Uruguay Public Services and Social Sectors SSAL

closed

The Public Services and Social Sectors Structural Adjustment Loan (SAL) and Special Structural Adjustment Loan Project, will support reforms to restore economic growth, improve competitiveness of the Uruguayan economy, and improve the population's welfare through greater efficiency in the provision of public services and infrastructure, which should include as well increased impacts from public expenditures on education and health. As a follow up on two previous SAL loans approved in August 2002 focused on fiscal, financial, and social protection reforms, this adjustment operation is part of a concerted effort by multilateral institutions, to help Uruguay withstand the impact of strong external shocks, and set the stage for recovery of sustained economic growth. Within the energy, telecommunications, postal services, water and sanitation, and transport sectors, the project will support measures to reduce prices, increase quality and coverage, and improve the efficiency of investment, production, and distribution of services, and infrastructure, by: a) liberalizing the wholesale power market, and restructuring the petroleum, water and sanitation, and transport sectors; b) strengthening regulatory frameworks, as well as strengthening sector planning, management, and service delivery; and, c) increasing transparency, and accountability, and reducing tax distortions to improve public expenditures. The project will also support improvements in the education, and health sectors, by restructuring national health funding instruments; reducing cross subsidies in public hospitals; fostering priority education programs; and, improving the education sector management. Given the high macro, and debt sustainability risks, close monitoring of macroeconomic aspects will be performed; the reform consensus risk is seemingly under considerable political commitment, and, the weak institutional capacity risk, will be mitigated by the support of the ongoing technical assistance loan to strengthen technical, and human resources constraints.