UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
Uganda: World Bank and Poverty Date distributed (ymd): 020506 Document reposted by Africa Action
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Region: East Africa Issue Areas: +economy/development+
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 [type URL on one line]
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 poverty- reduction 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
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)
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: firstname.lastname@example.org
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: email@example.com
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.
1. 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
************************************************************ Message-Id: <200205061452.KAA26060@server.africapolicy.org> From: "Africa Action" <firstname.lastname@example.org> Date: Mon, 6 May 2002 10:37:31 -0500 Subject: Uganda: World Bank and Poverty
Editor: Ali B. Ali-Dinar
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