News Brief No. 99/50

News Brief: IMF Completes Review and Approves US$22.78 Million Credit Tranche for Uganda

August 26, 1999

Shigemitsu Sugisaki, Deputy Managing Director of the International Monetary Fund (IMF), said: "The Executive Board of the IMF today completed the second review under the Enhanced Structural Adjustment Facility (ESAF) for Uganda. As a result, Uganda will now be able to access SDR 16.7375 million (about US$22.78 million) from the IMF.

"Directors welcomed the authorities' commitment to the continued implementation of prudent macroeconomic policies, strong structural adjustment reforms, public service rationalization, improvement of social services, and a robust poverty reduction program. These policies had sustained Uganda's track record of rapid economic growth and moderate inflation, and had contributed to a notable drop in the incidence of poverty in Uganda.

"Directors welcomed the authorities' efforts to strengthen fiscal performance through measures designed to enhance expenditure monitoring and control. These measures would help to achieve the targeted reduction of defense outlays, the provision of increased resources to the social sectors, and the successful elimination of domestic arrears and avoidance of further such arrears. Directors also emphasized the need to boost revenue performance through actions to improve tax enforcement and compliance and steps to broaden and deepen the tax base. They also underscored the importance of extending the ministerial restructuring exercise to all other functions of government, and of reforming the pension system and the related benefit formula.

"Directors urged the authorities to continue their efforts-including through appropriate legislative changes-to ensure greater transparency, accountability, and efficiency, as well as broader participation in the privatization process. They attached importance to the authorities' intention to speed up the privatization of the targeted "showcase" enterprises, especially the public utilities, in order to reduce the uncertainty and cost of service delivery. Directors recommended close monitoring of the operations of the major public enterprises.

"Directors emphasized the need to strictly enforce the existing prudential regulations in the banking sector, so that undercapitalized banks are either promptly recapitalized or closed. The authorities were urged to move forward expeditiously with the reprivatization of the Uganda Commercial Bank (UCB). Regarding the existing commitments to repay net deposits at three failed banks and the recapitalization of the UCB, Directors urged that all the related costs be transparently reported, and their liquidity impact fully sterilized.

"Directors welcomed the increased priority given to poverty reduction. They supported the authorities' intention to increase public outlays on poverty and social areas within the context of disciplined expenditure management. In this connection, they welcomed the various initiatives under way in these areas aimed at making good use of the resources freed up by the Initiative for Heavily Indebted Poor Countries, recalling that Uganda had been the first recipient of assistance under the HIPC Initiative," Sugisaki said.