest in removing structural constraints for the efficient use of sector resources. 6. The implementation of the UPE policy is a major effort of the GOU to improve primary education achievement. IDA's budget support will be key to allow initial implementation of the policy. The GOU has produced the Education Strategic  3 Investment Plan spelling out the most important policy implications as reflected in the Policy Letter (Annex 1). The policy reform to be supported by the operation is a clear example of a policy designed to improve education in the country, one of the clear objectives of the HIPC Initiative. Since the initial implementation of the policy, in the 1997 academic year, about 2.5 million additional students enrolled in primary education. III. THE EDUCATION SECTOR A. Issues 7. Access. Although education statistics are limited and, sometimes, unreliable, key indicators reveal a sector in distress. Primary education enrollment had stagnated in the early 1990s. Up to 1996, before the implementation of the UPE policy, total enrollment was equivalent to a net primary enrollment ratio of about 63 percent (Integrated Household Survey 1992/93) and a gross primary enrollment ratio of 93 percent. These ratios compare unfavorably with the ones of comparable low-income countries like Ghana, Madagascar, Lesotho, and Kenya. Secondary enrollment is extremely low. Net enrollment and gross enrollment rates are about 12 and 19 percent respectively. These rates also compare unfavorably with African averages, especially with comparable low- income countries like Togo, Nigeria, Ghana, Zambia, Lesotho, and Kenya. Only a small proportion of secondary school graduates continue to higher education, with net and gross enrollment rates of about 3 percent. 8. Equity. Access to education continues to favor the better-off, males, and those in the urban areas. Until recently, the net enrollment rate for primary education varied among income groups from 46 percent for the poorest quintile to 81 percent for the richest quintile. The pattern is more dramatic for secondary and higher education: the net enrollment rate for secondary education varies from 2 percent for the poorest quintile to 27 percent for the richest quintile, and the net enrollment rate for higher education varies from 1 percent for the poorest quintile to 5 percent for the richest quintile. Net enrollment in Uganda has been inequitable not only between income groups but also between males and females and between regions. Nationwide, 45 percent of primary school students were girls. However, considerable variation exists in gender equity among districts. There were eight districts where girls constituted less than 40 percent of enrollment, and eleven districts where girls represented at least 49 percent of enrollment. Household survey data also illustraLted that girls' enrollment in primary education has been lower than boys, mainly among the poorest families. In fact, for the richer families there are no gender differences in enrollment. Although enrollments at secondary education are low, the ratio of girls to boys decreases by grade from 0.67 for first grade (Primary 1) to 0.34 for the sixth grade (Primary 6). The higher education female enrollment of about 30 percent is similar to the average for the African Region. The intent of the UPE policy is to change these trends to assure better access for the poor, girls, and those in rural areas.  4 9. Internal Efficiency. Repetition. In primary government-aided schools in 1995, repeaters accounted for 19 percent of the total primary education enrollment. However, there are clear variations by regions. For example, in Kampala only 4 percent of primary students repeated a grade, while in Kumi 32 percent of primary students repeated a grade. The repetition rate in secondary education is much less, about 2 percent, due to a liberal promotion policy. At the tertiary level, failure rates for undergraduates can be very high; for example 40 percent in Law and 56 percent in Commerce. Dropout rates for primary education at the national level are about 10 percent. The highest dropout rate (14 percent) is in the transition from first grade (Primary 1) to second grade (Primary 2). Thereafter, the annual dropout rates are in the range of 9-11 percent. For Primary 1 through Primary 4, girls' dropout rates do not differ from boys'. The average of cohort survival rates to Primary 7 for the past three years is only 30 percent (boys 32 percent and girls 28 percent). Dropout in lower secondary schools is high. Between Secondary 1 and Secondary 4, it is about a third; and about 15 percent of those who enter Secondary 1 go on to 'A' Level in Secondary 5 and Secondary 6. 10. Quality. Academic Achievement. The high dropout and repetition rates point to general low quality of education, which is also reflected in low learning achievement. Recent results from a study by the Uganda National Examinations Board (UNEB) on numeracy and literacy of Primary 4 students show that in math, six out of ten problems were correctly answered by 50 percent or fewer students. Regarding literacy, the results also show low achievement. The low achievement of the system is more dramatic when considering that by P4 half of the original cohort has dropped out, and presumably the learning accomplishments of the dropouts are below those of the students who remain in school. Results from the Primary Leaving Examination also show that almost I out of 3 students do not pass the exam. The problems of wastage are also found in the secondary education level, where few students progress on time. In secondary schools, overall grades in 'O' and 'A' level examinations show a failure rate of 50 percent of candidates, indicating poor performance. Teacher Quality. Almost 25 percent of primary education teachers are unqualified. In spite of recent improvements, teachers' salaries only remain close to the living wage and are often paid late. As a consequence of this financial strain, many teachers pursue other income generating activities. With this outside pressure and little formal accountability, teachers often follow no common timetable and ignore the need to develop lesson plans. Teaching Materials. In primary schools, the student book ratio for math, English and science is about 6:1 and for social sciences about 10:1. Although the student book ratio has improved, there is evidence that books are not being consistently used as a part of classroom practice. Pedagogical Issues. Students generally take a passive approach. There is little active teaching where the teacher facilitates the students own learning. At the primary level, there is little group work or cooperative education. School Facilities. The number of primary schools across the country has expanded. Between 1980 and 1990, for example, the number of primary schools increased by 89 percent. However, these primary schools often lack libraries and basic equipment such as desks and chairs. As a result of the UPE, there is a critical shortage of classroom space. Over 70 percent of schools have no water supply and no effective  5 drainage system. Poverty, low teacher quality, inadequate educational inputs (software and hardware) and pedagogical problems help to explain the low level of internal efficiency. 11. External Efficiency. The low human capital level of the labor force is reflected even in the urban areas where the majority of both women and men have not completed primary education. In fact, Uganda has one of the lowest levels of human development in the world. It ranks 158 out of 174 countries in the UNDP Human Development Index. However, cost-benefit analysis of investment in different education levels in Uganda reports high social rates of return -- 16 percent and 8 percent for primary and secondary education respectively. 12. Overall the Government has made some progress in addressing the major issues facing education; in particular, the implementation of the UPE policy starting in the 1997 academic year. Although the financial implications are a major constraint, the GOU is committed to increase public expenditure for basic education. It is expected that the GOU will continue the trend observed in the reduction in its budgetary support for tertiary education, so that more resources are available for basic education. Central govemment expenditure on primary education has increased from .8 percent of GDP in 1992/93 to about 2.3 percent in 1997/98. Even with these increases, central government expenditure on primary education remains lower than most comparable low income countries. Reflecting this situation the GOU continues to seek additional international support to facilitate higher levels of spending on education. B. Bank Strategy in Education 13. IDA has supported five projects in the education sector: (i) for improvement of coverage of general secondary education (Education I, for US$9.38 million, signed in 1967 and closed in 1973); (ii) for curriculum development for technical and vocational secondary education (Education II, for US$7.3 million, signed in 1971 and closed in 1981); (iii) for improvement of quality of education and management of the system (Education III, for US$32.1 million, signed in 1983 and closed in 1988); (iv) for improved coverage and quality of primary education (Education IV, for US$22 million, which was signed in 1989 and closed in 1994); and (v) for the improvement of preservice and inservice teacher training with the ongoing Primary Education and Teacher Development, PETD, for US$52.6 million, signed in 1993. With the ESAC, IDA will provide needed budget support to improve the implementation of UPE. Parallel to the implementation of this ESAC, IDA and other donors will assess the need for further investments to further improve quality of basic education, including secondary education. 14. Other Donors' Involvement in Education. The education sector also benefits from broad support from the donor community. USAID has provided important support for primary education. DANIDA is supporting special education; Irish Aid is supporting community education; JICA is supporting rehabilitation of primary schools; the  6 Netherlands are supporting teacher training; the Department for International Development (DFID-United Kingdom) is supporting inservice secondary teacher education and is providing direct support to the UPE policy as well; EU/OPEC is supporting rehabilitation of technical colleges, colleges of commerce and national college of business studies; UNICEF is supporting adult education; and UNDP/GTZ/AFDB are supporting re-equipping and furnishing of Makerere University. Regular donor consultations are organized periodically by the MOE, and there is close cooperation in working with MOE on UPE. 15. Since 1993, the achievement of the policy goals for primary education has depended significantly on the current Primary Education Reform Programme (PERP) supported by the World Bank Primary Education and Teacher Development Project and by USAID. Although the educational inputs provided by PERP are sound and changes in school management and teaching practices are observed, the program is not enough to support the needs created by UPE. 16. Lessons Learned. The contribution of IDA in education investment dates back to 1967, making Uganda one of the first countries that received financial assistance for education from the World Bank. Implementation of the IDA-financed education projects suggests the following key lessons: (i) the need for a detailed analysis of the magnitude of project recurrent costs burden on the Borrower and of sources for its financing to take place at appraisal, in particular for learning materials and teachers' salaries; (ii) the need to thoroughly appraise risks and take appropriate precautions during disturbed country conditions; and (iii) the importance of informing and involving local communities in design and implementation of education investment interventions. The experience of expanding access to primary education in Tanzania and Malawi indicates the need to guarantee financial support to cover a minimum number of education inputs, specifically teachers, classrooms and textbooks. 17. Value Added. The most important source of value added by Bank support is its comparative worldwide experience in the sector, which would help to provide technical advice in education and financing issues, facilitating donor support for the sector and contributing to develop consensus around acceptable policies. C. Policy Framework 18. Borrower Commitment. One of the most important recommendations of the Ugandan Government's policy for education, fully described in its White Paper on education (Education for National Integration and Development, 1992), is the universalization of primary education. Starting in 1997, the GOU has initiated implementation of the policy by abolishing tuition fees for the majority of students attending primary education. To support UPE, the Government's strategy, as characterized in the Background to the Budget document, is to shift government resources from secondary and tertiary institutions, particularly where they are being used  7 for non-instructional subsidies. The Ugandan government is also committed to improving teacher salaries. In 1996/97 the government increased the minimum pay for trained teachers from Sh 49,000 to Sh 72,000 per month. This raise helps assure a living wage, as estimated by the Ministry of Public Service (MPS) for the first time. 19. Within the GOU's curre:nt plan for the reduction of poverty, there is a strong emphasis on education, based on the correlation between higher education levels, particularly for women, and improved social indicators and productive capacity. The Government's strategy of reducing poverty by increasing primary school enrollment triggered the shifting of Government expenditure noted above, toward primary education and away from non-instructional subsidies at higher levels. As a result of this strategy, there has been a reduction in parents' private contributions for primary education and an increase in cost-sharing for those attending higher education levels. 20. The recommendations in the White Paper chart an ambitious and appropriate course of action. Support for primary education as reflected in the UPE policy is admirable and is fully supported by the Bank. Assistance to the Government to achieve and sustain quality provisions of universal primary education is an important next step for the World Bank. However, it is essential to find a growth rate toward UPE that is financially and administratively sustainable. Sustaining UPE requires programmatic cost sharing which builds on demonstrated willingness to pay local taxes, strong community ownership, decentralization, accountability to parents, and also targeting subsidies to the poorest. UPE has clearly benefited the poorest families. 21. It is important to note that education spending in Uganda cannot continue to be so low if human capital levels are to be raised sufficiently to have an economic impact. The question of whether the Government be able to increase expenditures for primary education to around 4.0 percent of GDP (the level of expenditure necessary to finance the UPE policy in the near future) is a central focus of this operation. At the same time, efforts to improve efficiency and equity within the education sector should not await improved revenue performance nor international support. It is however clear that the sustainability of any coverage increase will be jeopardized without substantial inter sectoral allocations. 22. Finally, public sector reforms are a crucial prerequisite for successful reform of the education sector. The MOE needs to catch up with the recent changes in the public sector. The role of the MOE should increasingly be focused on equalizing the opportunity for schooling among richer and poorer regions and in making schooling accessible to presently excluded groups. UPE is a significant effort to support some of these policies.  8 V. THE PROPOSED OPERATION A. Objectives of the Proposed Operation 23. The policy of providing free primary education for up to four children per family, the UPE policy, has led to a registration of about 5.3 million children for this academic year, almost twice the enrollment for the previous year. This dramatic increase was not fully expected and the Government is under significant pressure to develop short term strategies to deal with it. There is concern that unless some actions are taken, the quality of education provision will deteriorate, causing a backlash to the UPE policy and subsequent declines in primary school participation, particularly by the poor. 24. The purpose of this sector adjustment operation is to provide core budget support to promote and further develop the UPE policy. Consistent with this policy, DFID has recently announced a grant of UK pounds 20 million to support UPE. Other coordinated donor activity will focus on the accompanying reforms that are urgently needed to improve the performance and organization of the education system in the context of the UPE policy. This operation is designed to support the Government's own priority in achieving UPE while also complementing other donors' interventions. In addition to providing the budgetary support required for the Government to implement its education program, the operation will work to improve the allocation of resources, the efficiency in the use of resources, and the quality and availability of education inputs. Attention will also be given to overall sector management, planning, budgeting and information systems. The adjustment operation will be critical in assuring that the resources exist to sustain the growth in enrollment by assuring proper financial disbursements and distribution of education inputs. 25. Policy Objectives. The proposed IDA operation would finance about 25 percent of the total budget for primary education for the FY97-00. There are four measures underlying this operation which support the implementation of UPE, as follows: A. Improved Allocation of Resources It will be critical to maintain measures promoting the increased priority in resource allocation to primary education. The implementation of the UPE policy itself is the first step to improve allocation of resources. The second step is the reduction of public financed enrollment in tertiary education. The Government is already doing this. For example, for the 1993 academic year, 10 percent of total enrollment at Makerere were private students, paying full fees and by the 1996 academic year, only two years later, private enrollment increased to 24 percent. The Government needs to ensure sufficient financial resources to implement the UPE policy, in particular to pay additional teachers, (mostly retired teachers hired  9 on a temporary contract basis at the district level), including teacher salaries arrears. Training for new teachers will be mostly provided by the PETDP project, and provisions have been made to provide for this training using the available infrastructure. Primary education spending is expected to be about two fold in FY98/99 compared to FY95/96 in real terms. As a percent of total government budget, public primary education allocation will move from about 13 percent in the FY96/97 to about 18 percent in the FY99/00. With the abolition of tuition fees some have argued that the communities will not be as active in school matters as before, when private financing was needed. Traditionally, private contributions were about 50 percent of total financing for primary education. As it is critical to keep the community involved in school activities, both to increase the total resources available and to support quality, it will continue to be necessary to encourage the mobilization of parents and community involvement to increase resources for investment and recurrent cost financing of primary education. According to the policy, parents can contribute to some inputs, like food and educational materials, but many officials and parents remain confused as to what parental contribution may be. At appraisal the preparation team discussed and agreed with the Government the need to clarify its policy regarding parental financing and involvement in school activities. B. Increased Efficiency in the Use of Resources Measures promoting the efficient use of resources are required to increase access at marginal cost. In order to increase efficiency in teacher and classroom utilization, the Government will introduce double shift teaching in selected grades in a small number of schools in 1999 and under voluntary agreements. The use of double shifting will be a necessary temporary transition policy as it would be financially impossible to build all the classrooms the country needs in the short- run. Multigrade teaching will be piloted as a way to provide education services to children in remote areas and in schools with small numbers of students per class. The excess supply of teachers will be avoided. Also, as an additional quality and efficiency measure, classroom construction will be expanded through parallel investments of communities, private sector and Government. C. Protecting Quality Inputs There are important measures which need to be adopted to maintain the quality of education. To increase the supply and quality of textbooks and instructional materials for primary level, budget support will be provided to get textbooks, based on a ratio of 1:3 for math and English textbooks. Teacher training will be strengthened by extending the Teacher Development and Management System, TDMS.  10 D. Strengthening Sector Management To improve the operation and management capacity of the sector, the GOU has been discussing the establishment of an Education Management Information System (EMIS) as a tool to develop indicators to monitor school progress by the education authorities. The EMIS will set clear and attainable objectives relating to key outputs of the Ministry of Education and measuring the performance of the sector in achieving those objectives. Other actions supported by IDA will also help with the strengthening of the management in the sector. For example, SACIII will improve the management and efficiency of public expenditure, including introduction of an outcome-oriented budgetary process (including the education sector), the strengthening of the poverty focus of public spending and of the expenditure management under decentralization, and accountability and transparency. The introduction of an outcome oriented budget is a condition of second tranche release of SACIII and will be monitored in the context of SACIII. Improvement of management of teacher payroll is expected to be achieved at the end of the operation. Teacher payroll management will be strengthened. Finally, a system for monitoring the accountability of public funds allocated to districts and schools will be implemented. B. Conditions of Tranche Release 26. Agreements and Understandings Reached and Monitorable Actions. The Government's policy has been set out in the Letter of Education Sector Policy and in the Policy Matrix presented in Annexes 1 and 2. The Government has fulfilled the following conditions: (i) an UPE dissemination strategy with different products aimed at district offices, headteachers, teachers, and with a plan for implementation from March 1988 incorporating current activities and a budget (this includes the clarification of parental contribution to support UPE); (ii) a finance plan satisfactory to IDA for UPE; (iii) a draft policy paper on options for double shifting including voluntary participation and incentives; (iv) formalized policy on provision, distribution and utilization of textbooks and instructional materials; (v) a plan for the expansion of in-service teacher training to cover all districts; (vi) guidelines to all districts and schools for recruitment, deployment and payment of teachers, finalize action plan to update teachers payroll, and prepare financing plan to clear teachers' salary arrears; (vii) guidelines issued to districts and schools for accounting for public funds; and (viii) design an exercise for districts to conduct educational development planning, including school mapping. The first tranche of US$ 75 million under the Grant will be released upon signing and effectiveness of the IDA Development Grant Agreement. Conditions of effectiveness requires that by April 28th, 1998 the aggregate amount of teachers' salary payment made to primary school teachers does not exceed Shs 75 billion (the salary estimate for primary teachers wage bill for ten months for FY 97/98) and the number of primary school teachers on the payroll does not exceed that determined by the formula specified in the staff establishment policy  11 by district; and issuing of letter of termination to all redundant primary school teachers. The second and third tranches will be disbursed under the IDA Development Credit Agreement for US$ 45 million and US$ 35 million respectively. 27. The following conditions would need to be fulfilled prior to second tranche release: (i) UPE dissemination activities targeted at district offices, headteachers, teachers, and parents underway with particular attention to encourage parental and community participation; (ii) allocate to primary education at least 19.5% of total government recurrent budget (excluding statutory and interest payments) in FY98/99; (iii) adopt a voluntary double shifting policy and implement a campaign to promote it for the 1999 academic year; (iv) complete policy paper on multigrade teaching with implementation plan for demonstration sites in at least two districts; (v) complete a study on primary teacher supply and demand and approve an action plan to implement the recommendations of the study; (vi) adopt a plan on classroom construction in which government, communities, and parents participate by piloting alternative modalities; (vii) allocate at least 2.8 percent of total primary education recurrent budget to textbooks and instructional materials in the FY98/99 budget; (viii) commence implementation of the expansion of phases IV and V of the TDMS; (ix) implement an action plan to update teachers' payroll and assure all arrears are paid; (x) furnish to IDA evidence that a monitoring system for the accountability of public funds allocated to districts and schools is operational based on a random sample of 350 schools in at least four districts; (xi) complete educational development plans (including school maps) in at least 12 districts and furnish to IDA evaluation forms from districts officials; and, (xii) design an Education Management Information System. 28. The following additional conditions would need to be fulfilled prior to third tranche release: (i) allocate to primary education recurrent budget at least 17.5% of total government recurrent budget (excluding statutory and interest payments) for FY99/00; (ii) report on the experience of the implementation of the double shifting in the 1999 academic year; (iii) pilot in at least two schools in each of two districts the introduction of multigrade teaching; (iv) implement the action plan to prevent excess supply of teachers, including the closure of teacher colleges not deemed to be cost effective; (v) assess different modalities of classroom construction; (vi) provide to IDA the actual expenditure of budgetary item for textbooks and instructional materials for the 1998 academic year, and keep same allocation for textbooks and instructional materials in FY99/00 budget; (vii) assure all active teachers should be on payroll and paid in a timely manner; and (viii) complete educational development plans (including school maps) in an additional 20 districts and furnish to IDA evaluation forms from districts officials; and, (ix) furnish evidence to IDA of EMIS implementation. 29. The following five impacts are expected from ESAC: * wide understanding of respective roles within UPE by parents, school, communities, districts, and central government; * increased resources available to primary education;  12 * increased efficiency in the use of public resources; * protecting the quality of teaching and learning; * strengthening education sector management. C. Supervision Plan 30. Borrower's Leading Role. The overall coordination and implementation of ESAC will be the responsibility of MOE and MOF. These ministries and others involved in implementation, including the Ministries of Planning and Economic Development, Public Service and Local Government, will work jointly with IDA in-country supervision missions. They will continue to coordinate and support provision of other donors in the education sector. In addition, MOE would be responsible for preparing the groundwork for supervision missions as well as organizing quarterly project reviews with various stakeholders and submitting regular progress reports to IDA. A completion report will be compiled by the Government for IDA within six months of Credit closing. 31. IDA Supervision. Given the nature of the proposed operation, adequate supervision resources would need to be provided by IDA. The Bank will monitor implementation of the agreements and will integrate lessons learned in future operations. The project will be monitored by professional staff based in the Kampala office as well as by regular supervision missions. Monitoring of the planned actions include the following: (i) review of draft budget and statement on education sector expenditure prepared by the MOF; (ii) provision of teachers, textbooks and classrooms; (iii) double shift will be reviewed through statistics and sampled visits to schools; (iv) designing and implementing of an accountability mechanism for the conditional grants; and (v) establishing of the Education Management Information System, including school mapping exercise conducted by the MOE and the districts. Requirements for supervision are estimated at about 60 staff weeks, including consultants, over three fiscal years. The supervision resources will be financed out of IDA's administrative budget. SUPERVISION PLAN (in staff weeks) Fiscal Year FY98 FY99 FYOO HQ Supervision 2 6 2 RM Supervision 4 6 4 Missions 4 12 20 TOTAL 10 24 26 Note: FY refers to WB fiscal years.  13 32. The detailed plan for supervision is presented in the following table: TIMETABLE FOR IN-COUNTRY SUPERVISION Planned Date Activity Expected Skills (Staff weeks) February/March 1998 Supervision mission to assess Task Manager (1) compliance for Board Education Specialist (1) presentation and agree on next Economist (1) steps September 1998 Supervision mission to assess Task Manager (2) progress in implementation of Education Specialist (2) the program Operation Officer (2) March 1999 Supervision mission to evaluate Task Manager (2) whether second tranche actions Education Specialist (2) have been met and assess Economist (2) progress towards meeting third tranche actions September 1999 Supervision mission to assess Task Manager (2) progress in implementation of Education Specialist (2) the program Economist (2) March 2000 Supervision mission to evaluate Task Manager (2) whether third tranche release Education Specialist (2) actions have been met Economist (2) June 2000 Final supervision mission and Task Manager (2) implementation completion Education Specialist (2) report Country Economist (2) Operation Officer (2) D. Credit Administration Institutional and Implementation Arrangements: 33. Amount of IDA Financing, Use of Funds, and Tranching. The proposed IDA financing credit/grant would be SDR 114.7 million (US$155 million equivalent). The borrower/recipient would be the Republic of Uganda. The Operation would be disbursed in three tranches of US$75 million, US$45 million, and US$35 million for FY97/98, FY98/99 and FY99/00 respectively. These tranches would help Uganda fill its budgetary financing gap for the primary education sector, essential to maintain a sound implementation of the UPE policy, within the framework of a sound financial and macroeconomic program. The first tranche would be released upon Board approval and effectiveness of the IDA Development Grant and the IDA Development Credit  14 Agreements. The other two tranches would be subject to satisfactory implementation of the reform program; and the applicable relevant conditions of tranche release; they are scheduled to be disbursed in May 1999 and in May 2000 at the end of the fiscal year. The final draft policy matrix specifying the content and timing of tranche release conditions, and performance targets was developed and agreed with the GOU during appraisal. 34. Disbursement. Disbursement arrangements will follow the simplified procedures approved by the Board on February 1, 1996. The Government of Uganda will open an account in the Bank of Uganda. Upon IDA notification of tranche release, proceeds of the IDA Credit and the IDA Grant will be deposited by IDA in this account at the request of the Government of Uganda. Although a routine audit of the account will not be required, IDA reserves the right to require it. 35. Management, Monitoring and Accounts. The MOF will be the Governmental agency responsible for overall coordination of the proposed program, while the MOE is responsible for the implementation of the education sector reform. IDA will work closely with MOF and MOE staff for the supervision of the program, which will be mainly conducted from the Resident Mission. The MOF has been successfully managing several structural adjustment credits as well as the Economic and Financial Management Project. Bank staff would continue to coordinate internally and with IMF staff to ensure adequate monitoring of key sectoral and macroeconomic policy indicators. E. Environmental Aspects 36. None of the activities foreseen by the project are anticipated to have any negative impact on environment. In accordance with IDA policies for adjustment operations, no environmental rating has been assigned. V. BENEFITS AND RISKS 37. The operation will assist the Government to improve the comparatively low and stagnant level of primary education and, indirectly, improve secondary education coverage by opening up opportunities for access to secondary education in places where enrollment levels have been low. 38. Economic Benefits. Social rates of return for primary and secondary education in Uganda are about 16 percent and 8 percent respectively. As a result, this investment will be beneficial to the society at large. Other benefits would be the following: (a) increased equity of educational opportunities for the disadvantaged (mainly rural and poor and in particular girls); (b) reduced illiteracy due to greater participation in primary education; and (c) increased efficiency of all education levels, resulting in resource savings that  15 would contribute to system expansion and improvements. Finally, estimates of the welfare gain arising from externalities on women's health (improvements in female fertility, child and maternal mortality rates) shows a positive benefit-cost ratio of investing in girls' education; the ratio is about 1:4 (1:2 assuming that the benefits materialize 15 years after the girls' additional year of schooling). In Uganda, providing 1,000 girls with an extra year of primary schooling would cost about US$25,000 to the Government, and even after discounting to take account of the time lag between when girls are educated and when they grow up and have children, the social benefits of educating girls are enough (about US$94,000) to cover the cost without taking any account of the market return. For a more detailed presentation of the rate of return and the cost-benefit analyses see Annex 4. 39. Target Population. The expansion of the system will benefit primarily children from the poorest families, especially girls, who traditionally have had less access to education. As girls and boys have registered this year in similar proportions, the operation will support greater equality of educational opportunities. The re-introduction of double shift teaching will decrease unit cost by covering more students with the same capital investment. By supporting UPE, the proposed project will address the issue related to lower and inequitable access in primary and secondary education. It will also ensure that financial constraints do not lead to declines in educational quality and a subsequent fall in participatory rates. 40. Risks. The project would support education inputs that normally are implemented on a regular basis (i.e., hiring of teachers, provision of textbooks, educational materials and classrooms), as well as the recently introduced conditional grants to cover for non-wage expenditures at the school level, as part of the decentralization policy. During the design and initial implementation of the UPE policy, MOE officials have had ample opportunity to internalize the reforms to be supported. One main risk lies in the Central Government's ability to continue to allocate increased resources for the education sector within the context of the overall budget. In addition funds allocated may not reach the intended beneficiaries because of weaknesses in the current accountability system. For these, budget monitoring will be carried out in close cooperation with IDA to guarantee that resources provided are in fact allocated to the education sector and spent on the agreed inputs. A final risk is the one of capacity for classroom construction. To deal with this it has been agreed that the MOE will use several cost-effective approaches. 41. Poverty Category. Because the program supports the expansion of primary education, it is mainly targeted at rural communities in poor areas of the country and where the education indicators are the lowest in the country. It falls 100 percent within the category of Poverty Reduction and Human Resources Development.  16 VI. RECOMMENDATION 42. Recommendation. I am satisfied that the proposed Credit and Grant would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve them. James D. Wolfensohn President By: Sven Sandstrom Managing Director Attachments Washington, D.C. February 27, 1998  Telephone: 234700/9 (10 lines) Kampala Ministry of Finance Pae of8 PO Box 8147PaeIo Fax: 230163 Kampala Telegrams Finsec" Uganda Email: finance@imul.com In any correspondence cn nTH RELc OF OGCANfA this subject please quote No. 12 February, 1998 Mr CalListo Madavo Vice President, Africa Region The World Bank Washington, D.C. Dear Mr. Madavo: Re: Letter of Education Sector Policy 1. The purpose of this letter is to describe the education sector policies that we plan to folLow during the implementation of the proposed Education Sector Adjustnent Credit. Specific actions are included in the attached Policy Matrix, and have to do with disseminating the Universal Primary Education Policy (UPE), increasing resources available to UPE, increasing efficiency in the use of public resources, protecting quality of teaching and learning, and strengthening sector management. The letter discusses each of these actions in further detail. Overall Development Strategy 2. The Government of Uganda has been implementing a solid program of stabilisation, economic recovery, and structural adjustment. As indicated in the most recent Policy Framework Paper distributed to World Banlks Board in November 1997 and as reflected in the most recent Country Assistance Strategy, the public expenditurc strategr concentrates on those activities in which goverment must play a leading funding role. ln particular it concentrates on those, such as education, which are a priority for the government as reflected in the recent Poverty Eradication Action Plan of 1997. Education Sector Policy 3. Uganda's education sector suffered substantially in the 1970s and 1980s. Following the restoration of peace in 1986, the government initiated the process of reforming and reconstructing the education sector by establishing an Education Policy Review Commission (EPRC). Following the recornmendations issued in 1989 by EPRC, a detailed government White Paper identified improved access to education as one of the priorities for the sector. One central goal is to universalise primary education in Uganda. In February 1997 the Ministry of Education introduced the Universal Primary Education Policy (UPE) to ensure that educational access, quality, equity, and relevance are affordable to the majority of children of school-going age (6 - 12). Since the initial implemnentation of the policy in the 1997 school year, more than 2.5 million additional pupils enrolled in primaxy education and remained in the system during the whole academic year. The proposed Education Sector Adjustment Credit (ESAC) will provide support to the government as it addresses certain essential policy issues. As part of the ESAC, the Ministry of Education (MoE) will finalise the Education Strategic lnvestnent Plan (ESIP), following consultation with the donor co=munity and other stakeholders, creating the underpinming for investaent in the sector in the mid-term. The following issues are to be addressed by the ESAC:  ANNEX I Page 2 of 8 1. Clarification of the UPE Policy 4. The main objective of the UPE is to provide the minimum necessary inputs and resources to enable every Ugandan child of school-going age to enter and remain at school to complete the primary education cycle. This goal should be accomplished by 2003. 5. The policy objectives of providing UPE include: (i) establishing, providing and maintaining quality of educatiorn to promote national human resource development; (ii) transforming society in fundamental ways; (iii) facilitating the entry, retention, and completion of the primary education cycle for all children; (iv) making basic education equitable, accessible and relevant to the nation; and (v) ensuring that education is affordable to the majority of Ugandans. The rapid implementation of UPE has caused some misunderstanding concerning the actual details of the policy. 6. Under the programme, the Government's responsibilities are to: (i) pay statutory fees for four children per family and all orphans; (ii) provide instructional materials, teachers guides, syllabus, and curriculum (iii) provide pre-and in-service training for teachers; (iv) provide teachers' salaries in government grant-aided schools; and (v) assist with construction of school buildings. Districts should provide: (i) ftrniture; (ii) clean and safe water within reach of school; (iii) land or premises where teaching and leaming can take place; (iv) assistance in the construction of school buildings; and (v) supervision and inspection of schools. Parents are responsible for: (i) exercise books, pencils (ii) meals; (iii) clothing for their children; (iv) transport to and from school; and (v) assistance in the construction of the school buildings. These responsibilities will be clarified to all parties involved. The Ministries of Education, Public Service, Local Government, Planning and Economic Development, and Finance will work closely to agree on the content of the dissemination campaign and will ensure that the campaign is carried out smoothly, starting in 1998 and continuing during the next two years. 7. A national dissemination strategy is intended to make sure that all district staff, teachers and head-teachers, communities and parents understand the policy and their roles in relationship to the policy. The strategr, incorporating al efforts to date, will be prepared with an implementation plan and budget. This disseination exercise will require MoE to conduct a national public campaign using multiple channels of communication. It will involve the media, including radio and newspapers, posters, as well as other materials designed to reach those in remote areas and those who lack literacy skills. As part of its dissemination effort, the Government will specifically create materials to be publicly displayed at all private community schools to inform both parents and teachers that government resources for these schools at this time extend only to capitation grants, and that full grant- aiding (paying of teachers' salaries) will only take place as resources allow and following assessment of all criteria for acceptance. The MoE has established a committee, the UPE Implementation Committee, expressly for defining and implementing the UPE Policy. Policy decision taken by this committee will be communicated in a variety of ways. Specifically the methods to be used will include: (i) circular and guidelines sent from the MoE to Local Council 5 chairpersons, Chief Admirnistrative Officers (CAOs), District Education Officers (DEOs), District Inspectors of Schools (ISs) and Resident District Commissioners (RDCs) in all districts; (ii) seminars and workshops with headteachers, teachers, parents at the district (including LC 1) level, and the national level; (iii) intersectoral briefs; (iv) policy statements to parliament and cabinet; and (v) use of Co-ordinating Centre Tutors to assist in sensitising the teachers and the community.  ANNEX I Page 3of8 2. Increasing Resources Available to UPE 8. The GOU will pursue these objectives by reforming the pattem of resource mobilisation and resource allocation in the sector, and through appropriate institutional reform and strengthening, and this trend will continue. The elimination of primary tuition fees for four children per family and the elimination of Parents and Teachers Association (PTA) fees in rural primary schools, and the ceilings imposed in municipal schools, have already relieved the household financial constraints on enrolment especially for low income fnmilies. 9. Education subsidies are greatest at the university level, relatively less for secondary and primary teacher training, and least at the primary education level. This structure is inequitable, since post-primary education pupils, especially at the university level, tend to come mainly from relatively better-off households. At the primary level, the burden of fees traditionally led to school dropout and low enrolment, mainly among poor households. With the UPE policy, and with the charge for education service at post primary levels, this traditional inequity of education subsidies will recede. Untargeted across-the-board subsidisation will be substantially reduced. Boarding subsidies at the secondary level have already been discontinued, and boarding subsidies at the university level will be progressively phased out. The increased mobilisation of resources from pupils and their parents at post-primary levels will allow a greater share of Central Government expenditure to be devoted to primary education as reflected in the budget of FY 97/98 and subsequent years. The government wi allocate to the primary education recurrent budget at least 19.5 % of total government recurrent expenditure (excluding statutory and interest payments) in FY98/99 and 17.5 % in FY99/00. 10. The public campaign (see Par 7) will also address how parents can support primary education. Although the policy eliminates all school fees, the policy does permit parents' support in other essential areas such as school construction. Specific programs will be developed to help parents better understand the role they can play in supporting primary education, as part of the dissemination effort. 3. Increasing Efficiency in the Use of Resources 11. The Government!s policy is designed to increase efficiency in the use of public resources. Efficiency measures at the primary education levels will include: (i) introduction of a revised Staff Establishment formula for primary schools; (ii) double shift teaching; (iii) multigrade teaching strategies in schools with small classes; and (iv) rationalising of teacher training programs. Revised Staff Estabrishment Formula 12. Prior to the introduction of UPE, the provision of teachers.to schools was based on one teacher for forty pupils per class plus one teacher. With the great increase in enrolments, the number of teachers required would have been 155,178 in 1997. This figure was revised to one teacher for 55 pupils (or per class) - the staff establishment under this ratio would be 114,267, an efficiency saving of nearly 41,000 teacher places. The ratio will be revised, as funds become available, to increase the numbers of teachers, with regard to the number of pupils in the system and the level of teacher salaries. Double Shifting 13. As a further efficiency measure, double shift classes have been built into the stiff establishment ratio for all primary schools, by providing one teacher position for 110 pupils in Primary 1 and 2 classes. Double shifting involves using physical and human resources twice in one day to accommodate two cohorts of pupils and the staff establishment assumes that this will take place. Effectively this means that no school has any stnffing advantage by not introducing double shift teaching. This  ANNEX I Page 40f8 reduced the staff establishment from 114,267 to approximately 91,000, a further saving of 23,000 places. With the introduction of the amended Staff Establishment Ratio in 1998, there are limited further efficiency gains to be made for these classes. As the majority of upper primary classes have less than 55 pupils (the current pupil:teacher ratio) little can be gained in efficiency by splitting classes with more than 55 pupils. Some further gains could be made by considering other options such as the one teacher teaching P3 in the morning and P4 in the afternoon. Provision of teachers' salaries to districts will now be based on the revised establishment and districts are being informed of this with lists of establishments for all government grant-aided schools. As the large cohort of pupils which enrolled in P1 in 1997 moves through the system it will be important to consider the class of this cohort (e.g. P3 in 1999) for fiurther double shifting. Multigrade Teaching 14. Multigrade schools combine pupils of different ages and abilities (enrolled in different grades) in one classroom under the direction of one teacher. Multigrade schooling can be a cost-effective means of expanding access and increasing learning achievement. In the case of Uganda, a number of schools operate with very smal classes that could be combined if teachers were properly trained in multigrade teaching. The first step in Uganda will be to explore the concept and relevance to the current needs in the country. By April 30, 1999, a policy paper will be completed that examines the issue and addresses how a national pilot project could be launched. The paper will address how to pilot at least two multigrade schools in each of at least two districts and how these schools could serve as an experimental training program for others that might be willing to implement the policy voluntarily. The paper will also include a strategy for marketing the policy to be implemented in the 1999 school year. Teacher Supply 15. The MoE will complete a study on primary teacher supply and demand and approve an action plan by April 30, 1999. The current system does not take into account the number of teachers that are needed or can be afforded. This study will define the respective roles and responsibilities of pre-service and in-service teacher education, identify responsible authorities, and determine the number of Teachers Trnining Colleges required to meet the demand for primary teacher education during the next five years. The MoE will address the potential closure of Teacher Training Colleges based on cost-effectiveness criteria. By April 30, 2000 there will be complete implementation of the recommendations of the report, including closure of colleges. 4. Protecting Quality Inputs On-going Teacher Support 16 Teachers are one of the most cost-effective education inputs in Uganda. In order to improve the quality of teaching, Government has been supporting inservice trnining. Teachers' salaries have improved over the last few years and the Government is committed to maintaining the current levels. The Government wMl continue giving priority to teacher training, providing a balanced program of pre- service training, upgrading untrained teachers, and expanding in-service training, by extending the scheme supported by the Teacher Development and Management System (TDMS) to cover the whole country. Double Shitt Teaching 17 Double shift teaching for P1 and P2 has been built into the staff establishment of all primary schools. However, the physical arrangements of how individual teachers will be allocated to individual classes will be a matter for schools. The quality of teaching may suffer if schools choose to place one teacher with 110 pupils in a  ANNEX I Page 5 of 8 single shift arrangement. Double shifting will be selectively applied as a temporary measure by schools in consultation with district administrators. The policy could allow for participating teachers to receive a monetary incentive to teach a morning and aftemoon session with different pupils. The policy, where appropriate, is appealing in that it provides a mechanism by which to reduce class size without needing more physical space or additional teaching staff. The policy will be further explored in a draft policy paper to be completed by February 28,1998. The paper will examine how double shifting might be an appropriate policy to accommodate enrolment growth across all grades of primary education. The paper will also include an implementation plan that presents a strategy to market the policy, together with a budget for implementation. The marketing plan will address how to make the policy appeal to pupils, parents, and teachers as it changes the notion of schooling that is currently practised. Marketing will begin at least three months before the 1999 school year to assure implementation in 1999 school year. The MoE will monitor the implementation to see how many schools respond and what effect the policy has on reducing class size and improving school quality. Instructional Materials 18. The protection of the provision of textbooks and other instructional materials is also essential to achieve quality of education. In order to achieve the goal of 90% of schools reaching a 1:3 ratio for Mathematics and English textbooks and 70% of schools reaching a 1:3 ratio for Social Studies and Science textbooks, the Government will continue its policy of encouraging private sector development in the production and distribution of these materials. The role of the public sector witl be policy oriented (setting policies, formulating guidelines and monitoring standards), and to facilitate a worling market in instructional materials. A committee has been reviewing goverrnment policy in this area and will issue recommendations by 28 February 1998. The recommendations will guide the next procurement of instructional materials. Policy guidelines will ensure that schools have adequate choice of instructional materials. The government will allocate. at least 2.8% of total primary education recurrent budget to instructional materials in FY98/99 and FY99/00. It will ensure that schools have received shipments of instructional materials in the 1999 school year, based on a random sample survey of at least 350 schools in each of at least four districts. Provision of Physical Infrastructure 19. The expansion of primary education has created an enormous demand for more schools and classrooms. MoE will pilot at least two models for school construction starting in the 1998 academic year and a final report assessing the experience wi be ready by April 30, 1999. Information on the number and location of schools, their status and their infrastructure is incomplete and just beg-nning to be systematically mapped by district. Implementation of the pilot phase in one district (i.e. Kumi) has been completed and launched. Plans are now under way to design a program for countywide district level educational development plans, which will include school mapping (collection of data on school hum an resources, educational facilities and location). Funding has been secured for the first nine districts. An inventory of school buildings and classes was taken during the headcount of August 1997 and an investment fund for school construction (including classrooms, latrines and teacher housing) is being set up to systematically provide the necessary infrastructure. Teacher Workforce 20 A headcount of teachers on August 1997 identified about 102,300 teachers in the system, including gove.=ient grant-aided and some private and community schools with UPE children. AbGut three percent were identified as ghosts (i.e. not  ANNEX I Page 6of8 present at their schools) so about 99,000 were physically in schools. Of these, 65,000 were included on the payroll, and about 33,700 were working without being on the payroll. Among these, more than 14,000 had been worldng before the introduction of UPE policy, and 19,700 were hired as a result of the policy. The number worldng in identified governzmaent schools was 89,000. Revisions to the payroll on the basis of the headcount give a total, including all districts, of 74,139 teachers on the government primary teacher payroll as of January 31, 1998. The staff establishment for government schools distributed on February 10 for the 1998 school year is 90,031. The government commits itself not to exceed the agreed prmary teacher wage bill of 90.1 billion for FY 97/98. The budget estimate for this ceiling for the 1998 academic year is equivalent to approximately 92,000 teachers, though this number may vary, resources permitting. This allows for some schools not contained in the headcount data set such as those in Bundibugo, and may allow for the acceptance of some private community schools. Ceilings will be established for each fsnancial year for the number of primary education teachers 'whose salaries will be financed by the Central Government budget (see Para 12). The government is committed to solving the issue of teacher arrears by paying these salaries quickly and efficiently. Appropriate mechanisms for hiring teachers and placing them on the payroll will be completed by January 31, 2000. The government wiMl design and implement a system that increases the control of central government over primary teacher wage costs and limits its liability to only pay teachers within the system. 5S. Strengthening Sector Management Recrultment, Deployment, and Payment of Teachers 21. The Ministy of Education is committed to worlkig with other ministries to improve the overall management of the pay roll system. As a part of strengthening the sector management, the MoE is also worling on designing guidelines for al districts and schools related to the recoruitment, deployment, and payment of teachers. Two sets of guidelines have been circulated. By March 1, 1998 all teachers in excess of the district staff establishment will have been identified and notified in writing of the termination of their services. By March 6 CAOs will inform MoE, MoPS, MoF and MoLO of the names and number of teachers terminated. As of April 28, 1998 schools will receive salary payments for a number of teachers not exceeding the staff establishment distributed February 10, 1998. Chief Administrative OCiicers and District Education Service Conmmittees will be responsible for the implementation of this policy. The Ministry has developed and will implement a financing plan to clear teachers' arrears by May 31, 1999. The updating of the payroll will also assure the exclusion of ghosts. As new teachers are bired and added to the payroll all efforts will be made to mi-imise the number of teachers that are untrained. Priority will be given to those experienced teachers that were previously supported by PTA funds. Management Intormation System 22. The Ministry of Education will also desigp an education management information system (EMIS) to include essential inputs and outputs. A planning process that includes representatives from other ministries as wel as practitioners will contnbute to deciding what inputs and outputs should be gathered. The Education Planning Department wiU be responsible for overseeing this effort. An essential part of this EMIS will be a school mapping exercise, whose terms of reference wiU be ready by February 28,1998. By April 30, 2000 the system wil be operational in at least 20 districts.  ANNEX I Page 7 of 8 Implementation of Accountability System 23. The Ministry will issue guidelines to districts and schools for accounting for public funds consistent with the government accounting manual and regulations. The monitoring system that is implemented will follow the Guidelines for Transparency and Accountability already issued to schools. Responsibilities for MoE, districts and schools are as follows: (a) MoE will: (i) issue conditions for the UPE conditional grants and seek the consensus of local goveznment; these conditions will be circulated to all levels of local government and UPE beneficiary schools; (ii) submit requests for release of funds to Ministry of Finance. The requests will include a schedule of districts and urban authorities and the respective number of schools, number of teachers, total enrolment; and funds allocated, with copies of the requisition to Auditor General, IGG, Ministry of Local Government. The Ministry of Finance win release the funds to the CAOs with a schedule of enrolment for the respective districts. MoF will transfer the money to CAOs specifically for the UPE program and MoF will publish monthly conditional transfers. (b) Districts will: (i) notify each government-aided primary school in the district the total amount budgeted for salary and non-salary expenses for the school year-, (ii) display publicly the total amount received from the Central Government in conditional grants for salary and non-salay primary school expenditure for UPE; and (iii) display publicly the full list of government aided primary schools receiving the non-salary capitation grants from these conditional grants and the amounts gven to each school. The list will be by sub-county, city, and municipal/urban authority, and will be displayed at the district administration office and sub-county notice board, and the list will be updated monthly at the time of the distribution of conditional grants. (c) Schools will: (i) display the total amount budgeted by the district for salary and non-salary expenses for the school year; (ii) display the monthly amount received from the district for salary and non-salary expenses for the school year, updated monthly; (iii) these amounts will be displayed publicly at the school, accessible to any parent and community member, (iv) have meetings between headteachers and staff to agree on priority items/activities on which expenditure is to be incurred and in line with MoE guidelines; and (v) make sure the headteachers send monthly accountability reports to the CAO through the DEO and copies of accountability reports wMll be sent to the chairperson of the School Management Committee and sub-county chief. Failure to account for releases in a term will lead to disciplinary action against the responsible officer. 24. The government will monitor the implementation of this accountability system for public funds using a random sample of 350 schools in at least four districts.  ANNEX I Page 8 of 8 25. Finally, with the help of the donor community, Uganda can succeed in delivering primary education to almaost double the number of pupils previously enrolled at the same level of quality. This wil require firther investment in teachers, instructional materials, and construction of school infastructure. We are hopeful that. the actions outlined in this letter and in the policy matrix can be achieved. We are looldng forward to continued collaboration with IDA to achieve these objectives. Yorrs sincerdy, J.S>ayanjikangi Amanya Mushega .2 Minister of Pxnce Minister of Education  ANNEX 2 Page I of 4 UGANDA EDUCATION SECTOR ADJUSTMENT OPERATION POLICY MATRIX Objective Action Prior to Board Actions to be Taken Prior to the Actions to be Taken Prior to Outcomes by December 31, Presentation - Feb. 98 Release of Second Tranche - the Release of Third Tranche 2000 _______________ May 1999 - May 2000 I. Clarify UPE 1. ESIP approved by MoE Policy following consultation with donor community 2. Design UPE dissemination Dissemination activities targeted Continue dissemination effort Wide understanding of strategy with different at each group underway and monitoring of results respective roles by parents, products aimed at district nationwide schools, communities, offices, headteachers, districts, Central teachers, and parents, with a Provide IDA with copies of Provide IDA with copies of Government, and donor plan for implementation dissemination materials dissemination materials community. from March 1998 incorporating current activities, and a budget II. Increase 1. The borrower has included in Allocate to primary education Allocate to primary education Maintain 1997 enrolment Resources the education sector financial recurrent budget at least 19.5% of recurrent budget at least 17.5% levels. available to projections a finance plan for the the total government recurrent of total government recurrent UPE support of UPE policy for FY budget (excluding statutory and budget (excluding statutory and 97/98, FY 98/99, and FY 99/00 interest payments) in FY 98/99 interest payments) in FY 99/00 2. Clarify in writing the role of Launch public campaign to Continue public campaign to Sustained parents parents' monetary and in-kind encourage parent participation as encourage parent participation understanding of their role in contribution in support of UPE part of overall dissemination as part of overall dissemination supporting primary education as part of the dissemination effort effort efforts I  ANNEX 2 Pnge2 or4 Ill. Increase Complete draftl policy paper on 1. As a temlporary nicasure, adopt Implement policy ror 1999 Pupil teaclier ratio of 1:55 Cfficiciicy in optioi lsr ordo iblc shifling luot)blc sillifg pot licy mid acadeneIc yea ia indl foi rnisl I1)/A file use ofl ilmlisdng N'oI11noy p:llicipi lioll imoptlcui(w11t a dslillill:olioil wvilli ; progwss Itpol ol 01 public anid ilit'c'llivcs i;aiipalln wilth al illllkn111viin:uliou shoods p;Ii tklicipipi' ill cloiil,lc. resotirces plan, prodiulectsaid a bulget to) sliiifliuig pIromote it for tlie 1999 schiool year 2. Coiupl Ie poliicy oi nmiltli- Im1p lemiclit delni oust ratli' sites Pupil teacher ratio of 1:55 grade leeaching withll an0 f i uiui 1ti-grade leaching ill at ilplmentllal ioln plall for least two scllools inl two tlislticts deminonstia t ion sites in at least two and promote vol lintary districts participation 3. Complete a situ(ly on pl)rimalry Implemenilt ic action plan to lExcess supply of teachiers teacher Suilplply and demCIand a md prevecnt excess su)pply ofr vill be rcne(IeL ap)pI'ove aii action l)l;lIl teachers 4. Giovermilentl to decide on1 best Release progress report oni lEInsurc effcctivc and conistrtictioni modality mid pilot. classroom cons(rtictioni sustainiable classroom Strenlgtlhenl and coinsolidate tlhe constrtrctioni .)policy oil c lassrooln constmi iction ill wVichliC goverInInciut, local Commin un ities, paicunts ndu (IOIIOIS participate IV, Protecting 1. Adopt policy Allocate at least 2.8 % of total Fturnislh to IDA evidence that 90% of schiools reaching at quality of recommiieindationis on provision, primary education recurreint schools have received sliipmienit 1:3 ratio for matlh and English teachiniig and d istribimlion and til isat ion or lbiidget in FY98 /9') to iinstinuction:l of inmstrucdional minaterials- based textbooks learning texit ooks anid oliher insinictional nImaterialIs onil a 0 raidoill sample of ; tolal of' loaeriaIls th mat assure adeqIualte at least 350 schiools selectedl 70% of selools reacihing at clhoice by scilools fioim at least four districts and in 1:3 ratio for social studies FY99/0U allocate at least 2,8% and sciCeIce textbooks of total primary education recurrent budget to instr6clional materials  ANNIEX 2 _________ _'itgc 3...................i . 3 of 4 2. D)evelopadul appro)vC a plan (Coulneice it ipletlienitatlio of' I(lhe % of tintrained teachers niot for the expansiont ol in-service expansion or ph,ases IV and V of undergoinig training, on teachier training to cover all the TDMS payroll will be lower tihan districts pre-UPE levels Increased supply of refresher corllse V. Strengthiening 1. Improve management of iImproved coordination sector teachier payroll thirough between Ministry of Public Management inter-minlisterial working Service, Ministry of Finance, group by: and Ministry Planning and I-cotnomic l)evelopmuent a) Prepare financing plan to clear teacliers' arrears; b) Design and issue guidelines to all districts and schools for recruitmiienlt, deployment and paynien t oflteachers in Actioin plan lor updaling thli IProv ide evidenie to II)DA thiat all All active teachers on payroll aca(lei iic year 198 payroll iimlplenicnted. All sa lary active leachllers on payroll ate paid in a tiitiely mn anner including a stalf arrears paid palid in a titoiely man ner establishmnclt formutla and withinl the total allocation for the wage bill for teachers; c) Fiinalise action plan to pdlatc teacher payroll incluiditig: i) tllc cxcluisioln ofglhosts; ii) miniiiiisinig thc number of teachers added to tlhc paytoll that ate untrained; and  ANNEX 2 Page 4 of 4 iii) giving priority to experienced teachers (pre- UPE) for inclusion in the payroll 2. Issue guidelines to districts Implement a monitoring system Implement a monitoring system Transparency in use of and schools for for the accountability of public for the accountability of public resources accountability for public funds allocated to districts and funds allocated to districts and funds consistent with schools following the guidelines schools following the guidelines Government Accounting for transparency and for transparency and Manual and Regulations and accountability already issued to accountability already issued to prepare procedures schools schools Furnish to IDA evidence that the Furnish to IDA evidence that the system is being implemented system is being implemented based on random sample of a based on random sample of a total of at least 350 schools total of at least 350 schools selected from at least four districts selected from at least four districts 3. Design terms of reference 12 districts complete educational Further 20 districts complete Identification of physical for educational development development plans (including educational development plans infrastructure and human planning, including school school maps) (including school maps) resource needs mapping, exercise to be completed by districts and Furnish to IDA evaluation forms develop training manuals from district staff trained Design EMIS to include essential Implementation of EMIS in at EMIS in place inputs and outputs least 20 districts Furnish to IDA sample reports from EMIS from each district  ANNEX 3 pape I of 9 Uganda at a glance Sub- POVEERTY and SOCIAL Saharan Low- Uganda Africa Income eveopment diamond, Population mid-1996 (nilliOns) 19.7 600 3,229 GNP per capita 1996 (USS) 290 490 500 Life expectancy GNP 1996 (billions USS) 5.7 294 1,601 Average annual growth, 1990-6. Population (%J 3.1 2.7 1.7 GNP Gro Labor force(%) 2.7 2.6 1.7 p Gross per ~~~~~~primary Moat recent estimate (latest year available since 1989) capita enrollment Povery: headcount index (% odpopulailon) 55 Urban population (% ortotal population) 13 31 29 Life expectancy at birth (years) 42 52 63 Infant mortality (per 1,000 JIve births) 98 92 69 Acress to sate vwier Child malnutrition (% or chlkren under 5) 23 Access to safe water (X ofpopulatIon) 42 47 53 Illiteracy (% ofpopulatIon age 15+) 38 43 34 Uganda Gross primary enrollment (% o(schoolage population) 67 72 105 Male 74 78 112 -Low-income group Female 59 65 98 KEY ECONOMIC RATIOS and LONG-TERM TRENOS 1975 1986 1996 19" GDP (billions USS) .. 3.5 5.7 6.0 Econ* radow' Gross domestic investment/GDP 7.6 8.7 16.4 16.7 Exports of goods and services/GDP 8.2 13.7 12.0 12.1 Openneas ofeconomy Gross domestic savings/GOP 5 5 7.5 7.4 6.3 Gross national savings/GDP 5.9 7.5 12.4 12.8 Cufrent account balance/GDP .. -2.5 -7.9 4.6 Interest payments/GDP .. 0.5 0.6 Savings Investment Total debtlGDP .. 35.0 63.0 Total debt service/exports 6.6 38.0 20.0 Present value of debt/GDP ,. .. 33.0 Present value of debtlexports .. .. 273.5 Indebtednesa 197545 1986-96 1996 1996 199746 (average annual growth) - Uganda GOP .. 6.7 11.5 9.8 5.4 o4noe m GNP per capita 3.4 8.6 7.2 2.7 Low-Income gn up Exports ogoodsandservices .. 8.2 27.4 19.2 4.8 STRUCTURE of the ECONOMY 1975 1985 1996 1996 (% of GOP) Growtth rats of output and Invetent (I% Agriculture 72.2 .52.7 49.7 45.6 '