KANANASKIS G7 SUMMIT ISSUE BRIEFS (June 2002): New Strategies, Old Loan Conditions: The Case of Uganda

A growing chorus of critics from around the world have increasingly questioned the efficacy of World Bank and International Monetary Fund (IMF)-promoted economic policy reforms. As a result, the two institutions renewed vows to fight poverty at their annual meetings in Prague 2000. Uganda is viewed as pivotal to the success of much-publicized efforts to reform the institutions and their policies. Over 41 countries are in the pipeline for the adoption of similar policies, but is Uganda a success?
Uganda, a country of 22 million in East Africa, is the most advanced country in terms of the adoption of the new and supposedly poverty-oriented concessional policy lending instruments of the Bank and the Fund. These new terms, known as the Enhanced HIPC Programme, require countries to complete a Poverty Reduction Strategy Paper (PRSP) in consultation with civil society in order to be eligible for debt relief. Further, the IMF renamed its “Enhanced Structural Adjustment Facility”, the “Poverty Reduction and Growth Facility” (PRGF) and the World Bank developed a new loan arrangement called the Poverty Reduction Support Credit (PRSC) in response to these new arrangements.
Research in Uganda has shown that crucial policy prescriptions within the PRSC and the PRGF may impair Uganda’s ability to effectively realize its anti-poverty and growth goals, however. 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 this “pro-poor” 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 country’s Poverty Reduction Strategy was seriously flawed. 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. This, 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”. 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 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 totalling over $1 billion (approved in 1998-2001) continued to move ahead without disclosure or public involvement and oversight.
As worrying as 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 strategy to avoid the previous negative social impact of abandoning trade barriers and subsidy cuts. 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.
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”. Lending policy documents do not incorporate the risks posed by Uganda’s membership in the World Trade Organization (WTO) or bi-lateral and multi-lateral trading policies Yet close analysis of WTO rules clearly shows that Uganda will not be permitted to develop adequate regulation.
This is particularly unacceptable in the wake of the completion of the five-year, seven-country study known as the Structural Adjustment Participatory Review Initiative (SAPRI), of which both the World Bank and Ugandan government were members. The World Bank has ignored the findings, which strongly questioned the efficacy of rapid trade liberalization, privatization and deregulation.
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.
The newly adopted Ugandan 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.
It is unclear from the Uganda case how these “new” policy prescriptions will eradicate poverty reduction today when they have clearly failed over the last two decades. We support the growing tide of claims internationally that the World Bank and IMF has repackaged past controversial adjustment policies in new forms.
Ultimately, the only way Uganda will emerge from 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.
Produced By:
Uganda National NGO Forum and RESULTS Educational Fund
FULL REPORT AVAILABLE at http://www.resultsusa.org/