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Uganda: World Bank and Poverty
Uganda: World Bank and Poverty
Date distributed (ymd): 020506
Document reposted by Africa Action
Africa Policy Electronic Distribution List: an information
service provided by AFRICA ACTION (incorporating the Africa
Policy Information Center, The Africa Fund, and the American
Committee on Africa). Find more information for action for
Africa at http://www.africaaction.org
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: East Africa
Issue Areas: +economy/development+
SUMMARY CONTENTS:
This posting contains the executive summary and a few additional
excerpts from a new paper evaluating the World Bank/IMF poverty
framework in Uganda. The full 88-page paper is available at:
http://www.brettonwoodsproject.org/topic/adjustment/Uganda%20PRSP-PRSC-PRGF%20Analysis.pdf
The paper is particularly significant given its comprehensively
documented critique of one of the Bank's most prominent "success"
stories. While acknowledging the additional flow of some resources
to poverty reduction as well as the involvement of Ugandan civil
society in some aspects of the process, the paper documents how
other imposed World Bank policies, disguised under the innocuous
technocratic label of "reform," in fact undermine the povertyreduction
goals.
Among the sources cited in the paper is the recently completed
series of studies by the Structural Adjustment Participatory
International Network (SAPRIN), which included Uganda as a case
study. See http://www.saprin.org
for full research reports and study conclusions.
Also included in this posting are additional links to related web
sites and recent documents. Additional sources can be found at
http://www.africaaction.org/action/wbank.htm
+++++++++++++++++end profile++++++++++++++++++++++++++++++
New Strategies, Old Loan Conditions:
Do the New IMF and World Bank Loans Support Countries' Poverty
Reduction Strategies? The Case of Uganda
By Warren Nyamugasira and Rick Rowden,
With Assistance by Action Aid (Uganda and USA)
April 2002
Warren Nyamugasira is the National Coordinator of the Uganda
National NGO Forum, a network of over 600 national and
international NGOs, P. O. Box 4636, Kampala, Uganda
Tel. 256-78-260373 Fax 256-78-260372 Email:
ngoforum@infocom.co.ug
Rick Rowden is a Researcher for RESULTS Educational Fund, the
research arm of the US citizens-based lobby group, RESULTS 440
First Street NW, Suite 450, Washington, DC 20001 USA
Tel. 1-202-783-7100 Fax 1-202-783-2818 Email:
rowden@action.org
Executive Summary
In 2002, with its population of close to 22 million people, Uganda
is pivotal to the success of the much-publicized reform of the
World Bank and International Monetary Fund policies. These
international financial institutions and indeed the Government of
Uganda and civil society organizations have lauded the Ugandan
experience as an international flagship for participatory
governance, transparency and economic growth over the last two
years.
Uganda is also the most advanced country in terms of the adoption
of new and supposedly, poverty-oriented concessional policy lending
instruments, the Government-developed Poverty Reduction Strategy
Paper (PRSP), the World Bank Poverty Reduction Support Credit
(PRSC) and the IMF's Poverty Reduction and Growth Facility (PRGF).
Over 41 countries are in the pipeline for the adoption of similar
policies. Learning from Uganda is instructive for these countries
dotted across most of Asia, Latin America, the Caribbean and Africa
itself.
This report is written in the context of the controversial process
of economic globalization. A growing chorus of critics from Ghana
to Bolivia to Cambodia, as well as the streets of Seattle, Prague,
Genoa and elsewhere have increasingly questioned the efficacy of
World Bank-promoted economic policy reforms.
Based on secondary materials and interviews with leading officials
within the Government of Uganda, bi-lateral and multi-lateral
institutions and civil society organizations in Uganda and
Washington DC over 2001, this study presents evidence that crucial
policy prescriptions within the PRSC and PRGF may impair Uganda's
ability to effectively realize its antipoverty and growth goals.
This finding, coupled with the dissatisfaction of Ugandan NGOs on
specific processes that led to the determination of these policy
prescriptions, places the legitimacy of the policy framework and
the integrity of the World Bank and IMF further in doubt.
While helping to significantly improve relations between civil
society and the Government of Uganda, the adoption of the Poverty
Eradication Action Plan as the country's Poverty Reduction Strategy
was flawed by serious limitations. Ugandan NGOs were invited to
provide input on the development of the poverty-reduction goals,
but not on the nature of the policies to achieve those goals.
Despite the public claims by the IMF that "key macroeconomic
policies, including targets for growth and inflation, and the
thrust of fiscal, monetary, and external policies, as well as
structural policies to accelerate growth, [would be] subjects for
public consultation," in Uganda they were not.
Based on our interviews, it would appear that the actual policies
in the loans were determined by the IMF and World Bank
representatives in consultation with small technical teams within
the Ministry of Finance and the Central Bank.
Apart from the credibility of the consultative process, our
analysis shows that the PRSP, PRSC and PRGF exclude serious
consideration of the potential impact of ongoing World Bank loan
programs to Uganda.
Despite World Bank claims that the PRSP process would involve
"informed participation" by civil society, the contents and details
of Government commitments to more than 20 other loans totaling over
$1 billion (approved in 1998-2001) continued to move ahead without
disclosure or public involvement and oversight.
More worrying perhaps than the issue of public accountability and
participation is the fact that these new loans do not learn from
the IMF and World Bank's own reviews of previous structural
adjustment programs and failed programs. There appears to be no
institutional learning from these evaluations evident in the new
policy designs of the PRGF and PRSC. This is striking in the area
of trade and health.
The new loans lack an assessment or corrective strategy to avoid
the previous negative social impact of abandoning trade barriers
and subsidy cuts. This report demonstrates how the new loans failed
to consider how price increases for clean water (a consequence of
the water sector privatization directives of the PRSC) might
undermine the health-related poverty-reduction goals of the PRSP.
This is particularly unacceptable in the wake of the completion of
the five-year, sevencountry study known as the Structural
Adjustment Participatory Review Initiative (SAPRI), of which both
the World Bank and Ugandan government were members. To date, the
World Bank has ignored these findings, which strongly questioned
the efficacy of rapid trade liberalization, privatization and
deregulation.
The Ugandan Government's record on the rights of citizens to basic
social services, public information and constitutionalism is
recognized internationally. The constitutional reform process and
the newly adopted Constitution provides for basic human rights
principles and instruments of non-discrimination, equality, and
access to be guaranteed for all citizens and special rights for
women, people with disabilities and children most notably. It is
stunning that the lending policy instruments do not build on this
tradition of establishing state directives on the basis of state
obligations to citizens. The report demonstrates this with regards
the rights of labor.
A range of important external processes and institutions beyond the
Bank and Fund influence Ugandan economic and social policy in 2002.
It is surprising that the lending policy documents do not
incorporate the risks and opportunities posed by Uganda's
membership in the World Trade Organization or bi-lateral and
multi-lateral trading policies.
A key issue of concern lies in the policy treatment of regulating
services, utilities and markets. The IMF and World Bank loans
prescribe that Uganda must privatize its key utilities and markets.
The documents lay emphasis that regulation "will eventually
follow". Yet, close analysis of WTO rules clearly shows that Uganda
will not be permitted to develop adequate regulation. The report
indicates similar problems for the impact of the US African Growth
and Opportunity Act (AGOA) and the European Union's Cotonou
Agreement.
Core to the goal of effective regulation is decentralization. From
the Uganda experience, accelerating decentralization where there is
poor administrative or technical capacity and regulatory oversight
at the district levels may actually produce impediments to poverty
reduction.
Based on the findings of this report, we find ourselves unable to
contradict the growing tide of claims internationally that the
World Bank and IMF have repackaged past controversial adjustment
policies. The report questions the claim that the new loans support
countries' poverty-reduction goals. It is unclear from the Uganda
case, how these policy prescriptions will eradicate poverty
reduction today when they have clearly failed over the last two
decades.
Ultimately, the only way Uganda will become independent of its
current donor dependency is to develop its own domestic economy
with selective and strategic state supports not different than
those used successfully by the industrialized countries. It must
also actively explore, initiative, promote and establish
sub-regional and regional trade and commerce options.
Introduction and Overview
Uganda's Poverty Reduction Strategy Paper (PRSP) is based on a
revision of the Government of Uganda's Poverty Eradication Action
Plan (PEAP), which the country had originally produced in
1995-1997. Upon the request of the Government of Uganda, the World
Bank and IMF determined that an updated revision of the PEAP,
completed in 2000, could serve as the operative PRSP required for
debt-relief under the Heavily-Indebted Poor Country (HIPC)
initiative.
Uganda's PEAP/ PRSP document determines poverty-reduction priority
areas for the national budget. It has formalized the national goal
to reduce poverty from 44 percent in 1997 to 10 percent by 2017.
The Poverty Action Fund (PAF) was created to use debt-relief
proceeds to supplement the government's education and health
budgets, and as a result, Uganda has been able to increase its
expenditures in these and other priority areas. PAF is administered
with full openness to Ugandan civil society organizations (CSOs)
and with some oversight by Parliament. Any future increases to the
PAF contribution to the national budget are dependent upon
additional flows of debt-relief proceeds.
Uganda is one of the first countries to have received the World
Bank's new concessional lending instrument, the Poverty Reduction
Support Credit (PRSC), which was the first in a series of three
single-tranche programmatic structural adjustment credits ($ 150
million) designed to support the implementation of the PEAP/ PRSP
(For a complete description of the design and intent of the PRSC,
see Annex 2). ...
The Poverty Eradication Action Plan (PEAP)
The PEAP is the broad policy framework paper first formulated in
1995-1997 for the elimination of poverty in Uganda, and revised in
2000 with extensive public consultations involving civil society
organizations. ...
The updated PEAP is a very comprehensive document compared to the
earlier version. It identifies the critical poverty areas and
prescribes the 4 broad goals for its eradication:
(1) creating an enabling environment for sustainable economic
growth and transformation (2) promoting good governance and
security (3) directly increasing the ability of the poor to raise
their incomes (4) directly increasing the quality of life of the
poor
With the approval of its PRSP, Uganda was able to access debt
relief under HIPC II, becoming the first beneficiary of the
Enhanced HIPC debt relief initiative. To this effect, the country
obtained approximately $46 million in debt-relief in the Financial
Year 2000/01, and relief is projected to increase to $55 million in
each of the Financial Years 2001/2 and 2002/3 (Gariyo, 2001a).
Taken together, the HIPC I and HIPC II debt relief initiatives are
producing savings of approximately $90 million annually on Uganda's
repayments of foreign debts. All the savings from debt relief are
being committed to poverty eradication through the Poverty Action
Fund (PAF) ... Through the PAF, donors have almost doubled their
contribution to poverty programs in the Financial Year 2000/2001
(Gariyo, 2001a). For 2001/2002, the PAF resources were projected to
increase to Ug. Shs. 609 billion, comprising about 35 percent of
this financial year's budget (Twijukeye, 2001).
How the PRSC and PRGF are intended to support Uganda's PRSP
Ostensibly, the PRSC and PRGF are designed to finance the
implementation of policy advice that will help Uganda achieve the
four major goals of its PRSP. ...
The first PRSC, approved in 2001 for $150 million, set out to
achieve a host of major reforms. Regarding the PSRP's first goal,
"creating an enabling environment for sustainable economic growth
and transformation," the PRSC supports reforms to strengthen public
expenditure and budgetary management as a critical first step in
improving public service delivery. The "enabling environment for
sustainable economic growth" is understood by the institutions to
refer to the macroeconomic stability that is maintained by the
IMF's PRGF with a deflationary program for tight monetary policies,
strict budget surpluses and thresholds for financial reserves.
In support of the second major goal, "promoting good governance and
security," the PRSC supports the decentralization of public service
provision and fiduciary responsibilities from the central
ministries to the local district governments, including health,
education, water and agricultural extension services. These efforts
are coupled with reforms designed to reduce corruption, ensure law
and order and security, and provision of disaster management.
In support of the third major PRSP goal, "directly increasing the
ability of the poor to raise their incomes," the PRSC prepares the
groundwork for the Plan for Modernization of Agriculture (PMA),
which is scheduled to become fully operational by the time PRSC II
reforms are implemented. The PMA seeks to further liberalize and
privatize domestic agricultural markets and services. When fully
operational, the PMA will involve government, private sector and
civil society organizations in the provision of services for
research and technology, agricultural advisory services,
agricultural education, a framework for rural finance, access to
markets, sustainable natural resource utilization and management,
and the strengthening of land rights and land administration.
In support of the fourth PRSP goal, "directly increasing the
quality of life of the poor," the PRSC supports major privatization
and deregulatory reforms in the health, education, water and
sanitation sectors. While it is noted that each of these sectors
has been characterized by inefficiency, waste and corruption, NGOs
raise serious concerns about the efficacy of the PRSC's proposed
solutions. Regarding health reforms, the program supports the
"rationalization of financing" (lifting price caps on service fees
for consumers), procurement reform, increased drug stocks, more
trained clinic staff, increased vaccinations, and the
"rationalization" of health infrastructure construction. Regarding
education, the PRSC supports recruitment for more teachers,
training for teachers, increased textbook supply, and "increasing
the efficiency" (privatization) of primary school construction. In
the water and sanitation sector (WSS), the PRSC facilitates the
decentralization process by assisting the central government with
programs to transfer duties to local governments, and to support
local governments. It also works to create a "demand-driven"
approach to management of WSS projects and to have projects based
on "community ownership".
The terms "rationalization," "increasing efficiency,"
"demand-driven," and "community ownership" are euphemisms for
privatization and deregulation of key public services and
elimination of their subsidized prices to be replaced by going
private market rates. Although the problem of inefficiency in the
WSS sector is a real one, the PRSC represents the World Bank's
preference to resort to privatization over improvements in the
existing system.
The IMF's new lending instrument, the PRGF, will support the
poverty reduction goals of the PRSP by providing Uganda with an $11
million loan to support its eliminating trade protections for its
domestic textiles and sugar industries, continuing with the
privatization of the Ugandan Commercial Bank, eliminating the
surcharges on cigarettes and other tobacco products, maintaining a
low level of inflation (below 5 percent), staying within the
agreedupon allocations in the three-year, revolving Medium Term
Expenditure Framework (MTEF), and maintaining a reserves level four
months' expenditures. ...
...
Uganda's Lessons from the 5-Year SAPRI Study
Four of the seven countries of the 5-year SAPRI study, which
included important lessons from Uganda's experience, commissioned
specific field studies on the impact of privatization as part of
SAPRIN series of studies on structural adjustment. The SAPRI
studies drew a distinction between the privatization of enterprises
involved in production and those delivering basic services, such as
water and electricity. As far as the latter category is concerned,
in the three countries where there was a review of the
privatization of public utilities, access to affordable quality
services did not improve for the societies as a whole and, in some
cases, they worsened. Privatization measures exacerbated inequality
and failed to contribute to macroeconomic efficiency.
The general outcomes can be summarized as follows: In Uganda, while
the privatization of large productive enterprises improved the
efficiency and profitability of individual firms, benefits to the
wider society have been questionable. The financial [short-term]
costs to the state of privatization were found to have outweighed
the fiscal benefits. The sale of state assets was marred by
corruption. No property-owning middle class was created, and a
large share of the value of assets sold is now owned by foreigners.
Workers laid off during the privatization process suffered from
inadequate compensation and retraining, while those who kept their
jobs experienced greater job insecurity and income inequality
within the firm. There was limited employment generation in
privatized firms, mostly in low-paying jobs (SAPRIN, 2001). Other
important findings in the reports on privatization in Uganda and
the other SAPRI countries are summarized in Annex 3.
In total disregard of all these legitimate concerns raised about
privatizations by the SAPRI studies, the Uganda Debt Network, and
many other CSOs, the World Bank and IMF have failed to adequately
address these concerns with any effective provisions, changes or
reconsiderations of future planned privatizations in the PRSC and
PRGF. The institutions remain firmly committed to insisting that
Uganda move ahead with the scheduled privatizations of the Uganda
Commercial Bank, the state-funded agricultural advisory services,
and the national water utility.
Additional Sources on World Bank / IMF and Poverty Strategies
World Bank, Poverty Reduction Strategy Papers (overview page)
http://www.worldbank.org/poverty/strategies
International Development Association (IDA) and IMF, Review of the
Poverty Reduction Strategy Paper (PRSP) Approach, March 26, 2002
(100-page report)
http://www.worldbank.org/poverty/strategies/review/earlyexp.pdf
"Controversy Continues to Dog Major World Bank Projects,"
allAfrica.com analysis, April 25, 2002, by Jim Cason
http://allafrica.com/stories/200204250002.html
Reports on Uganda's Bujagali Dam project and Tanzania's
Bulyanhulu Gold Mine.
Bank Information Center
http://www.bicusa.org
Independent NGO with links to recent reports from wide variety of
sources
Bretton Woods Project
http://www.brettonwoodsproject.org
Independent NGO with extensive news/reports from wide variety of
sources
Centro de Estudios Internacionales (Nicaragua)
"The World Bank and the PRSP: Flawed Thinking and Failing
Experiences," by Jubilee South, Focus on the Global South,
AWEPON, and the Centro de Estudios Internacionales
http://www.ceinicaragua.org.ni/espa/flawed_thinking_prsp.htm
World Development Movement
"States of Unrest II: Resistance to IMF and World Bank policies
in poor countries in 2001"
http://www.wdm.org.uk/presrel/current/Unrest2.htm
This material is being reposted for wider distribution by
Africa Action (incorporating the Africa Policy Information
Center, The Africa Fund, and the American Committee on Africa).
Africa Action's information services provide accessible
information and analysis in order to promote U.S. and
international policies toward Africa that advance economic,
political and social justice and the full spectrum of human
rights.
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