Environment and Social Development Public Sector Reform and Capacity 0ONAL 8 August 2002 Flndings reports on ongoing operational, economic, and sector work carried out by the World Bank and its member govemments in the Africa Region. It is published periodically by the | WORLD BANK Knowledge and Leaming Center on behalf of the Region. The views expressed in Findings are those of the author/s and should not be attributed to the World Bank Group. hKtp:l/www.worldbank.org/afr/findings X AND0ts Uganda: Policy, Participation, People /7 hen the government of Presi- of the need to deepen its commit- \W / dent Museveni assumed ment and broaden the ownership power in Uganda in 1986, it of reform. took over a shattered post-war Reforms helped place Uganda economy. Market-oriented reforms among the top economic perform- led to a remarkable recovery. In- ers in Africa in growth and infla- ternational Development Associa- tion control. Growth and realloca- tion (IDA) operations in Uganda ini- tion of expenditures to the social iially tackled economic recovery, re- sectors helped reduce absolute pov- . 8 habilitation, and stabilization, then erty significantly, and its poverty turned slowly to institutional and eradication, universal primary edu- _w private sector development as the cation, and Poverty Reduction country stabilized. Since 1995, IDA Strategy Paper programs serve as has focused on poverty reduction best practice for other IDA countries. _ and social progress. But health indicators remain poor, An OED (Operations Evaluation gender inequities are still stark, and U Department) assessment of IDA economic disparities have deepened assistance to Uganda during 1987- between urban and rural areas, geo- 0 * 99 found that IDA has excelled at graphic regions, and cash and food policy dialogue, economic and sec- crop farmers. Corruption, distur- tor work (ESW), and fostering par- bances in the north, and Uganda's ticipatory processes; had signal military entanglements with its success in mobilizing resources neighbors threaten the sustainability and debt relief; and broadened the of past rates of growth and poverty stakeholder dialogue on aid coor- reduction. dination. There is room for im- - ~ _provement, however, in some as- Uganda's recovery - spects of project implementation. The Bank and other donors were When Uganda's civil war ended in * winvolved on a very high plane in 1986 and the government of Presi- Uganda, and important successes dent Museveni assumed power, it were achieved, partly because of took over an economy that faced the government's strong political overwhelming challenges. Initially, leadership, its eagerness to learn not all policymakers were con- from experience, its good use of vinced that stabilization and mar- U technical assistance in core govern- ket-oriented adjustment were cor- ment agencies, and its recognition rect, and attempts to constrain budget expenditures were under- cation Action Plan (PEAP) to main- cused, but its reform objectives mined by lax controls. An increase tain growth-promoting macroeco- have been consistent with those of in public spending in fiscal 1992 nomic policies; encourage sufficient the government, and there has combined with a sharp fall in cof- broad-based growth to benefit the been close and continuous coopera- fee prices pushed the budget defi- poor (especially in agriculture); pro- tion between the government and cit to 14.4 percent of GDP. Broad vide social infrastructure; create IDA since 1987. money expanded, inflation soared the capacity for a quick response to an annualized 230 percent, do- to shocks; build a just, secure, and Bank lending. OED rated outcomes nors cut back on aid, and IDA and tolerant social order; and promote satisfactory for about 63 percent of the International Monetary Fund balanced regional development. IDA-supported projects. Roughly a (IMF) delayed assistance. Uganda also took steps to address quarter of IDA's projects and lend- The president changed his eco- gender bias. IDA built on the open- ing led to substantial institutional nomic team and reaffirmed his ness to participation evinced by development. OED ratings for out- commitment to stabilization. Fiscal Uganda and on the experience of comes and institutional develop- 1992 marks a great divide in the the participatory approaches to the ment in Uganda were at least as government's ownership of reform. PEAP. IDA's country assistance good as the average ratings for Af- After the 1992 crisis the monopoly strategy for 1995 was developed rica, but poorer than average rat- marketing arrangements for agri- through extensive consultations ings for the Bank and IDA overall. cultural commodities-especially with stakeholders. This participa- Outcome ratings for education, fi- coffee, tea, and cotton-were tory process-conducted jointly nance, public sector management, gradually dismantled and foreign with the government, with techni- telecommunications, transport, exchange allocations became more cal support from the United King- and urban development were bet- market-oriented. Uganda's trade dom-broke new ground and was ter than the averages for both IDA regime became one of the most lib- widely appreciated in Uganda. Par- and Africa. Overall, outcomes for eral in Africa. Fiscal policy was ticipation has become almost rou- IDA's Uganda program were satis- strengthened with the adoption of tine in preparing lending opera- factory and IDA's contribution to cash budgeting, revenue measures, tions, and has become an ongoing institutional development was improved tax administration, and means of eliciting information on modest. But given the many risks strong donor support. GDP grew, poverty trends in Uganda. It also clouding Uganda's future-espe- inflation declined, and the rate of plays a major part in OED's evalu- cially corruption, disturbances in private investment almost doubled ation of IDA's country assistance. the north, and Uganda's military over the decade. Although growth (Part 2 of OED's evaluation is titled entanglements with its neighbors- led to a significant decline in abso- Voices of Stakeholder, quoted the sustainability of past rates of lute poverty, the share of the rural throughout this article.) growth and poverty reduction is poor increased, to slightly over 95 uncertain. percent of the poor in Uganda. IDA's performance IDA's program slowed during fis- cal 1995-96-lending declined, the Participatory poverty reduction Deployment of products and shift to sector strategies proved dif- services ficult, following through on findings Absolute poverty fell 21 percent Nonlending services. In deployig from economic and sector work between fiscal 1992 and 1998, but Bank products and services, IDA took time, and reorganization of the 44 percent of the population re- has excelled at both policy dialogue Africa Region took its toll-but the mained poor. Poverty, which is and ESW, which has been highly program has now regained momen- overwhelmingly rural, is concen- participatory, drawing broadly on tum. Overall, IDA's use of its non- trated among food crop farmers and resources in Uganda and from do- lending and lending sources was women, and in Uganda's northern nors and the Bank. ESW has been satisfactory and eastern regions. Realizing that successful in sharpening Ugandan broad-based growth was not doing awareness of neglected issues and enough to reduce poverty, in 1995 in creating donor interest. IDA's celled at macroeconomic reform Uganda adopted a Poverty Eradi- strategy could have been more fo- through adjustment lending. Its successive adjustment operations CODE Response and technical assistance credits- aimed initially at economic recov- The Committee on Development Effectiveness (CODE) welcomed the ery, rehabilitation, and stabiliza- timing of the CAE, as well as the participatory approach used to tion-were relevant and their over- capture stakeholder perceptions of the Bank's assistance, and noted all outcome was highly satisfactory. Management's broad concurrence with OED's recommendations. The Working together, the government, Committee also voiced support for the report's main recommenda- IDA, and the IMF managed to get tions, while emphasizing the need to increase government account- the needed macroeconomic and ability and transparency to reduce persistent regional economic dis- coffee reforms, and IDA has been parities and combat corruption. The members noted the impressive central in repairing the macroeco- improvement in aid coordination and the creation of strong partner- nomic environment to the benefit ships in-country with donors and between the Bank and the govern- of both private and public sector ment, and suggested that the positive lessons of the Uganda experi- development. ence be shared with other countries implementing the CDF. It was also suggested that OED evaluate the quality of partnerships as part of the CAE process. The members noted that IDA assistance appears Instiiopena IDAnd operatesoral dep- to be more effective in addressing issues at the macro level than at port for institutional development the sector and project level, and several emphasized the need for hportaforninstitudeti develorm,apm more efficient and effective sector-wide approaches. CODE also high- has spanned budget reform, capac- lighted the need for progress in privatization and private sector de- ientyrbildtion, civilservice reform,de- velopment in general, as well as a more consistent agriculture and centralization, and governance,. ua eeomn oiy Budget reform efforts were highly relevant and satisfactory in out- come and critical to maintaining litical interference or lack of en- Next steps macroeconomic stability. Efforts at forcement. IDA's efforts to improve capacity building and civil service infrastructure services for the pri- OED recommends that IDA take reform yielded mixed outcomes be- vate sector have been inadequate- the following measures. (Stake- cause of inadequate pay reform and partly because of the borrower's holder recommendations are also problems of sequencing, coordinat- slow commitment to sector reforms. listed.) ing, and harmonizing diverse re- * The Comprehensive Develop- forms and their underlying strate- Poverty reduction. From 1995 on, ment Framework (CDF) and aid gies. IDA initially confined its sup- IDA focused on poverty reduction coordination: Build on the CDF port of decentralization and gover- and social progress. To promote and be more selective; engage nance to capacity building. Only in these ends, it appropriately relied other stakeholders in identifying fiscal 1999 did IDA thoroughly on growth and reallocations of pub- IDA's comparative strengths; re- study corruption in Uganda, and lic spending to the social sectors. strict new initiatives to a few in 2000 it approved a local govern- The economic gap between urban major goals; rely on other donors ment development program to test and rural areas, geographic re- to support other areas; and help alternative mechanisms for deliv- gions, and cash and food crop farm- Uganda's government strengthen ering services and devolving the ers has deepened, but rapid growth its aid management. development budget. and IDA-supported reform of cof- Stakeholders: The Bank needs IDA's program for improving the fee and cotton marketing have to adopt an integrated, holistic policy environment for private sec- helped reduce absolute poverty sig- approach to sector development tor development has been highly nificantly. Social indicators have (agriculture and infrastructure), relevant, as has its support for improved somewhat, but health governance, and private sector privatizing public enterprises and indicators remain poor and gender development [an implicit endorse- reforming the financial sector. But disparities enormous. ment of the CDF]. outcomes have been only partly satisfactory because of either po- * Efficiency: Handle procurement a Institutional Development: IDA * Private Sector Development: and disbursement more flexibly. should take a stronger stance on With the help of its partners, IDA governance, coordinate major ef- should encourage the govern- * Poverty Reduction and Social forts at institutional reform, and ment to push ahead with infra- Development: To sustain poverty promote monitoring and evalua- structure development, especially reduction, IDA should determine tion so that Uganda can develop in power, transport, and urban its niche within a more compre- a culture that values transpar- development (industrial space hensive assistance strategy for ency, accountability, and results. and water and sanitation), to rural development. It should help Stakeholders: To promote gov- close the gap between needs and map the regional, economic, so- ernance, transparency, and ac- resources. It should encourage cial, and gender characteristics countability, the Bank needs to progress on competition, private of the poor so government can be more transparent about its sector participation, and regula- clarify its priorities and refine its own agenda. It should enlist al- tory reform. approaches. Much remains to be lies in civil society in its fight Stakeholders: Liberalization of done to diversify agriculture out against corruption by involving markets is necessary but not suf- of the food crop sector and ex- stakeholders in independent ficient for private sector develop- tend the reach of commercial ag- monitoring and evaluation of ment. Future development of riculture; increase productivity Bank programs. The Bank needs Uganda's private sector is predi- and employment; implement to stand tall in promoting en- cated on massive investments in tenural reform; expand roads, forcement of the prosecution and infrastructure, efficient and research, and the extension net- punishment of corruption. transparent privatization, an ex- work; restore rural finance net- panded role for the private sec- works; and identify export crops tor (including NGOs) in the pro- that need "market and trade fa- vision and financing of public cilitation.' goods, financial sector reform, Stakeholders: To eradicate pov- and a regulatory framework that erty, the Bank should focus on fosters competition. reducing disparities (urban and rural, regional, and gender), tar- geting the very poor, and plug- This'article wasfirstpublished as ging leaks in service delivery by an OED Precis, No. 214, Fall 2001, transferring delivery to the pri- Operations Evaluation Department, vate sector. World Bank.