News Brief: IMF Completes First Review of Uganda under PRGF-Supported Program, Extends Arrangement and Approves US$11.6 Million Credit
September 7, 2000
The Executive Board of the International Monetary Fund (IMF) completed the first review of Uganda’s third annual arrangement under the Poverty Reduction and Growth Facility (PRGF)1 (See Press Release No. 99/59). The Board approved the extension of the PRGF arrangement until March 31, 2001 from the original expiration date of November 9, 2000. The completion of this review enables the release of SDR 8.93 million (about US$11.6 million), which brings total disbursement under the three-year program to SDR 91.5 million (about US$119 million).
Following the Executive Board’s discussion on Uganda, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chairman, made the following statement:
“Uganda has experienced a significant deterioration in its terms of trade, and the budget has had to absorb sizeable costs arising from bank restructuring. Directors welcomed the steps the authorities have taken in response to these challenges so as to maintain the level of high priority social outlays: they have curtailed non-priority expenditure, and enhanced expenditure monitoring and control, as well as maintaining a prudent monetary policy. However, Directors emphasized the need to reverse the recent widening of the fiscal deficit, which had occurred despite the authorities’ efforts.
“The authorities have produced a commendably comprehensive poverty reduction strategy, to be implemented primarily through the Poverty Action Fund (PAF). They have also made progress in integrating this strategy in a medium-term budget framework, and in elaborating systems for monitoring its implementation, especially at the district level. Provisions for PAF spending in the medium term are envisaged to rise substantially, while allocations for defense are to decline as a share of GDP. However, there were concerns that the resources identified in the medium-term expenditure framework (MTEF) would not be adequate to achieve Poverty Eradication Action Plan (PEAP) targets. Accordingly, Directors welcomed the authorities’ intention to better prioritize expenditures while exploring options for increasing resources. Strengthening revenue performance, particularly through better tax and customs administration and a broadening of the tax base, will be essential in ensuring that the poverty reduction strategy remains viable in the long run in a climate of financial stability.
“The authorities intend to pursue and deepen structural reforms in trade, banking supervision, and public enterprises, which should improve the efficiency of key public services and boost private investment. Directors urged the authorities to tackle governance issues vigorously, in view of the seriousness of the problems Uganda is facing in this area.
“Directors agreed to grant waivers for end-December 1999 performance criteria not observed and to extend the commitment period for the PRGF arrangement through end-March 2001 on the basis of the authorities’ revised program,” Mr. Sugisaki said.
1 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 (PRGF), and its purposes were redefined. It was 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. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½ year grace period on principal payments.