Document of
                               The World Bank


                                                 Report No: 63526-UG




                         RESTRUCTURING PAPER

                                    ON A

             PROPOSED PROJECT RESTRUCTURING
                           OF
LOCAL GOVERNMENT MANAGEMENT AND SERVICES DELIVERY PROJECT

                           CREDIT NO. 4372-UG


                                   TO THE

                          REPUBLIC OF UGANDA



                                 June 21, 2011




Urban and Water Unit (AFTUW)
Country Department AFCE1
Africa Region
 Reallocation of Unallocated Proceeds and Extension of
                      Closing Date
_______________________________________________________________________

UGANDA — LOCAL GOVERNMENT MANAGEMENT AND SERVICES DELIVERY
                          PROJECT
                           P090867
                     CREDIT NO. 4372-UG

                                      Restructuring Paper

1.      This paper presents the background and rationale to (i) reallocate the unallocated
credit proceeds and (ii) extend the closing date of the project by 12 months.

2.      The unallocated proceeds for UGANDA LOCAL GOVERNMENT
MANAGEMENT AND SERVICES DELIVERY PROJECT, Credit No. 4372, P090867
will be reallocated as follows:

       Category of Expenditures                 Allocation Expressed in SDR    % of Financing
      Current           Revised                    Current        Revised     Current Revised
(1) Works for:          (1) Works for:                                        100%      100%

(a) Part A of the       (a) Part A of the             770,000       770,000
Project                 Project

(b) Part B.1 (a) and    (b) Part B.1 (a) and         8,290,000    9,265,570
B.1(c) of the Project   B.1(c) of the Project

(2) Goods,              (2) Goods,                                            100%      100%
Consultants’            Consultants’ services
services (including     (including audits),
audits), Training and   Training and
Operating Costs for:    Operating Costs for:

(a) Part A of the       (a) Part A of the           10,580,000   10,580,000
Project                 Project

(b) Parts B.1(a),       (b) Parts B.1(a),            9,690,000   10,807,830
B.1(c), B.2 and C of    B.1(c), B.2 and C of
the Project             the Project

(3) CDDGs for           (3) CDDGs for                3,190,000    3,190,000 100% of     100% of
Subprojects under       Subprojects under                                   the         the
Part B.1(b) of the      Part B.1(b) of the                                  amounts     amounts
Project                 Project                                             disbursed   disbursed

(4) Unallocated         (4) Unallocated              2,580,000      486,600


                                                2
TOTAL AMOUNT          TOTAL AMOUNT                35,100,000       35,100,000



3.     Project Implementation Progress: Project disbursement as of June 21, 2011,
stood at US$30.5 million – 55.5 percent of the total IDA credit of US$55 million. The
midterm review (MTR) which was conducted in November 2010 concluded that project
implementation was on course and that the project will achieve its development objective.
However, since project effectiveness was delayed by twelve (12) months because of the
Constitutional requirement to have the credit approved by Parliament, the MTR recommended
that the project closing date be extended by twelve (12) months to December 31, 2012 to allow
the client to complete implementation of project activities.

4.      The proposed reallocation of the unallocated creed proceeds is necessary to
accommodate (i) increase in cost for Goods, Consultants’ services, Training and
Operating Costs from SDR 9,690,000 to SDR 10,807,830 for the additional one year
period, and (ii) the need to finance the increase in civil works cost from SDR 8,290,000
to SDR 9,265,570 due to cost increases as a result of delays in the start up of civil works
in Northern Uganda. The re-allocation of the SDR 2,093,400 is from the original
unallocated category of SDR 2,580,000 of the credit (see table above) and it will not
affect the achievement of the project development objective.

5.      The most recent Implementation Status and Results (ISR) report for the project
rates the overall implementation progress as moderately satisfactory. This is because of
the slow progress in the implementation of Component 1 – Support to Public Financial
Management Systems Reform Program and the delays in the implementation of civil
works for the Support to the North. There are no changes to the original project
development objective and basic project design, and the project objective continues to be
relevant and achievable. The progress toward achieving the project development
objective is rated satisfactory. The overall risk rating is medium high. Because of the
twelve months delays in project effectiveness, the end-of the project targets have not been
changed, but rolled forward by one year.

6.      The proposed extension is necessary to allow Government to complete the
implementation of the planned project activities and in particular, to make up for the
delays caused by parliamentary approval of the credit, which delayed the effectiveness of
the credit by one year. The Borrower has submitted an action plan acceptable to the Bank
to complete the project.

7.     This will be the first extension of the closing date of the project.




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