Document of The World Bank

 

Report No: ICR2784

 

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-51200)

ON A

CREDIT

IN THE AMOUNT OF SDR 9.1 MILLION

(US$14 MILLION EQUIVALENT)

TO

THE REPUBLIC OF TOGO

FOR THE

ECONOMIC GOVERNANCE AND RECOVERY CREDIT 5

June 26, 2013  

 

 

 

 

 

 

Poverty Reduction and Economic Management 4 Country Department AFCF2 Africa Region 

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CURRENCY EQUIVALENTS

(Exchange Rate Effective as of March 2, 2013)

Currency Unit = CFA Franc (CFAF) US$1.00 = 491 CFAF

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AfDB African Development Bank ANC Alliance Nationale pour le Changement (National Alliance for Change) BIA-T Banque Internationale pour l'Afrique au Togo (International Bank for Africa) BTCI Banque Togolaise pour le Commerce et l’Industrie (Togolese Commerce and Industry

Bank) BTD Banque Togolaise de Développement (Togolese Development Bank) CAR Comité d’Action pour le Renouveau (Action Committee for Renewal) CAS Country Assistance Strategy CEB Communauté Electrique du Benin (Electric Company of Benin) CEET Compagnie d’Energie Electrique du Togo (Togo Electric Energy Company) CEM Country Economic Memorandum CFAF Franc of the African Financial Community DGE Direction Générale de l’Economie (General Directorate of Economy) CPDS Cadre Permanent pour le Dialogue et la Concertation (Permanent Framework for

Dialogue and Reconciliation) DPO Development Policy Operation DPL Development Policy Lending EC European Commission ECF Extended Credit Facility ERGC Economic Recovery and Governance Credit ERGG Economic Recovery and Governance Grant ESW Economic and Sector Work EU European Union GDP Gross Domestic Product FNGPC Fédération Nationale des Groupements de Producteurs de Coton (National Federation of

Cotton Producer Groups) HIPC Heavily Indebted Poor Countries IBRD International Bank for Reconstruction and Development IDA International Development Association IGE Inspection Générale de L’Etat (State Finance Inspectorate) IGF Inspection Générale des Finances (General Finance Inspectorate) IMF International Monetary Fund IPP Independent Power Producers ISN Interim Strategy Note ISP Internet Service Provider LONATO Loterie Nationale Togolaise (Togolese National Lottery)

  

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MDRI Multilateral Debt Relief Initiative MEF Ministry of Economy and Finance NSCT Nouvelle Société Cotonnière du Togo (New Togo Cotton Company) PAL OTR

Port Autonome de Lomé (Lomé Autonomous Port Company) Office Togolaise des Recettes (Togo’s Revenue Authority)

PASA Agriculture Sector Support Project PEFA Public Expenditure and Financial Accountability PEMFAR Public Expenditure Management and Financial Accountability Review PER Public Expenditure Review PFM Public Financial Management PRSP Poverty Reduction Strategy Paper RPT Rassemblement du peuple togolais (Togolese People’s Rally) SDR Special Drawing Rights SIGFIP Système Intégré de Gestion des Finances Publiques (Integrated Public Financial

Management System) SIGMAP Information Management System for Public Procurement SNPT Société Nouvelle des Phosphates de Togo

(New Phosphate Company of Togo) SOTOCO Société Togolaise de Coton (Togo Cotton Company) TA Technical Assistance TdE Togolaise des Eaux (Togo Water Company) TOFE Tableau des Opérations Financières de l’Etat (State Finance Operations Tables UTB Union Togolaise de Banque (Togolese Bank’s Union) WACS West Africa Cable System WAEMU West African Economic and Monetary Union WARCIP West Africa Regional Communication Infrastructure Program

Vice President: = Makhtar Diop Country Director:

Sector Director: Sector Manager:

Task Team Leader: ICR Team Leader:

= = = = =

Madani M. Tall Marcelo Giugale Miria Pigato Johannes Hoogeveen Yemdaogo Tougma

  

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TOGO

IMPLEMENTATION COMPLETION AND RESULT REPORT ON

THE ECONOMIC GOVERNANCE AND RECOVERY CREDIT 5

CONTENTS

DATA SHEET .............................................................................................................................................. v

A. Basic Information ..................................................................................................................................... v

B. Key Dates ................................................................................................................................................. v

C. Ratings Summary ..................................................................................................................................... v

D. Sector and Theme Codes ......................................................................................................................... vi

E. Bank Staff ................................................................................................................................................ vi

F. Results Framework Analysis ................................................................................................................... vi

H. Restructuring (if any) ............................................................................................................................... x

 1. Program Context, Development Objectives and Design ........................................................................ 1 2. Key Factors Affecting Implementation and Outcomes .......................................................................... 4 3. Assessment of Outcomes ........................................................................................................................ 8 5. Assessment of Bank and Borrower Performance ................................................................................. 18 6. Lessons Learned ................................................................................................................................... 20

Annexes:

Annex 1. Bank Lending and Implementation Support/Supervision Processes ........................................... 22 Annex 2. Beneficiary Survey Results (if any) ............................................................................................ 24 Annex 3. Stakeholder Workshop Report and Results (if any) .................................................................... 25 Annex 4. Summary of Borrower’s ICR and/or Comments on Draft ICR ................................................... 26 Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders ..................................................... 27 Annex 6. List of Supporting Documents .................................................................................................... 28 Annex 7. Country Map .............................................................................................................................. 29

  

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DATA SHEET

A. Basic Information

Country: Togo Program Name: Economic Governance and Recovery Credit-5

Program ID: P126897 L/C/TF Number(s): IDA-51200

ICR Date: 05/15/2013 ICR Type: Core ICR

Lending Instrument: DPL Borrower: GOVERNMENT OF TOGO

Original Total Commitment:

SDR 9.1M USD 14 M

Disbursed Amount: SDR 9.1M USD 14 M

Revised Amount: SDR 9.1M USD 14 M

Implementing Agencies: Ministry of Economy and Finance

Cofinanciers and Other External Partners: N/A

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 12/20/2011 Effectiveness: 07/18/2012 07/18/2012

Appraisal: 03/16/2012 Restructuring(s):

Approval: 05/24/2012 Mid-term Review:

Closing: 12/31/2012 12/31/2012

C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory

Risk to Development Outcome: Significant

Bank Performance: Satisfactory

Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Not Applicable

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

Not Applicable

Overall Bank Performance:

Satisfactory Overall Borrower Performance:

Moderately Satisfactory

  

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C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance

Indicators QAG Assessments (if

any) Rating:

Potential Problem Program at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Program at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Moderately satisfactory

D. Sector and Theme Codes Sector Code (as % of total Bank financing) Original Actual

Central government administration 56 56

Crops 11 11

Telecommunications 11 11

Banking 11 11

General energy sector 11 11

Theme Code (as % of total Bank financing)

Public expenditure, financial management and procurement 56 56

Infrastructure services for private sector development 22 22

State-owned enterprise restructuring and privatization 11 11

Rural policies and institutions 11 11

E. Bank Staff Positions At ICR At Approval

Vice President: Makhtar Diop (AFRVP) Obiageli Katryn Ezekwesili

Country Director: Madani M. Tall (AFCF2) Madani M. Tall (AFCF2)

Sector Manager: Miria A. Pigato (AFTP4) Miria A. Pigato (AFTP4)

Program Team Leader: Johannes Hoogeveen (AFTP4) Johannes Hoogeveen (AFTP4)

ICR Team Leader: Yemdaogo Tougma (AFTP4)

ICR Primary Author: Yemdaogo Tougma (AFTP4)

F. Results Framework Analysis

Program Development Objectives (from Project Appraisal Document)

The 5th Economic Governance and Recovery Credit supports Government-owned reforms to improve public financial management as well as structural reforms in cotton, energy, telecommunications and banking.

  

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Revised Program Development Objectives

- (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Number of budgets that have been published on the Government’s website in PDF

Value (quantitative or Qualitative)

4 by end January 2012 (2009, 2010, 2011, 2012)

5 by end January 2013 (2009, 2010, 2011, 2012, 2013)

2009, 2010, 2011, 2012, 2013

Date achieved 31/01/2012 01/31/2013 01/31/2013

Comments

The government set up BOOST which includes all budget data line by line. 100 % achieved

Indicator 2 : Number of days between a request for a budget in excel format and the receipt of the budget

Value (quantitative or Qualitative)

Budgets are not provided in excel format

Two weeks Less than fifteen minutes

Date achieved 31/01/2012 01/31/2013 01/31/2013

Comments

Togo’s budget can be downloaded from the togoreforme.com website (through BOOST) including in Excel format. 100% achieved

Indicator 3 : Number of audits that use the risk based approach.

Value (quantitative or Qualitative)

0 percent during the 1st trimester of 2012

At least 75 percent during last trimester of 2012

0 percent

Date achieved 03/30/2012 03/30/2012 12/31/2012

Comments

The target was not achieved because in 2012 only a methodological training was offered. Only after an additional training was given on how to operationalize the risk-based approach, could the approach be used. This training took place in March 2013. 0% achieved

Indicator 4 : Number of steps to analyze procurement contracts

Value (quantitative or Qualitative)

At least seven (7) steps for contract review before signing

Reduce the number to 4 steps

Number of steps reduced to 3.

Date achieved 31/01/2012 31/01/2012 02/21/2013

Comments

The Minister of Economy and Finance signed a decree decreasing the number of steps for contract review from 7 to 3 on February, 21st, 2013. 100% achieved

  

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Indicator 5 : Standard bidding documents are available on the procurement website

Value (quantitative or Qualitative)

No standard bidding documents are available

The three standard bidding documents can be downloaded from the Procurement Regulatory Authority’s website

Users can download the three standard bidding documents from the Procurement Regulatory Authority’s website

Date achieved 31/01/2012 31/01/2012 12/31/2012

Comments 100% achieved.

Indicator 6 : Procurement audits are carried out regularly

Value (quantitative or Qualitative)

No procurement audits are carried out (other than as policy action for ERGC-5)

Procurement audits are carried out as part of the regular activities of the Procurement Regulatory Authority

Procurement audits are carried out as part of the regular activities of the Procurement Regulatory Authority

Date achieved 01/31/2012 01/31/2012 12/31/2012

Comments

The Procurement Regulatory Authority is auditing procurement contracts issued during fiscal year 2011 and 2012. 100% achieved

Indicator 7 : The amount of fertilizer purchased supports increasing production levels

Value (quantitative or Qualitative)

Fertilizer purchased sufficient for production of 75,000-80,000 tons of seed cotton

Fertilizer purchased sufficient for production of 95,000 - 100,000 tons of seed cotton

Fertilizer purchased sufficient for production of 95,000 tons of seed cotton

Date achieved 01/31/2012 01/31/2012 12/31/2012

Comments

Supplies of fertilizers were around 30,000 tons per year between 1999 and 2006, fell to 7,700 tons in 2010 and rose to 10,700 tons in 2012. Cotton production increased from 27,857 tons in 2009 to 79,600 in 2011 to 80,340 tons in 2012. 100% achieved

Indicator 8 : Cotton farmers are paid for their crop according to the relevant price formula

Value (quantitative or Qualitative)

77 CFAF difference between what is paid and the price of the formula (322 actually paid versus 399 price according to formula)

0 CFAF (i.e. the price is in accordance with the revised price formula)

0 CFAF

Date achieved 01/31/2012 01/31/2012 12/31/2012

Comments

Cotton producers received the price as calculated by the price formula: CFAF 230. 100% achieved

  

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Indicator 9 : Distribution losses are reduced.

Value (quantitative or Qualitative)

Baseline: 19.6% electricity distribution losses

Target: 18.5%1 distribution losses

18.4%

Date achieved 01/31/2012 01/31/2012 12/31/2012

Comments

100% achieved

Indicator 10 : Number of CEET clients

Value (quantitative or Qualitative)

203,000 clients 220,000 clients 214,406 clients

Date achieved 01/31/2012 01/31/2012 12/31/2012

Comments

The number of clients of CEET increased by about 12,000 from 203,830 in 2011 to 215,517 in December, 2012 less than the expected increase of about 16,000 to 220,000 clients. 72% achieved

Indicator 11 : The price (USD / minute at peak time) for a local call in Togo is equal to or less than the average for the WAEMU (excluding Togo).

Value (quantitative or Qualitative)

WAEMU $0.17 per minute Togo $0.23 per minute

WAEMU average

WAEMU $0.17 per minute Togo $0.18 per minute

Date achieved 01/31/2012 01/31/2012 12/31/2012

Comments

The average communication cost for WAEMU countries except Togo is $0.17 per minute. Though the target is not fully met, the price for telecommunications in Togo declined by 22% (instead of the envisioned 26%). Consequently this indicator is considered partially achieved. 85% achieved

Indicator 12 : At least two new ISPs start to operate in Togo.

Value (quantitative or Qualitative)

0 2 or more new ISPs 0

Date achieved 01/31/2012 01/31/2012 12/31/2012

Comments

Reforms in the telecom sector were slowed by the delayed adoption of the new Telecommunications Act (adopted in December 2012). As a consequence, procedures to liberalize the internet market could not be started. 0% achieved

Indicator 13 : Number of state owned banks that entered into partnerships in which the majority of shares is owned by a strategic partner

                                                            1 The Government sent an official letter in June 2012 requesting a revision of the target rate for distribution losses to 18.5%. It was explained that the previously agreed target was unrealistically ambitious. The revised target was subsequently reflected in the aide memoire of the September 2012 supervision mission and is used in this ICR.

  

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Value (quantitative or Qualitative)

0 At least 3 2

Date achieved 01/31/2012 01/31/2012 12/31/2012

Comments

Privatization of BTD was adjudicated to ORAGROUP. BIA was adjudicated to Attijariwafa bank. 67% achieved

 

G. Ratings of Program Performance in ISRs

No. Date ISR

Archived DO IP

Actual Disbursements

(USD millions)

1 02/13/2013 Moderately satisfactory Moderately satisfactory 14.00

H. Restructuring (if any)

Not Applicable

  

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1. Program Context, Development Objectives and Design

1.1. Context at Appraisal

1. During the decade between the mid-1970’s and the mid-1980’s, Togo had a good reputation as a dynamic business hub. This changed when in the 1990’s and the first half of the 2000’s the country was affected by poor economic management and political and social tensions which eventually led to the suspension of World Bank assistance in 2002. Following the death in 2005 of President Etienne Eyadema Gnassingbé, who had ruled the country for 38 years, one of his sons, Faure Gnassingbé, took over. As this move was heavily contested, Faure Gnassingbé eventually stood down in 2006 and called elections which he subsequently won, although these elections were said by the opposition to have been unfair.

2. Togo made an important break with its past in August 2006 when the ruling party reached a Global Political Accord with the opposition. A national reconciliation process followed that culminated in multiparty parliamentary elections in October 14, 2007. The subsequently installed Government was politically inclusive and started a process of reforms that paved the way for reengagement with the international community (reengagement with the Fund happened in 2006; the Bank followed in 2008).

3. Faure Gnassingbé was reappointed following elections in March 2010 which observers considered to have been generally free and fair. A government of national unity was formed which was led by the ruling party, the "Rassemblement du Peuple Togolais (RPT)". For the first time in Togo's history, the main opposition party "Union des Forces du Changement – UFC" agreed to participate in a government led by the RPT.

4. The new inclusive government actively implemented economic reforms and reached the completion point of the enhanced HIPC initiative on December 14, 2010. Reaching HIPC completion point allowed the country to establish debt sustainability, gave the country a moral boost, and facilitated the normalization of relations with the international community.

5. At the time of appraisal in March 2012, Togo remained classified as a fragile country (CPIA of 2.9) but macroeconomic stability had been largely restored. The Government’s reform efforts were paying off and growth rates, which had been positive since 2006, were accelerating. Economic growth reached 4.0 percent in 2010 and was projected in early 2012 to have reached 4.9 percent in 2011. Growth was driven mainly by the extractive industries, especially clinker/cement, commerce, and public works. At appraisal Togo was still one of the poorest countries in Sub-Saharan Africa with an income per capita of US440 (2010: World Bank’s Atlas methodology) significantly below the average for Sub-Saharan Africa (US$1,165) and Low-Income Countries (US$510).2

6. The Fifth Economic and Recovery Credit (ERGC-5) of SDR 9.1 million (US$14 million) came at a time when the political situation worsened. In February 2012, the publication of two reports accusing the government of human rights violations inflamed human rights organizations. This led to the creation in April 2012 of the civil society movement “Collectif Sauvons le Togo” (CST, Let’s Save Togo), which successfully organized numerous

                                                            2 Source: (DDP) 2010. “Sub-Saharan Africa” refers to “Developing Sub-Saharan Africa” only.

  

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demonstrations demanding electoral and constitutional reforms to ensure free and fair upcoming legislative and local elections. At the time of appraisal these elections were scheduled to take place by November 2012, the constitutional deadline.

Table 1: Key Macro-economic indicators at time of appraisal (May 2012)

Indicator 2010 2011 2012 Real GDP growth (annual percentage change) 4.0 4.5 5.2 Real GDP per capita growth (annual percentage change) 1.5 1.9 2.6 Overall fiscal balance, payment order basis, incl. grants (percent of GDP) -1.6 -2.9 -6.2 Domestic primary balance 2.2 -1.0 -2.6 Current account balance, including official transfers (percentage of GDP) -5.9 -6.2 -8.4 Exports (percentage of GDP) 39.9 40.7 40.1 Imports (percentage of GDP) -55 -58.4 -59.8 CPI annual average (annual percentage change) 1.4 3.6 2.0 Total public sector debt (percentage of GDP) 32.1 30.4 31 External public debt (percentage of GDP) 17.1 17.0 17.9 External public debt service as percentage of exports 4.7 2.4 3.6

Source: ERGC-5 Program Document.

7. At appraisal the presence of potential macro-economic risks was duly noted. The identified risks were associated with the global economic crisis, commodity price fluctuations, and the fact that the Government, while spending much on fuel subsidies, had not adequately budgeted for them. It was also noted that by relying on one-off proceeds from privatization the budget risked becoming unsustainable unless revenue from taxation would increase.

8. Prospects for Togo’s future political and economic developments were viewed with cautious optimism during the first quarter of 2012. It was believed that political unrest would remain contained as the country continued to benefit from its newly found stability and as growth rates kept being revised upward. Appraisal coincided with a national economic forum which assessed economic and social developments since independence, and discussed the actions needed for Togo to emerge as a middle income country. The forum laid the analytical basis for a new PRSP (expected to be ready by August 2012) and a new ECF program with the IMF (expected to be signed by July of the same year).

1.2. Original Program Development Objectives (PDO) and Key Indicators (as approved)

9. The 5th Economic Governance and Recovery Credit supports Government-owned reforms to improve public financial management as well as structural reforms in cotton, energy, telecommunications and banking.

  

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Key Indicators

Policy Area I: Strengthening Public Financial Management

(i) Budget formulation and monitoring: Number of budgets that have been published on the Government’s website in PDF;

(ii) Budget formulation and monitoring: Number of days between a request for a budget in excel format and the receipt of the budget;

(iii) Budget control: Number of audits that have used the risk based approach; (iv) Procurement: Number of steps and time allocated to analyzing the procurement

contracts; (v) Procurement: The standard bidding documents are available on the procurement

website; (vi) Procurement: Procurement audits are carried out regularly.

Policy Area II: Supporting the Bases for Economic Growth (reform in key economic sectors)

(i) Cotton: The amount of fertilizer purchased supports increasing production levels; (ii) Cotton: Farmers are paid a price for their cotton in accordance with the relevant price

formula; (iii) Electricity: Distribution losses are reduced; (iv) Electricity: Number of CEET clients; (v) Telecommunication: The price (USD / minute at peak time) for a local call in Togo is

equal to or less than the average for the WAEMU (excluding Togo); (vi) Telecommunication: At least two new ISPs start to operate in Togo; (vii) Banking sector: Number of state owned banks that have entered in partnerships in

which the majority of shares is owned by strategic partners. 1.3. Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification

The objectives and indicators were not revised.

1.4. Original Policy Areas Supported by the Program (as approved)

The ERGC-5 supported reforms in two policy areas.

Policy Area I: Strengthening Public Financial Management

10. The design of ERGC-5’s public financial management component drew from the Public Expenditure Management and Financial Accountability Review (PEMFAR) completed in 2009 and the 2008 PEFA, with policy actions in the areas of (i) budget monitoring, (ii) budget controls and (iii) procurement. The operation aimed to enhance budget transparency by making budget information publicly available, supported the strengthening of the internal inspection offices (IGF and IGE) and aimed to contribute to the strengthening of external controls through the Court of Accounts. In the area of procurement, the operation supported measures identified in the PEMFAR as critical.

  

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Policy Area II: Supporting the Bases for Economic Growth

11. In this policy area, ERGC-5 focused on four sectors: (i) cotton, the country’s main cash crop, (ii) the financial sector, (iii) telecommunications and (iv) electricity. The operation aimed to strengthen the business environment with policy actions to enhance transparency in the cotton sector, to privatize four state owned banks, to bring more competition to the telecommunications sector, and to strengthen the management of the electricity distribution company (CEET).

1.5. Revised Policy Areas.

The policy areas were not revised.

1.6. Other significant changes:

There were no changes in design, scope and scale, implementation arrangements and schedule, or funding allocations of this operation.

2. Key Factors Affecting Implementation and Outcomes

2.1. Program Performance

12. ERGC-5 was a single tranche operation. The operation was approved on May 24, 2012 and became effective on July 18, 2012. All 9 prior actions were fully implemented (Table 2.1) when the operation was submitted to the Board of the World Bank.

 

  

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Table 2: Togo ERGC-5-nine prior actions and status at project submission to the Board

ERGG-5 Prior Actions Implementation Status

1. The Recipient has published on its website, the Budgets for the Fiscal Years 2009, 2010, 2011 and 2012, and has furnished, on the same website, an email address through which an excel version of any of said Budgets can be requested by the public.

Implemented The Government put the various budgets on the website; the email address (spreformetg@yahoo.fr) is available on the togoreforme.com website.

2. The State Finance Inspectorate and General Finance Inspectorate have both adopted an appropriate risk-based approach to the selection of public entities to be inspected by it.

Implemented A training on the risk-based approach took place in February 2012; informed by this training, a methodology encapsulating the risk based approach was formulated and adopted.

3. The Court of Accounts has provided parliament its report on the execution of the Budget for the Fiscal Year 2007.

Implemented The Court of Accounts submitted the report on the execution of the 2007 accounts (loi de règlement) to the Parliament on June 29, 2011.

4. The Procurement Regulatory Authority has prepared standardized bidding documents acceptable to the Association (IDA) for the procurement of supplies, works and consultants.

Implemented Bidding documents have been prepared.

5. The Procurement Regulatory Authority has, to assess their conformity with the Recipient’s procurement laws, undertaken audits of procurement contracts issued during the respective fiscal year 2010 by: (a) the Recipient’s ministries responsible for (i) health, (ii) agriculture, (iii) education, (iv) public works, and (v) water and sanitation; (b) seven state-owned companies, namely Togotélécom, NSCT, LONATO, CEET, TdE, SALT and PAL; and (c) the city of Lomé.

Implemented 14 reports have been made available (3 for the different Ministries of Education).

6. NSCT has furnished to FNGPC a table for the 2010/2011 Production Season, presenting an accurate breakdown of its cost of producing cotton, in conformity with its financial statements.

Implemented A cost table was produced in December 2011. Based on this cost table the price for cotton for the 2010/11 season was set at CFAF 322 / kg.

7. The board of directors of CEET has appointed a general manager based on an open competitive selection process and has signed a performance management contract.

Implemented A new director was appointed in December 2011.

8. The Recipient’s Council of Ministers has adopted an updated telecommunications strategy designed to develop a competitive information and communications technology market.

Implemented The minister submitted the strategy to the Council of Ministers by the end of January 2012; the strategy was discussed and adopted.

9. The Privatization Commission has invited pre-qualified applicants to bid on the purchase of four state-owned banks, namely BIA-T, BTCI, BTD and UTB.

Implemented The Privatization Commission launched the call for bids for two banks on November 30th; the call for bids for the other two banks went out early March 2012.

Source: ERGC-5 program document.

  

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13. There were thirteen key indicators linked to the prior actions, at least one for each action. These indicators form the basis for assessing the performance of the operation. Most of the indicators related to PFM have been met except the one related to budget control and one indicator related to procurement. The indicator related to the cotton sector was fully met; the indicator related to bank privatization was partially met, as were two of the four indicators related to energy and to telecommunications. One other energy indicator was fully met; one telecom indicator was not met.

2.2. Major Factors Affecting Implementation:

14. External Factors: Togo’s external environment did not significantly affect the implementation of the program. The financial crisis in North America and Europe had little effect on Togo’s economy as trade links with these regions are limited and Togo’s exports go mainly to West Africa and Asia. A somewhat positive development (for Togo as least) was the management crisis at the port of Cotonou, which led to a relocation of some trade to the port of Lomé, possibly offsetting a shortfall in trade caused by the crisis in Mali. Continued high international fuel prices had a negative effect on the terms of trade, but this was largely offset by high prices for two of Togo’s main exports: cotton and phosphates. Meanwhile, the weather was conducive to agriculture, resulting in limited food price increases and a level of inflation of less than 3%.

15. A major factor that did affect the implementation of the program in a negative way was the absence of a program with IMF. During the operation the Togolese government and the IMF failed to agree on a new program.3 Consequently, financial support from the IMF and the European Commission was not disbursed, nor was budget support from France. This negatively affected the Government’s financing situation and absorbed considerable political attention.

16. Government Ownership: Ownership of the reform program was demonstrated by those responsible for the implementation of ERGC-5, in particular the Permanent Secretary for Reforms and his team as well as high level staff across the various ministries and agencies incorporated in the program. Reforms proposed by the operation were reflected in Togo’s first full Poverty Reduction Strategy Paper adopted in July 2009 and further elaborated in the PFM action plan adopted by the Council of Ministers in September 2010 in response to weaknesses identified by the PEFA and PEMFAR reports.

17. Effective donors’ coordination: The ERGC-5 was implemented in close coordination with the main donors active in Togo. Prior actions related to public finance were closely coordinated with structural benchmarks for the European Union and the African Development Bank because they were considered to be critical measures for both the Bank and these donors in Togo. There was consistency of conditionalities across donors providing budget support. Regarding non-PFM prior actions, the World Bank was the only donor working in these areas, reducing the need for coordination with others donors. Nevertheless, the team ensured that other donors were kept well informed by organizing debriefing meetings at the end of supervision and preparation missions.

                                                            3 See lessons learned section for details on why a program was not concluded.

  

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18. Insufficient professional staff and institutional capacity had been identified as a significant risk in the project document and were indeed responsible for some delays. The problem was alleviated through the provision of technical assistance by IDA (in areas such as the Financial Sector and Governance TA Project supporting financial sector reform) and by others (IMF, AFRITAC, AfDB, EC, and France). Intensive country dialogue and close involvement by Bank staff, in particular the local staff, contributed to overcome the constraints. As a result, and other than some implementation delays, capacity constraints did not affect the substantive progress of the reform program.

19. Political Economy: Postponed parliamentary and local elections and rising civil unrest resulted in the Government paying more attention to political concerns. Following the violent repression of demonstrations in June, the Prime Minister handed in the resignation of his team, which aggravated this situation. A new Government was appointed in August 2012, but the vacuum this created and the continued social tensions were not conducive to reform implementation. Political support for reforms was still palpable but concrete results were few. For instance, while the draft PRSP was finalized in November 2012, it has still not been approved by the Council of Ministers; improved horizontal communication between various departments in the Ministry of Finance (budget department, debt department, and treasury) would have greatly improved the budget process, but was not being promoted. The adoption of the new telecommunications law providing a legal underpinning for the road map towards a competitive telecommunications sector took 12 months to be adopted by Parliament. A number of critical WAEMU directives including on program budgeting, decentralization, and a new chart of account continue to be held up in Parliament despite the large majority has in the National Assembly.

2.3. Monitoring and Evaluation (M&E) Design, Implementation and Utilization

M&E Design:

20. The Ministry of Economy and Finance was entrusted with the responsibility for monitoring and evaluating the Government’s reform program. Consequently monitoring the implementation of ERGC-5 fell under this Ministry and particularly the Permanent Secretariat for Policy Reform (Comité de Suivi des Programmes et Réformes). As the Permanent Secretariat for Policy Reform is part of the Ministry of Finance, PFM reforms are directly under its control. Reforms other than the PFM were monitored under the oversight of the Ministries of Agriculture (cotton sector), Mines and Energy (electricity), Telecommunications as well as the Privatization Committee (bank privatization) with the Permanent Secretariat for Policy Reform providing overall coordination.

M&E Implementation:

21. Implementation went smoothly because the entities covered by the operation were closely involved in its preparation. Bank missions to supervise the implementation of ERGG-4 and to prepare a successor operation were held in September and December 2011 and in March 2012 and engaged directly with the entities involved as well as with the Permanent Secretariat for Reforms. Missions from relevant technical departments of the Bank (TWICT, AFTAR, AFTEG, AFTMW, and AFTFW) and follow-up by country office staff provided complementary expertise and allowed for close supervision. On the side of the Government, the authorities

  

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organized a number of meetings to assess progress made in its reform program. Reports from these meetings can be found on the Togo reform website.

M&E Utilization:

22. The overall reform efforts were reviewed by the Government during (i) its own review meeting and (ii) during Bank supervision missions. The results were used to inform the preparation of the successor operation (ECGC-6).

2.4. Expected Next Phase/Follow-up Operation

23. ERGC-5 was the fifth development policy operation and the first to offer budget support in the form of a credit. The operation pursued objectives in line with those of its predecessors, thereby ensuring continuity in the Bank’s support. ERGC-5 laid the basis for a follow-up development policy operation which, in accordance with the newly drafted PRSP is expected to continue where ERGC-5 left off. It is envisaged that the follow-up operation will be programmatic. ERGC-5 and its predecessors were stand-alone operations but a programmatic approach is preferred particularly because there remain a number of reforms which were started under ERGC-5 but which require a longer timeframe to complete (e.g. telecommunications, cotton, electricity, and bank privatization). A concept note for a 3-year series was discussed in January 2012. Compared to its predecessors, the focus of the proposed series shifts from economic recovery (which has largely been achieved) and PFM (in which the IMF and EU are leading) to economic growth and real sector reforms. The attention to strengthening economic governance remains. Preparation of this operation has been delayed as there are concerns over Togo’s macro-economic policy position, and as one prior action needs to be completed.

3. Assessment of Outcomes

3.1. Relevance of Objectives, Design and Implementation

Relevance of Objectives:

24. The focus of ERGC-5 (enhancing public financial management as well as structural reforms in cotton, energy, telecommunications and banking sectors) was relevant given Togo’s development challenges. Strengthened public financial management systems are critical for improved service delivery while reforms in the four aforementioned sectors helps lay the basis for sustained economic growth. ERGC-5’s objectives are aligned with the PRSP and the ISN. The continued relevance of the supported program and objectives is confirmed by Togo’s newly drafted PRSP, with its overarching objective of achieving inclusive economic growth and middle income status by 2030.

25. ERGC-5 is consistent with Government priorities. The main objectives of the PRSP are a strengthening of political and economic governance, a sustainable recovery of the economy, and social and human development. With respect to economic governance, the PRSP emphasizes three pillars: (i) restoring fiscal and debt sustainability; (ii) improving public finance management; and (iii) strengthening governance and transparency in the management of key public enterprises. PFM reforms were supported by the operation, as were reforms in banking, cotton, telecom and electricity, which pertain to these three pillars. In the case of PFM, ERGC-5 relied heavily on the public financial management strategy (Stratégie de Gestion des

  

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Finances Publiques - SGFP) and the associated action plan (downloadable from www.togoreform.com). ERGC-5 was designed to support the objectives of the Interim Strategy Note (ISN), which itself draws on the PRSP. The three pillars of the ISN are to (i) support the normalization of relations with the World Bank through the clearance of arrears, set the stage for provision of regular IDA resources and pave the way towards debt relief under the HIPC Initiative and MDRI; (ii) improve public financial management and governance in key sector institutions; and (iii) provide assistance to address critical social needs. ERGC-5 was designed under the second pillar of the ISN (strengthening economic governance).

26. In addition, ERGC-5 was aligned with several IDA-financed operations and advisory services. ERGC-5’s work on the banking sector was complemented by the Financial Sector Reform and Governance Project. ERGC-5’s dialogue on cotton benefited from support offered by the multi-donor Agriculture Sector Support Project (PASA) which aims to strengthen the cotton producer organization and which was used to recruit a cotton value chain specialist (consultant) who was instrumental in helping revise the cotton pricing formula under the exceptional circumstances of the 2012 campaign. ERGC-5’s support to telecommunications was complemented by the West Africa Regional Communications Infrastructure Program (WARCIP) which deals with ensuring Togo's access to international communications infrastructure, while work on energy was complemented by the Emergency Infrastructure Rehabilitation and Energy Project.

Relevance of Design:

27. As was the case with the four previous budget support operations, the design of ERGC-5 was informed by extensive diagnostic work (2008 PEFA, 2009 PEMFAR, 2010 Country Economic Memorandum) and shorter studies prepared in the context of the 2012 poverty assessment. The continued focus on public financial management and reforms in key sectors of the economy was justified by the notion that these issues remained crucial for Togo’s economic recovery and development.

28. In addition, ERGC-5 was aligned with the Bank’s five Good Practice Principles on Conditionality. The operation was aligned with the Government’s reform agenda; Government’s own monitoring system was used, a focused set of prior actions was chosen in conjunction with the Government and other partners and transparent progress reviews were carried out in conjunction with other donors (EU and IMF in particular).

Relevance of Implementation:

29. Implementation arrangements were aligned with the country’s development priorities, which included restoring sound public finance management as well as improved governance and efficiency in the key sectors of the economy. The ERGG-5 was implemented in close cooperation between the Bank and other donors. 30. The operation was evaluated to be of modest risk, mainly because of low implementation capacity. To address the capacity issue, technical assistance such as the Financial Sector and Governance TA Project was provided to support the financial sector reforms. However, progress on prior actions moved slowly due to the degradation of the political situation, the consequences of the lack of a program with the IMF, and the non-disbursement of budget support from the EU and France, which negatively impacted the implementation of the reform.

  

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3.2 Achievement of Program Development Objectives

Outcome Area 1: Improving Public Financial Management

31. Togo’s 2008 PEFA and 2009 PEMFAR had identified weaknesses in Togo’s public financial management system. Under previous budget support operations, efforts had been initiated to strengthen the PFM system, but as the Government’s own strategy indicated, more needed to be done. The ERGC-team agreed on five prior actions with the Government, and made an effort to select prior actions that contributed to a strengthening of incentives to improve the PFM system.

32. The prior action related to the publication of budget and expenditure details contributed, in particular, to improved incentives for PFM reforms. With the prior action4 the Government effectively agreed to publish its budget and execution data in machine readable format. Once this was agreed, it was a small step for the Government and the World Bank to agree to create BOOST, a data tool that makes detailed finance data easily accessible (box 3). In September 2012, as part of the Public Expenditure Review, the Government launched the BOOST web-tool allowing anyone with access to the internet to assess detailed budget and expenditure data. In this manner, budget information became accessible to all and it became much easier to assess the quality of data in the PFM system. An EU-WB team used BOOST to prepare a joint assessment of PFM data quality (World Bank, 2012) which subsequently informed dialogue with Government. Some of the findings (such the lack of information sharing between departments) were later reflected in the Government’s own assessment of progress on its reform program (Republic of Togo, March 2013). The prior action thus triggered a chain of events that facilitated external oversight, which in turn triggered a positive response from the authorities to improve the functioning of the PFM system.

33. ERGC-5 also sought to strengthen incentives to improve the PFM system through prior actions aimed at internal (IGF/IGE) and external (Court of Accounts) oversight institutions. The impact of these measures is harder to assess. If one takes a narrow perspective, the prior action related to the IGF/IGE (adopting a risk based approach) was not effective as the theoretical training was not followed with a practical one, and the risk based approach was not adopted. However, taking a broader perspective on the period of program implementation, the institutions, particularly IGF, became more assertive as evidenced by a high profile inspection of the cotton producer organization (FNGPC). And as the IGF became more in demand, it took it upon itself to assure that a practical training in risk based management was obtained. This finally happened in March 2013 (after the closure of ERGC-5). Presently, inspections do follow a risk based approach.

                                                            4 Publish on the togoreforme.com website the budgets for fiscal years 2009- 2012 and provide an email address through which an excel version of any of the budgets can be obtained by members of the public.

  

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Box 3: BOOST a Tool to Facilitate Use of Public Financial Management Data

BOOST is the name of a data tool developed at the World Bank which makes detailed public spending data more accessible. By having expenditure data readily available BOOST facilitates budget analyses as elaborate searches for data are no longer needed. In addition, BOOST enhances access to budget information by Government staff and, in countries where BOOST is made publicly available, civil society. By providing access to all data in the public financial management system, BOOST also facilitates assessing the quality of the PFM system.

To allow users to easily navigate these multiple dimensions, BOOST presents the data in Microsoft Excel with a PivotTable user interface. The PivotTable feature allows the user to aggregate data using different combinations of budget classifications, or to choose (using filters) individual items of spending by sector, region, or budget holder and drill down further to get a better understanding of how that spending has evolved. For instance, a user of Togo’s BOOST can filter the data to focus only on education expenditure; then break it down into spending by region and within each region by prefecture. The data can be broken down further by economic use: salaries or investments, whereby for salaries it is possible to make a distinction between permanent and temporary staff. Similarly, the user can follow the seven steps in Togo’s expenditure chain from dotation initiale, dotation finale, autorisé, engagé, liquiditation, ordonnacé, and mandate prise en charge, allowing the user to identify for instance whether arrears are being incurred.

To help civil servants and civil society analyze the budget, Togo’s BOOST is disseminated through a web-based application that can be accessed through www.togoreforme.com and in excel format (downloadable from: http://bit.ly/TsDjhh).

34. A comparable narrative holds for the prior action related to the Court of Accounts. Furnishing a report on the execution of the Budget for the Fiscal Year 2007 to Parliament in 2012 hardly counts as effective oversight. But by doing so, the Court of Accounts was able to complete a dry-run of its tasks. As a new institution (the Court of Accounts became only effective in 2010), related organizations perceived it as important to familiarize themselves with the procedures and the substance of the Court. The 2007 report was followed by a report on budget execution of fiscal year 2010. This report was completed in January 2013. The timing of its release meant that the report was not discussed alongside the budget for 2013 (which is the preferred timing) but it did mean that Parliament received an independent evaluation of the 2010 budget in a more or less timely manner. It is envisaged that the report for budget year 2012 will be available at the same time when Parliament discusses the budget for 2014.

35. Procurement is the fourth area that ERGC-5 sought to strengthen. It was operationalized through a measure to make standard bidding documents publicly available (through the website http://armp-togo.com) and was expected to lead to a reduction in the number of reviews needed prior to procurement taking place. While the prior action was completed by March 2012, it took another 11 months before the envisaged streamlining was achieved. In the meantime the procurement authority trained those involved in the procurement process and in February 21, 2013, the Minister of Economy and Finance signed a decree to make the use of the new procurement documents obligatory, thereby reducing the number of step to review the procurement contract from seven to three.

36. To assess whether with the new procedures, the procurement process was simplified, and the PRA commissioned a study (for delivery in December 2013) to assess the conformity with the prevailing procurement laws of procurement contracts issued by key

  

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ministries (health, agriculture, education, public works, and water and sanitation), state owned companies (Togotélécom, NSCT, LONATO, CEET, TdE, SALT and PAL), and the city of Lomé. This study is a follow up to a comparable study that was carried out as prior action for ERGC-5. Once completed, its results will allow ARMP to identify weaknesses in the prevailing procurement system.

37. All considered, ERGC-5’s actions contributed in a positive way to a strengthening of the PFM system, directly as well as indirectly by creating an environment with greater transparency and enhanced oversight. Yet, shortcomings remain. The 2013 budget approved by Parliament late December 2012 was unrealistic as it increased investment spending much above the capacity of Government to implement and foresees a cash deficit (of over 11% of GDP) that is not conducive to macro-economic stability. The revised 2012 budget that was submitted to Parliament early December 2012 had a number of inconsistencies with information published earlier by the authorities on budget execution. Nevertheless, such information is now readily available, and feedback can be provided in ways that were not possible before.

Table 3: Indicators status of prior action of PFM

Indicators Baseline Target Actual (ICR date)

Number of budgets that have been published on the Government’s website in PDF  

4 by end January 2012 (2009, 2010, 2011, 2012) 

5 by end January 2013 (2009, 2010, 2011, 2012, 2013)  

All five budgets have been published. 

Number of days between a request for a budget in excel format and the receipt of the budget 

Budgets are not provided in excel format 

Available in less than two weeks 

Available on-line through the BOOST link on www.togoreforme.com 

Number of audits that have used the risk based approach 

0% during the 1st trimester of 2012 

At least 75% of audits during last trimester of 2012 use the risk based approach

None of the audits used the risk based approach 

Number of steps and time allocated to analyzing the procurement contracts

At least seven (7) steps for contract review before signing

Reduce the number to 4 steps

3 steps

Procurement audits are carried out regularly

No procurement audits are carried out (other than as policy action for ERGC-5)

Procurement audits are carried out as part of the regular activities of the Procurement Regulatory Authority.

The Procurement Regulatory Authority carries out procurement audits as part of its routine activities

Outcome Area 2: Supporting the Bases for Economic Growth  

38. At the design of ERGC-5 a number of real sector reforms undertaken by the authorities still needed support. Relations between NSCT and the cotton producer organization, FNGPC, were marred in distrust and the two institutions could not agree on a final price to be paid to cotton farmers. Management of the electricity company still had to be appointed (only interim management was in place) and bank privatization was progressing slowly. Other reforms, such as in the telecommunication sector—which is dominated by a state owned company—had not even begun. To assure continuity with previous operations, ERGC-5 continued to engage in the electricity and cotton sectors, while—informed –by lessons from Togo’s past—the operation added prior actions on telecommunications and bank privatization.

  

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39. The prior action related to cotton was for NSCT to provide FNGPC a table presenting an accurate breakdown of its cost of producing cotton during the 2010/11 season. The data in this table had to be in conformity with NSCT’s financial statements. This seemingly futile prior action, which was endorsed by both NSCT and FNGPC, provided an objective basis for discussions between the two organizations about the producer price that should be offered to cotton farmers. Under ordinary circumstances, the producer price should have been determined on the basis of a price formula agreed to in 2009, but exceptionally high international cotton fiber prices uncovered a weakness in the formula which made it impossible to apply. It was agreed that the price would be determined on the basis of the actual sales prices realized and costs incurred by NCST, but this required an objective cost estimate, which the prior action ensured. The price was finally set at CFAF 322 per kg, less than the CFAF 399 that should have been paid according to the price formula, but considerably more than the price that had originally been announced and also much higher than the price paid in neighboring countries.

40. The prior action helped restore trust between the two organizations. In doing so, it set the stage for improved cooperation between producers united in the FNGPC and NSCT and contributed to further increases in cotton production. Cotton production reached 80,340 tons in 2012 less than the expected 95,000 tons which proved too optimistic. More importantly, however, by restoring trust, the cotton prior action laid the foundation for improved collaboration resulting in a new cotton sector development strategy which was finalized in April 2013. This strategy aims to address some structural issues affecting performance of the sector, such as the need to enhance transparency, the need to professionalize management of FNGPC, and the need to gain clarity on the assets owned by NSCT.

41. Since 2006, Togo’s electricity sector has overcome number major obstacles, yet at the time of project preparation, CEET’s management still lacked independence. To enhance performance, one of the prior actions stipulated that management of CEET, its Director General, and a Deputy would be competitively recruited and appointed on the basis of a performance contract. The associated indicator stipulated a reduction in distribution losses and increase clients of CEET.

42. The newly selected management took office on January 5, 2012. As a consequence, overall performance improved. One of the challenges of CEET was to reduce its distribution losses. In 2011 they stood at 19.2%; by 2012 they had fallen to 18.4%, which was significant improvement that exceeded the target agreed with the Bank of 18.5%. However, performance was not satisfactory in all areas. Difficulties with internal procurement procedures meant that the target for the increase in customers was not met as supplies to make the necessary connection were not obtained on time. The number of customer increased from 203,830 in 2011 to 214,609, less than the 220,000 clients that were envisaged by the results indicator.

43. Whereas the net financial result of CEET is positive, the electricity sector as a whole continues to face large financial deficits. Taken together CEB and CEET are projected to incur a loss of 21.4 FCFA billion in 2012 and 15.9 FCFA billion in 2013. The positive impact of the 2010 and 2011 tariff increases (which helped the sector break-even) has largely dissipated as the cost of generation is increasing. So, while some improvement in the financial situation of the electricity sector took place, these issues were not directly addressed by the prior action.

  

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Table 3.3: Comparison of achievements and objective of CEET in 2012

Objective contained in the performance contract

2012 (A)

Achievement 2012 (B)

Difference between

(A and B)

Total Number of clients 220,625 215,517 -5,108 Clients using High voltage 480 556 76 Clients using Low voltage 220,145 214,961 -5,032

Source: CEET

44. The telecommunication sector has significantly untapped potential and is dominated by the state-owned operator Togo Telecom. Telecommunication costs remain high and in 2011 Togo ranked 161st out of 165 countries in terms of cost of telecommunication. The authorities intend to restructure the national telecom operator and to make the sector more competitive. This is reflected in a sector policy which was adopted in May 2011 by Cabinet. Accordingly, a prior action built upon this policy requested that the Council of Ministers adopt an updated telecommunications strategy with a clearly defined set of concrete actions that the authorities would implement in 2012. These were to: reduce the price of mobile phone calls to the WAEMU average, ensure that more internet service providers become operational in Togo, invite MVNOs to become active in Togo, and create a level playing field for agents who would like to access the WACS cable. The selected results indicators (a reduction in the price of mobile telephony and an increase in the number of ISPs) reflected the consequences of the adoption and implementation of the updated strategy on the telecommunications market.

Table 4: Evolution of communication and Internet costs 2011-2012

Mobile phone communication price Mobile phone

communication price second half of year 2011

Mobile phone communication price second half of year 2012

Change in percentage

Intra networks 112 85 -24%

Inter-network 145 128 -12%

Fixed 143 128 -10%

International 214 180 -16%

Access to internet

Capacities Access to internet price second half of year 2011

Access to internet price second price second half of year 2012

Change in percentage

128 K 22,295 NA NA

256 K 34,685 22,295 -36%

512 K 74,340 34,685 -53%

1 M 173,630 74,340 -57%

2 M NA 173,630 NA

Source: ARTP, 2012.

  

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45. During the implementation period significant progress was made in reducing the cost of telecommunications. However, progress in other areas (ISPs, MVNOs) stalled because it required the adoption of a new telecommunications act. A draft law on electronic communication transposing ECOWAS directives into domestic legislation was first discussed by the National Assembly in January 2012, but was only officially adopted in December 2012. As a consequence, limited progress could be made with the introduction of MVNOs and new ISPs. This is reflected in the results indicator for ISPs which has not been met. The indicator for price reduction, on the other hand, which was largely met (the average reduction turned out to be 22 percent against an envisaged reduction of 26 percent).

46. The restructuring of the Togolese banking sector has been at the center of the dialogue between the Government, IMF and the World Bank since 2006, and was informed by a Financial Sector Review undertaken by the World Bank in collaboration with the Government. The dialogue focused on four public banks: Togolese Trade and Industry Bank (BTCI), Togolese Development Bank (BTD), International Bank for Africa (BIA), and Togolese Banking Union (UTB). It was decided that banking reform would include organizational, institutional, and financial restructuring, and that following a recapitalization, the Government would sell its shares in these banks to private partners.

47. Despite a massive recapitalization in 2008/9 of $176 million (about 8% of GDP), bank privatization took until early-2012 to get started. The process was supported by a prior action which required the Privatization Commission to invite pre-qualified applicants to bid on the purchase of the four state owned banks that were put up for sale. To measure the achievement of the objectives targeted by the prior action related to bank privatization, ERGC-5 identified as indicator the number of state-owned banks that had entered into partnerships in which the majority of shares were owned by strategic partners. To allow for delays and other difficulties, the target was prudently set at 3.

48. The process of privatization turned out to be complex. More than 1 year later in April 2013, only two of the four banks have been successfully privatized (BTD and BIA), while the privatizations of UTB and BTCI were declared unsuccessful as the purchase conditions offered by the final bidders were unacceptable to the Privatization Committee. The case of BTCI is particularly worrisome as the Committee believes that BTCI is likely to have contracted new, poorly performing loans, to a degree whereby the bank may need additional recapitalization.

Table 3.5: Indicators status of prior action related to key sectors of the economy

Indicators Baseline Target Actual (ICR date)

Cotton: The amount of fertilizer purchased supports increasing production levels. 

Fertilizer purchased sufficient for production of 75,000-80,000 tons of seed cotton. 

Fertilizer purchased sufficient for production of 95,000 - 100,000 tons of seed cotton 

Fertilizer was purchased to support a production of 95,000 tons of seed cotton 

Cotton: Farmers are paid a price for their cotton in accordance with the relevant price formula.

 

77 CFAF difference between what is paid and the price of the formula (322 actually paid versus 399 price according to formula).  

0 CFAF (i.e. the price paid is in accordance with the prevailing price formula) 

Farmers received a price in accordance with the price formula 

  

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Indicators Baseline Target Actual (ICR date)

Electricity: Distribution losses are reduced. 

19.6% distribution electricity losses.  18.5% electricity

distribution losses 

18.4% electricity distribution losses 

Electricity: Number of CEET clients

203,000 clients. 220,000 clients 214,406 clients

Telecommunication: The price (USD / minute at peak time) for a local call in Togo is equal to or less than the average for the WAEMU (excluding Togo).

WAEMU average $0.17 per minute Togo $0.23 per minute.

WAEMU average ($0.17) per minute

$0.18 per minute

Telecommunication: At least two new ISPs start to operate in Togo.

0 2 or more new ISPs

0

Banking sector: Number of state owned banks that have entered in partnerships in which the majority of shares is owned by strategic partners.

0 At least 3

2

49. In conclusion, the real sector reforms supported by ERGC-5 were successful in bringing about reforms. The potential of ERGC-5 to bring about structural reforms was limited as the operation was a stand-alone operation. Yet even though in the case of cotton and electricity the prior actions did not address the most critical structural issues in the sector, the operation did manage to lay the foundation for further reaching reforms which will need to be picked up by the (programmatic) successor operation. In the case of telecommunications and banking, the results that were achieved fell short of what was expected at the start of the program, and a successor operation will need to continue focusing on these sectors as well.

3.3 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs)

Rating: Moderately Satisfactory

50. The overall outcome rating is moderately satisfactory, as the operation is considered satisfactory on the relevance criterion and moderately satisfactory on the achievement of the PDO criterion:

Relevance: With a continued focus on economic growth and improving governance the operation was relevant as demonstrated by the fact that the subsequent PRSP mirrors many of the themes included in ERGC-5. Specific policy areas supported by the ERGC-5 were consistent with the Government’s PRSP and the Bank’s ISN, and were complementary to a number of investment operations supported by the Bank (agriculture, telecommunications and finance) as well as by donor partners (in particular, PFM, which is supported by the EU and IMF). In addition, the operation was aligned with the Bank’s five Good Practice Principles on Conditionality as well as Government’s reform agenda.

  

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Achievement of PDO: Despite civil unrest, a difficult political situation and a change in Government in July 2012, the dialogue between the team and the Government counterparts remained of high quality and the Government remained committed to implementing the reform program. This is reflected by the indicators: 8 out of the 13 indicators were fully achieved, 3 were partially achieved and 2 were not achieved. Among the indicators that were not fully achieved are the privatization of banks (two instead of three were privatized), reduction in telecommunications cost (a reduction of 22% instead of 26%), and increase in electricity connections (12,000 new clients instead of 16,000). Targets that were not achieved include the introduction of two new Internet Service Providers (because the adoption of the new Telecommunications law was delayed and the non-operationalization of a risk based approach to select inspection mission by IGF and IGE (only a methodological training was offered, but additional training on how to operationalize the risk-based approach was not given until March 2013).

3.4. Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

51. The direct impact on poverty, gender and social development of a Development Policy Operation that focuses on PFM and selected real sector reforms is limited, even though improved public financial management resulting from the policy actions may be expected to have had a positive impact on poverty through a more efficiently and effectively functioning civil service. Likewise, improving governance, transparency and the financial sustainability of the electricity and banking sectors can be expected to have had an indirect poverty impact by reducing the drain on the budget these parastatals imposed thereby increasing fiscal space for priority spending. By assuring that an attractive producer price was paid for cotton – a price that was significantly higher than the originally announced price, the operation had a direct positive impact on the livelihoods of about 300,000 farmers in the poorest regions of Togo. Similarly, reducing telecommunications costs by 22% made mobile communications much more accessible to poor households. (b) Institutional Change/Strengthening

52. The operation contributed to institutional strengthening in public finance management, as well as in the four sectors in which the operation was active. The focus in the PFM area was to strengthen internal and external oversight and to improve the ability of the PFM system to self-correct itself. This was most evident from the establishment of BOOST, which already in its first year generated a number of outputs that helped focus the dialogue on the quality of the budget data and the processes that generate these data. In the real sectors, the operation contributed to institutional strengthening as well: in the energy sector, the operation established competitive recruitment for the Director General of CEET; in the cotton sector, transparency around the price mechanism was improved; in telecommunications, a process to arrive at a competitive sector was initiated; and in banking two state owned banks were privatized.

  

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(c) Other Unintended Outcomes and Impacts (positive and negative)

53. ERGC-5 was the first IDA credit to be provided to Togo, allowing the Bank team to assess how this debt was recorded. It was noted that information on newly contracted debt is poorly communicated within the Ministry of Finance (e.g. the debt department was aware of the credit while the budget department was not) and that errors were made in recording the debt. This led to further (i) technical discussions with the permanent secretary of reforms as well as the debt and budget departments and (ii) policy dialogue with the minister of finance on how to improve debt management in Togo. As a result, the Minister of Finance agreed to request for technical assistance to strengthen the function of the debt department and to publish the 2010 DeMPA report. 4. Assessment of Risk to Development Outcome

Rating: Significant

Most of the reforms supported by the ERGC-5 were built with a strong consensus and commitment by the government and are thus likely to be sustained. However, the sustainability of development outcomes is affected by risks at the macro level including Togo’s significant political and economic vulnerabilities. In addition, the external environment could present a substantial risk to the sustainability of the objectives, as global economic conditions may have an adverse impact on the budget as well as cotton producer revenues, particularly if cotton prices drop. Many of the reform areas require sustained commitment and effort for them to yield the desired results; accordingly, capacity constraints also pose a significant risk to the sustainability of results.

5. Assessment of Bank and Borrower Performance

5.1. Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating: Satisfactory.

54. The team initiated a preparation mission in September 2011 to ensure a thorough understanding of the issues. This mission was followed by another mission in December 2011 during which the final wording of the prior actions was agreed with the authorities, and a third mission in March 2012 prior to appraisal. During these missions, extensive consultations were held. Project identification and appraisal were facilitated by the existence of solid analytical ground work (PEMFAR, audits and studies on cotton and electricity sectors, and PFM action plan), while the mission itself prepared background notes on poverty, the business environment and telecommunications.

55. The team took advantage of the alignment with priorities highlighted in the Bank’s 2010 ISN, Government’s own Poverty Reduction Strategy, and the strategic focus provided by continuity with previous budget support operations. The Bank team worked closely with the Government counterparts and where capacity in the implementing agencies was limited (e.g. cotton) the Bank’s team went to great lengths to help assure implementation of the prior actions.

  

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The team coordinated preparation and appraisal of the operation with other donors (most notably the IMF and the EU) and contributed to the dialogue in the area of cotton, energy, and telecommunications as well as banking, public financial management, and governance. The program document was clear in its arguments and the results framework was closely aligned with the prior actions.

56. It was strategically relevant to refocus the operation towards real sector reforms –an area of comparative advantage for the Bank at a time when the EU and the IMF were scaling up their support to PFM. The prior actions for cotton had a satisfactory impact on the issues affecting the sector and laid the foundation for the preparation and adoption of a revised cotton development sector strategy. Similarly, the prior action on electricity, not only dealt with an urgent and relevant issue, by putting in place a more professional and independent management at CEET, but also created scope to address more fundamental issues in the sector, particularly its financial sustainability.

(b) Quality of Supervision

Rating: Satisfactory

57. Three supervision visits were held, in respectively June, September and December 2012. This facilitated a high quality dialogue and a close follow-up of the reforms supported by the operation. Where needed (in the electricity sector, for instance), problems were identified early and resolved in a mutually agreeable way. Supervision missions were complemented by follow up by staff from the Bank’s technical departments (electricity, telecommunications, finance, PFM) and by country office staff. Despite the intensive supervision, the team was unable to prevent two of the indicators from remaining unmet. This was largely due to factors beyond control of the team: the issuance of ISP licenses was delayed because of the delayed adoption of the new Telecommunications law by Parliament, and funding for follow up training to IGF and IGE did not materialize (it was supposed to be provided by the EU) and resources could only be found once the budget for 2012 had been approved. The training did finally take place in March 2012.

(c) Justification of Rating for Overall Bank Performance:

Rating: Satisfactory

58. As Bank performance for quality at entry was rated as Satisfactory and quality of supervision was rated as Satisfactory, overall Bank performance is rated as Satisfactory in accordance with IEG’s harmonized evaluation criteria guidelines for ICRs.

5.2. Borrower Performance

Rating: Moderately Satisfactory

59. With a current CPIA rating of 3.0, Togo falls in the category of fragile countries. It is encouraging that in spite of rising social unrest, a liquidity crisis, and limited political guidance, the program was largely implemented. The commitment of the technical staff involved in the various Ministries and public entities is commendable along with the follow-up

  

20  

by the Secretariat for Reforms in the Ministry of Finance. Yet despite all this goodwill and efforts, a number of outcome indicators were not met. Since the government and the implementing agency are indistinguishable, the overall borrower performance is rated as moderately satisfactory.

6. Lessons Learned

60. One lesson is that even in a politically uncertain environment a well-designed and closely supervised operation can deliver results. ERGC-5 managed to attain most of its objectives, even as Togo was dealing with social unrest, a liquidity shortfall and a government that had resigned abruptly. Some of the indicators that were only partially achieved (e.g. telecommunications and electricity) may have been too ambitious, underlying the need for caution in a fragile reform environment.

61. A second lesson is that in a fragile country facing deep structural reforms, insufficient political attention might derail the entire reform program. This can be illustrated by how the casual introduction to the IMF of a proposal to create a Revenue Authority, contributed to a liquidity crisis late in 2012. Inspired by similar propositions in Burundi and Rwanda, the Togolese authorities decided in early 2012 to work towards the introduction of a revenue authority (OTR) by end 2012. Introducing a Revenue Authority is a substantial reform with potentially significant implications for revenue collection which requires extensive preparation. In the case of Togo, its introduction is particularly complex because an independent revenue collection agency does not ‘fit’ well within WAEMU’s institutional set-up. After having worked on it for several months, the authorities first introduced the idea to the IMF just prior to the conclusion of negotiations for a new ECF program, but offered limited information about its specifics. Given its potential implications for revenue collection, and with limited information to go by, the IMF’s negotiating team had little choice but to discontinue the negotiations. The non-agreement of a program with the IMF, later contributed to the non-disbursement of budget support by other donors, which in turn worsened an emerging liquidity shortfall. Consequently by the end of the fiscal year, the Government was required to opt for an emergency issuance of T-bills, ad-hoc budget cuts, and the introduction of a hastily prepared revised budget to Parliament.

62. A third lesson is that in a fragile country a political economy analysis should guide the team in selecting prior actions and indicators. One aspect characterizing fragile economies is that many relations are personalized rather than institutional; agreement with one group of reformers does not necessarily mean that reforms will be implemented. For instance, in the case of Togo, commentators have noticed that Government may use the independence of Parliament (in which the ruling party holds a large majority) to block reforms. This has been advanced as explanation of why the two WAEMU directives pertaining to PFM reforms have not been adopted. The ERGC-5 team, even though it was the fifth budget support operation for Togo, was not in a position to benefit from a political economy analysis. As a consequence, the operation may have been less well informed than it could have been, and the team may have relied too much on the optimism of reformists when defining targets for the outcome indicators.

63. A fourth lesson is that ownership requires political will as well as buy-in from technical staff. At the technical level there was (and still is) considerable appetite to implement the reform program. Still, these same reformists demonstrated limited pro-activeness when it

  

21  

came to solving problems. This may be a capacity problem, but is more likely to be the long-term effect from years of economic and financial mismanagement during which the ability to maintain a position depended on passive obedience to higher authorities. To change this, clear leadership from the political top is needed. Such leadership was exercised in the run-up to the HIPC completion point when an impressive number of reforms were initiated and completed, but seems to have waned post-HIPC.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/implementing agencies

64. The borrower noted that the ICR assessment and ratings could have given greater weight to the significant efforts made by the Togolese authorities in implementing their political, economic and financial reforms in a record period of time. The Borrower broadly concurs with the assessment contained in the ICR and highlights the adverse impact that the political crisis and the consequences of a lack of program with IMF had on the implementation of the program. The Borrower also underlined the need to carefully define outcomes and result indicators in order to be able to assess the impact of the program.

(b) Cofinanciers N/A (c) Other Partners and Stake Holders N/A

  

22  

Annex 1. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Name Title Unit Name Title Unit Name Title Unit

Lending (from Task Team in Program Document)

Madani Tall Country Director AFCF2

Miria A. Pigato Sector Manager AFTP4 AFTP4

Katrina Sharkey Country Program Coordinator AFCCI

Hervé Assah Country Manager AFMTG AFMTG

Mark Thomas Lead Economist AFTP4

Johannes G. Hoogeveen Sr. Country Economist AFTP4

Yemdaogo Tougma Economist AFTP4

Diop Saidou Senior Financial Management Specialist AFTMW

Fily Sissoko Lead Financial Management Specialist AFTMW

Itchi Ayindo Senior Procurement Specialist AFTPW

Brigitte Bocoum Senior Mining Specialist SEGM2

Ayi Klouvi Agriculture Economist AFTA

Christian Berger Senior Agriculture Specialist AFTA1

Nicolas Gergeley Consultant

Franklin Gbedey Energy Specialist AFTG2

Anca Dumitrescu Sr. Transport Specialist AFTTR

Adja Dahourou Private Sector Development Specialist AFTFW

Andre Ryba Consultant

Leonardo Iacovone Economist FIEEI

Alice Ouedraogo Senior Private Sector Development Specialist CICBR

Aminata Ndiaye Junior Professional Associate

Qiang Cui Economist CFPIR

Nneoma Veronica Nwogu Counsel LEGAM

Diala Afram Counsel LEGAM

Aissatou Diallo Sr. Finance Officer CTRLA

Hassine Hedda Finance Officer CTRLA

Judite Fernandes Program Assistant AFTP4

  

23  

Supervision (from Task Team Members in all archived ISRs)

Madani Tall Country Director AFCF2

Miria A. Pigato Sector Manager AFTP4 AFTP4

Katrina Sharkey Country Program Coordinator AFCCI

Hervé Assah Country Manager AFMTG AFMTG

Mark Thomas Lead Economist AFTP4

Volker Treichel Lead Economist AFTP4

Johannes G. Hoogeveen Sr. Country Economist AFTP4

Yemdaogo Tougma Economist AFTP4

Diop Saidou Senior Financial Management Specialist AFTMW

Itchi Ayindo Senior Procurement Specialist AFTPW

Brigitte Bocoum Senior Mining Specialist SEGM2

Ayi Klouvi Agriculture Economist AFTA

Christian Berger Senior Agriculture Specialist AFTA1

Nicolas Gergeley Consultant

Franklin Gbedey Energy Specialist AFTG2

Anca Dumitrescu Sr. Transport Specialist AFTTR

Adja Dahourou Private Sector Development Specialist AFTFW

Leonardo Iacovone Economist FIEEI

Alice Ouedraogo Senior Private Sector Development Specialist CICBR

Judite Fernandes Program Assistant AFTP4

P117286 - Growth Policy Reform Operation II

Stage

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending

FY12 50 125

Supervision

FY13 25 50

Total: 75 175

  

24  

Annex 2. Beneficiary Survey Results (if any)

N/A

  

25  

Annex 3. Stakeholder Workshop Report and Results (if any)

N/A

  

26  

Annex 4. Summary of Borrower’s ICR and/or Comments on Draft ICR  

1. The Government of Togo agrees with the findings of the ICR and thanks the World Bank for supporting Togo’s governance reforms aimed at reducing poverty and promoting growth. 2. The borrower noted that the ICR assessment and ratings could have given greater weight to the significant efforts made by the Togolese authorities in implementing their political, economic and financial reforms in a record period of time. The Borrower broadly concurs with the assessment contained in the ICR and highlights the adverse impact of the political crisis and the consequence of lack of program with IMF on the implementation of the program. The Borrower also underlines the need to carefully define outcomes and result indicators in order to be able to assess the impact of the program.

  

27  

Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders

N/A

  

28  

Annex 6. List of Supporting Documents

 

1. Program Document, April 26, 2012

2. Letter of Development Policy, April 12, 2012

3. Appraisal Aide-memoire, March 2012

4. Aide-memoire, Technical Mission, June 2012

5. Aide-memoire, Technical Mission, September 2012

6. Aide-memoire, Technical Mission, December 2012

7. Minutes of Negotiations, April 2012

8. Minutes of ROC meeting, February 2012

9. Interim Strategy Note and Economic Recovery & Governance, May 29, 2008

10. Minutes of Concept Note Review Meeting, December 2011

11. Closing letter, December 2012

12. World Bank, Implementation Status and Results Report for an ERGG, December 16, 2009

13. World Bank, Implementation Status and Results Report for ERGG 2, June 30, 2010

14. World Bank, Implementation Status and Results Report for an ERGG 3, June 20, 2011

15. World Bank, Implementation Status and Results Report for an ERGG 4, June 26, 2012

16. Republic of Togo: Full Poverty Reduction Strategy Paper 2009-2011, May 2009

17. Republic of Togo: Rapport de l’atelier de revue de mise en œuvre des réformes du deuxième semestre 2012 (www.togoreforme.com)

18. Republic of Togo. Budget data base with approved budget for 2013 (BOOST).

19. Republic of Togo. Plan d’actions de la Gestion des Finances Publiques Actualise pour la Periode 2011-2013 (www.togoreforme.com).

20. World Bank 2012: Financial Situation of CEB, CEET, and SBEE in Togo and Benin

21. World Bank 2012: Togo: Request for guidance from DPO team

22. World Bank 2012: Note sur la qualité des données budgétaires  

23. World Bank 2013: Banking restructuring strategy historical context in Togo

S AS AVVA N N AA N N A

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C E N T R A LC E N T R A L

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H A H OH A H OK L O T OK L O T O

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MangoMango

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KantKantéé

NiamtougouNiamtougou

AtakpamAtakpaméé

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KaraKara

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To o NavrongoNavrongo

To o OuagadougouOuagadougou

To o DiapagaDiapaga

To o NatitingouNatitingou

To o KokoroKokoro

To o SavSavé

To o Kétoutou

To o AccraAccra

To o AccraAccra

To o Yendiendi

To o BimbilaBimbila

To Lagoso Lagos

To o ParakouParakou

To o ParakouParakou

To o Tamaleamale

S AVA N N A

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Mango

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To Ouagadougou

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To Natitingou

To Kokoro

To Savé

To Kétou

To Accra

To Accra

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To Bimbila

To Lagos

To Parakou

To Parakou

To Tamale

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Mont Agou(986 m)

0° 1°E

1°E

2°E 3°E

7°N

8°N

9°N

7°N

6°N

8°N

9°N

10°N

11°N 11°N

TOGO

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

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60 Kilometers

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NOVEMBER 2004

TOGOSELECTED CITIES AND TOWNS

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REGION CAPITALS

NATIONAL CAPITAL

RIVERS

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PREFECTURE BOUNDARIES

REGION BOUNDARIES

INTERNATIONAL BOUNDARIES