## _cr05308

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---

### PEAP 2004/05-2007/08: scope, preparation, and strategic focus
- The Revised Poverty Eradication Action Plan (PEAP) 2004/05-2007/08 was formally launched in May 2005 and represents the second revision of the 1997 PEAP; it serves as Uganda’s Poverty Reduction Strategy Paper (PRSP).
- Preparation:
  - Prepared by the government through broad-based consultations with stakeholders and civil society, building on the PRSP Annual Progress Report presented to the Executive Boards of IDA and IMF in September 2003 and the Joint Staff Assessment (JSA).
  - Revision process involved extensive consultations over a two-year period, including three national stakeholder workshops; relied on a bottom-up approach from sector working group review papers and extensive civil society comments.
  - Uganda NGO Forum and Private Sector Foundation contributed comments at each stage; Parliament held two separate workshops.
  - Final draft presented to the Cabinet in November 2004.
- Strategic shift and pillars:
  - Shifts policy focus from recovery to sustainable growth and structural transformation; presents specific Government policies to accelerate poverty reduction.
  - Emphasized policy areas: stable and consistent macroeconomic framework; fiscal deficit reduction; conflict-resolution; good governance; increased production and productivity in the agricultural sector; strengthened human development.
  - Identified major challenges: high population growth and increasing income inequality.
  - Five pillars: (i) economic management; (ii) enhancing production, competitiveness and incomes; (iii) ensuring security, conflict resolution and disaster preparedness; (iv) good governance; (v) promoting human development.

### JSAN purpose and poverty diagnosis (A)
- Purpose:
  - The Joint Staff Advisory Note (JSAN) provides staffs’ analysis and advice on key priorities for strengthening the PEAP and ensuring effective implementation, and highlights areas where current policies do not match the PEAP 2004.
- Poverty diagnosis — findings and research needs:
  - Household Survey-based analysis provides an adequate poverty profile, but additional research is needed to identify factors behind the recent slowdown in poverty reduction and rising inequality.
  - Suggested lines of inquiry: impact of rapid population growth on poverty; vulnerability to commodity price shocks; lack of accumulated savings for cash-crop production; suppression of economic activity and service delivery due to insurgency.
  - Data points and inconsistencies:
    - Observed increase in poverty between 1999 and 2002 is a cause for concern but inconsistent with other well-being measures.
    - World Bank Poverty Assessment evidence suggests household asset values increased and ownership of assets (bicycle, radio, television, etc.) increased between 1999 and 2002.
  - Gender inequality:
    - Identified as an impediment due to limited land and property rights, lower labor participation, higher prevalence of HIV/AIDS among women, and greater care burdens.
    - PEAP priority actions include implementation of the revised National Gender Policy, strengthening women’s land rights, domestic relations and sexual offense laws, and addressing gender and equity issues in planning and budgeting.
  - Regional focus and impact of conflict:
    - Staff calculations using 2002 Household Survey geographical poverty data show significant national poverty reductions if conflict-affected North and East are addressed:
      - If poverty rates in the two regions were brought down to the national average, overall poverty would reduce by about 6 percentage points.
      - Reducing poverty in these regions by half would yield over 10 percent decline in overall poverty.
    - Some northern districts (Pader, Kitgum, and Gulu) were not included in surveys due to insecurity; approximately 1.6 million people are living in camps due to insurgency.

### Macroeconomic framework, fiscal policy, and vulnerabilities (B)
- Growth target:
  - Medium-term growth objective set at 7 percent; characterized as ambitious but realistic if policies are strengthened.
  - PEAP could benefit from more developed analysis on sources of growth and sectoral productivity shortfalls.
- Fiscal policy and revenue mobilization:
  - Government plans to reduce the fiscal deficit, excluding grants, by 1 percentage point annually, from about 10 percent of GDP in 2004/05 to about 7 percent in 2007/08.
  - Staffs welcome the discussion but recommend stronger analysis of managing scaled-up donor inflows for MDGs while maintaining macroeconomic stability.
  - Low tax-to-GDP ratio by regional standards; room exists to raise revenue via tax administration reform and broadening tax bases.
  - Measures that would seriously erode the tax base, such as income tax holidays, should be avoided.
  - Ongoing restructuring of the Uganda Revenue Authority noted as important.
  - Staffs suggest being more specific on tax measures envisaged for 2005/06 and 2006/07 and defining contingency measures for revenue shortfalls.
- Expenditure prioritization and public financial management:
  - Need increased attention to expenditure prioritization and value for money given restrained overall expenditure growth.
  - Concern: recurrent spending has grown at the expense of domestic public investment (PEAP 2004, Table 8.1).
  - Recommendations:
    - Rationalize low priority recurrent spending—especially in public administration—to create fiscal space for infrastructure investments and reduce dependence on donor inflows for wages and recurrent expenditures.
    - Strengthen public expenditure management, including:
      - (i) integration of donor-supported projects into the budget;
      - (ii) monitoring and control of domestic arrears;
      - (iii) budgeting, expenditure execution, and reporting at the local government level.
    - Continue strengthening expenditure management and fiscal reporting to ensure decentralization success.
  - Note: Nearly 40 percent of total expenditures and about 60-70 percent of spending under the PAF are executed by subnational authorities; initiatives coordinated under Uganda’s Fiscal Decentralization Strategy (FDS).
- Finance, trade, and debt vulnerabilities:
  - PEAP assigns an important role to financial deepening but analysis and coverage are weak; few policy actions related to micro finance institutions and pension reform identified.
  - Policies to foster financial intermediation and long-term financing, including carefully structured pension reform, are critical.
  - Staffs support openness and regional integration but call for a better analysis of EAC benefits and caution against tax holidays for EPZs given Uganda’s relatively low tax revenue ratio.
  - Reference: Recent FSAP update presents a thorough analysis of financial sector weaknesses and possible policy actions.
  - Debt sustainability:
    - Government commitment to reduce reliance on external borrowing and creditors’ intent to provide more grants should contribute to further decline in debt sustainability indicators.
    - External debt service burden has remained at broadly similar ranges as a share of GDP at HIPC completion point.
    - Debt burden is highly sensitive to export shocks and adverse weather conditions.
    - PEAP provides limited discussion of vulnerability of macroeconomic performance and poverty reduction to exogenous shocks (terms of trade, donor support, security, weather).
    - Stock of domestic debt is growing and associated debt servicing cost now exceeds that for external debt.

### Promoting growth for poverty reduction — agriculture, infrastructure, and security (C)
- Overall challenge:
  - Moving from recovery to sustained growth and structural transformation requires substantial infrastructure investments and strengthened policies.
  - Over 50 percent of the population is in dependent age groups, increasing demand for primary and secondary education and health care.
  - Noted average fertility rate currently standing at just below 7 children per woman.
- Agriculture:
  - 86 percent of Ugandans live in rural areas; 77 percent of active rural labor is employed in agriculture.
  - Slow implementation of the 7 pillars of the Plan for Modernization of Agriculture (PMA) and limited rollout to districts is a major handicap.
  - PMA has been implemented only for 2 pillars (extension and research) and in a limited number of districts.
  - Farmers face high transactions costs accessing inputs and markets and lack access to affordable credit.
  - Recent studies show access to infrastructure and agricultural services by the rural poor has not kept pace with growth in access to social services since 1992.
  - Government encouraged to emphasize rural transportation, rural energy, and agricultural services in future budget and policy decisions.
- Infrastructure:
  - Need for reliable and more accessible electricity supply to enable structural transformation and agro-processing.
  - Better roads, rail, and air freight links required to reduce high transactions costs of being landlocked.
  - PEAP notes public infrastructure investment as a share of GDP has been falling, risking that additions fail to keep pace with depreciation.
- Security and conflict-affected areas:
  - PEAP lacks a comprehensive and strategic plan that simultaneously addresses security and poverty reduction objectives.
  - Regional poverty rates:
    - North: 64 percent
    - East: 46 percent
    - Central: 22 percent
    - Western: 31 percent
  - PEAP reports nine districts most affected by insecurity and distress migration (PEAP Table 5.2) where an average of about half the population is classified as internally displaced persons.
  - Progress toward peace and reintegration in conflict-affected areas is an urgent priority and is likely to yield a substantial peace premium through restored economic activity.

### Human development and MDGs — service access, quality, and targets (D)
- Improvements in access:
  - Net primary school enrolment improved from about 65 percent in 1992 to about 85 percent in 2003, attributed in large part to Universal Primary Education (UPE).
  - Outpatient visits increased from 9.3 million new cases in FY1999/2000 to 17.7 million in FY2002/03, equivalent to an increase from 0.4 to 0.7 visits per person per year; abolition of user fees in public health centers in 2001 may have contributed.
  - Access to safe drinking water in 2004 stood at about 62 percent; rural access increased from 20 percent in 1991 to 55 percent in 2002.
- Service quality and outcomes:
  - PEAP notes improvements in quality but highlights poor outcomes in learning achievement, life expectancy, child and maternal mortality, and high incidence of stunting among children under five.
  - Possible reasons for slow progress in outcomes:
    - (i) Poor quality of service delivery elements (drug shortages, poor water chain management, poor sanitation and hygienic practices) despite increased access.
    - (ii) High population growth causing demand to outstrip supply.
    - (iii) Insufficient attention to cross-cutting sectoral interventions.
  - Health sector specifics (footnote):
    - DPT3 coverage increased from 41 percent to 85 percent.
    - Proportion of trained health care workers increased from 33 percent to 68 percent.
    - Drug supplies and availability have improved.
- Recommendations:
  - Renew focus on improving quality of social services by ensuring better value-for-money, strategic investments in service provider capacity, and promoting access to family planning services.
  - Staffs suggest stronger consideration of issues of efficiency, sustainability, and strategic orientation of sector budgets.
- MDG alignment:
  - Most PEAP targets are consistent with the MDGs; Uganda is committed to achieving them.
  - Recent studies indicate Uganda is likely to meet half of the MDG targets but faces significant challenges on maternal and under-5 mortality, gender equality, and environmental sustainability.
  - Additional technical and financial support is necessary to return progress to MDG track.

### Governance reforms and implementation gaps (E and governance progress)
- Governance as core pillar:
  - PEAP includes governance reforms as a core pillar and highlights good governance as necessary for poverty reduction and growth.
  - Staffs point to areas where governance-related policies and implementation need strengthening, including macroeconomic governance, public expenditure management, and sectoral implementation constraints.
- Governance progress and concerns:
  - Overall progress in governance has continued to be slow, despite some marked progress in a few areas.
  - Recent reports on corruption show that Uganda has slightly improved its rating globally, but still remains at the low end of the scale in country rankings.
  - Setback in implementation of the Leadership Code arising from the High Court challenge of some of its provisions is regrettable and a cause for concern.
  - Progress in implementing the recommendations of various Commissions of Inquiry has been very slow and warrants specific actions.
  - Staffs stress the need for a clear demonstration of Government’s commitment on governance reforms and a strengthening of the specific implementation details currently lacking in the PEAP 2004.
  - Government engaging stakeholders to define measures for improved governance in the annual PEAP policy and results matrix, but concerns remain on the speed of implementation and effectiveness of some proposed measures in reducing corruption.
- PEAP definition and donor concerns:
  - PEAP 2004 defines “transparent, efficient, accessible and affordable Government” as one of the elements for good governance.
  - Donors have expressed concerns over recent government interventions in favor of individual investors or businessmen where there may be a perceived or real conflict of interest.
  - Staffs recommend that such interventions, which have distorted or placed a burden on the approved budget, be strictly avoided.
- Political governance institutions and fiscal implications:
  - PEAP 2004’s attention to political governance institutions is welcomed; these institutions absorb a significant amount of resources.
  - Large and unpredictable claims on resources by these institutions have been a problem, requiring frequent supplemental expenditures in the past.
  - PEAP 2004 alludes to efforts to develop a coordinated strategy to deal with over-expenditures, mostly in the public administration sector, but decisive political backing is needed.

### Monitoring, evaluation, conclusions, and priorities for implementation
- Monitoring and Evaluation:
  - PEAP 2004 provides an innovative results matrix linking policy actions with intended results and annual indicators.
  - Government developed a substantially more detailed results matrix after finalization, tying specific policy actions to monitorable annual output/outcome indicators.
  - Once finalized, the matrix will allow consolidation of multiple Monitoring and Evaluation processes used by Government and donors.
  - The Bank supports implementation of the National Integrated Monitoring and Evaluation Strategy (NIMES) and Statistical Capacity-building program.
  - The cost of implementing the NIMES needs to be firmly established and incorporated into the medium-term expenditure framework.
- Conclusions and issues:
  - Bank and Fund Staffs believe PEAP 2004 constitutes a comprehensive and well-balanced strategy to achieve accelerated growth and poverty reduction.
  - Builds on experience of implementing two earlier programs, benefits from more extensive consultations, and provides a clear framework for poverty reduction.
  - Macroeconomic performance remains sound, supported by prudent fiscal and monetary policies and structural reforms.
  - Major challenges and risks persist:
    - The number of people living in poverty and inequality of income distribution are high.
    - Quality of life indicators are still generally poor.
    - Economy prone to exogenous shocks.
    - Corruption, perceived or real, needs to be tackled resolutely.
  - PEAP 2004 candidly recognizes these challenges.
- Questions posed to Directors and implementation priorities:
  - Do Directors support the staffs’ view that the PEAP 2004 provides a credible strategy for achieving poverty reduction?
  - Do Directors agree with the staffs’ recommendation that special attention needs to be given during implementation of the PEAP 2004 to the following priorities?:
    - (i) maintenance of a stable macroeconomic environment and a gradual fiscal consolidation;
    - (ii) efforts to achieve savings in nonpriority spending that can be reallocated to infrastructure and other priorities;
    - (iii) dealing with the current high population growth and fertility rates;
    - (iv) innovative ways to bring about increased agricultural production, productivity and increased incomes;
    - (v) energy supply and infrastructure development;
    - (vi) decisive measures to deal with corruption at all levels; and
    - (vii) improvement in the security situation in the country.

*IMF staff report excerpt.*

### 1.      In May 2005, the Government of Uganda formally launched its Revised

### _cr05308 - 1.      In May 2005, the Government of Uganda formally launched its Revised

### PEAP 2004/05-2007/08: scope and preparation
- The Revised Poverty Eradication Action Plan (PEAP) 2004/05-2007/08 was formally launched in May 2005 and represents the second revision of the 1997 PEAP. It serves as Uganda’s Poverty Reduction Strategy Paper (PRSP).
- The PEAP 2004 was prepared by the government through broad-based consultations with stakeholders and civil society, building on the PRSP Annual Progress Report presented to the Executive Boards of IDA and IMF in September 2003 and the Joint Staff Assessment (JSA).
- The revision process:
  - Involved extensive consultations over a two-year period, including three national stakeholder workshops to discuss revision guidelines, draft sector papers, and the first draft of the PEAP.
  - Relied on a bottom-up approach building from sector working group review papers and extensive comments from civil society.
  - Notes that Uganda NGO Forum and Private Sector Foundation contributed comments at each stage, and Parliament held two separate workshops.
- The final draft of the Revised PEAP 2004/05-2007/08 was presented to the Cabinet in November 2004.

### Strategic focus and pillars
- The PEAP 2004 shifts policy focus from recovery to sustainable growth and structural transformation and presents specific Government policies to accelerate poverty reduction.
- Emphasized policy areas:
  - Stable and consistent macroeconomic framework
  - Fiscal deficit reduction
  - Conflict-resolution
  - Good governance
  - Increased production and productivity in the agricultural sector
  - Strengthened human development
- Identified major challenges: high population growth and increasing income inequality.
- Five pillars for accelerating growth and improving service delivery:
  - (i) economic management
  - (ii) enhancing production, competitiveness and incomes
  - (iii) ensuring security, conflict resolution and disaster preparedness
  - (iv) good governance
  - (v) promoting human development

### JSAN purpose and key observations
- The Joint Staff Advisory Note (JSAN) provides staffs’ analysis and advice on key priorities for strengthening the PEAP and ensuring effective implementation, and highlights areas where current policies do not match the PEAP 2004.

### A. Poverty diagnosis — findings and research needs
- Household Survey-based analysis provides an adequate poverty profile, but additional research is needed to identify factors behind the recent slowdown in poverty reduction and rising inequality.
- Suggested lines of inquiry:
  - Impact of rapid population growth on poverty
  - Vulnerability to commodity price shocks
  - Lack of accumulated savings for cash-crop production
  - Suppression of economic activity and service delivery due to insurgency
- Noted data points and inconsistencies:
  - Observed increase in poverty between 1999 and 2002 is a cause for concern but inconsistent with other well-being measures.
  - World Bank Poverty Assessment evidence suggests household asset values increased and ownership of assets (bicycle, radio, television, etc.) increased between 1999 and 2002.
- Gender inequality:
  - Identified as an impediment to poverty reduction and growth due to limited land and property rights, lower labor participation, higher prevalence of HIV/AIDS among women, and greater care burdens.
  - PEAP priority actions include implementation of the revised National Gender Policy, strengthening women’s land rights, domestic relations and sexual offense laws, and addressing gender and equity issues in planning and budgeting.
- Regional focus:
  - Staff calculations using 2002 Household Survey geographical poverty data show significant national poverty reductions if conflict-affected North and East are addressed:
    - If poverty rates in the two regions were brought down to the national average, overall poverty would reduce by about 6 percentage points.
    - Reducing poverty in these regions by half would yield over 10 percent decline in overall poverty.
  - Note: Some northern districts (Pader, Kitgum, and Gulu) were not included in surveys due to insecurity; approximately 1.6 million people are living in camps due to insurgency.

### B. Macroeconomic framework — growth, fiscal policy, and vulnerabilities
- Growth target:
  - Medium-term growth objective set at 7 percent; characterized as ambitious but realistic if policies are strengthened.
  - PEAP could benefit from more developed analysis on sources of growth and sectoral productivity shortfalls.
- Fiscal policy:
  - Government plans to reduce the fiscal deficit, excluding grants, by 1 percentage point annually, from about 10 percent of GDP in 2004/05 to about 7 percent in 2007/08.
  - Staffs welcome the discussion but recommend stronger analysis of managing scaled-up donor inflows for MDGs while maintaining macroeconomic stability.
- Revenue mobilization:
  - Low tax-to-GDP ratio by regional standards; room exists to raise revenue via tax administration reform and broadening tax bases.
  - Measures that would seriously erode the tax base, such as income tax holidays, should be avoided.
  - Ongoing restructuring of the Uganda Revenue Authority noted as important.
  - Staffs suggest being more specific on tax measures envisaged for 2005/06 and 2006/07 and defining contingency measures for revenue shortfalls.
- Expenditure prioritization and public financial management:
  - Need increased attention to expenditure prioritization and value for money given restrained overall expenditure growth.
  - Concern: recurrent spending has grown at the expense of domestic public investment (PEAP 2004, Table 8.1).
  - Recommendations:
    - Rationalize low priority recurrent spending—especially in public administration—to create fiscal space for infrastructure investments and reduce dependence on donor inflows for wages and recurrent expenditures.
    - Strengthen public expenditure management, including:
      - (i) integration of donor-supported projects into the budget
      - (ii) monitoring and control of domestic arrears
      - (iii) budgeting, expenditure execution, and reporting at the local government level
    - Continue strengthening expenditure management and fiscal reporting to ensure decentralization success.
  - Note: Nearly 40 percent of total expenditures and about 60-70 percent of spending under the PAF are executed by subnational authorities; initiatives coordinated under Uganda’s Fiscal Decentralization Strategy (FDS).
- Finance and trade:
  - PEAP assigns an important role to financial deepening but analysis and coverage are weak; few policy actions related to micro finance institutions and pension reform identified.
  - Policies to foster financial intermediation and long-term financing, including carefully structured pension reform, are critical.
  - Staffs support openness and regional integration but call for a better analysis of EAC benefits and caution against tax holidays for EPZs given Uganda’s relatively low tax revenue ratio.
  - Reference: Recent FSAP update presents a thorough analysis of financial sector weaknesses and possible policy actions.
- Debt sustainability and vulnerabilities:
  - Government commitment to reduce reliance on external borrowing and creditors’ intent to provide more grants should contribute to further decline in debt sustainability indicators.
  - External debt service burden has remained at broadly similar ranges as a share of GDP at HIPC completion point.
  - Debt burden is highly sensitive to export shocks and adverse weather conditions.
  - PEAP provides limited discussion of vulnerability of macroeconomic performance and poverty reduction to exogenous shocks (terms of trade, donor support, security, weather).
  - Stock of domestic debt is growing and associated debt servicing cost now exceeds that for external debt.

### C. Promoting growth for poverty reduction — agriculture, infrastructure, and security
- Overall challenge:
  - Moving from recovery to sustained growth and structural transformation requires substantial infrastructure investments and strengthened policies.
  - Over 50 percent of the population is in dependent age groups, increasing demand for primary and secondary education and health care.
  - Noted average fertility rate currently standing at just below 7 children per woman.
- Agriculture:
  - 86 percent of Ugandans live in rural areas; 77 percent of active rural labor is employed in agriculture.
  - Slow implementation of the 7 pillars of the Plan for Modernization of Agriculture (PMA) and limited rollout to districts is a major handicap.
  - PMA has been implemented only for 2 pillars (extension and research) and in a limited number of districts.
  - Farmers face high transactions costs accessing inputs and markets and lack access to affordable credit.
  - Recent studies show access to infrastructure and agricultural services by the rural poor has not kept pace with growth in access to social services since 1992.
  - Government encouraged to emphasize rural transportation, rural energy, and agricultural services in future budget and policy decisions.
- Infrastructure:
  - Need for reliable and more accessible electricity supply to enable structural transformation and agro-processing.
  - Better roads, rail, and air freight links required to reduce high transactions costs of being landlocked.
  - PEAP notes public infrastructure investment as a share of GDP has been falling, risking that additions fail to keep pace with depreciation.
- Security and conflict-affected areas:
  - PEAP lacks a comprehensive and strategic plan that simultaneously addresses security and poverty reduction objectives.
  - Regional poverty rates:
    - North: 64 percent
    - East: 46 percent
    - Central: 22 percent
    - Western: 31 percent
  - PEAP reports nine districts most affected by insecurity and distress migration (PEAP Table 5.2) where an average of about half the population is classified as internally displaced persons.
  - Progress toward peace and reintegration in conflict-affected areas is an urgent priority and is likely to yield a substantial peace premium through restored economic activity.

### D. Human development and MDGs — service access, quality, and targets
- Improvements in access:
  - Net primary school enrolment improved from about 65 percent in 1992 to about 85 percent in 2003, attributed in large part to Universal Primary Education (UPE).
  - Outpatient visits increased from 9.3 million new cases in FY1999/2000 to 17.7 million in FY2002/03, equivalent to an increase from 0.4 to 0.7 visits per person per year; abolition of user fees in public health centers in 2001 may have contributed.
  - Access to safe drinking water in 2004 stood at about 62 percent; rural access increased from 20 percent in 1991 to 55 percent in 2002.
- Service quality and outcomes:
  - PEAP notes improvements in quality but highlights poor outcomes in learning achievement, life expectancy, child and maternal mortality, and high incidence of stunting among children under five.
  - Possible reasons for slow progress in outcomes:
    - (i) Poor quality of service delivery elements (drug shortages, poor water chain management, poor sanitation and hygienic practices) despite increased access
    - (ii) High population growth causing demand to outstrip supply
    - (iii) Insufficient attention to cross-cutting sectoral interventions
  - Health sector specifics (footnote):
    - DPT3 coverage increased from 41 percent to 85 percent.
    - Proportion of trained health care workers increased from 33 percent to 68 percent.
    - Drug supplies and availability have improved.
- Recommendations:
  - Renew focus on improving quality of social services by ensuring better value-for-money, strategic investments in service provider capacity, and promoting access to family planning services.
  - Staffs suggest stronger consideration of issues of efficiency, sustainability, and strategic orientation of sector budgets.
- MDG alignment:
  - Most PEAP targets are consistent with the MDGs; Uganda is committed to achieving them.
  - Recent studies indicate Uganda is likely to meet half of the MDG targets but faces significant challenges on maternal and under-5 mortality, gender equality, and environmental sustainability.
  - Additional technical and financial support is necessary to return progress to MDG track.

### E. Governance reforms
- The PEAP includes governance reforms as a core pillar and highlights good governance as necessary for poverty reduction and growth.
- Staffs point to areas where governance-related policies and implementation need strengthening (details on specific governance actions and gaps are discussed earlier under macroeconomic governance, public expenditure management, and sectoral implementation constraints).

*Joint Staff Advisory Note (JSAN) summarizing staffs’ analysis and advice on PEAP 2004/05-2007/08*

### 21.      Overall progress in governance has continued to be slow, despite some

### _cr05308 - 21.      Overall progress in governance has continued to be slow, despite some

### Governance progress and concerns
- Overall progress in governance has continued to be slow, despite some marked progress in a few areas.
- Recent reports on corruption show that Uganda has slightly improved its rating globally, but still remains at the low end of the scale in country rankings.
- The set back in implementation of the Leadership Code arising from the High Court challenge of some of its provisions is regrettable and a cause for concern.
- The progress in implementing the recommendations of various Commissions of Inquiry has been very slow and warrants specific actions.
- Staffs stress the need for a clear demonstration of Government’s commitment on governance reforms and a strengthening of the specific implementation details currently lacking in the PEAP 2004.
- The Government is currently engaging the stakeholders in defining measures that could contribute to improved governance in the annual PEAP policy and results matrix, but concerns remain on the speed of implementation as well as the effectiveness of some proposed measures in reducing corruption.

### PEAP 2004: definition and donor concerns
- The PEAP 2004 defines “transparent, efficient, accessible and affordable Government” as one of the elements for good governance.
- The donor community has often expressed concerns over a number of recent government interventions in favor of individual investors or businessmen where there may be a perceived or real conflict of interest.
- As many of these interventions have distorted, or placed a burden on, the approved budget, the Staffs recommend that such interventions be strictly avoided.

### Political governance institutions and fiscal implications
- The Staffs welcome the PEAP 2004’s attention to political governance institutions which absorb a significant amount of resources.
- It notes that large and unpredictable claims on resources by these institutions have been a problem, requiring frequent supplemental expenditures in the past.
- The PEAP 2004 alludes to efforts underway in developing a coordinated strategy to deal with over-expenditures, mostly in the public administration sector, but this will need decisive political backing to be meaningful.

### Monitoring and Evaluations (PEAP 2004 results matrix)
- The PEAP 2004 provides an innovative results matrix which links areas for policy action with intended results and annual indicators for monitoring the results.
- After the finalization of the PEAP, the Government has developed a substantially more detailed results matrix which ties specific policy actions to monitorable annual output/outcome indicators.
- Once finalized, this matrix will allow, at the same time, the consolidation of multiple Monitoring and Evaluation processes used by the Government and the donors.
- The Bank is supporting these efforts through assistance on the implementation of the National Integrated Monitoring and Evaluation Strategy (NIMES), and by helping to strengthen the collection of relevant data through the Statistical Capacity-building program.
- The cost of implementing the NIMES needs to be firmly established and incorporated into the medium-term expenditure framework.

### Conclusions and issues for discussion
- Bank and Fund Staffs believe that the PEAP 2004 constitutes a comprehensive and well-balanced strategy to achieve accelerated growth and poverty reduction.
- The report builds on the experience of implementing two earlier programs, benefits from more extensive consultations with stakeholders and, thus, provides a clear and coherent framework for poverty reduction in Uganda.
- The macroeconomic performance remains sound, harnessed by prudent fiscal and monetary policies, as well as by continued broad-ranging structural reforms.
- However, major challenges remain and risks persist:
  - The number of people living in poverty and inequality of income distribution are high.
  - The quality of life indicators are still generally poor.
  - The economy will continue to be prone to exogenous shocks.
  - Corruption, perceived or real, needs to be tackled resolutely.
- The PEAP 2004 candidly recognizes these challenges.

### Questions posed to Directors and implementation priorities
- Do Directors support the staffs’ view that the PEAP 2004 provides a credible strategy for achieving poverty reduction?
- Do Directors agree with the staffs’ recommendation that special attention needs to be given during implementation of the PEAP 2004 to the following priorities?:
  - (i) maintenance of a stable macroeconomic environment and a gradual fiscal consolidation;
  - (ii) efforts to achieve savings in nonpriority spending that can be reallocated to infrastructure and other priorities;
  - (iii) dealing with the current high population growth and fertility rates;
  - (iv) innovative ways to bring about increased agricultural production, productivity and increased incomes;
  - (v) energy supply and infrastructure development;
  - (vi) decisive measures to deal with corruption at all levels; and
  - (vii) improvement in the security situation in the country.

*IMF staff report excerpt.*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05308.pdf_