Uganda - Structural Adjustment Program Project

 Structural Adjustment Report No: ; Type: Report/Evaluation Memorandum ; Country: Uganda; Region: Africa; Sector: Macro/Non-Trade; Major Sector: Economic Policy; ProjectID: P002947 The Uganda Structural Adjustment Program for US$125 million equivalent, supported by Credit 2314-UG was approved in FY92. The credit was closed on schedule in FY94. The program was cofinanced by the African Development Bank (US$31 million), Switzerland (US$12 million), Britain (US$22.6 million) and Norway (US$3.8 million). The Implementation Completion Report (ICR) was prepared by the Africa Regional office. The Borrower’s contribution is included as an appendix. The broad objective of the credit was to continue to support implementation of the Government’s Economic Recovery Program (ERP), which had previously been supported by two Economic Recovery Credits. The Government’s program was outlined in a Letter of Development Policy appended to the President’s Report. The specific objectives of the project were to promote private sector development and improve the effectiveness of the public sector. Private sector development was to be encouraged by: (a) easing restrictions on trade and removing restrictions on foreign exchange transactions; (b) introducing a new Investment Code designed to encourage private investment and establishing an Investment Authority to administer the Code to promote investment; and, (c) providing an important positive signal to potential investors, by speeding up resolution of claims for return of expropriated properties. The effectiveness of the public sector was to be enhanced by (a) establishing an independent agency to collect revenues; (b) reorienting public expenditures to protect high priority programs in primary health care, primary and secondary education, water supply, road maintenance, and agricultural research and extension; and (c) transforming the civil service into a smaller, more efficient, effective and manageable service. Program targets were met or exceeded in almost all areas. All restrictions were ended on current international transactions and a unified foreign exchange system was established in which banks and foreign exchange houses are market makers. The existing restrictive foreign investment legislation was repealed and replaced by an Investment Code designed to promote and facilitate investment. Settlement of expropriation claims was greatly accelerated. By 1994, 640 (of 690) claims from non-citizens and 1,860 (of 2,000) claims from citizens had been validated and properties returned. A new Revenue Authority was established, and tax collections increased 60% in real terms. New public investment projects were screened, and low priority projects dropped. Finally the Government was reorganized and downsized. The number of ministries was reduced from 38 to 21 in 1992 and the staff payroll was cut by 37%. Austria, The Netherlands, Sweden and Denmark provided US$13 million for severance packages. The SAC program was well focused. The Government was committed to the program and most of the policy measures were implemented before Board presentation. Donor assistance was important in endorsing and reinforcing the Government’s program. Preparation was expeditious and satisfactory, as was monitoring of implementation of policy measures. Supervision missions were well documented and closely coordinated with the IMF. The ICR was generally satisfactory, and rates project outcome as satisfactory, sustainability as likely and the institutional development impact as modest. Bank performance is rated as satisfactory. OED concurs with these ratings. The main lessons to be drawn from this project are that (i) continuity of management, adequate deployment of qualified personnel and IDA and donor-financed technical assistance are important to ensure adequate institutional capacity for reform; (ii) the program should not overburden the Government’s limited institutional capacity and should support a few, high priority, properly sequenced actions; (iii) all stakeholders should understand the nature of reform and that further actions will be required as emerging constraints become evident. No audit is planned.