For more information, see Uganda and the IMF

Uganda—Enhanced Structural Adjustment Facility
Policy Framework Paper, 1998/99-2000/01

Tables

Table 1. Uganda: Policy Matrix, 1998/99-2000/011

Policy Area

Objectives and Targets

Strategies and Measures

Implementation

TA Requirements


A. Fiscal policies

1. Revenue

Improve tax administration, enhance tax base, and reduce distortions in tax system

Restructure excise taxes and restructure and reduce tariffs

1998/99-2000/01

 

 

 

 

 

Implement changes in customs management and administration and improve internal audit procedures

1998/99

IMF, U.K. Department for International Development (DfID)

 

 

 

Approval by URA of the new anti-smuggling action plan

September 1998

 

 

 

 

 

Customs Departments implement Wide-Area Network to monitor customs traffic

1998/99

 

 

 

 

 

Install seals on all petrol station pumps (including those in nonretail outlets). All unsealed stations along the main transit routes will be closed

September 1998

 

 

 

 

 

Complete on-site audits of all retail and nonretail petrol outlets by the URA

June 1999

 

 

 

 

 

Establish a Large-Taxpayer Unit (LTU) and assign to it the assessment, auditing, collection, and enforcement functions for the 100 largest taxpayers

September 1998

IMF

 

 

 

Complete a centralized inventory of all available information on tax arrears by the business sector

September 1998

 

 

 

 

 

Ensure auditing of enterprises whose tax holidays will have expired by the income tax department, in consultation with the (value-added tax) VAT and customs departments

June 1999

 

 

 

 

 

Establishment of duty drawback desk and clearance of drawback backlog

1998/99

 

 

 

 

 

Establishment of tax tribunal and commencement of its operations

September 1998

 

 

 

 

 

Process VAT refunds within 30 days

1998/99

 

 

 

 

 

Introduce nonwaivable (except for good cause) penalty tax on late VAT payments, set at 2 percent per month on the amounts outstanding

July 1998

 

 

 

 

 

Replace the fixed penalty for late filing with a nonwaivable penalty tax of 2 percent of the tax liability—a general write-off facility on overdue taxes applies to this penalty

July 1998

 

2. Expenditure and budget control

Improve budget management

Improve expenditure control and financial accounting mechanisms, including,

1998/99-2000/01

IMF/World Bank

 

 

 

  •  put in place a Pilot Commitment Monitoring and Reporting System, and

April 1999

IMF

 

 

 

  •  put in place uniform budget preparation and reporting regulations for districts

1998/99-2000/01

IMF

 

 

 

Cease issuing promissory notes except to regularize domestic arrears accumulated prior to July 1, 1997

Effective from July 1, 1997 onward

 

 

 

 

 

Limit supplementary expenditures to no more than 3 percent of budgeted expenditures

1998/99-2000/01

 

 

 

 

 

Ensure that all cash releases are recorded appropriately and provided in a timely manner

1998/99

 

 

 

 

 

Increase allocation for priority program areas and for development budget at least at the rate of growth of nominal GDP

1998/99-2000/01

 

 

 

 

 

Arrears Monitoring and Reporting Unit and its Verification subcommittee audit existing central government arrears and prepare plan for their elimination

February 1999

 

 

 

 

 

Clear all outstanding arrears

1998/99-2000/01

 


 B. Monetary and financial sector policies

1. Monetary policy

Maintain low and stable inflation

Strengthen the use of indirect instruments by promoting secondary markets in treasury bills

1998/99

IMF/World Bank

2. Institutional reforms

Promote efficiency and soundness of banking system

Strengthen financial sector supervision and training

1998/99-2000/01

World Bank

 

 

 

Conduct 12 on-site examinations of commercial banks

1998/99

 

 

 

 

 

Communicate required corrective measures to the four banks found to be in violation of bank regulations

September 1998

 

 

 

 

 

Conclude reinspections of these banks

December 1998

 

 

 

 

 

Begin policy of annual on-site inspections of all commercial banks

2000/01

 

 

 

 

 

Issue a master repurchase agreement to serve as a guide to all sales of government securities

1998/99

 

 

 

 Promote rural finance

Provide subsidies, if needed, to keep selected rural branches of the Uganda Commercial Bank (UCB) operating

1998/99-2000/01

 

 
C. External sector policies

1. Exchange and trade liberalization

 

Submit new Foreign Exchange Bill to Parliament

March 1999

 

 

 

 

 Promote trade and reduce anti-export bias and other tax-induced distortions

Clear the stock of outstanding export duty drawback claims

1998/99

 

 

 

 

 

 

 

Reduce the maximum processing time of export duty drawback claims to two months

June 1999

 

 

 

 

 

 

Reduce the maximum processing time of export duty drawback claims to one month

June 2000

 

 

 

 

 

 

Eliminate import ban on cigarettes

March 1999

 

 

 

 

 

Phase out temporary additional tariffs on beer, soft drinks, automobile batteries

1998/99-March 2001

 

 

 

 

 

Imported cigarettes, and other tobacco products

1999/00- June 2001

 

 

 

 

 

Phase out discriminatory excise tax of 10 percent on selected imports

1999/00-2000/01

 

2. Debt strategy

Improve debt profile

Contract new concessional borrowing only on IDA terms, or better

1998/99-2000/01

 

 

 

 

 

 

Limit amount of annual nonconcessional debt contracted or guaranteed by the government to US$10 million

1998/99-2000/01

 

 

 

 

 

 

Normalize relations with non-Paris Club creditors

1998/99-2000/01

 

 


D. Structural and institutional reforms

1. Private sector development

Enhance private sector's capacity to generate economic growth

Advance commercial related legislation and related judicial processes by:

 

 

 

 

 

 

 

Drafting new commercial laws and obtaining cabinet approval

1998/99

 World Bank

 

 

 

 Establishing a Tax Division of High Court to expedite tax-related disputes

1998/99

 

 

 

 

 

Improve legal infrastructure by:

 

 

 

 

 

 

 

Reducing backlog of cases

1998/99-2000/01

 

 

 

 

 

Establishing a separate registry of commercial cases

1998/99

 

 

 

Promote private equity and security markets

Begin offering residual shares in partially privatized enterprises to public via the Capital Markets Authority

1998/99-2000/01

 

 

 

 

2. Public service reform

Improve effectiveness and efficiency of the public service

Implement the major part of the remaining staff cuts arising from ministerial restructuring

1998/99

 

 

 

 

 

Implement results-oriented management in government ministries

1998/99

World Bank

 

 

Strengthen personnel and payroll management and control

1998/99-1999/00

DfID

 

 

Complete job evaluation and grading exercise

1998/99

World Bank

 

 

Complete National Service Delivery Survey

1998/99

World Bank

 

Rationalize public service pensions and separation benefits

Approve a cabinet paper embodying the basic principles of the proposed pension reform, including a specification of the new pension formula as well as the intended adjustment to benefits for persons who retired prior to the monetization of in-kind benefits

December 1998

 

 

 

 

 

Complete study on long-term financial requirements of revised benefit schemes

1998/99

World Bank

 

 

Establish working group on pension reform

1998/99

 

3. Decentralization

Improve service delivery and accountability

Complete Decentralization Implementation Plan

December 1998

 

 

 

 

 

Enhance financial oversight and management capacities at central and local levels

1998/99-2000/01

 

 4. Privatization and public enterprise reform

Reduce the role of the government in commercial activities and increase exposure of retained public enterprises to market signals

Relinquish government management control to core investor or divest at least 51 percent of government shares in all 126 enterprises with at least partial public ownership

December 1999

 

 

 

 

 

Approve for sale 16 of the 18 commercial public enterprises that remain to be approved for sale

1998/99

 

 

 

 

 

 

 

Regularize all Uganda Electricity Board (UEB) debt service to the central government

December 2000

 

 

 

Enhance efficiency and reduce costs of public enterprises

Properly reflect all direct subsidies from budget to public enterprises in the budget and eliminate all subsidies over the next three years, except for those to enterprises with agreed social missions

1998/99

World Bank

 

 

 

Make loans from government to public enterprises at market interest rates

1998/99-2000/01

 

 

 

 

 

Liquidate all arrears of public enterprises

1998/99-2000/01

 

 

 

 

 

Complete study on rationalization and restructuring of public enterprises

March 1999

World Bank

 

 

 

Strengthen MFPED's mandate for financial oversight of public enterprises

December 1998

World Bank

 

 

 

Decide whether to adopt multisectoral regulatory agency for utilities regulatory structure for public enterprises

1998/99

World Bank

 

Improve institutional framework for privatization

Monitor use of divestiture proceeds and their use for agreed activities

1998/99-2000/01

 

 

 

 

 

 

Present to cabinet amendments to PERD statute

June 1999

World Bank


E. Sectoral Policies

1. Agriculture

Improve agricultural productivity

Develop, through participatory approach, consistent sector-wide approach, including redefinition of role and activities of Ministry, decentralization of activities and prioritization of investments.

December 1999

 

 

 

 

 

Provide adequate budgetary provisions for agricultural research and rural roads

1998/99-2000/01

 

 

 

 

 

Review all marketing regulations on agricultural outputs and inputs, remove any remaining restrictions, and simplifying export procedures for all agricultural exports

1998/99-2000/01

 

 2. Environment

Build capacity for sustainable management of natural resources

Implement the National Environment Bill and proceed with follow-up on National Environmental Action Plan (NEAP)

1998/99-2000/01

World Bank

 

 

 

Strengthen capacity of environmental and resource management agencies

1998/99-2000/01

World Bank

3. Infrastructure

 

 

 

 

 

 

 

 Power

Improved supply of power on a least-cost basis

Cabinet will approve plan for power sector restructuring and private sector investment

March 1999

World Bank

 

 

 

Establish a transparent process for evaluating the technical, financial, and environmental aspects of the independent power producer proposals, and for selecting the most economic order and timing of the proposed investments

December 1998

 

 

 

Improve UEB's operational and financial performance

Reduce accounts receivable to:

  • Four months of sales



December 1999

World Bank

 

 

  • Three months of sales
2001 onward

World Bank

 

 

Reduce energy losses from 30 percent to:

 

 

 

  • 26 percent

December 1998

 

  • 22 percent
December 2000

 

 

 

 

Reduce UEB's operating ratio to: 36 percent

 2000

 

 

 

 

 

Reduce staff to 2,000

December 1998

 

 

 

 

 

Complete the divestiture of noncore activities

March 1999

 

4. Transport

Improve maintenance and rehabilitation of main roads

Increase government funding for routine maintenance to 100 percent of requirements

2001

World Bank

 

 

 

Strengthen institutional capacity in roads sector

Make Road Agency Formation Unit operational

September 1998

World Bank

 

 

 

Establish autonomous Road Agency/Authority

July 2000

World Bank

 

Improve the accessibility of rural areas

Increase feeder road investment and strengthen planning at district level

1998/99-2000/01

World Bank

 

 

 

Complete prioritized rural feeder road and investment plan

1998/99

World Bank

 

Increase commercial orientation of Uganda Railways Corporation (URC)

Take decision on continued operation of the Kampala- Kasese line

1998/99

World Bank

 

 

 

Take decision on increased private sector participation in Uganda Railway Corporation

December 1998

 

 

5. Post and Telecommunications

Increase private sector participation in service delivery through liberalization

Re-tender Uganda Telecommunications Ltd. (UTL)

December 1998

 

6. Water

Improve provision of safe water and sanitation to urban and rural populations

Complete review of water sector policy

December 1999

 

 

 

 

 

Take decision on increasing private participation in NWSC

1998/99-2000/01

 

 

 

 

 

Allow National Water Supply and Sewerage Corporation (NWSC) to make tariff changes as needed to cover marginal costs

1998/99-2000/01

 

 

 

 

 

Increase government funding in sector

1998/99-2000/01

 


F. Social and statistical issues

1. Education

Universal Primary Education (UPE)

Implement the UPE dissemination strategy

1998/99

 

 

 

 

 

Increase resource efficiency by adopting policy guidelines on double-shift teaching, multigrade teaching, and rationalization of teacher training program

1999/2000

 

 

 

 

 

Expand in-service teacher training to cover all districts

1998/99

 

 

 

Improve resource management

Ensure that all active teachers are on the payroll and paid on time

1998/99

 

 

 

 

 

Implement monitoring system for accountability and transparency in use of public funds

1998/99-2000/01

 

 

 

 

 

Implement the Education Management Information System

1999/2000

 

 

 

 

 

Adopt education sector strategy

June 1999

 

2. Health

Improve health indicators

Update health policy and prepare five-year strategic plan

1998/99

 

   

Carry out regular and systematic monitoring of:

1998/99-2000/01

 

   
  •  key health indicators;
   
   
  •  incidence and prevalence for major diseases/ conditions, such as HIV/AIDS, malaria and nutrition;
   

 

 

 

 

  •  service indicators, such as overall access to services and specific services, such as contraceptive use

 

 

 

 

 

Improve nutritional situation

Implement program of locally based interventions supported by Nutrition and Early Childhood Development Project

1998/99-2000/01

World Bank

3. Statistics

Improve statistical base

Improve collection and reporting of national accounts, revenue, expenditure, BOP, and debt statistics, including through increased efforts to implement the recommendations of previous technical assistance missions

1998/99-2000/01

Fund

 

 

 

Provide adequate funding for statistical development

1998/99-2000/01

 

 



   1/ July 1998 to June 2001
 


Table 2. Uganda: Selected Economic and Financial Indicators, 1994/95-2000/011

1994/95

1995/96

1996/97

1997/98

1998/99

1999/00

2000/01

Prog.

Prov.

 

(Annual percentage changes, unless otherwise indicated)

National income and prices

   GDP at constant prices

10.5

8.1

5.2

5.0

5.5

7.0

7.0

7.0

   GDP deflator

9.2

6.2

6.5

8.8

4.4

5.0

5.0

5.0

   GDP at factor cost

      (in billions of Uganda shillings)

4,915

5,640

6,323

7,207

6,964

7,824

8,790

9,875

   Consumer prices

      End of period

3.4

5.4

10.4

7.5

-1.4

5.0

5.0

5.0

         Nonfood

6.2

7.2

1.7

...

3.5

5.0

5.0

5.0

      Annual average

6.1

7.5

7.8

8.8

5.8

5.0

5.0

5.0

External sector (in U.S. dollars)

   Exports, f.o.b.

134.5

-0.8

13.6

-22.5

-30.6

16.5

16.4

13.2

   Imports, c.i.f.

61.6

12.2

2.3

7.1

11.8

8.1

8.0

9.2

   Terms of trade (deterioration -)

72.2

-29.3

-11.4

4.0

15.0

-1.8

0.6

1.2

   Average exchange rate

      (Uganda shillings per U.S. dollar)

933

1,013

1,058

...

1,150

...

...

...

   Nominal effective exchange rate

      (end of period; depreciation -)

-6.8

-0.1

1.6

...

-7.1

...

...

...

   Real effective exchange rate

      (end of period; depreciation -)

-7.9

0.6

7.2

...

-11.5

...

...

...

Government budget

   Total revenue and grants

37.3

15.2

16.9

11.0

16.5

17.0

11.1

11.1

   Revenue

44.7

19.1

16.6

10.9

8.8

19.1

16.1

16.8

   Expenditure and net lending

34.3

10.3

15.7

8.0

8.3

18.7

12.9

12.9

 

(Annual changes in percent of beginning-of-period broad money, unless otherwise indicated)

Money and credit

   Net foreign assets

33.9

22.9

33.0

12.2

38.7

15.0

11.1

13.8

   Net domestic assets 2/

-3.4

-0.6

-12.5

4.3

-10.9

3.4

4.8

2.1

      Domestic credit

-12.3

21.2

2.7

4.4

-1.0

3.4

4.8

2.1

         Central government

-23.7

6.0

0.0

-5.6

-9.6

-8.6

-6.9

-8.9

         Credit to the private sector

11.4

15.2

2.6

10.0

8.6

12.0

11.8

11.0

   Money and quasi money

25.3

20.7

15.8

15.0

21.7

17.0

15.0

15.0

Velocity (GDP/M2) 3/

10.8

10.1

9.6

9.5

8.9

8.4

8.1

8.0

Interest rate (in percent) 4/

8.0

10.8

11.9

...

12.3

...

...

...

 

(In percent of GDP at factor cost)

National income accounts

   Gross domestic investment

18.4

16.7

17.1

20.5

16.9

17.1

17.1

17.1

   Gross national savings (including grants)

15.7

14.7

16.2

17.9

14.9

13.4

14.4

14.7

External sector

   Current account balance

      (including official grants)

-2.7

-2.0

-0.9

-2.6

-2.0

-3.7

-2.7

-2.4

      (excluding official grants)

-8.4

-6.9

-6.0

-7.7

-8.3

-9.2

-7.6

-6.7

   External debt (including Fund)

62.4

61.1

56.4

56.7

54.2

52.2

49.0

45.9

Government budget

   Revenue

10.7

11.1

11.6

11.4

11.4

12.1

12.5

13.0

   Grants

4.8

4.4

4.6

4.5

5.7

5.7

5.1

4.4

   Total expenditure and net lending

18.3

17.6

18.1

17.2

17.8

18.8

18.9

19.0

   Government balance (excluding grants)

-7.6

-6.5

-6.6

-5.8

-6.4

-6.7

-6.4

-6.0

   Government balance (including grants)

-2.8

-2.0

-1.9

-1.3

-0.7

-1.0

-1.3

-1.6

   Net foreign financing

4.8

3.5

3.3

2.9

2.8

3.3

2.4

2.6

   Domestic bank financing

-1.9

-0.5

-1.1

-0.5

-1.0

-0.9

-0.8

-1.0

   Domestic nonbank financing

-0.0

-0.9

-0.2

-1.0

-1.1

-1.4

-0.3

0.0

 

(In percent of exports of goods and nonfactor services)

Debt-service ratio 5/

   Including Fund obligations

23.5

21.8

17.9

26.9

26.7

15.6

16.2

12.7

   Excluding Fund obligations

18.8

15.6

10.6

17.7

16.9

7.4

10.2

7.9

 

(In millions of U.S. dollars, unless otherwise indicated)

Overall balance of payments

125.2

59.6

111.2

44.5

109.7

47.1

43.2

78.6

External payments arrears (end of period)

234.6

255.0

314.2

0.0

273.5

0.0

-0.0

-0.0

Foreign exchange reserves

388.2

479.7

621.9

693.4

750.5

832.7

900.7

974.8

Gross foreign exchange reserves (in months

   of imports of goods and nonfactor services)

3.4

3.6

4.5

4.7

4.9

5.0

5.0

5.0

   Sources: Ugandan authorities; and Fund staff estimates and projections.

   1/ Fiscal year begins in July.

   2/ Change in net domestic assets for 1998/99 through 2000/01 is calculated using constant exchange rate of
       U Sh 1,232 per U.S. dollar.

   3/ Nominal GDP divided by average of current year and previous year end-period money stocks.

   4/ End-period rate on 7-12 month time deposits.

   5/ The debt-service ratio incorporates estimates of the effects of the April 1998 Paris Club stock-of-debt
       operation and assumes rescheduling with non-Paris Club bilateral and commercial creditors on
       comparable terms.




Table 3. Uganda: External Financing Requirements, 1998/99-2000/01

(In millions of U.S. dollars)

 

1998/99

1999/00

2000/01

1998/99-2000/01

Total

 

 

 

Proj.

 

Total financing requirements

-1,032.1

-705.5

-697.0

-2,434.6

Current account 1/

-583.8

-543.1

-527.6

-1,654.4

Amortization (public sector)

-72.9

-84.1

-83.0

-240.0

Other capital (net)

39.8

40.6

41.4

121.8

Change in gross official reserves

of the BOU (increase = -)

-84.3

-69.3

-81.0

-234.7

Change in arrears (decrease = -)

-273.5

-0.0

0.0

-273.6

IMF repayments

-57.3

-49.6

-46.8

-153.8

Sources of financing

1,032.1

705.5

697.0

2,434.6

Official grants

349.9

352.9

341.8

1,044.7

Import support

147.0

129.5

98.2

374.7

Project support

203.0

223.4

243.6

670.0

Official loans

316.3

278.4

313.6

908.3

Import support

113.3

55.0

70.0

238.3

Of which: IDA

85.0

55.0

0.0

140.0

Project support

203.0

223.4

243.6

670.0

Of which: IDA

...

...

...

0.0

IMF disbursements

44.8

35.9

0.0

80.7

Exceptional financing

321.0

38.3

41.6

401.0

Current maturities

23.5

-0.0

-0.0

23.5

Arrears

260.3

0.0

0.0

260.4

HIPC

37.2

38.3

41.6

117.1

Financing gap

0.0

0.0

0.0

0.0

Sources: Ugandan authorities; and Fund staff projections.

 

1/ Excludes official grants.

 



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