Uganda - Alleviation of Poverty and the Social Costs of Adjustment Project (PAPSCA)

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-5174-UG MEMORANDUM AND RECOMMENDATIONS OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 22 MILLION TO THE GOVERNMENT OF UGANDA FOR AN ALLEVIATION OF POVERTY AND THE SOCIAL COSTS OF ADJUSTMENT PROJECT JANUARY 10, 1990 This document has a restricted distribution and mav be used by recipients onlv in the performance of their official duties. Its contents may not otherwisc be disclosed without World Bank authorization.  REPUBLIC OF UGANDA ALLEVIATION OF POVERTY AND THE SOCIAL COSTS OF ADJUSTMENT PROJECT CURRENCY EQUIVALENTS Currency Unit = Uganda Shillings (USh) US$1 = USh 200 1/ USh 1 = US$ 0.005 SDR 1 = US$ 0.78411 2/ US$1 = SDR 1.27533 2/ ABBREVIATIONS AND ACRONYMS ERP - Economic Recovery Program IDA - International Development Association MOE - Ministry of Education MOPED - Ministry of Planning and Economic Development NGO - Non-Governmental Organization PAPSCA - Program for the Alleviation of Poverty and the Social Costs of Adjustment SDA - Social Dimensions of Adjustment FISCAL YEAR July 1 - June 30 1/ June 1989 2/ November 1989.  FOR OFFICUIL USE ONLY REPUBLIC OF UGANDA PAPSCA CREDIT AND PROJECT SUMMARY Borrower: Republic of Uganda Implementing Agencies: Ministry of Planning and Economic Development Credit Amount: SDR22 million (US$28.0 million equivalent) Terms: Standard IDA Terms with 40 years maturity. Financing Plan: Government US$ 6.8 million NGOs US$ 2.2 million IDA US$ 28.0 million TOTAL US$ 37.0 million Staff Appraisal Report: No. 8179-UG Map: 21751 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.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF UGANDA FOR THE ALLEVIATION OF POVERTY AND THE SOCIAL COSTS OF ADJUSTMENT PROJECT 1. The following memorandum and recommendation on a proposed development credit to the Republic of Uganda for SDR22 million (US$28 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with 40 years maturity. Cofinancing of US$2.2 million would be provided by two NGOs - Action Aid and World Vision. 2. Background. Political turmoil and economic decline have devastated Uganda's economy and severely reduced the living standards of the vast majority of Ugandans. When the current Government assumed power in 1986, its first priority was to restore law and order and civil liberties, overcome remaining insurgencies in the North and East, and begin once again the long and difficult task of nation building. With the assistance of donors, the Government developed in 1987 a comprehensive program of reforms under its Economic Recovery Program (ERP). In view of the severity of the imbalances in the economy, the program accorded high priority to stabilization measures including an exchange rate adjustment, a reduction in the Government's indebtedness to the banking system, and an increased interest rate. In addition, the program also included structural reforms to improve incentives for producers, increase capacity utilization in industrial enterprises, and restore discipline and efficiency in public administration. In the immediate futurc, the Government intends to undertake further policy actions geared toward financial stabilization. These include further adjustments to the exchange rate, budgetary reform, and the further liberalization of imports. Over the medium term, the intention is to continue the reconstruction and rehabilitation of productive facilities, and of the physical and institutional infrastructure. 3. With the assistance of IDA and other donors, the task of improving the social welfare of the majority of Ugandans has already begun. The rehabilitation of the sorial infrastructure is underway as major projects in the social sectors, all geared toward poverty alleviation, are either ongoing or planned. In addition, the ERP is not accompanied by the widespread liberalization of controlled prices or by the removal of subsidies - measures which may be expected to have an adverse impact on the poor - since Uganda did not have a pervasive system of price controls and subsidies on essential commodities, such as that found in several developing countries. In fact, the central impact of the ERP is the projected decline in inflation following the full implementation of the program's stabilization measures. Hence with an improved economic climate, the enlarged inflow of foreign exchange, and policies designed to stimulate a supply response in the economy, higher levels of per capita consumption, and enhanced social welfare, are projected for the medium term. 4. While the benefits of the ERP will materialize gradually over time with its sustained implementation, there is concern that in the short run, the urgent needs of some of the worse victims of the period of civil unrest and economic decline will not be addressed. These include victims of  2 the wars - widows, orphans, and the disabled; AIDS orphans; and children and other residents of disadvantaged districts including those living in dangerously unhealthy urban slum areas. These groups are unable to participate in the recovery program, and unless their needs are addressed, their economic and social conditions will continue to deteriorate. They will require special assistance if they are to eventually respond to policy measures under the ERP, increase their productivity and restore their income earning capacity. 5. Furthermore, the Government's ability to respond to the needs of these vulnerable groups is constrained by its limited resources in the short run as well as by the complexity of Uganda's political situation. In addition to managing the FRP, considerable efforts will be devoted to sustaining the relative peace and stab.lity recently attained throughout Uganda; tasks which will strain the limited resources available to the Government. 6. To address these concerns, the Government has prepared a Program for the Alleviation of Poverty and the Social Costs of Adjustment (PAPSCA). The program consists of 19 targeted initiatives which aim to address the needs of those who will be in precarious economic and social conditions in the short run while recognizing that the implementation of the ERP will place immediate and heavy demands on the Government's limited resources. Hence PAPSCA attaches priority to the involvement of local communities and NGOs in the program's implementation. As a by-product, th. prugram will enhance the sustainability and acceptability of the ERP by addressing most pressing problems affecting the vulnerable groups and thereby increasing the level of participation of the broad mass of the Ugandan population in the recovery efforts. For the medium term, the program provides for the strengthening of social policy planning in order to incorporate concerns for the poor and the most vulnerable in the design of the Government's social sector policies and investment programs. 7. Rationale for IDA Involvement. Recent and proposed Bank lending operations to Uganda provide the basis for sustained economic development and the alleviation of poverty. These include projects in health, education, agriculture and infrastructure rehabilitation. These projects represent ongoing attempts by IDA to address poverty alleviation in a sustainable manner. In some cases, however, their impact is not yet visible because they are at an early stage of implementation. In addition, the severity of the devastation caused by war, the resource constraints at this early stage of the economic recovery, and the urgent need to ensure that the most vulnerable groups are in a position to participate fully in the Economic Recovery Program, point to the need for shorter term action programs to complement and supplement the medium to long term sector investments. PAPSCA actempts to address these concerns in that it consists of technically simple and easily implementable projects which complement ongoing efforts. Furthermore, the program envisages the mobilization and involvement of local communities in its implementation and thus represents a unique opportunity for maximizing participation in the recovery efforts and for enhancing the sustainability of the ERP. As such, it is consistent with IDA's strategy of strengthening institutional capacities, at both local and centralized levels,  3 for identifying and implementing targeted poverty alleviation strategy through self-help measures. 8. Project Objective. The project's overall objective is to address some of the most urgent social concerns of Uganda's vulnerable groups in order to help the Government in sustaining the ERP. In the medium term, the project aims to strengthen the institutional capacity of the Government to identify, formulate and maintain interventions for assisting the country's most vulnerable groups. 9. Project Description. The proposed project, which represents about 30 percent of the total PAPSCA Program, would support five PAPSCA projects and a PAPSCA Coordination and Monitoring Unit which would have oversight responsibility for the implementation of the program. The project would include the following: (a) the provision of financial and technical resources to local communities in a disadvantaged district for the undertaking of small scale infrastructure projects; (b) the rehabilitation of primary school classrooms in 12 of the poorest Districts; (c) health programs for orphans and war widows, and a pilot community-based health care scheme; (d) low cost water and sanitation improvements in two low income areas in Kampala; (e) the strengthening of the Government's capabilities in social planning including, inter alia, the undertaking of priority household surveys and the preparation of a program of assistance for retrenched civil servants; and (f) program administration. 10. In order to ensure ease of implementation, the projects would be implemented by either existing and proven project implementation units, or by NGOs who have demonstrated capabilities for reaching the poor. The primary education and low cost sanitation components would be implemented by the Project Implementation Units of the Ministry of Education and the Kampala City Council respectively, and NGOs have been selected to implement the small-scale infrastructure and health components. In a.l cases the implementing agencies would be required to work closely with local district and village authorities. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group Operations in Uganda are given in Schedules C and D. A riap is also attached. The Staff Appraisal Report, No. 8179-UG dated January 10, 1990, is being distributed separately. 11. Actions Agreed. Agreement was reached with the Government on: (a) the designation of a district for the carrying out of the work under the Small-Scale Infrastructure Component; and (b) arrangements for the administration of the project as a whole and its specific components. 12. Conditions of Disbursement against specific project components would be as follows: (a) for the Small-Scale Infrastructure Component, the signing of an agreement, satisfactory to the Association, with Action Aid to administer the component; (b) for the Primary Education component, the signing of a contract, satisfactory to the Association for the required technical assistance and related services; (c) for the Low Cost Sanitation component, the signing of a contract, satisfactory to the Association for the required  4 technical assistance and related services; (d) for the Health component, the signing of an agreement, satisfactory tc the Association, with World Vision and the Uganda War Widows Foundation, for its implementation; and the establishment and staffing of the Coordinating Committee; (e) for the SDA component, the recruitment of the specialist services required for its implementation. 13. As a Condition of Credit Effectiveness, the PAPSCA Coordination and Monitoring Unit, which would be responsible for overall project administration, would be fully operational. 14. Benefits. The project would enhance the productivity, and help to restore the income earning capacity of some of the most vulnerable groups in Uganda by improving their access to some basic social services. The project would leave the beneficiary communities with the managerial and technical skills necessary to design and implement future self-help projects on their own. The project would also strengt..en the Government's capacity for incorporating concerns for the poor into the design of macro-economic and social policies. 15. Risks. In general, risks involve the implementation capacity of the Government, and the extent of local community participation in the Small- Scale Infrastructure Rehabilitation, Primary Education and Low Cost Sanitation components. Implementation risks have been minimized, for example, by the use of qualified NGOs, the MOE Project Implementation Unit, and the Kampala City Council, all experienced in implementing similar projects. In every case stated above, technical assistance and training have been included in the project. Information and advertising campaigns are also key elements of the investment components; nevertheless the limits of community participation to provide funds and in-kind contributions would be monitored carefully as work proceeds. In the case of the Social Dimensions of Adjustment component, coordination of work to be carried out without duplication and repetition of similar work would be minimized by the use of experience staff and short term consultants in the Ministry of Planning and Economic Development which presently coordinates such work. 16. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Fxecutive Directors approve the proposed credit. Barber Conable President Attachments January 10, 1990  5 Scheduli A USS Million A. Estimated Costs: Local Foreign Total Components 1. Small Scale Infrastructure 1.32 2.87 4.19 2. Primary Education 5.01 7.64 12.65 3. Low Cost Sanitation 1.87 1.01 2.88 4. Health 3.39 4.39 7.78 5. Social Dimensions (SDA) 1.51 3.55 5.06 6. Program Administration 0.13 0.62 0.75 Base Cost (12/89) 13.24 20.07 33.31 7. Contingencies 1.47 2.22 3.69 Physical (5Z) 0.54 0.82 1.36 Price (8%) 0.93 1.40 2.33 Total Project 14.70 22.30 37.00 B. Financing Plan: US$ Million Local Foreign Total Government of Uganda 6.79 - 6.79 IDA 6.37 21.63 28.00 NGO 1.54 0.67 2.21 Total: 14.70 22.30 37.00  6 Schedule B Prcr~emWnt Method (US. Millian- THEM ICB LCB OTHER TOTAL CIVIL WORKS 1.70 1.88 3.58 - (1.45) ;1.15) (2.60) CONST. MAT./ 13.06 3.57 1.23 17.86 EQUIP. TOOLS/ (13.06) (3.19) (1.00) (17.25) VEHICLES/FURN. CONSULTANTS - - 4.30 4.30 - - (4.30) (4.30) SURVEYS/STUDIES - - 1.75 1.75 ANALYSISMTRAIN. - - (1.15) (1.15) OPER. COST - 0.71 2.61 3.32 - (0.61) (2.09) (2.70) TOTAL 13.06 5.98 11.77 30.81* (IDA) (13.06) (5.25) ( 9.69) (28.00, IDA Financing * excludes NGO component Estimated IDA Disbursements: IDA Fiscal Year 1990 1991 1992 1993 1994 1995 Annual 3.5 4.5 6.0 7.5 6.0 0,5 Cumulative 3.5 8.0 14.0 21.5 27.5 28.0  7 Schedule C UGANDA PROJECT FOR THE ALLEVIATION OF POVERTY AND THE SOCIAL COSTS OF ADJUSTMENT Timetable of Key Project Processing Events Time Taken to Prepare: 12 months Prepared By: Government with IDA Assistance First IDA Mission: January, 1989 Appraisal Mission Departure: June, 1989 Negotiations: November, 1989 Planned Date of Effectiveness: March, 1990  -8-- Schedule D Poge 1 of 2 STATUS OF BANK GROUP OPERATIONS IN UOANDA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of September 80. 1989) ------US8 million- Anount(Lose Cancellations) Loan or Undtn- Credit No. Year Borrower Purpose Bank IDA burued -- - -- - - -- - -- - - -- - - ---- - - - - - One (1) loan and twenty-two (22) fully disburaod 8.40 315.45 1248 1982 Uganda IDF I 36.00 7.80 1328 1983 Uganda Agricultural Rehabilitation 70.00 11.76 1434 1984 Uganda Second Technical Assistance 16.00 8.99 1446 1984 Uganda Third Highway 68.00 38.66 1510 1986 Uganda Water Supply and Sanitation Program 28.00 1.92 1639 1986 Uganda Agricultural Development 10.00 8.57 160O 1986 Uganda Second Powor 28.80 29.46 1561 1986 Uganda Petroleum Exploration Promotion 5.10 5.66 1803 1987 Uganda Fourth Highway 18.00 9.86 1824 1988 Uganda Forestry Rehabilitation 13.00 10.14 0340 1988 Uganda Non-Sector Specific (Econ. Recov. Cr/SAF) 24.00 0.03 1844-0 198 Uganda Non-Sector Specific (Econ. Recow. Cr/SAF) 66.00 2.64 18S9 1988 Uganda South West Ag. Rehab. 10.00 9.30 1893 198 Uganda Sugar Rehabilitation 24.90 21.08 1934 1986 Uganda Health Roc. 42.60 35.96 1961 1986 Uganda Toch. Aest. III 18.00 16.64 1844-1 1989 Uganda Econ. Recovery Credit 1.70 - 1844-2 1989 Uganda Econ. Recovery Credit 26.00 11.79 1962 1989 Uganda Public Enterprise. 16 00 14.30 1966 1969 Uganda Education IV 22.00 18.91 1986 1989 Uganda Railways I 7.00 6.63 1991 1989 Uganda Telecom II 62.30 48.86 Total 8.40 903.76 308.86 of which repaid 8.40 23.34 Total held by Bank & IDA 0.00 880.41 TOTAL Undisbursed 308.86 ug1dl .wkl 10. 30. 89  -9- Schedule D Page 2 of 2 B. STATEXdENT OF IFC INVESTMENTS IN UGANDA (Soptcobor 30, 1989) Amount In US2 Million Fltoeal ----______________ Yoor Obligor Type of Business Loan Equity Total 1935 Mulco Textiloe, Ltd. Textiles 2.79 0.71 3.50 1972 Tourimn Proeotiona Services Tourlm 1.11 - 1.11 1984 Toro and lfityano Toa Co., Ltd. Food end Food (TAMTECO) Processing 1.62 - 1.62 1984 Sugor Corporntion of Uganda Food and Foo4 Processing 8.00 - 8.00 1985 Uganda Too Corporation Ltd. Food and Food Processing 2.81 - 2.81 198S Developn3nt Finance Company Develoroent Finance - 0.38 0.38 of Uganda ----- ----- ---- Total gross co.ittents 18.33 1.09 17.42 Lose: Ropaymente, cancellations, torminations and sales 6.01 0.72 5.73 Total Comittsento now hold by IFC: 11.32 0.37 11.89 Total undisburged (including 0.00 0.00 0.00 participants' portion) Sourco: IFC Dioburgcsonts Section u92odl .wk 11-08-99  IBRD 21751 UGANDA 3~~~~~~~~~~~~~~~~~~12 33, U G A N D A 3-3-/ PROJECT FOR THE ALLEVIATION OF POVERTY. s u D A N AND THE SOCIAL COST OF ADJUSTMENT / r " ' -MOYO\ Yvrob/% Koa:bongJ Malor Rocids / g g } MCR}>O 93 ~~~~~~KITGUMn O/ Mo or Roads ~ ~ ~ ~ ~ ~ ~ oy Kr R a. 1,. Rdods hn j,lK 7 G M A 3. R,lves )AU n/ \ KOTID 3t DIstrict Copitols K U Come _D.st,,ic Bo,,,do,ieS \ -. GU _$ Internationol Boundaries ( * ( MOROTO \V1 ri, JXVtf l 8 Ng.,. I N2TRA S 0 25 50 75 100 KILOMEIERS o 20 40 60 MILES Agrt IAA 2t /' / HO /t4 A Neonr I N/?AP/:I--5ORWA'ORO \ 0 1 9RO)'/41 (E C/CRMt> 2 BNIGY , vie, Y MASINDIH < J $ ' SID +~~~~~~~ ~~~~~ ~~~~~~~~ rU vr,m';,ritr OvuO,, 2~~~~~~~OM K APCHOS EWAX a' (\o SE 7;<7~ *- - Ereb . ____________________________ RUKUNGIRI / ZAIRE a N Kt ( TA2AI )NLA~~~~A Y/RWANDA T 1 ( J 32- 23- ZAMBiA ' 3I' SEPTEMBER 1989