Global Policy Forum

By Usuo Ojeh

In line with the World Bank's new credit policy, Uganda has become the first low income country to benefit from a new World Bank Poverty Reduction Support Credit (PRSC).

The US$150 million PRSC is the first of a planned series of three World Bank operations to support Uganda's medium-term development and reform programme. It will be supported by a US$150 million equivalent credit from the International Development Association (IDA), the Bank's lending arm for the poorest countries. The IDA credit is on standard term of 40 years maturity, including 10 years grace.

The PRSC is designed to support the implementation of the government's poverty reduction strategy, which aims to improve the delivery of basic services to the population.

It will be recalled that the world bank earlier in an earlier release said that its new policy seeks to link credit facilities with good governance. Rich donors were urged to reward developing countries who follow good policies rather than try to buy reform with aid.

World Bank pointed out that donor nations should channel their assistance to developing countries committed to broad-based economic reform, warning that indiscriminate aid packages can actually do serious damage to their recipients.

According a release, the new approach to World Bank lending is designed to help low-income countries with strong policy and institutional reform programs carry out their poverty reduction strategies.

Commenting on the economic state of the country, the World Bank's Country Director for Uganda Jim Adams said that despite the fact that Uganda's economic performance in the past decade has improved but has not resulted in the dramatic fall in poverty in the 1990s. 35 percent of the population still remains in acute poverty.

"To tackle this development challenge and other constraints, the government prepared a comprehensive Poverty Eradication Action Plan (PEAP). This credit will support their reforms as elaborated in their poverty action plan, especially in the area of improving basic service delivery," he said.

Thisday learnt that a major programme launched in December 1999, Poverty Reduction Strategy Papers (PRSPs), produced by countries, are becoming the basis for debt relief and concessional lending from the Bank and the IMF.

Uganda is one of four low-income countries that has drawn up a full PRSP; another 32 countries have produced interim papers. Updated every three years with annual progress reports, PRSPs describe the country's macroeconomic, structural and social policies and programmes to promote broad-based growth and reduce poverty, as well as associated external financing needs and major sources of financing. Where appropriate, the implementation of PRSPs will be supported by Poverty Reduction Support Credits, underpinned by analytic work that provides the basis for assessing country readiness and designing the benchmarks for program implementation.

"This PRSC supports policy measures detailed in the government's Poverty Eradication Action Plan in a selective manner. The participatory process used to develop their action plan broadened the country's ownership of the reforms and a large number of partners are ready to support their implementation," said Ritva Reinikka, World Bank Team Leader. "The credit will provide support to areas where the Bank has a comparative advantage and to policy and institutional reform measures which have the highest poverty impact."

The PEAP's objectives are fully consistent with those of the Poverty Reduction Strategy process, and a summary of the PEAP was used as a basis for Uganda's PRSP presented to the Board of the World Bank in May 2000. The government's strategy for economic transformation and poverty eradication are based on four pillars: a framework for economic growth and transformation; ensuring good governance and security; directly increasing the ability of the poor to raise their incomes; and directly increasing the quality of life of the poor.

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