News Brief: IMF Statement on Uganda Reaching Enhanced HIPC
May 2, 2000
The International Monetary Fund's (IMF) Executive Board and the World Bank Group's International Development Association agreed on May 1, 2000, and May 2, 2000, respectively, that Uganda has fulfilled the conditions for reaching the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative1 (see Press Release No. 00/34).
"Building on their strong track record, the Ugandan authorities have continued to implement economic reforms supported by the Poverty Reduction and Growth Facility2 (PRGF). Despite the sharp deterioration in its terms of trade and the consequent decline in budgetary revenues, Uganda has taken steps to protect poverty related outlays while preserving financial stability.
"Uganda's Poverty Reduction Strategy Paper has benefited from being prepared in the context of a highly participatory process, involving parliamentarians, government officials, donor representatives, civil society, and representatives of poor communities through the 1999 Uganda Participatory Poverty Assessment Project. The strategy it outlines, although needing further elaboration in some respects, provides a suitable framework within which the authorities can use additional debt relief to raise spending on poverty reduction, and in which IMF lending can proceed in a context of macroeconomic stability and strong economic growth. Further estimates of budgetary costs of poverty reduction programs, as well as a strengthening of links between budgetary expenditures on poverty reduction and indicators of poverty, will be required to consolidate the poverty reduction strategy. Determined measures to strengthen governance, accountability, and transparency, as well as the pursuit of other structural and institutional reforms across a broad front, are critical to achievement of the authorities' goals for economic growth and poverty reduction.
"There were concerns over the impact of the recently concluded lease-purchase of a jet on Uganda's fiscal situation, its poverty reduction program, and prospective external payments. The Ugandan authorities are committed to ensuring that payments related to this transaction do not jeopardize the implementation of the poverty reduction strategy, and have stressed their intention to offset the budgetary cost associated with this transaction through cuts in defense and other non-wage outlays.
"The disbursement of the IMF's assistance under the enhanced HIPC Initiative is subject to confirmation of the participation of the African Development Bank in the debt relief operation. In the meantime, the IMF will continue to provide interim assistance to support the implementation of Uganda's poverty reduction strategy," Mr. Sugisaki stated.
1 The HIPC Initiative was launched by the World Bank and the IMF in 1996 as the first comprehensive effort to eliminate unsustainable debt in the world's poorest, most heavily indebted countries. In October 1999, the international community agreed to make the Initiative broader, deeper and faster by increasing the number of eligible countries, raising the amount of debt relief each eligible country will receive, and speeding up its delivery.
2 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility, and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. Once broadly endorsed by the Executive Boards of the IMF and World Bank, the PRSP will provide the policy framework for lending operations under the PRGF arrangement. PRGF loans carry an interest rate of 0.5 percent a year, and are repayable over 10 years with a 5 ½ year grace period on principal payments.