Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No. 44832-GN

FOOD PRICE CRISIS RESPONSE TRUST FUND

EMERGENCY FOOD CRISIS RESPONSE PROGRAM TO THE

REPUBLIC OF GUINEA

UNDER THE GLOBAL FOOD CRISIS RESPONSE PROGRAM

PROGRAM DOCUMENT

FOR A PROPOSED

FOOD CRISIS RESPONSE DEVELOPMENT POLICY GRANT (US$2.5 MILLION)

AND EMERGENCY PROJECT PAPER

FOR AN ADDITIONAL FINANCING GRANT

TO THE

THIRD URBAN DEVELOPMENT PROJECT (US$2.5 MILLION)

AND

A GRANT FOR AN EMERGENCY

AGRICULTURAL PRODUCTIVITY SUPPORT PROJECT (US$5.0 MILLION)

September 8,2008

Agriculture and Rural Development Sustainable Development Department Country Department AFCWl Africa Region

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without Wor ld Bank authorization.

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CURRENCY EQUIVALENTS (Exchange Rate Effective as o f July 16,2008)

Currency Unit = GuinCe Nouveau Franc (GNF) US$1 = GNF4,526

GUINEA - GOVERNMENT FISCAL YEAR January I -December 31

WEIGHTS AND MEASURES Metric System

ACRONYMS AND ABBREVIATIONS

AFD AfDB I African DeveloDment Bank

I Agence Franqaise de Ddveloppement (French Development Agency)

1 EuroDean Union I

.. 11

FOR OFFICIAL USE ONLY

UN UNDP UNFPA UNICEF VCSP WFP WHO

United Nations United Nations Development Program United Nations Fund for Population Activities Uni ted Nations Children Fund Village Communities Support Program Wor ld Food Program Wor ld Health Organization

Vice President: Obiageli Katryn Ezekwesili Country Director: Ishac D iwan Sector Directors: Inger Andersen

Sector Managers: Karen McConnell-Brooks Sudhir Shetty

Antonella Bassani Eustache Ouayoro Jane Hopkins (Task Team Leader) Wi l f r ied Engelke (Co-Task Team Leader - DPO) Catherine Farvacque (Co-Task Team Leader - Urban)

Task Team Leaders:

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

... 111

REPUBLIC OF GUINEA

EMERGENCY FOOD CRISIS RESPONSE PROGRAM

TABLE OF CONTENTS

OVERVIEW OF A PROPOSED EMERGENCY FOOD CRISIS RESPONSE PROGRAM FOR THE REPUBLIC OF GUINEA ........................................................................................................................................... 1

A.

B.

C.

D.

E.

F.

G.

H.

I.

INTRODUCTION ............................................................................................................................................. 1

RATIONALE FOR PROPOSED BANK EMERGENCY PROGRAM ........................................................ 2

COUNTRY CONTEXT ..................................................................................................................................... 3

INSTITUTIONAL AND CAPACITY ISSUES ............................................................................................... 3

GOVERNMENT RESPONSE TO THE CRISIS ............................................................................................ 4

OTHER DEVELOPMENT PARTNER STRATEGIES AND PROGRAMS ............................................... 5

BANK RESPONSE ............................................................................................................................................ 5

CONSISTENCY WITH COUNTRY STRATEGY ........................................................................................ 7

R I S K S AND MITIGATION MEASURES ...................................................................................................... 7

ATTACHMENT 1: PROGRAM DOCUMENT FOR A PROPOSED FOOD CRISIS RESPONSE DEVELOPMENT POLICY GRANT ................................................................................................................ ........9

A.

B.

C.

D.

E.

F.

INTRODUCTION ................................................................................................................. ............................9

COUNTRY CONTEXT ........................................................ ............................................. ............................10

Developmental Status and R Recent Economic Developmen Macroeconomic Outlook for 2 ....................................... .................... 14 External Debt Sustainability

THE GOVERNMENT’S PROGRAM ................................. .......................................................................... 18

The Challenge of Pervasive Poverty 18 The Poverty Reduction Strategy ....................... .............................................. 20

BANK SUPPORT TO THE GOVERNMENT’S PROGRAM .................................................................... 21

Link to the Country Assistance Strategy ...... ................................................ 21

Collaboration with IMF and Other Development Partners ... Lessons Learned. ....................................................................... ................... .23 Analytical Underpinnings ............................ .................................

Relationship with Other Bank Activities ............................................................ ..................................

THE PROPOSED OPERATION ......................................... ..................................................................... .....24 Description of the Operation ..................... ....................................................... 24

.................... 25 Policy Areas .................................................... Prior Actions for the Proposed Grant 26

OPERATION IMPLEMENTATION .................................... .............. .... .......... ........ ..... ................................ 27

Poverty and Social Impact ...................................................... .................... 27

i v

Environmental Aspects 28 Implementation. Monitoring and Evaluation ..................................................................................................... 28 Fiducialy Aspects Disbursement and Risks and Risk Mitigation

ANNEX 1: LETTER OF DEVELOPMENT POLICY .......................................................................................... 31

ANNEX 2: POLICY MATRIX ................................................................................................................................ 40

ANNEX 3: FUND RELATIONS NOTE .................................................................................................................. 41

ATTACHMENT 2: EMERGENCY PROJECT PAPER FOR A PROPOSED ADDITIONAL FINANCING GRANT TO PHASE I1 OF THE THIRD URBAN DEVELOPMENT PROJECT AND A GRANT FOR AN AGRICULTURAL PRODUCTIVITY SUPPORT PROJECT ............................................................................. 43

A . INTRODUCTION ........................................................................................................................................... 43

B . LABOR-INTENSIVE URBAN PUBLIC WORKS PROGRAM (US$2.5 MILLION) .............................. 43

C . AGRICULTURAL PRODUCTIVITY SUPPORT PROJECT (US$5.0 MILLION) ................................. 47

ANNEX 1: FINANCIAL MANAGEMENT AND DISBURSEMENT ARRANGEMENTS .............................. 59

ANNEX 2: PROCUREMENT ARRANGEMENTS ............................................................................................... 68

ANNEX 3: PROJECT PREPARATION AND APPRAISAL TEAM MEMBERS ............................................. 73

GUINEA AT A GLANCE ......................................................................................................................................... 74

COUNTRY MAP ....................................................................................................................................................... 77

The Food Crisis Response Development Policy Grant for Guinea was prepared by an IDA team consisting of Jane Hopkins. Elizabeth Mekonnen (AFTAR); Wilfried Engelke. Carlos Cavalcanti. Mamady Koulibaly and Glaucia Ferreira (AFTP4); Barbry Keller (AFCGH); Renaud Seligmann (AFTFM); Irina Luca (AFTPC); Irina Kichigina. Nathalie Munzberg (LEGAF); and Aissatou Diallo (LOAFC) .

V

DEVELOPMENT POLICY GRANT DATA SHEET PROPOSED FOOD CRISIS RESPONSE DEVELOPMENT POLICY GRANT

FINANCING AND PROGRAM SUMMARY

Recipient: Government o f Guinea

Proposed Amount: US$2.5 mi l l ion

Terms: Grant

Schedule of Disbursement

Single tranche to be disbursed upon effectiveness

Description: The proposed Food Crisis Response Development Policy Grant o f US$2.5 mi l l ion i s intended to support the government’s poverty reduction strategy by providing the authorities with needed fiscal space to compensate for the lost revenues resulting from the temporary customs duties reduction on rice imports. The proposed Grant i s being undertaken under the Global Food Crisis Response Program (GFRP), which was endorsed by the Board on M a y 29, 2008, and wil l be financed out o f the Food Price Crisis Response (FPCR) Trust Fund (TF). The government’s recent pol icy clarification that the export ban on agricultural products expired at the end 2007, and that no new export ban is being considered, wil l provide a boost to food production. The government has, however, made an exemption from this pol icy for rice exports for the time being because o f distortions in the market. I t i s preparing to analyze the rice market, with support from i t s development partners, to study the possibilities o f levying a tariff on the re-exports o f rice to address distortions in the market. In the medium- term, the government intends to stimulate agricultural production through agricultural investment projects, investments in rural infrastructure and rehabilitation o f extension services.

Benefits:

Risks:

The measures supported by the proposed grant are expected to have a significant positive impact on poverty reduction. By providing the authorities with needed fiscal space to compensate for the lost revenues resulting from the recently reduced customs duties o n rice imports (25 percent broken rice), the operation would help mitigate the impact o f such price increases and contribute to continued basic service delivery for vulnerable groups. Also, the government’s confirmation that there i s no export ban on agricultural products in place since the end 2007, i s expected to ameliorate food security.

The following r isks could jeopardize the success o f the program supported by the proposed grant. First, Guinea remains highly vulnerable to

vi

commodity price changes. Further increases in world food and fue l prices may undermine macroeconomic stabilization efforts and the impact o f the government’s program on the poor. Also, further worsening o f the external environment may lead to increased political and social instability. These r isks are mitigated through intensive monitoring by the government and dialogue with donors and, in the case o f further significant increases in food and fue l prices, may require additional measures to sustain the fiscal balance and macroeconomic stability. The r isk o f further social and political instability i s mitigated by the broad commitment from the government and trade unions to the objectives o f the economic program and the willingness o f development partners to support the program with additional financing, in case needed.

Second, the goal o f creating fiscal space to protect critical expenditures could be made more difficult in the event that revenues and grants fal l significantly short o f targets or if substantial new and unavoidable spending requirements emerge. This risk i s mitigated by the government’s already demonstrated commitment to protect priority expenditures through reductions in less essential spending.

Finally, while Guinea may be able to import food (notably rice), the vulnerable and food insecure may not be able to pay for it. This risk i s mitigated by the fact that several development partners (including the World Bank) are supporting programs aimed at creating income and employment opportunities during this period o f rising food and o i l prices.

Operation ID No.: P113625

vii

EMERGENCY OPERATION PROJECT PAPER DATA SHEET Guinea: Third Urban Development Project (Phase 11)

Africa Region

Date: September 8, 2008 Country Director: Ishac Diwan Sector Manager: Eustache Ouayoro Lending instrument: Emergency Recovery Loan

Team Leader: Catherine Farvarque Sectors: General water, sanitation and flood protection sector (1 00%) Themes: Global food crisis response (P) Environmental screening category: B

Development Objective: The original project development objectives remain unchanged: (a) to improve the provision o f infrastructure and service in Conakry and secondary cities; and (b) to improve the financial and organizational management o f municipalities in support o f the decentralization process.

Project ID(s): P113608

Proposed terms: 100 percent grant basis

Expected effectiveness date: September 15,2008

Recipient: Government o f Guinea

Total Amount: US$2.5 mill ion

Expected implementation period: 9 months

Expected closing date: September 30,2009

Responsible agency: Project Coordination Unit,

Source

... Vl l l

Local Foreign I Total Borrower Total IBRD/IDA Trust Funds Others Total

2.50 2.50

2.50 2.50

Total IBRD/IDA Trust Funds

2007 2008 2009 2010 201 1 2012

2.25 0.25 Does the emergency operation require any exceptions from Bank policies?

Are there any critical r i sks rated “substantial” or “high”? Have these been approved by Bank management?

Yes [I N o [XI Yes 11 N o [I Yes [XI N o [I

What safeguard policies are triggered, if any? The urban labor intensive public works program component i s being implemented through the implementation arrangements already existing for the Phase I1 o f the Third Urban Development Program (APL) which i s in the safeguard screening category S2 and the environmental category B. Both an ESMF and RPF were prepared. N o additional safeguards will be triggered under the additional financing grant.

I Significant, non-standard conditions, if any: None

ix

EMERGENCY OPERATION PROJECT PAPER DATA SHEET Guinea: Emergency Agricultural Productivity Support Project

Africa Region

Date: September 8,2008 Country Director: Ishac Diwan Sector Manager: Karen Mcconnell Brooks Lending instrument: Emergency Recovery Loan

Team Leader: Jane C. Hopkins Sectors: Crops (1 00%) Themes: Global food crisis response (P) Environmental screening category: B

Project ID(s): P113268

Proposed terms: 100 percent grant basis

Expected effectiveness date: September 15, 2008 Recipient: Government o f Guinea

Total Amount: US$5.0 mi l l ion

Expected implementation period: 18 months

Expected closing date: June 30, 2010

Responsible agency: Ministry o f Agriculture, National Federation o f Producer Organizations, PACV2

Source Borrower Total IBRD/IDA Trust Funds Others

What safeguard policies are triggered, if any? Environmental Assessment Policy (OP/BP/GP 4.01) and Pest Management Policy (OP 4.09)

Significant, non-standard conditions, if any: None

Local Foreign Total

5 .OO 5.00

X

Total 5.00 1 5.00

Total JBRD/IDA Trust Funds

2007 2008 2009 2010 201 1 2012

4.50 0.50 Does the emergency operation require any exceptions f rom Bank policies?

Are there any critical r isks rated “substantial” or “high”? Have these been approved by Bank management?

Yes [I N o [ X I Yes [I N o [ 1 Yes [XI N o [ ]

OVERVIEW OF A PROPOSED EMERGENCY FOOD CRISIS RESPONSE PROGRAM FOR THE REPUBLIC OF GUINEA

A. INTRODUCTION

1. This document seeks approval to provide Grants totaling US$lO.O mi l l ion to support the Bank’s Guinea Emergency Food Crisis Response Program (GEFCRP). The program consists o f a proposed Food Crisis Response Development Policy Grant (US$2.5 million), additional financing to the Third Urban Development Project (US$2.5 million), and an Emergency Agriculture Productivity Support Project (US$5 .O million). The proposed Grants are being undertaken under the Global Food Crisis Response Program (GFRP), which was endorsed by the Board on M a y 29, 2008, and wil l be financed out o f the Food Price Crisis Response (FPCR) Trust Fund (TF). The objectives o f the GFRP are to: (i) reduce the negative impact o f high and volatile food prices on the lives o f the poor in a timely way; (ii)support governments in the design o f sustainable policies that mitigate the adverse impacts o f high and more volatile food prices on poverty while minimizing the creation o f long-term market distortions; and (iii) support broad-based growth in productivity and market participation in agriculture to ensure an adequate and sustainable food supply response.

2. This document i s composed o f three sections: (i) an overview document describing the GEFCRP program including background, context, rationale and a description o f the Government and the Bank’s response; (ii) the program document for the proposed Food Crisis Response Development Policy Grant (Attachment 1 , plus Annexes); and (iii) the emergency project paper (EPP) for the two proposed investment operations (Attachment 2, plus Annexes). To avoid duplication, the overview document provides the context and rational for al l three operations and the Food Crisis Response Development Policy Grant program document provides the macroeconomic and fiscal outlook for the entire GEFCRP. Thus, the Emergency Policy Paper (EPP) assumes the information in the overview document and the proposed Food Crisis Response Development Policy Grant as background and does not repeat what i s provided in these sections.

3. The proposed GEFCRP would help finance activities to mitigate both the short-term and the medium-to-long-term impact o f rising food prices in Guinea, which result from the global acceleration in food price inflation. The proposed interventions wil l support the Government of Guinea’s (GoG’s) national strategy to maintain and enhance food security, including: (i) customs duty reduction on rice imports, which i s a basic staple for the poor; (ii) increasing access to food for the poorest and most vulnerable; and (iii) expediting a supply response o f agricultural production through the implementation o f measures to raise yields and consequently the production o f staples. Specific Bank interventions include:

0

0

Increasing the availability of affordable rice by temporarily reducing customs duties on imports o f the lowest-price rice, thus targeting the most vulnerable consumers; Creating employment and income opportunities for households in the most affected urban areas through labor intensive public works programs; and

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Enhancing rice productivity by distributing improved seed, fertilizer, and providing technical assistance.

Component I: Food Crisis Response Development Policy Grant

4. to the food crisis and constitutes the Bank’s contribution to a joint UN response.

5.

The GEFCRP was formulated in the context o f the Government’s own strategic response

The proposed overall allocation is as follows:

Table 1: Costs by Activity

2,500,000 New Project

Project Component I :mo,nt US% 1 Modality I I

5,000,000 Component 111: Emergency Agricultural Productivity Support Project New Investment Lending

Component 11: Emergency Labor Intensive Public Works I 2,500,000 I Additional Financing I I

I TOTAL I 10,000,000 I

B. RATIONALE FOR PROPOSED BANK EMERGENCY PROGRAM

6. Food insecurity i s a chronic phenomenon in Guinea. In spite o f a strong agricultural potential, the country imports approximately a third o f i t s rice needs. The World Food Program (WFP) estimates that 6 percent o f households are severely food insecure. Acute malnutrition affects 9 percent o f Guinean children. Food insecurity i s linked to poverty, which affects 54 percent o f the population. There i s concern that higher prices could lead to a decline in the quantity and quality o f food consumption, and lead to higher rates o f acute malnutrition, especially during the current lean season. This risks exacerbating an already fragile political situation with potential for increased unrest and violence.

7. I t is in this context that the Bank i s proposing a three-pronged food emergency response program for Guinea. The first component o f this program consists o f a new Food Crisis Response Development Policy Grant aimed at providing the authorities with needed fiscal space to compensate for the loss o f revenues resulting from the temporary reduction o f customs duties on low-quality rice, while targeting the reductions to the poorest consumers. The second component o f this program proposes a labor-intensive urban public works program aimed at providing employment and income to the poorest households in the most affected areas. The third component o f this program i s a new agricultural productivity project that would finance the distribution o f improved seeds, fertilizer and technical assistance to boost rice production.

8. The proposed emergency food crisis response program is consistent with the Bank’s new Global Food Response Program (GFRP), which aims at allowing a comprehensive and rapid response to the crisis across a range o f different instruments. The objectives o f the GFRP are to: (i) reduce the negative impact o f high and volatile food prices on the lives o f the poor in a timely way; (ii)support governments in the design o f sustainable policies that mitigate the adverse impacts o f high and more volatile food prices on poverty while minimizing the creation o f long-

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term market distortions; and (iii) support broad-based growth in productivity and market participation in agriculture to ensure an adequate and sustainable food supply response.

C. COUNTRY CONTEXT

9. Guinea i s a low-income, food-deficit country o f 10.2 million, which ranked 160 out o f 175 countries in the 2007 UNDP Human Development Indicators. Over the past 15 years, Guinea has been plagued by political instability. Starting in early 2000, the country has been strongly affected by mil i tary conflicts in neighboring countries, such as Liberia and Sierra Leone. Since then Guinea’s economy has experienced low growth and double-digit inflation. In January and February 2007, strikes and confrontations between security forces and demonstrators in urban areas were partly caused by high food and fuel prices, but a fragile peace has since been maintained. There i s concern that the recent worldwide increases in commodity markets could again jeopardize the country’s new-found political stability. Gas prices increased 63 percent on April l s t , and retail rice prices have increased by over 85 percent in the past year, leading to fear o f renewed political tension and violence.

D. INSTITUTIONAL AND CAPACITY ISSUES

10. As part o f its 2007 emergency response program, the Government has embarked upon a significant program o f governance reform with assistance from development partners including the Bank. Government’s five-point strategy for public finance reform aims at: (i) improved effectiveness, efficiency and transparency o f public resource management; (ii) improving internal and external resource mobilization with a view to carry out al l expenditure programs and attain fiscal balance; (iii) reinforced institutional structures o f the Ministry o f Economy and Finance, working along with Guinea’s development partners, with a view to improve social delivery; (iv) establishing a public financial management fiamework that i s coherent, effective and adapted to the Guinean needs; and (v) developing a Public Financial Management (PFM) control system that reflects international best practices.

11. The Bank has been able to support progress in governance in selected areas, where there has been national leadership and political commitment. Government, under the leadership o f former Prime Minister Lansana Kouyat6, acted resolutely in re-establishing basic principles o f economic governance. These include work on budgetary deconcentration and the development o f budget tracking mechanisms. The government also implemented measures related to the mining sector, including the Extractive Industries Transparency Initiative (EITI), finalizing audits for most ministries bubl ished in form o f a summary), and starting a review o f several mining contracts and implemented measures related to the Extractive Industries Transparency Initiative (EITI).’ Finally, the authorities pushed forward with reforms in the Central Bank o f Guinea (BCRG) to strengthen i t s accounting system and independence addressing rapidly key weaknesses in the realm o f economic governance. The reform policies were acknowledged by the IMF, whose three-year arrangement under the Poverty Reduction and Growth Facility (PRGF) was approved by the Board on December 21, 2007. However, both economic and

’ Guinea adhered to the EITI in 2005. The first EITI report auditing government revenue data from six mining companies for 2005 was published in October 2007. I t found that payments reported by the authorities and the companies matched closely.

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political governance remain challenges that need to be addressed. The new Government seems highly committed to continuing reforms already started.

12. Strengthening institutional capacity has focused mainly on institutional transformation in government entities carrying out service delivery functions. The Bank’s support in this area focuses primarily on system-wide reforms in public financial management and procurement - critical functions for implementing development programs. In addition, the Bank provides technical assistance to strengthen capacity and governance in the mining sector, a key sector in the Guinean economy. However, overall implementation capacity remains weak. To mitigate this, the Bank’s proposed investment financing responding to the food crisis wil l be channeled through entities carrying out existing Bank’s projects which have strong management and a good track record o f implementation.

E. GOVERNMENT RESPONSE TO THE CRISIS

13. The Government o f Guinea has recently formulated i t s strategy for responding to the food price crisis along two main pillars: (i) supporting access to food for the most vulnerable populations; and (ii) supporting increases in agricultural production. In the short-term, the Government i s working with partners and the private sector on measures to ensure a sufficient stock o f rice and fish until the end o f the year; putting in place social protection measures to protect the poorest and most vulnerable; and enhancing management o f 150,000 hectares o f land to improve agricultural production in the 2008/2009 period. Over the longer term, Government plans to meet food demand with local production through improvements in water management systems, access to technology, provision o f tools and seeds and building capacity in the fishing sector. An Emergency Food Crisis Committee, under the supervision o f the Prime Minister, has been created to coordinate and monitor the crisis situation and undertake emergency measures aiming at protection o f vulnerable groups. Specifically, the program includes:

(i) Supporting access to food: . . .

The temporary reduction o f rice customs duties from 12.75 to 2.75 percent from June 1 to end October 2008; The distribution o f take-home food rations for children for fami l ies o f five or more members; Emergency school feeding and nutrition support; Building an emergency food reserve o f 25,000 metric tons.

(ii) Increasing agricultural production: . Emergency support in the 2008 planting season with fertilizers, improved seeds, veterinary inputs, repair and maintenance o f agricultural assets, construction o f storage, capacity building in agricultural services; and Medium- to longer-term support to intensify rice production and ensure national food supply through investments in irrigation infrastructure and improved inputs, water management, technology transfer, technical assistance to producers and diversify crop production.

.

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F. OTHER DEVELOPMENT PARTNER STRATEGIES AND PROGRAMS

14. In the past months, intensive discussions on support for the government’s efforts in responding to the crises have taken place among representatives from the European Commission, France and key UN agencies. A rapid food assessment has been carried out by WFP from M a y 12-23, 2008, identifying priority sectors for response. The result is an emerging UN-family response from WFP, UNICEF, FAO, WHO and UNFPA that reflects a number o f existing approaches combined with innovative rapid-response initiatives aligned with the strategic pillars o f the Government’s response to the crisis. The objective o f the response i s to save lives by delivering food and medicines to people in need while also putting in please measures to safeguard against epidemics and reduce the prospects o f violence. Currently, WFP has set up a food security program in the poorest areas o f Guinea during the 3 months o f the lean season (July to September), consisting o f a monthly rice food-ration o f lOkg per person per day distributed to an estimated 88,000 acute food insecure people. Also, since March 2008, UNICEF is providing therapeutic feeding to severely malnourished children between the age o f 0 to 5 years old and pregnant women in areas most at risk and plans to scale up activities to 50,000 children and pregnant women throughout the country. Finally, the Red Cross is regularly mobilizing to assist the population during vaccination campaigns, epidemics and to provide f i rs t aid.

15. In addition, FA0 plans to provide agricultural inputs and tools to 70,000 households in 33 prefectures and 2 communes in October to December 2008 for gardening and to 165,000 households in M a y to September 2009 for rice and maize production in al l the prefectures. In the health sector, UNFPA, WHO, UNICEF wil l intensify prenatal care for 500 000 pregnant women and nutritional rehabilitation o f malnourished babies under 5 years o f age in 360 health centers o f Haute Guinea, Moyenne Guinea and the Forest Region through existing national programs aiming at reduction o f maternal morbidity and mortality, neonatal and juvenile nutritional rehabilitation.

G. BANK RESPONSE

16. The Bank’s strategy for emergency support is aligned with the Government’s strategic approach and i s in the context o f the agreed jo int UN response. The Bank proposes an emergency program that focuses on measures to address both the short and medium to long term implications o f the global food crisis for Guinea. The suggested sequence o f the emergency program i s mutually supportive. The proposed program reflects the Bank’s comparative advantage and builds on current strengths - particularly i t s existing portfolio o f programs - and i s cognizant o f proposed responses o f Government and other Development Partners. I t i s fully consistent with the interventions set out in the Bank’s Global Food Crisis Response Program (GFCRP). In this context i t should be noted that Guinea is very fragile and has no additional resources to use for food price crisis response. Guinea’s existing IDA program is limited and fully committed. Thus, the proposed interventions are suggested to be financed out o f the newly created Food Crisis Response Trust Fund.

17. The three components o f the Bank’s emergency response are:

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. Component 1: Food Crisis Response Development Policy Grant (US$2.5 million). This is intended to support the Government’s poverty reduction strategy by providing the authorities with needed fiscal space to compensate for the loss o f revenues resulting from the temporary reduction o f customs duties on low-quality rice by 10 percentage points, from 12.75 to 2.75 percent. The application o f reduced customs duties wi l l be effective for the period from June 1 to October 3 1 , 2008, which covers the lean season through the Ramadan period. The reduced duties will apply to low-quality imported rice only. The Government’s 2008 budget assumed a rice import price o f US$280 per ton. At a now assumed current average import price o f US$600 per ton and projected monthly rice imports averaging about 30,000 metric tons, the Government estimates that the revenue loss due to the reduction o f customs duties on rice amounts to US$2.5 mi l l ion compared to the projected revenues to be collected from custom duties on rice imports assumed for the budget 2008 law. Also, the government’s recent pol icy clarification that the export ban on agricultural products expired (except for rice for which an export tari f f i s currently being considered by the government after conclusion o f a respective study) at the end 2007, and that no new export ban i s being considered, wil l provide a boost to food production.

. Component 2: Emergency Urban Labor-Intensive Public Works Program (US$2.5 million). This component includes road maintenance and urban works programs aimed at providing employment and income to households in the most affected areas. This support would be provided through additional financing to the ongoing Third Urban Development Project.

1 Component 3: Emergency Agricultural Productivity Support Program (US$5.0 million). This component would finance (i) the production o f 2000 tons o f certified seed by scaling up the farmer seed multiplication network; (ii) the procurement o f 2000 tons o f fertilizer; and (iii) the distribution o f input packages to 70,000 smallholder farmers. The component aims to increase yields by 50% on 1000 irrigated hectares during the 2008-09 dry season and on 35,000 hectares during the 2009-10 rainy season for a total increase in rice production o f 100,000 tons (equivalent to national consumption needs for four months).

18. The proposed interventions are being undertaken under the Global Food Crisis Response Program (GFRP), which was endorsed by the Board on M a y 29, 2008, and wil l be financed out o f the Food Price Crisis Response (FPCR) Trust Fund (TF). The objectives o f the GFRP are to: (i) reduce the negative impact o f high and volatile food prices on the lives o f the poor in a timely way; (ii)support governments in the design o f sustainable policies that mitigate the adverse impacts o f high and more volatile food prices on poverty while minimizing the creation o f long- term market distortions; and (iii) support broad-based growth in productivity and market participation in agriculture to ensure an adequate and sustainable food supply response. The interventions proposed under the Guinea Food Crisis Response Program fit well within objectives o f the GFRP.

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H. CONSISTENCY WITH COUNTRY STRATEGY

19. The activities proposed under this emergency response build on the implementation successes and lessons learned o f the past CAS and offer a continuation through the focus on the most vulnerable. The current portfolio emphasizes community development, basic and urban services, and rural infrastructure mirrors this focus. The Government’s Poverty Reduction Strategy Paper I1 (PRSP II), completed in August 2007, outlines three main objectives: governance, growth and employment, and access to basic services. I t also identifies the agricultural sector as the prime sector for pro-poor growth and the sector’s development as the prime vehicle to achieve food security. Fol lowing the general strike and riots in 2007 which brought to the open deep socio-economic tensions in Guinea, the country has embarked on a political transition in a context o f political fragility, with two governments in 15 months (five governments since 2004) and a challenging macroeconomic stabilization in a difficult external environment. Recognizing the fragile context, the Bank i s currently preparing an Interim Strategy Note (ISN) for the period 2008 to 2010 in support o f the PRSP 11, assuming that the period up to the next presidential elections in 2010 wil l help to strengthen the policy framework and, therefore, the conditions for a Country Assistance Strategy (CAS) after 2010. The ISN will be presented to the Board before the end o f fiscal year 2009. The I S N supports the three main PRSP I1 objectives by arguing for improvements in economic governance as wel l as the government’s capacity, especially in areas with a high growth potential such as mining and agriculture. The strategy note also focuses on strengthening o f basic services, with an additional financing provided to the education sector governance project and a lending operation to improve performance o f water and electricity. The proposed food price crisis response program fits wel l within the PRSP and I S N frameworks.

I. R I S K S AND MITIGATION MEASURES

20. Guinea’s political and security situation remains fragile and volatile and i s l ikely to be exacerbated by food and fue l price increases. The Government might not be able to meet popular demand for better living conditions within the given tight fiscal situation and shifting external conditions. Popular unrest and demand for political change could de-stabilize the situation. Also, the country’s external position remains frail and i s vulnerable to external shocks. The program seeks to mitigate these r isks as part o f a multi donor effort to address the food and fuel price crisis targeting the most vulnerable groups, a key source o f instability, particularly in urban areas. Moreover, the proposed program includes budget support to help offset budgetary gaps caused by Government’s response to the food price crisis and help keep the macro program on track.

21. In general, the governance situation remains weak and there i s the risk that institutions lack capacity and political wil l to implement reforms; even though much has been accomplished on the reform agenda and on building institutional capacity since 2007 and although the new government seems committed to continuing the reform path, future commitment remains uncertain. The program aims to mitigate these r isks through use o f well established project management entities to implement the food crisis response program. The investment components o f the program are being implemented through existing project management units (PMUs) of second phase Adaptable Program Loans (APLs) with solid track records on project and fiduciary management. The program includes provisions for intensified supervision and monitoring for

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investment projects as allowed for under OP 8.00. Also, continuous support through a PRGF arrangement with the IMF will help the Government to make more progress toward macroeconomic stabilization and implement important structural reforms which impact positively on governance over the longer term. A broader dialogue on governance issues wil l be articulated in the ISN to be presented to the Board before the end o f fiscal year 2009.

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ATTACHMENT 1: PROGRAM DOCUMENT FOR A PROPOSED FOOD CRISIS RESPONSE DEVELOPMENT POLICY GRANT

A. INTRODUCTION

1. Food insecurity i s a chronic phenomenon in Guinea. Six percent o f rural households are severely food insecure,2 35 percent o f the population has regularly problems to meet minimum daily caloric requirements and 9 percent o f children suffer from acute malnutrition. Food insecurity i s linked to poverty, which affects 54 percent o f the population. Furthermore, Guinea has among the world's highest rates o f infant and maternal mortality - thus access to affordable food i s a major concern.

2. Rice i s the main staple food, accounting for about 48 percent o f the caloric intake of the poorest quintile of the population. About a third o f the annual national rice consumption i s supplied though imports and rice represents almost 70 percent o f al l food imports. The urban population i s dependent on imported rice. Higher rice import prices are therefore a particular burden on the one-third o f the Guinean population that resides in urban areas (60 percent o f which live in the greater Conakry area).

3. Global price increases have reached crisis proportions in 2008: the average export price for rice increased from US$375 metric tons in January 2008 to US$775 metric tons by June 2008. The impact o f high world food prices is compounded by the pass-through effects o f higher fuel prices, which adds to distribution costs, further fieling the rate o f food price inflation across the world. As a result, consumer prices for food have risen rapidly in Guinea. The price o f a kilogram o f imported rice in Conakry increased 96 percent from June 2007 to June 2008. Similarly, the price o f locally produced potatoes and palm o i l increased during the same period by about 80 and 64 percent, respectively, while annual inflation, which had declined to 12.8 percent at end-2007 from 39.1 percent at end-2006, has accelerated since then and was 24.6 percent at end June 2008.

4. The combined effect o f the food and fuel price hikes has created severe hardships for the population, made it more difficult for the government to maintain the planned level of basic services and exacerbated existing political and social tensions. The government i s especially concerned about the programs for education, health, and the security services. There i s a need for urgent action. The months between July and September are traditionally known as the "lean season" and, since Guinea does not have a food security stock, the government i s deeply concerned about both welfare and maintaining social peace during this period. I t i s estimated that at least 220,000 people could be pushed below the poverty l ine by a rice price increase o f 50 percent alone, according to a recent analysis, raising the poverty headcount by 1.6 percentage point^.^ The impact would be more severe for the urban population, whose poverty headcount would be increased by 5.5 percentage points (or a quarter o f the urban population).

World Food Program, Impact ofHigh Prices on Food Security and Nutrition," May 2008. Engelke, W. and Q. Wodon, Policy note on the impact of rice andpetroleum product prices in Guinea, May 2008;

based on 2003 household survey data; includes the impact on producers. See also World Bank, Guinea Poverty Diagnostic, November 2006, report no. 32822JGN.

3

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5 . Thus far, the government has taken several actions to mitigate the impact of the food and fuel price increases, notably i t has reduced customs duties on rice imports since June 1,2008, for a limited period, reduced transport prices for school students, increased scholarships for university students and launched work-for-food schemes. The customs duty reduction applied during the period June 1 to end October 2008 wil l result in revenue losses o f about US$2.5 million. In addition, the cost o f delivering priority basic services in 2008 has increased by about US$4 million, o f which US$3 mi l l ion is accounted for by the higher cost o f food, electricity and fbel.

6. The proposed grant of US$2.5 million would support the Government’s poverty reduction strategy in 2008 by providing the authorities with needed fiscal space to compensate for the lost revenues in 2008 resulting from the recently reduced customs duties on r ice imports. The proposed grant i s being undertaken under the Global Food Crisis Response Program (GFRP), which was endorsed by the Board on M a y 29, 2008, and wil l be financed out o f the Food Price Crisis Response (FPCR) Trust Fund (TF). This support would help mitigate the impact o f such price increases, especially for the urban poor who rely heavily on imported rice, and would contribute to continued basic service delivery for vulnerable groups. The government recently issued a pol icy instructions to the administration, which was publicized, clarifying that an export ban on agricultural products, which was in place in 2007, expired at end 2007. The pol icy instruction exempts, however, the export o f rice for which an export tariff i s currently being considered by the government after conclusion o f a respective studyS4 The issuance o f the pol icy stance was necessary because custom officials and popular perception continued to assume that the export ban was in place jeopardizing regional export flows o f agricultural products. The pol icy clarification is expected to provide a boost to food production. These measures would be complemented by the provision o f additional employment and income-generating opportunities for the poor, notably through work-for-cash programs, supported by donors (see paragraph 29 under this attachment). These interventions would help bridge the impact o f higher food prices until an agricultural supply response sets in with the next planting season. In the medium-term, the government intends to stimulate agricultural production through a combination o f agricultural investment projects, investments in rural infrastructure and rehabilitation o f extension services.

B. COUNTRY CONTEXT

DEVELOPMENTAL STATUS AND RECENT POLITICAL DEVELOPMENTS

7. Despite its rich endowment of natural resources, Guinea’s i s one of the world’s poorest countries. The country fares poorly in most indicators related to human development and the Mil lennium Development Goals. It ranked 160th out o f 175 countries in the 2007/08 UNDP Human Development Report.’ L i f e expectancy at birth i s reported at 54 years. Infant mortality in 2005 was estimated at 91 per 1,000 l ive births, and the mortality rate o f children under 5 years stands at 163 per 1,000, Thirty five percent o f children under 5 are chronically malnourished and 26 percent are underweight. The adult literacy rate i s 28 percent, whilst the gross enrolment rate for primary education i s estimated at around 78 percent.

The export market for rice i s distorted and a tar i f f o n re-exported rice would a im to address such distortions. Human Development Report, UNDP 2007/08 Report.

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8. Guinea’s fragility has been exacerbated by governance problems and external factors, including regional instability. In the early 2000s, regional conflict in neighboring countries spilled over into Guinea, resulting in armed attacks, significant destruction o f infrastructure and an inf low o f rehgees. As a result o f political instability and weakened governance, Guinea’s macroeconomic situation worsened, with real growth averaging only 2.5 percent in 2001-2006, a fiscal deficit o f -4.3 percent in 2006 and inflation rising to 39.1 percent by end 2006. The worsening socio-economic situation and governance environment led to strikes and civil unrest in early 2007. The unrest rapidly became a wide political movement demanding hndamental political change, improved governance and public service delivery. After eight weeks o f strike and political action, resulting in violent clashes and over 100 deaths, an agreement on the formation o f a government o f national consensus was made between the unions and the President. A new reform-minded government came to power in late March 2007 under the leadership o f Prime Minister Lansana Kouyate.

9. The government led by Lansana KouyatC began in April 2007 to carry out fundamental reforms aimed at stabilizing macroeconomic performance, improving governance and basic services. I t s policies were f i rst based on a short-term economic rehabilitation emergency program (May 2007) and, as o f August 2007, on a second generation PRSP (PRSP 11). The government acted resolutely to stabilize the economy by tightening fiscal and monetary policies, extending rapidly i t s control over expenditures and re-establishing basic principles o f economic governance. The reform policies pursued by the Kouyate government resulted in the approval by the IMF Board o f a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF) on December 2 1 , 2007. The ongoing PRGF supports the government’s macroeconomic stabilization and reform program. Maintenance o f macroeconomic stability i s in turn a key condition for Guinea to reach the HIPC Completion Point: currently estimated for end 2008, and for continued and increased donor assistance.

10. The political situation remained tense in the first half o f 2008, compounded by the impact of world food and fuel price increases. A threatened general strike in early 2008 was only avoided by last minute negotiations with the trade unions. Finally, the Kouyate Government was dismissed by presidential decree on M a y 20, 2008, after having exhausted i t s credibility to bring visible change in the living conditions o f the population. The rise in food and petroleum prices further undermined i t s range o f options. The new Prime Minister Ahmed Tidiane Souare declared his intent to continue with the reform program initiated under the Kouyate Government. Underlining this point is that key Ministers o f that government remain in their positions, including the Minister o f Finance. The new government i s considered one o f a “large consensus,” reaching out to the political parties, unions and civ i l society.

RECENT ECONOMIC DEVELOPMENTS

1 1. Economic stabilization policies were broadly successful in 2007. Fiscal targets for the year were broadly achieved in spite o f a revenue shortfall. The basic primary balance improved by 2 percentage points o f GDP (to 3.7 percent o f GDP), largely due to the strict application of monthly expenditure ceilings for l ine ministries, suspension o f automatic debits o f treasury accounts by the Central Bank o f Guinea (BCRG), prohibition o f extra-budgetary expenditures

The HIPC Decision Point was reached in 2000.

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and ad hoc tax or customs exemptions. Currency appreciation lowered the taxable basis in Guinean francs and mining revenues fe l l short because o f costs overruns, but intensified audits and a growing telecommunications sector boosted domestic taxation to 14.3 percent o f GDP (as compared to a target o f 14.8 percent). The authorities cut non-priority current spending to maintain budget discipline.

12. Monetary policy supported prudent fiscal policies through improved coordination and reporting, freezing credit to the government and aligning reserve money growth strictly to nominal GDP growth. Significant reductions in the fiscal deficit and a zero government financing pol icy helped the BCRG to make progress in the management o f monetary policy, allowing for a sharply declining growth rate o f reserve money from 84.1 percent in 2006 to 11 percent in 2007. Inflation declined from 39.1 percent at end-2006 to 12.8 percent at end- 2007, the interest rate for treasury bills turned positive in M a y 2007 as the annual inflation rate declined, the nominal effective exchange rate ended the year about one third stronger and exchange volatility eased.

13. After stalling during social unrest in early 2007, economic activity made a timid recovery (to 1.8 percent). Several sectors were constrained by frequent power outages and low government spending. However, most mining companies made up during the year for the losses occurred to their operations during the c iv i l unrest in early 2007.

Table 1: Guinea - Selected Economic Indicators, 2006-2010

Real GDP Growth Aggregate 2.4 1.5 1.8 4.5 4.7 5.0

Percent of GDP Exports Goods & Non-factor Services 23.5 6.8 6.7 26.0 10.6 8.4 Imports Goods & Non-factor Services 24.8 27.0 9.6 34.9 11.5 4.2 Current Account Balance a/ 0.5 -10.8 -2.0 -5.4 -6.8 -6.3

Revenue and Grants Revenues Grants

Expenditures Investment expenditures

Fiscal Balance Fiscal Balance, excluding grants b/ Domestic Primary Fiscal Balance

Other Broad money (%, e.0.p.) Reserve money (%, e.0.p.) Gross Official Reserves (months o f imports) Consumer Price Inflation (%, e.0.p.) Treasury Bill Interest Rate (%, e.0.p.)

16.3 14.8

1.5 19.6 4.7

-4.8 1.5

-3.2

59.4 84.1 0.8

39.1 22.0

17.1 15.1 14.8 14.3 2.3 0.8

16.8 14.8 4.5 3.5 0.3 0.3

-2.0 -0.5 3.5 3.7

5.8 4.7 11.9 11.0 0.4 0.4

15.0 12.8 20.0

17.5 15.6

1.9 18.4 5.5

-1.0 -2.9 3.5

24.2 22.2

1 .o 15.0

57.7 16.5 41.2 18.6 6.0

39.1 -2.1 4.0

2.0 10.0

18.5 16.9

1.6 18.9 6.5

-0.4 -2.0 4.2

3 .O 7.0

Exchange Rate (GNFAJS$, p.a.) 2,650 4,167 a/ Including official transfer. b l The domestic primary fiscal balance i s defined as domestic revenues minus total expenditures and net lending, excluding interest payments and externally financed capital expenditures. Source: International Monetary Fund and World Bank staff estimates and projections.

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14. In 2008, the government continued to implement bold actions to stabilize the economy despite the challenging and fragile social context. The authorities increased the petroleum price at the pump on April 1 by 63 percent;’ the electricity prices were increased on average by 62 percent on M a y 1, leaving the social tariff unchanged. The custom administration was reinforced through contracting the pre-inspection company VEFUTAS as o f M a y 1 , 2008. In addition, the authorities decided not to renew the decree banning agricultural exports which had constrained agricultural production. Also, on June 27, 2008 the government adopted a comprehensive public financial management (PFM) reform plan. The plan i s supported by Guinea’s development partners and provides the blueprint to achieve measurable progress in budget preparation, execution and oversight.

15. However, the food and fuel price increases are threatening the fragile path towards macroeconomic stabilization. The increases in food prices and the pass-through effects o f the increases in o i l prices at the pump by 63 percent on April 1, 2008 have resulted in an acceleration o f inflation since the beginning o f the year to M a y 2008, when the rate peaked at 25 percent. Since then, due to the government’s adoption o f mitigating measures and an austere macroeconomic pol icy stance, the indication i s that the annual inflation rate has declined (in June by 0.4 percent). The end o f the year inflation rate i s now estimated to be 15 percent, revising earlier projection o f 10 percent. The price hike i s also projected to increase the external current account deficit by about 4.3 percent o f GDP. Rising import prices for food and crude o i l led to a widening in the country’s trade deficit and to a decline in the import cover to less than 10 days, down from around 20 days in 2006.

16. The price increases are also challenging the government’s efforts to achieve the 2008 fiscal targets. Rising world fuel prices are gradually eroding the tax margin on the fixed pump price and fiscal revenue on top o f the impact o f the currency appreciation on the revenue base. Furthermore, the reduction o f customs duties on rice imports during June-October 2008, combined with the impact o f rising food and fuel prices, wil l make it difficult to maintain public service delivery at planned levels. As a result, the target for the primary fiscal balance under the PRGF-supported program has been lowered by 0.2 percentage points to 3.5 percent o f GDP to make room for a pol icy response to the food and fuel price crisis. There is an additional risk that continued inflationary pressures could motivate a demand for higher c iv i l service wages. Already, following unrest in the military, the government accommodated the repayment o f wage arrears to soldiers and decided to postpone the implementation o f the petroleum price adjustment formula until end-November 2008, following the earlier 63 percent price increase in April 2008. The challenge for the government i s to pursue macroeconomic stabilization while also managing demands for compensation for the price increases.

’ Through the April 1, 2008 increase, the government restored temporarily the normal petroleum taxation that had been suspended in early 2007. Since then, however, world prices o f oi l have continued to increase and the authorities decided to postpone the automatic adjustment o f pump prices to end-November 2008, due to the risks tied to hrther domestic price increases in the present fragile social context. The impact o f this postponement on government revenue in 2008 is about 0.3 percent o f GDP.

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MACROECONOMIC OUTLOOK FOR 2008-1 0

17. The changes in international prices will continue to pose a challenge for macroeconomic stability in Guinea. The global economic prospects for traded goods suggest that Guinea wil l continue to be subjected to high fuel and food prices for the next few years. The terms o f trade are expected to decline for Guinea up to 2009 as imported fue l and food prices continue to accelerate faster than export commodity prices. Only in 2010 i s Guinea projected to show slight gains in its terms o f trade (see Table 3 o f this attachment). Crude o i l prices are forecast to rise by 52 percent in 2008. Even though the price i s then expected to fa l l by 2 percent in 2009 and another 7 percent in 2010, the price in 2010 wil l st i l l be almost double the 2005 price. The outlook for rice i s equally worrisome: the international price i s expected to r ise by 99 percent in 2008 and wil l be 1.7 times the 2005 price by 2010. Similar outcomes are forecasted for sugar and wheat.

18. Key macroeconomic objectives underlying the government’s medium-term strategy as detailed in the PRSP I1 and the IMF-supported PRGF program are to continue stabilizing the economy through fiscal and monetary policies and to unlock Guinea’s economic potential by facilitating private sector involvement and pushing through governance reforms. In this regard, two sectors, agriculture and mining, are central for Guinea’s economic growth and development. Agricultural expansion i s a key medium-term objective, given i t s importance for poverty reduction,* food security and employment. Guinea’s considerable mineral endowments wi l l continue to support the balance o f payments and output growth, through large foreign direct investment (FDI) inflows which are financing a massive expansion in bauxite production. The large FDI inflows are also expected to provide new opportunities for private sector growth through enhanced linkages between mining and local f i rms.

19. The medium-term macroeconomic framework for 2008-10 projects real output to grow by 4.7 percent annually through 2010, compared to the 2005-07 average o f 2.4 percent, reflecting continuous macroeconomic stabilization, the pursuance o f structural reforms improving governance, and the impact o f the large FDI inflows. The main stimuli behind the projected growth include the strong increase in FDI in mining and an increase in public investment focusing on priority sectors (education, electricity and water).

According to the PRSP II,60 percent o f the population and 86 percent o f the poor population were found in rural areas in 2003.

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Table 2: World Trade Prices, 2006-2010"

Crude 011 US$ per barrel Percent change (%,p.a.) Percent change (%, e.0.p.)

Aluminum US$ per metric ton Percent change (% p.a.)

Rice US$ per metric ton Percent change (%,p.a.) Percent change (YO, e.0.p.)

US cents per kilogram Percent change (%,p.a.) Percent change (YO, e.0.p.)

U S $ per metric ton Percent change (%,p.a.) Percent change (%, e.0.p.)

sugar

Wheat

53.4 64.3 71.1 108.1 105.5 98.5 41.5 20.4 10.6 52.1 -2.4 -6.7 44.5 8.1 46.8

1,806 2,570 2,638 2,818 2,587 22.3 42.3 2.6 6.8 -8.2

286.3 304.9 326.4 650.0 560.0 500.0 20.5 6.5 7.1 99.1 -13.8 -10.7

0.8 8.7 18.3

21.8 32.6 22.2 28.0 30.0 32.0 37.9 49.5 -31.8 26.0 7.1 6.7 61.3 -13.1 -7.8

152.4 192.0 255.2 380.0 340.0 300.0 -2.9 26.1 32.9 48.9 -10.5 -1 1 .a 6.9 24.2 80.4

Terms o f Trade, percent change (%) -6.2 -0.4 -13.5 0.5 0.8 a. Period average changes in US$ prices. Source: World Bank commodity price projections, May 2008, and International Monetary Fund terms o f trade projections, June 2008.

20. Fiscal policy in the medium term will be geared towards improving the domestic primary fiscal balance from 3.7 percent o f GDP in 2007 to 4.2 percent o f GDP by 2010. This i s expected to be achieved through increased revenue mobilization efforts as the government aims to achieve macroeconomic stability while also expanding investment spending to support the implementation o f the PRSP 11. Several measures to improve the tax administration are being implemented, foremost the review o f the mining code in conjunction with the code for non-mining investment and the building o f capacity at the Ministry o f Economy and Finance (MEF) to assess tax declaration o f mining companies. In addition, the custom administration i s being strengthened, made subject to a comprehensive performance contract, and assisted in revenue collection by the international import pre-inspection company VERITAS. The government also aims to protect priority expenditure programs, particularly those which contribute to poverty reduction, through better budget preparation, execution and control procedures. To that effect, as indicated in paragraph 14 o f this attachment, the government has recently adopted a medium term public financial management reform plan. Continuous prudent fiscal pol icy will assist monetary pol icy in lowering inflation and ensuring that the domestic public debt i s at a sustainable level. This wil l provide scope for expanding private sector credit and contribute to lower domestic interest rates. This fiscal stance, combined with prudent monetary policy, would lead to a reduction in the inflation rate to 7.0 percent in 2010 from 12.8 percent in 2007 (and an estimated 15 percent in 2008).

21. The measures adopted by the government to respond to the price shocks have put an additional burden on an already tight budget and balance of payments situation. The customs duties reductions on rice imports result in revenue losses relative to what could have

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been collected had the tariffs been maintained at the level o f 12.75 percent. The MEF estimates that the loss in 2008 will be approximately GNF12 bi l l ion (or US$2.5 million) when valued at actual prices seen in the f i rst ha l f o f the year.g In addition, the cost o f basic service delivery i s projected to increase by an estimated GNF18 bi l l ion (US$4 million), o f which GNF 14 bi l l ion (US$3 million) i s accounted for by the higher cost o f fuel. As a result, the government’s financing requirements for 2008 amount to US$152 mi l l ion (see Table 4 o f this attachment). Additional debt rel ief and budget support pledged since the beginning o f the year are expected to close the financing gap in 2008. Guinea received better than expected terms under the January 2008 Paris Club agreement that resumes bilateral debt rel ief in the context o f the PRGF arrangement. The World Bank, AfDB and BADEA have provided supplemental interim assistance under the HIPC Initiative on an exceptional basis. Guinea has also obtained an augmentation o f access to PRGF resources o f 20 percent o f quota in 2008, which would finance about a fifth o f the balance o f payment impact. The government i s preparing a revised budget for 2008, which incorporates the additional costs incurred due to the fuel and food price shock, the additionally received external financial assistance, and reductions o f expenditures (US$7.5 million), a l l o f which would close the financing gap for 2008.

BOP (L‘SS Million) Change in Net Foreign Assets Changes in arrears Debt Rescheduling HIPC Interim Assistance Financing Sources (US$ Million)

Additional debt re l ie f ADB Paris Club Agreement Comparable treatment non-PC members Support EU New PRGF Disbursements Other Donor Support

Table 3: Guinea’s 2008 Financing Requirements (US$ million)

-76 0 -92 0

-168 0 29 0

IS9 0 152.0

8.0 35 0 14 0 18 0 53 0 12.5

EXTERNAL DEBT SUSTAINABILITY

22. A Debt Sustainability Analysis (DSA) completed in November 2007 concludes that Guinea i s in debt distress, and would remain at a high risk o f debt distress into the medium term in the absence o f the country’s reaching the Completion Point under the Enhanced HIPC Initiative and benefiting from the Multilateral Debt Reduction Initiative (MDRI). Guinea reached the Decision Point in December 2000, qualifying for US$545 mi l l ion (in NPV terms) in debt relief, and received interim debt re l ie f by al l main creditors in 2001-02. After the PRGF went

This revenue loss i s the calculated net results o f the originally budgeted revenues at a custom tariff o f 12.75 percent on 30,000 tons o f rice per month for the months June 1 to end October 2008 at a price o f US$280 per ton, C.I.F. Conakry, and the revenues collected at a custom tariff o f now 2.75 percent for same period but at an estimated import price o f US$600 per ton, C.I.F. Conakry.

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off-track at end-2002, many creditors discontinued interim rel ief and the AfDB continued i t until it exhausted resources allocated to that purpose. Only IDA and two Paris Club creditors continued providing uninterrupted interim rel ief to date. As a result o f pol icy slippages and dwindling debt relief, Guinea has had difficulties servicing i t s external debt since 2003. IDA’S HIPC interim assistance to Guinea was increased to 50 percent o f the HIPC debt re l ie f in NPV terms, but exhausted in M a y 2008, resulting in the resumption o f Guinea’s full debt service payment to IDA since then (or an additional US$15 mi l l ion for 2008).

23. At end-2006, Guinea’s public and publicly guaranteed external debt was US$3,188 million, or 101.5 percent of GDP. In the baseline scenario, several debt burden indicators are projected to remain above the thresholds for the next 10-12 years.” In particular, the NPV o f debt-to-exports ratio i s estimated at 186 percent at end-2006, well above the indicative threshold o f 100 percent, and is not projected to go below this threshold until 2020. However, the ratios o f debt service to export and revenues can fal l below the thresholds as soon as in 2008 reflecting both the projected resumption in interim HIPC debt rel ief by some creditors and a projected increase in fiscal revenues.

24. The delivery of debt rel ief under the HIPC Initiative and the MDFU would significantly reduce Guinea’s external public debt. Assuming that Guinea reaches the HIPC completion point at end-2008, the external debt burden would decline to a sustainable level from that point. The HIPC debt rel ief would reduce projected annual debt service due to Paris Club creditors by about three quarters.” Upon reaching the HIPC Completion Point, the country will also become eligible for debt relief under the MDRI, which would write-off al l debt obligations to IDA incurred up to end-2003, and the IMF and AfDB debt obligations incurred up to end- 2004.12 The implementation o f HIPC and MDRI debt relief at the end o f 2008 would eliminate about 60 percent o f Guinea’s outstanding external debt at the end o f 2008 (in net present value terms). This would proportionally reduce Guinea’s external debt ratios at the end o f 2008, which would remain wel l below the policy-based thresholds afterwards.

25. However, even after benefiting from HIPC and MDFU, Guinea’s debt sustainability would remain vulnerable to adverse exogenous shocks (especially from exchange rate fluctuations) and policy reversals. These conclusions highlight the importance o f a rapid attainment o f the HIPC Completion Point, sustained implementation o f sound macroeconomic and structural policies, and a prudent debt strategy, which includes contracting external loans only on concessional terms. Results o f the public sector D S A indicate that Guinea’s domestic debt i s significant but is expected to decrease over time. The sustainability analysis indicates, however, that the pace o f public debt reduction may be significantly affected by pol icy reversal or exogenous shocks.

lo T h e thresholds are based on the empirical finding that low-income countries with stronger policies and institutions tend to have a higher debt carrying capacity. See IDA and IMF, “Operational Framework for Debt Sustainability Assessments in Low-Income Countries-Further Considerations” (IDA/R2005-0056), April 2005.

I’ The staff estimates for HIPC Completion Point debt re l ie f are based on authorities’ data and subject to loan data verification and confirmation in the detailed pre-Completion Point debt analysis (HIPC DSA). I’ T h e MDRI does not impact the status of new debt accumulated to multilateral creditors after those dates.

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Table 1 : Policy-Based External Debt Burden Indicators Thresholds ’ Guinea’s Ratios

Baseline HlPC and MDRl scenario 2006 2007 2008 2009 2008.27‘ 2008 2009 2008.27‘

NPV of debt in percent of: Exports 100 186 160 157 146 107 59 60 67 GDP 30 65 41 43 41 29 16 17 18 Revenues 200 530 364 313 282 187 119 115 115 Debt service in percent of:

Revenues 25 53 37 15 24 14 15 10 8

‘ Policy indicative thresholds as used in the joint IMF-World Bank LIC DSA framewok for a weak

Exports 15 19 16 8 13 8 8 5 5

policy performance. The quality of policies and institutions is measured by the World Bank’s CPIA. Simple average. Revenues excluding grants.

C. THE GOVERNMENT’S PROGRAM

THE CHALLENGE OF PERVASIVE POVERTY

26. According to estimates detailed in Guinea’s PRSP 11, the poverty headcount increased from 49 percent in 2002 to 54 percent in 2005.13 The increase in poverty was mainly due to political instability, weak macroeconomic performance and poor governance. The quality o f service delivery, especially in education, health and public utilities, has also deteriorated. Since 2000, economic growth has not been sufficient to keep up with population growth. The recent food and fuel price increases have compounded the country’s social and political fragility and have likely further increased poverty. A recent analysis o f the impact o f rising food and petroleum prices suggest that the direct effects o f a 50 percent rise in rice and petroleum prices (well below the recent price increases, see paragraphs 3 and 15 o f this attachment) would cause poverty to increase by 2.3 percentage points (1.6 percentage points for the rice price increase alone). l4

27. Higher imported food prices negatively affect about one-third of the Guinean population that resides in urban areas (60 percent of which live in the Greater Conakry area). The rise in prices for imported rice i s particularly important for urban households because i t i s their main staple food, accounting for around 45 percent o f the daily calorific intake o f the average household. Figure 1 below highlights the most vulnerable districts within Guinea by simulating the impact on the poverty headcount index in each district o f a 25 percent increase in the price o f rice. These estimates suggest that the most vulnerable districts are primarily in Guinee Maritime (costal Guinea), including the capital ci ty Conakry, and G u i d e Moyenne (middle Guinea), in the northwestern part o f the country.

l3 T h i s i s an estimate based on available data in the absence o f any new household survey since 2002. I4see footnote 2.

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Figure 1 : Impact of a 25 percent increase in the price of rice on the poverty headcount index in each district

Source: World Bank staff calculations.

28. Another concern i s whether the vulnerable and food insecure population would be able to pay for the imported rice. The latest Poverty Assessment estimates that 35 percent o f Guineans regularly have problem feeding themselves and that the typical poor household spends 19 percent o f its income on rice alone. Recent developments in the food market can only have worsened food consumption levels and the situation is expected to further deteriorate through the lean season. Urban food consumption levels recently surveyed for the Greater Conakry area indicate that 39.5 percent o f households consumed seven or fewer food groups in the 24 hours preceding the survey. Some 10.5 percent o f households consumed five or fewer food groups.

29. A well balanced and sequenced emergency intervention can provide for effective and rapid relief to the poor, especially in urban areas. The urban poor households are the main consumers o f imported rice that i s 25 percent broken, preferring a lower priced imported rice over the higher priced domestically produced rice. Rapid relief for the urban poor can therefore be delivered through a lowering o f import prices for rice, as supported by the proposed operation, in the absence o f a more elaborate social safety net. This measure i s complemented with employment opportunities through work-for-cash programs, which helps stabilize the income situation o f the poor, and by other measures announced by the government (see paragraphs 49-5 1 o f this attachment). These measures can help bridge the impact o f higher food prices until an agricultural supply response sets in with the next planting season. Over the medium-tern, the Government plans interventions to stimulate agricultural production through agricultural investments and rural infrastructure projects to address bottlenecks, enhance productivity and increase rural, and through multiplier effects, urban incomes.

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THE POVERTY REDUCTION STRATEGY

30. The second Poverty Reduction Strategy Paper (PRSP 11), issued in August 2007, set out a number of objectives and priorities for 2007-2010 that address the main development challenges in Guinea. The PRSP I1 acknowledges the disappointing outcome o f the first PRSP. Thus, the objectives o f the PRSP I1 aim at recapturing ground lost over the past five years so that progress can be made towards the Mil lennium Development Goals (MDGs). The strategy has three pillars: (i) improving governance; (ii) accelerating growth and increasing employment opportunities; and (iii) improving access to basic services. I t identifies important economic and institutional reforms as wel l as mechanisms to reinforce the democratic process. The choice o f pillars and reforms derived from a number o f factors, including the experience with PRSP I, the weak status o f governance in the country, and the need to promote private sector growth in support o f the overarching commitment to reduce the high level o f poverty in the country. Special attention was also given to the topics o f food security and employment.

31. The PRSP preparation was based on a series of extensive consultations conducted throughout the country. These consultations were characterized by open and frank dialogue between government and key stakeholders - cabinet ministers, parliamentarians, non- governmental organizations (NGOs), members o f c iv i l society, the private sector, cooperative associations, and local authorities and religious leaders. The consultation culminated in a national validation congress held in Conakry on August 11 , 2007. Radio and television discussions were an important part o f the communication and sensitization efforts. The participatory approach built on the open dialogue across al l sections o f society, which arose from the general strike and violent clashes o f early 2007 and led to a new consensus government in late March 2007.

32. The first pillar recognizes weak governance as a major reason for the lack of progress in poverty reduction. The key elements o f the government program for good governance under the first pillar include: (i) strengthening the capacity o f democratic institutions; (ii) continued improvements in public financial management, especially in the management of natural resources; (iii) improvements in public service delivery through capacity building (administrative governance); (iv) decentralization o f service delivery; (v) better statistics for monitoring outcomes; (vi) judicial reform and improving the sanction system; (vii) tackling human rights abuses; (viii) improving access to information; and (ix) continued strengthening o f the police.

33. The second pillar emphasizes the continued implementation of sound economic policies to attain macroeconomic stability and a more favorable environment for private sector development. The key objectives o f the government program for sustainable growth under this second pillar include: (i) appropriate fiscal and monetary policies, including reaching the HIPC Completion Point; (ii) support to the productive sectors, and especially agriculture, through the provision o f inputs, machinery, extension services and training;15 (iii) investments in infrastructure for power, roads and information technology; and (iv) improvements in the investment climate, including through revision o f the legal framework for mining and non- mining investment in l ine with international practices, as well as a better dialogue between the

Is Inputs and machinery are to be provided on a cost recovery basis or through favorable credit terms.

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government and the private sector. In this respect, the authorities have also decided to enhance the Extractive Industry Transparency Initiative to improve governance in the management o f the country’s natural resources and enhance the benefits derived from the sector. As part o f this effort, they plan to adopt a standard mining contract and a revised mining code.

34. Under the third pillar investments in education and health and improved delivery of basic services will provide the basis for sustained poverty reduction by enhancing the capacities of the poor and reducing their vulnerability. This pillar includes several broad objectives: expanded basic education and training; expanded health, immunization and nutrition services, including HN/AIDS prevention and control; increased access to safe drinking water and sanitation facilities; social protection; and gender equality and empowerment. The key elements o f the government program under this pillar include: the decentralization o f several services, construction and rehabilitation o f facilities, subsidies, school feeding programs, improved curricula, training for teachers and health workers, and better administration, including improved statistics for monitoring educational enrollment rates and health outcomes.

35. The PRSP I1 targets are ambitious, given Guinea’s st i l l fragile situation and weak implementation capacity. The strategy targets a growth rate o f 5-5.6 percent per annum (on average 2 percent per capita). The IMF-World Bank Joint Staff Advisory Note recommended that the objectives o f the strategy be refined and updated in the annual reviews o f PRS implementation, in light o f implementation experience. Such updates could be supported by the preparation o f sectoral development strategies that would strengthen the link between the current PRS and achievement o f the MDGs.

36. A Permanent Secretariat for the Poverty Reduction Strategy, a unit o f the Ministry o f Economy and Finance (MEF), coordinates al l PRS monitoring activities. The Secretariat oversees working groups that monitor economic developments, resource allocations and expenditures, statistics, survey and census results, community based strategic planning and monitoring, and communication and dissemination. Monitoring and evaluation is coordinated by a National Technical Committee. A new household survey was conducted in 2007 and the results wil l be available in late 2008/early 2009.

D. BANK SUPPORT TO THE GOVERNMENT’S PROGRAM

LINK TO THE COUNTRY ASSISTANCE STRATEGY

37. The proposed operation i s consistent with the PRSP I1 objectives. The 2003 CAS supported the implementation o f the f i rst PRSP with a focus on reforming the institutional and policy framework, building capacity for service delivery and improving the management o f public finances. The 2003 CAS included a structural adjustment operation to support critical reforms to increase fiscal revenues and improve budget management, and envisioned PRSCs subject to a satisfactory macroeconomic framework and improvements in public expenditure management. The CAS did not include the proposed operation; however, the operation i s f i l l y consistent with the objective o f supporting the second strategic priority o f the PRSP 11, namely sustainable growth, food security and job creation. In particular, the operation would provide the authorities with needed fiscal space to compensate for the lost revenues resulting from the

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recently reduced customs duties on rice imports. This support would help mitigate the impact o f such price increases and contribute to continued basic service delivery for vulnerable groups.

38. Fol lowing the general strike and riots in 2007 which brought to the open deep socio- economic tensions in Guinea, the country has embarked on a political transition in a context o f political fragility, with two governments in 15 months (five governments since 2004), and challenging macroeconomic stabilization in a difficult external environment. Recognizing these transient circumstances, the Bank i s currently preparing an Interim Strategy Note (ISN) for the period 2008 to 2010 in support o f the PRSP 11, assuming that the period up to the next presidential elections in 2010 wil l help to strengthen the pol icy framework and therefore the conditions for a Country Assistance Strategy (CAS) after 2010. The I S N will be presented to the Board before the end o f fiscal year 2009.

RELATIONSHIP WITH OTHER BANK ACTIVITIES

39. Several operations are direct complements to the proposed grant. Key among these i s a proposed parallel Food Price Crisis Response Trust Fund operation to provide additional financing (US$2.5 million) to Phase I1 o f the Third Urban Development Project to implement a Labor-Intensive Public Works Project in Conakry. This short-term support wi l l be complemented by a medium- and longer-term support for relieving the pressure on food prices through increased agricultural production. To this effect, an Emergency Agricultural Productivity Support Project (US$5.0 million) i s also proposed. This program aims to accelerate the rice supply response through improved use o f seeds, fertilizer, herbicides and pesticides for the production o f rice in the next planting season, beginning in October. This emergency project wil l rely on the Project Coordination Unit o f the ongoing Village Communities Support Program for fiduciary oversight and will rely on a national producer organization network to facilitate rapid distribution o f the required agricultural inputs to targeted farmers. Furthermore, a grant from the LICUS trust fbnd i s being prepared to support the government’s economic reform program. Activities under the trust fund aim, among others, to: (i) create fiscal space to finance urgently needed priority expenditures through priori ty reforms in revenue administration o f the customs and mining sectors; (ii) promote efficiency, transparency and accountability in the use o f public resources through enhanced public financial management and governance; and (iii) improve the investment climate and the management o f the mining sector through the strengthening o f the legal mining and hydrocarbon investment framework.

COLLABORATION WITH IME” AND OTHER DEVELOPMENT PARTNERS

40. IMF and IDA staffs have coordinated closely on the identification of the respective institutions’ areas of focus. The IMF Board concluded the first review o f Guinea’s arrangement under the Poverty Reduction and Growth Facility (PRGF) on July 28, 2008. IMF and IDA staffs have collaborated closely to assist the authorities in the implementation o f the country’s PRSP, with the IMF taking the lead in supporting the Government on tax reform, monetary policies and financial sector issues. IDA has focused on supporting pol icy reforms in public financial management, reforms in the mining sector to enhance economic governance, c iv i l service reform, decentralization, private sector development and infrastructure (notably energy and rural roads).

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41. IDA staff have collaborated closely with other key donors. The European Commission (EC) plans to provide budget support in 2008. In addition, the E C has reserved about 50 mi l l ion Euros for the period 2008-10 for additional budget support. Public financial management, including the budget process and procurement, remain a key focus o f E C support. In addition, the EC plans to provide for l imited emergency and food security support. The AfDB intends to provide US$8 mi l l ion over the period 2008-10. IDA staffs have coordinated with the E C and the AfDB, notably on issues o f governance, corruption, PFM and capacity building.

42. The World Food Program (WFP) supports basic primary education through primary- school feeding in disadvantaged rural areas, including an incentive scheme for girls (take-home rations) and seeks to improve health and nutritional status o f women and children through integrated Mother-Child Health and Nutr i t ion programs. I t s current program reaches about 200,000 students. Discussions are under way to scale up these programs in response to the current food crisis. The WFP also supports the establishment o f a strategic rice stock to improve food security. UNICEF, jo int ly with WFP and UNDP, aims to alleviate acute malnutrition among children o f up to 5 years and expand services v ia health centers in urban areas. IFAD wil l provide US$545,000 for seed and tools in Basse GuinCe, Moyenne Guinke and Haute GuinCe for the 2008 growing season. IFAD i s also implementing medium term interventions in the country for a total o f US$20 million, in coordination with FAO.

LESSONS LEARNED

43. Cross country experience suggests that governments facing temporary price shocks should seek to maintain their expenditure plans, to the extent that they have access to non- inflationary and concessional financing, in order to minimize program disruptions and hold down costs. In the case o f permanent shocks, an adjustment in taxation and spending wil l be necessary. In the former case, budget support can help ease the process o f transition. Thus, development pol icy grants can be an effective aid mechanism for such a transition in fragile states such as Guinea. To ensure successfbl implementation, experience from other countries points to the need to emphasize continuous improvements in public financial management, adaptation to local implementation capacity, frequent consultations with the authorities, intensive supervision in collaboration with MEF staff and close collaboration with other donors.

ANALYTICAL UNDERPINNINGS

44. The conclusions and recommendations presented in a number of analytical documents provided the foundation for the design of the proposed operation. A November 2006 poverty diagnostic, based on data from the 2002 Integrated Household Survey and the Core Welfare Indicators Questionnaire (CWIQ), provides information on poverty and public service delivery issues. In addition, a recently prepared pol icy note examines the impact o f rising rice and petroleum product prices on consumer welfare and poverty.'6 The note concludes that the rice price inflation has a significantly more severe impact on the urban poor population than on the rural poor. These analyses are complemented by a recently undertaken Impact Analysis of Higher Prices on Food Security and Nutrition, issued by the World Food Program. The analysis

l6 See footnote 2.

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highlights the severe risk o f malnutrition among Guinea’s urban poor as wel l as implementation difficulties in an environment characterized by weak governance.

45. Key documents for issues related to public resource management include the Public Financial Management (PFM, Reform Plan, which was recently adopted by the government to reform public financial management. This built on IMF technical assistance reports on the status o f the PFM, the 2007 PEFA Report, a 2007 procurement audit, the 2004 PER and the 2005 corruption survey. These documents have highlighted areas for further strengthening in public financial management, several o f which are being supported under the planned LICUS Trust Fund mentioned in paragraph 38 o f this attachment.

E. THE PROPOSED OPERATION

DESCRIPTION OF THE OPERATION

46. The proposed grant of US$2.5 million would support the Government’s Second Poverty Reduction Strategy by providing the authorities with needed fiscal space to compensate for the lost revenues resulting from the recently reduced customs duties on rice imports. This support would help mitigate the impact o f international rice price increases and contribute to continued basic service delivery for vulnerable groups. The grant wil l be financed through the Food Price Crisis Response Trust Fund, which was approved by the Board on M a y 29,2008. The government’s recent announcement that the export ban on agricultural products i s no longer in effect (except for rice for which an export tariff is currently being considered by the government) i s expected to provide an immediate boost to food production. In the medium-term, the government intends to stimulate agricultural production through a combination of agricultural investment projects, investments in rural infrastructure, especially rural roads, and an expansion in the provision o f extension services.

47. Consultations on the content of the proposed grant were carried out with the MEF in July 2008. A prior World Bank mission in April and June 2008 provided advice on short and medium term interventions to counter the food crisis. The same mission included an inventory o f key safety net programs with the aim to verify opportunities for scaling up existing programs, in particular food emergency programs.

48. The proposed development policy grant meets all the requirements under the framework of the Global Food Crisis Response Program. Guinea i s an IDA-eligible country which i s a net importer o f both food and fuel. I t is therefore highly vulnerable to price fluctuations for both commodities. The appraisal mission provided pol icy analysis and advice to the Government on feasible pricing responses to the food crisis and on the agricultural growth strategy to overcome the crisis.

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POLICY AREAS

49. the food and fuel price increases:

The government has already taken the following actions to mitigate the impact of

(i) Support to consumers through the lean period: . reduction in rice customs duties from 12.75 to 2.75 percent during the period June 1 to end October 2008 to provide for a f i rst relief to the poor and vulnerable; and distribution o f take-home food rations for children for families o f five or more members. .

(ii) Support to agricultural production through: . emergency support to the 2008-09 season with fertilizers, improved seeds, veterinary inputs, repair and maintenance o f agricultural assets; and medium- to longer-term support to intensify rice production through investments in water management infrastructure, improved inputs and through activities to diversify crop production.

. 50. T o complement these measures, the Government has identified a series of measures aimed at protecting specific population groups and has asked for international assistance to support them: . . .

51.

establishment o f a food security stock o f 25,000 tons and emergency food assistance during the lean season (July-September 2008), the total costs o f which are estimated at US$28 mi l l ion - h d i n g i s being sought from UNDP, WFP and UNICEF; food assistance to primary and secondary school students in urban settings through school kitchens, and to lactating women through health centers (US$1.1 million) - funding for this assistance is not yet identified; quick infrastructure improvements for small scale fishery to improve productivity and facilitate the stocking o f fish - funding i s being sought from the BID.

Furthermore, the government has implemented specific measures to address the impact of high petroleum prices: . subsidy o f transportation for primary and secondary school students;

increased scholarships for students; and increased transport allowance for c iv i l servants. 9

52. These measures have reduced the magnitude of the shock felt by consumers; even so, inflation has been substantial, especially in urban areas (see Table 5 below). The impact has been severe particularly in 2008 when the June price o f rice rose by 97 percent over the June 2007 price, and fuel prices increased 63 percent over the same period. Moreover, with the

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exception o f agricultural support, these policies have only partially mitigated the full impact o f the price shocks.

53. The customs duties reductions result in revenue losses relative to what could have been collected had the tariffs been maintained at a level o f 12.75 percent. The Ministry o f Economy and Finance (MEF) estimates that the loss in 2008 wil l be approximately GNF12 bi l l ion (or US$2.5 million) when valued at actual prices seen in the f i rst ha l f o f the year.17 In addition, the cost o f basic service delivery increased by an estimated GNF18 bi l l ion (US$4.0 million), o f which GNT 14 bi l l ion (US$3.0 million) is accounted for by the higher cost o f fuel.

Table 5: Commodity Prices in Conakry, Guinea, 2004-0Sa (In GNF, unless otherwise mentioned)

RK e 1,275 1,778 2,604 2,065 2,529 4,05 1 I 4 7 9 96 2 Bonga fume

Bread 600 725 965 1,072 1,225 1,525 103.8 42.3 Palm oil 3,384 3,73 1 7,660 4,514 7,460 7,407 139.0 64.1

(local fish) 3,216 3,520 6,675 8,141 7,242 8,940 133.4 9.8

Wheat Flour 1,508 2,640 4,177 4,288 3,823 4,89 1 153.0 14.1 Fuel Kerosene 3,000 3,800 5,375 5,088 6,000 8,125 116.1 59.7 Petrol 3,800 3,800 5,000 4,300 4,300 7,000 80.4 62.8 Diesel 3,800 3,800 5,000 4,300 4,300 7,000 80.4 62.8 ‘ 12 month, end-of-period, inflation rates.

Source: Guinean authorities.

54. To alleviate the short-run impact on consumer welfare of rising food prices, the authorities are currently discussing options to expand ongoing safety net programs for school feeding, supplemental feeding for pregnant and lactating mothers, and food-for-workhash programs. The Bank plans to assist in this effort, as mentioned above by providing additional funding (US$2.5 million) for labor-intensive public works programs through a parallel grant under the Food Crisis Response Trust Fund. In the medium-tern, the authorities wil l stimulate food production through a combination o f agricultural investment projects, investments in the road network and the provision o f extension services. The Bank wil l contribute to this effort through the above mentioned Emergency Agricultural Productivity Support Project (US$5 .O million), for which financing i s sought under the Food Price Crisis Response Trust Fund. The Bank i s also planning to use IDA resources to meet critical agricultural investment needs for a medium term supply response.

PRIOR ACTIONS FOR THE PROPOSED GRANT

55. The proposed grant would support selected aspects of the government’s program described in Section 5.B and in i t s Letter o f Development Policy that are deemed essential to i t s

” See also footnote 10 for the calculation o f the revenue loss.

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successful implementation (see Annex 1 o f this Attachment). The rationale for the selection has been discussed in the previous section, namely their importance to the program and expressed government commitment and feasibility. Compliance with the prior actions below as defined in the Grant Agreement forms the basis for IDA to proceed with the proposed operation:

a.

b.

56.

The Recipient has reduced customs duties on imported rice, which is 25 percent broken, from 12.75 percent to 2.75 to mitigate the impact o f rapidly rising international prices o f food; and

The Recipient has issued an administrative instruction (arrzte) which clarifies that there i s no ban on agricultural exports in effect in Guinea. However, the export o f rice is exempted from this pol icy until a study on rice exports has been concluded, which i s to inform about options o f levying an exports tax on rice re-exports to address inherent distortions in this market. In addition, the Minister o f Economy and Finance informs the customs administration about this pol icy stance by issuing a ministerial instruction to the respective administrative entities. By way o f a dialogue with c iv i l society and with the help o f mass media the public dissemination o f this pol icy clarification is being sought.

The Government has decided to ban rice exports until an analysis of the rice sector, which i s affected by distortions, i s completed. TO address the question o f distortions, the government wi l l study, jo int ly with development partners, the benefits o f levying a tax on rice re-exports within the next four months. Once the study's conclusions are available, the government wi l l re-align its pol icy on rice exports with the general pol icy o f unrestricted agricultural exports.

57. The expected outcome of the proposed operation i s to enable the poor and vulnerable population in urban areas to maintain a minimum rice consumption level. The government's recent announcement that export bans on agricultural products are no longer in effect would also help ameliorate food security. I t i s estimated that the proposed pol icy measure wil l reduce the price o f imported rice by 5-10 percent" compared to prevailing prices in the absence o f this measure. Details on monitoring and evaluation arrangements are provided in paragraph 60 and in Annex 2 o f this attachment.

F. OPERATION IMPLEMENTATION

POVERTY AND SOCIAL IMPACT

58. The measures supported by the proposed grant are expected to have a significant positive impact on poverty reduction. A rapid assessment resulting from the recent Bank mission confirms that the set o f measures undertaken by the Government and detailed in paragraphs 49 to 51 are the most feasible given the circumstances and wil l have a fast and positive impact on Guinea's poor population. In addition, the 2006 Poverty Diagnostic and the analytical note on the impact o f the rice and petroleum price increases suggest that support for rice consumption i s pro-poor - with the poor accounting for 54 percent o f the food purchased in the country and spending 19 percent o f their household income on rice alone. However, while

'* It i s assumed that in the short-term the price o f imported rice i s reduced and substitution does not have an effect.

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the rural poor consume mostly domestically produced rice, the urban poor spend more than hal f of their budget for rice on imported rice. By providing the authorities with needed fiscal space to compensate for the lost revenues resulting from the recently reduced customs duties on rice imports (25 percent broken), the operation would help mitigate the impact o f such price increases and contribute to continued basic service delivery for vulnerable groups. The government’s recent announcement clarifying that no export ban on agricultural products i s in effect i s also expected to provide a boost to agricultural production and thus ameliorate food security.

ENVIRONMENTAL ASPECTS

59. The proposed operation i s not likely to have significant negative environmental impacts. The operation does not directly involve any significant physical process that would impact the environment o f Guinea. However, the operation i s set in the framework o f the government’s broad program to mitigate the impact o f the food and h e 1 price increases which i s expected to lead to the intensification and expansion o f rice production, including through the use o f fertilizers and pesticides. Potential negative environmental impact o f the government’s program could include soil erosion and water contamination from runoff. The Recipient wi l l be preparing a pesticide management plan and environmental management framework for the Emergency Agricultural Productivity Support Project mentioned in paragraph 54 above. These documents wil l be publically disclosed and disseminated by the Ministry o f Agriculture and, as such, can be more broadly applied to the Ministry’s program o f agricultural intensification. Although Guinea’s policies recognize the need to promote environmental protection, and efforts are made to mainstream such policies, including for the mining sector, the capacity to implement such policies remains weak. Incremental fbnding from the GEF financed projects integrated into the Phase I1 o f the Village Communities Support Program (VCSP) i s supporting capacity building for environmental project screening and increased awareness o f environmental issues.

IMPLEMENTATION, MONITORING AND EVALUATION

60. The government has established a Food Emergency Crisis Committee, under the authority o f the Prime Minister and supported by a technical unit, to coordinate, monitor and evaluate its global response to the crisis. Within this broader coordination arrangement, the administration o f the proposed operation wil l be the responsibility o f the MEF and the Ministry o f Commerce and Competitiveness. Both form the National Consultative Permanent Committee for Price Competitiveness. The committee i s charged to monitor the implementation and the impact o f the tariff reduction on rice prices. In particular, the committee has negotiated with importers a formal agreement which allows for tariff reductions on rice imports against additional disclosure and monitoring o f import and sales contracts as well as o f margins. I f the agreement i s violated, the granted tari f f advantage i s declared void and has to be repaid. The participation o f importers in the agreement is on a voluntary basis. W h i l e there i s no declared price for rice, a price ceiling o f GNF 190,000 for 50 kilogram o f rice i s targeted. The mechanism i s reviewed once a month. Price monitoring i s exercised permanently. The government wi l l make use o f the latest household survey data o f 2007, and collected price data, to analyzelg the impact o f the measure on the rice consumption o f the urban poor. The implementation of this pol icy wil l be reviewed by the government in close coordination with

This will be done prior to the closing o f the Food Crisis Development Policy Grant slated for July 31,2009.

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regular Bank missions to ensure continued implementation o f the program within an adequate macroeconomic pol icy framework.

FIDUCIARY ASPECTS

61. The Bank has reviewed the fiduciary arrangements in the context of the preparation of this grant proposal. Following the PEFA (Public Expenditure and Financial Accountability) assessment o f 2007 and earlier reports (PER, C F A A and CPAR), there are several shortcomings in the country’s public expenditure management:” (i) budget credibility, comprehensiveness and transparency; (ii) budget formulation and execution; (iii) accounting and financial reporting; and (iv) internal and external oversight (audit). The PEFA report indicates that budget comprehensiveness is weakened by the fact that the budget classification and documentation provide only a partial view o f expenditure programs. Budget execution suffers because, in some instances, expenditures were made directly by the Treasury without going through the normal commitment, verification and payment process. Lastly, accountability i s reduced by the limited coverage o f internal audits and the quasi-absence o f external oversight on the part o f the Court o f Accounts and Parliament. These findings have also been confirmed in a recent external audit covering al l ministries, which was requested by the authorities in M a y 2007. A summary o f the report has been widely published.

62. To address these concerns, the Government has recently adopted a multiyear public financial management reform plan.” The plan i s supported by the IMF, the Bank and other development partners. I t i s organized along five results that the plan aims to achieve: (i) improved effectiveness, efficiency and transparency o f public resource management; (ii) improved internal and external resource mobilization with a view to carry out al l expenditure programs and attain fiscal balance; (iii) reinforced institutional structures at the Ministry o f Economy and Finance, with a view to improve basic services delivery; (iv) establishment o f a public financial management framework that is coherent, effective and adapted to the Guinean needs; and (v) development o f a PFM control system that meets international best practices. The plan includes actions designed to: strengthen financial regulations in compliance with international standards; improve the budget process through capacity building for strategic planning and budgeting in sector ministries and the adoption o f a new budget classification to better track poverty-reducing expenditures and ensures budget comprehensiveness and transparency; reform public procurement; enhance budget execution, including through a strengthened Integrated Financial Management Information System and chart o f accounts; and strengthen internal and external audit and accountability by providing the chamber o f accounts with more resources and clarifying i t s mandate.

63. The IMF updated its safeguards assessment of the Central Bank of Guinea (BCRG) in 2007. The assessment confirmed the existence o f critical weaknesses. The main problems identified concerned foreign exchange management, the quality o f the internal control, the audit environment and a lack o f independence o f the BCRG. The authorities have committed to implementing the 2007 safeguards recommendations. In this respect, the latest IMF review mission noted important progress since July 2007 in strengthening internal controls and foreign

2o Mesure de la performance de la gestion des finances publiques en la Rkpublique de Guinke (Juillet 2007) - a report commissioned by the French Foreign and European Community Affairs Ministry.

Plan Stratkgique de reforme definance publiques en Rkpublique de Guinke, June 2008.

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exchange operations. A revised Central Bank law, strengthening the independence o f BCRG, i s expected for the end o f 2008.

DISBURSEMENT AND AUDITING

64. The proposed operation would consist o f a single tranche grant o f US$2.5 mi l l ion to be available upon effectiveness, anticipated by early August 2008. The grant wil l follow IDA’S disbursement procedures for development pol icy operations. Once the operation becomes effective, and at the request o f the Recipient, the proceeds wil l be deposited by the Bank into a government account at the BCRG, which forms part o f the country’s foreign exchange reserves. The grant wil l be disbursed against satisfactory implementation o f the development policy program and not linked to any specific purchases. As a due diligence measure, within 30 days o f receipt the Recipient will provide a written confirmation to IDA when the amount has been credited to an account available to finance budgeted expenditures in a manner acceptable to IDA. The proceeds o f the operation would not be used to finance expenditures excluded under the Agreement. If, after being deposited in a government account, the proceeds o f the grant are used for ineligible purposes as defined in the Grant Agreement, the Bank will require the Recipient to refund such amount promptly upon notice from IDA. Amounts refunded to the Bank upon such request shall be canceled.

R I S K S AND RISK MITIGATION

65. The following risks could jeopardize the success of the program supported by the proposed grant. First, Guinea remains highly vulnerable to commodity price changes. Further increases in world food and fuel prices may undermine macroeconomic stabilization efforts and the impact o f the government’s program on the poor. In particular, rising inflation could create pressures for c iv i l service wage increases or lead the government to revert to food export bans. Also, further worsening o f the external environment may lead to increased political and social instability. These r isks are mitigated through intensive monitoring by the government and dialogue with donors and, in the case o f further significant increases in food and fuel prices, may require additional measures to sustain the fiscal balance and macroeconomic stability. The risk o f further social and political instability, which could undermine the stabilization efforts, is mitigated by the broad commitment from Government and the trade unions to the objectives of the economic program and willingness o f development partners to support the economic program with additional financing, in case needed.

66. Second, the goal o f creating fiscal space to protect critical expenditures could be made more difficult in the event that revenues and grants fal l significantly short o f targets or if substantial new and unavoidable spending requirements emerge. This risk i s mitigated by the government’s already demonstrated commitment to protect priority expenditures through reductions in less essential spending.

67. Finally, while Guinea may be able to import food (notably rice), the vulnerable and food insecure may not be able to pay for it. This risk i s mitigated by the fact that several development partners (including the World Bank) are supporting programs aimed at creating income and employment opportunities during this period o f rising food and o i l prices.

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ANNEX 1 : LETTER OF DEVELOPMENT POLICY

Tel: 224-30-45 17 95 Fax: 224-30-41 52 08 Email: min tin @ soieleui.gn

Ministry of Economy and Finance BP 579 Conakry Guinea

August 19,2008

MEFI ICABIMINI.. ... Mr. Robert Zoellick, President

The World Bank Washington, D.C. U.S.A.

FOOD CRISIS RESPONSE DEVELOPMENT POLICY GRANT

LETTER OF DEVELOPMENT POLICY

Introduction

1. The country i s facing a price shock caused by rapidly rising international food and petroleum product prices, which undermines the Government’s efforts towards macroeconomic stabilization, and raises concerns about deepening social tensions in the country. The price for a kilogram of imported rice, the main staple food in Guinea, increased from June 2007 to June 2008 by 96 percent. Similarly, the price of locally produced potatoes and palm oil increased during the same period by about 80 and 64 percent, respectively. Oil prices at the pump had to be increased on April 1, 2008, by 63 percent to compensate for international price rises. Poverty i s likely to rise under these conditions. Inflation, which was declining last year, i s accelerating and stands at 24.6 percent at end June 2008. The Government has reacted, and in discussion with civil society, stakeholders, and development partners, has developed a program of emergency measures, which aims to mitigate the impact of this price shock on the poor and vulnerable, but allows for remaining on the path towards macroeconomic stabilization.

2. It i s in this context that I am writing on behalf of the Government of Guinea to request your approval for a Food Crisis Response Development Policy Grant amounting to US$2.5 million to help compensate for revenues lost due to reduction of customs duties on rice, a policy the Government applied since June and intends to apply up to end October, throughout the lean period and up to the end of the Ramadan period. The Government i s of the view that under the given circumstances the customs duty

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reductions on rice i s an effective and rapidly available policy to mitigate the impact of rapidly rising international commodity prices on the income of the poor. The additional resources help the Government to protect the provision of basic services in 2008, and help meeting expectations for better living conditions. In our view, this i s essential for the maintenance of economic and social stability and for the continuous successful implementation of the government macroeconomic stabilization program. The Food Crisis Response Development Policy Grant i s part of a broader strategy covering various short-term and medium term support measures that are explained further below.

Macroeconomic Policy Framework and Performance in 2007 and 2008

3. Since taking office at end-March 2007, the Government has adopted important measures to stabilize the macro-economy and initiated important reforms. We have acted quickly and resolutely to restore fiscal discipline, regain control of monetary policy, and improve transparency and governance. We also decided in May 2007 to launch a short term recovery program including a series of priority actions aimed at economic, political, and social stabilization, to be implemented by end-2007. Since end 2007 our policies are supported by an arrangement under the IMP Poverty Reduction and Growth Facility (PRGF).

4. Our macroeconomic policies are based on the Second Poverty Reduction Strategy (PRS-II) for the period 2007-10, which was adopted and issued in August 2007 after a broad national discussion. The strategy aims to reverse the upward trend of poverty observed since 2002 by expanding and deepening the priority actions conducive to growth and employment. This PRS-Il is based on: (i) improving governance and building capacity; (ii) accelerating sustainable economic growth that benefits all; and (iii) developing basic public services, We consider sound macroeconomic management and expedited structural reforms as essential for accelerating private sector development and thereby growth. To help to implement the macroeconomic and financial components of the PRS-II, the government intends to obtain debt relief under the HlPC initiative and MDRI in order to gain the required fiscal space and be able to refocus on priority investments.

5. The Government took bold action since March 2007 to restore macroeconomic stability and to provide for sustainable recovery of growth. Growth reached 1.8 percent in 2007 and i s expected to mover in 2008 to 4.5 percent, up from an average of 2.3 percent over the period 2001 to 2007. The primary fiscal balance (after grants) reached 3.7 percent of GDP in 2007, up from 3.5 percent in 2006. The primary fiscal balance i s projected to be 3.5 percent of GDP in 2008. Much of this improvement i s to be reached due to the strict application of monthly expenditure ceilings for line ministries within the monthly revenue envelope. suspension of automatic debits of treasury accounts by the Central Bank (BCRG), and prohibition of extra-budgetary expenditures as well as ad hoc tax or customs exemptions. Fiscal policies were complemented by important policy and

2

institutional reforms at the Central Bank of Guinea, improving the coordination of fiscal and monetary. As a result of these policies, the annual inflation rate could be reduced to 12.8 percent by end-2007, down from 39.1 percent at the closing of 2006.

6. However, while the Guinea Franc's effective exchange rate appreciated in real terms by 44 percent since the end of the strike of early 2007, the external reserve position remained precarious with less than 10 days of import coverage at end 2007, down from around 20 days in 2006. Current projections are that the trade deficit will increase in 2008 to about 6 percent of GDP, up from 3 percent of GDP in 2007. Rising import prices for food and crude oil led to a widening in the country's trade deficit and to a decline in the import cover to less than 10 days. Guinea's export revenues could not benefit from the rise in the international price of commodities as expected. Its main exports, bauxite and alumina, represent about 60 percent of export revenues. Prices of these products are typically not determined by international trade but by long terms delivery contracts within integrated industries. As a consequence, the terms of trade have deteriorated in 2007 by 8 percent and are projected to deteriorate by another 8 percent in 2008.

7. The current account balance in 2007 was financed mainly by concessional external project assistance, HIPC interim relief, a rising flow of foreign direct investment, and some arrears accumulation, which were cleared in early 2008 when Guinea reached agreement on a debt rescheduling with Paris Club creditors.

8. The challenge for the Government i s to pursue macroeconomic stabilization while having to face an unfavorable international environment and meeting demands for compensation for the high price increases for basic goods, foremost r ice and energy prices.

Medium-term Macroeconomic Objectives and Policies for 2008-10

9. The key medium-tern macroeconomic objectives include the restoration of sustainable growth, a stable macroeconomic environmmt. which allows for implementing the structural reform agenda, especially in the public financial management area and the mining sector, and a revitalizing of private sector growth. The macroeconomic framework projects real GDP growth of about 5.0 percent during 2008- 2010, underpinned by strong foreign direct investment in the mining sector and expansion in agriculture. Planned investment in infrastructure and improvements in the business climate are expected to contribute to the growth prospects of the economy. Inflation will decline to 7 percent only by 2010, given the lagged effects of rising food and energy prices, Gross external reserves are programmed to cover about 3 months of import by 2010.

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Fiscal Policy

10. Macroeconomic stability in the medium term will be underpinned by continuous prudent fiscal policies. The medium-term fiscal objectives will aim at increasing revenue mobilization, improving the domestic primary budget balance, reducing domestic and external debt, and reorienting public spending towards infrastructure and poverty spending.

11. The Government intends to increase domestic revenue (without grants) from 14.3 percent of GDP in 2007 to 16.9 percent of GDP in 2010. The increase in tax revenues wi l l primarily be achieved by expanding the tax base and by improving tax collection, including in the mining sector. To this end, the Government will continue reducing tax and customs exemptions, particularly through a thorough revision of the investment code, and will modernize the revenue-collecting units and enforce controls over them by applying performance contracts. To this effect the Government contracted in May 2008 the services of the International Company Bureau Ven'tas to work with the custom administration for the verification of pre-shipment values.

12. The Government wants to make a decisive break with past practices and aims to apply increasingly basic international standards to public finance management (PFM). For this purpose, a PFM reform strategy (action plan) for the period 2008-10 has been adopted on June 27, 2008. The plan covers the entire budget cycle, from budget preparation to submission of the budget review law to the National Assembly, execution, audit and supervision procedures, and data reporting.

13. As an immediate action, we are undertaking a review of the functional budget classification to allow for better identification and tracking of poverty reduction expenditure. The regular procedure for executing public expenditure, which now covers only a small fraction of expenditure, wi l l be reinstated and the use of exceptional procedures will be limited; in particular, the simplified procedure applicable to procurement contracts will be eliminated.

14. In addition, the transparency of Government accounting and of the Treasury balance wi l l be enhanced, The responsibilities of the financial supervision unit, the General Finance Inspectorate (IGF), and the General Government Inspectorate (IGE) wi l l be clearly defined and delineated and their performance more closely monitored. In the 2008 budget we have given the IGF and the IGE the resources they will need to improve their performance. We will also ensure that the findings and recommendations of their reports arc followed up and we will publish their annual activity report.

15. Given the importance of the mining sector in Guinea for growth and the fiscal balance, we are committed to improve the legal framework governing the investments in the mining sector. The Government has committed to adopt two model contracts based on international best practices, which govern (i) existing and (ii) new mining operations.

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Based on the principles and standards embedded in theses model contracts, the Government wil l undertake a review of existing contracts, and harmonize and align them with international standards. The mining investment code and the code for non-mining investments wil l be reviewed in light of these new policies to harmonize the given legal frameworks for investment incentives.

16. With the support of our development partners, we expect to improve the financial situation and the performance of EDG and SEG beginning with 2008. Efforts have been stepped up to eliminate the fraudulent use of water and electricity. The situation of cross arrears with the Government wil l be updated and a settlement plan wil l be adopted in 2008. To maintain the financial balance for both companies in light of increasing input costs, especially energy, the average tariff for services has been increased by 62 percent in June 2008, without a change in the social tariffs, which cover poor households. In addition, the ongoing study of the overall policy on electricity and water tariff rates will be completed by end 2008 with a view to rationalizing the rate structure by 2009.

Monetary and Financial Sector Policies

17. Monetary policy wil l be closely coordinated with fiscal policies and reserve money growth, and wil l be strictly aligned with nominal GDP growth. The Government has embarked on a program to strengthen the operational capacity of the Central Bank, following up on the recommendations of the safeguard assessment update conducted by the JMF in 2007, and especially improving internal control and audit operations. The Government intends to present this year to the National Assembly a new Central Bank law that strengthens the independence of the Central Bank and the transparency of its operations.

18. To deepen the financial sector development and to analyze relevant policy options, the Government has invited the Bank and the Fund to conduct a Financial Sector Assessment (FSAP) in 2009.

Exchange Rate PoUcy

19. Exchange rate flexibility wil l continue to be a key thrust of Oovernment's external sector policies as i t wi l l facilitate timely adjustments to external developments. The official exchange rate wil l continue to be determined by market mechanism while aiming to minimize exchange rate volatility. The exchange rate system wil l remain free from restrictions on the making o f payments and transfers for current international transactions.

External Debt Policy

20. Guinea reached the Decision Point under the enhanced HIPC Initiative in December 2000. Subject to satisfactory macroeconomic perfomance under the current

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PRGF mngement and implementation of the remaining HIPC triggers, the HIPC Completion Point could be reached by end 2008 and additional debt relief obtained under the Multilateral Debt Relief Initiative O M ) . The Government will work towards this goal to obtain more fiscal space for urgently ncedcd priority investment for poverty reduction and improving basic service delivery.

21. The Government i s conscious that the fragile economic balance of the country requires continuous implementation of a prudent external debt policy after reaching HIPC Completion Point, seeking grant financing whenever possible and contracting or guaranteeing only highly concessional loans to ensure sustainability of i t s external debt.

The Second Poverty Reduction Strategy

22. Our second poverty reduction strategy (PRS-II), which covers the period 2007-10, aims to reverse the upward trend of poverty observed since 2002, and set the appropriate condition for reaching the Millennium Development Goals (MDGs), This strategy i s based on three pillars: (i) improving governance and building capacity; (ii) accelerating growth and expanding employment and income opportunities; and (iii) improving access to basic public services.

23. Improving governance and building capacity. We have recognized weak governance as a major reason for the lack of progress in poverty reduction. The key elements of the Government program for good governance include: (i) strengthening the capacity of republican institutions; (ii) continued improvements in public financial management, especially in the management of natural resources; iii) improvements in public service delivery through capacity building (administrative governance); (iv) decentralization of service delivery; (v) better statistics for monitoring outcomes; (vii) judicial reform and improving of the sanction system; (viii) tackling human rights abuses; (ix) improving access to information; and (v) continued strengthening of the police.

24. Accelerating growth and expanding employment and income opportunitles. Thi8 pillar emphaslzes the contlnued implementation of sound economic pollcies to attain macroeconomic stability and a more favorable environment for private sector development. The key objectives of the government program for sustainable growth under this second pillar include: (i) appropriate fiscal and monetary policies, including reaching the HIPC Completion Point; (ii) support to the productive sectors, and especially agriculture, through the provision of inputs, machinery, extension services and training;' (iii) investments in infrastructure for power, roads and information technology; and (iv) improvements in the investment climate, including through revision of the legal framework for mining and non-mining investment in line with international practices, as well as a better dialogue between government and the private sector. I n this respect, the authorities have also decided to enhance the Extractive Industry Transparency Initiative

' Inputs and machinery are to be provided on a cost recovery basis or through favorable credit terms.

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to improve governance in the management of the country's natural resources and enhance the benefits derived from the sector. As part of this effort, they plan to adopt a standard mining contract by end-July and a revised mining code by end-2008.

25. Improving access to basic public services. Investments in education and health and improved delivery of basic services will provide the basis for sustained poverty reduction by enhancing the capacities of the poor and reducing their vulnerability. Policy objectives in this regard include: expanding basic education and training, expanding health, immunization and nutrition services, including HIVIAIDS prevention and control, increasing access to safe drinking water and sanitation facilities, social protection, and gender equality and empowerment. To realize these objectives, the Government will pursue decentralization of several services, construction and rehabilitation of facilities, development of a basic social network, improving of curricula, training for teachers and health workers, and better administration, including improved statistics for monitoring educational enrollment rates and health outcomes.

THE GOVERNMENT'S FOOD AND FUEL CRISIS RESPONSE PROGRAM

26. Given the high level of poverty in Guinea, and the risk of further increasing poverty in 2008 due to the food and petroleum price shocks, the Government established a high level task force under the leadership of the Prime Minister, comprised of the Ministers of Economy and Finance, of Commerce, and of Agriculture to lead the Government response to the food and fuel price increases,

27. As one of i ts first actions in response to the emerging crisis, the Government decided not to fully pass through the recent high international prices of food and fuel to consumers. This was achieved by subsidizing transport for primary and secondary school students and civil servants and by increasing scholarships allowance for students. Furthermore the Government is working with the World Food Program to expand existing school feeding programs in rural and urban areas. To obtain immediate relief for the poor and vulnerable, the Government has begun in June to reduce from 12.75 percent to 2.75 the customs duties on imported rice, which i s 25 percent broken, a rice quality that i s primarily consumed by the poorer segments of the populations. The measure i s applied temporarily during the so called lean and Ramadan period, stretching from June to end October. Jointly with the World Bank, the Government i s preparing for a work- for-cash program in Conakry to offer additional income opportunities for the poor.

28. The Government i s also pursuing short to medium term measures, which aim to enhance food security and accelerate the food supply response. Jointly with W, IFAD, FAO, UNDP and other partners the Government intends to establish a food security reserve, which could meet immediate demands but also would have a balancing effect on supplies and price volatility in Guinea. In addition, the Government has elaborated a

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program with the World Bank to enhance rice growing productivity by scaling up (i) the farmer seed multiplication network, (ii) the procurement of 2,000 tons of fertilizer, and (iii) the distribution of input packages to 80,000 smallholder farmers, which i s estimated to increase rice production by 100,OOO tons.

29. The reduction in customs duties on imported rice i s projected to lead to a revenue loss of about US2.5 million and thereby reduce the fiscal space to deliver the planned level of basic services. The combined fiscal implications of the lost revenues and the additional costs incurred for basic service delivery deserves serious consideration, in order to avoid jeopardizing ongoing efforts at macroeconomic and social stability. The lost revenues from reducing the customs duties in 2008 are significant for a country, which tries to overcome very fragile economic and social conditions, and which has an unsustainable high debt burden. Additional resources are needed in order to meet the commitments under the PRGF arrangement and stay on the path towards macroeconomic stabilization as well as for maintaining the delivery of basic services.

30. In this context, the Government seeks external assistance to mitigate the negative impact of the recent customs duties reduction taken in response to escalating international food prices.

The Food Crisis Response Development Policy Grant

31. The proposed grant of USS2.5 million equivalent would support a selected element of the Government response to mitigate the impact o f the food price crises in 2008 on the poor and vulnerable by providing needed fiscal space to compensate for the lost revenues resulting from the reduced custom duties on rice imports, applied between June and end October, 2008. This support would help mitigate the impact of such price increases and contribute to continued basic service delivery for vulnerable groups.

32. To support the food supply response, the Government has issued an administrative instruction (arrtte) written statement, which clarifies that the= i s no ban in Guinea on agricultural exports following the expiration at end 2007 of a temporary ban imposed in 2007. However, the export of rice i s exempted from this policy until a study on rice exports has k e n concluded, which i s to inform about options of levying an exports tax on rice re-exports to address inherent distortions in this market. The Government’s administrative instruction (urrSte) i s complemented by an instruction of the Minister of Economy and Finance (circulaire) informing the custom administration explicitly about this policy stance. In addition, by way of a dialogue with civil society, including the unions, and with the help of mass media the public dissemination of this policy clarification and policy stance i s being sought.

33. The high level steering committee formed for the response to the food emergency crises will report on the implementation of the measures and i s responsible for its monitoring. The committee will use technical support groups to discharge its steering

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responsibility. I t will share al l respective implementation and monitoring reports with the Bank.

Conclusion

34. Macroeconomic and budgetary management during 2008 has been, and wi l l be, very challenging due to the social and economic implication of high price rises of food and petroleum products. While the Government i s trying to mitigate the impact of rising food and fuel prices on the poor and vulnerable, the actions taken have resulted in revenue losses and increased fiscal costs, undermining the protection of basic services when they are most needed. In this context, the continued and enhanced support of our development partners remains critical in enabling the Government of Guinea to tackle the poverty situation and hence contribute to maintaining political and socio-economic stability.

Yours Sincerely,

HON. OUSMANE DORE MINISTER OF ECONOMY AND FINANCE

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ANNEX 3: FUND RELATIONS NOTE

Press Release No. 08/185 FOR IMMEDIATE RELEASE July 28,2008 IMF Executive Board Completes First Review under PRGF Arrangement for Guinea, Increases Financial Assistance to Mitigate Food and Fuels Price Impact, and Approves US%28.7 Million Disbursement

The Executive Board o f the International Monetary Fund (IMF) today completed the f i rst review o f Guinea’s performance under a three-year Poverty Reduction and Growth Facility (PRGF) arrangement. The Board also approved an SDR 21.42 mi l l ion (about US$34.9million) augmentation in the arrangement to help Guinea cope with the recent external shocks from rising food and fuel prices. The completion o f the review enables the disbursement o f SDR 17.595 mi l l ion (about US$28.7 million), which would bring total disbursements under the arrangement to SDR 24.48 mi l l ion (about US$39.9 million), including part o f the augmented amount.

The Executive Board also granted waivers o f non-observance for two performance criteria related to net international reserves and external payments arrears, on the basis o f remedy allocations taken, and decided to modify the performance criteria for the next disbursement in view o f the adverse external shock that Guinea i s experiencing. The Board completed the country’s financing assurances review under the arrangement as well.

The three-year PRGF arrangement for Guinea was originally approved by the Executive Board on December 21, 2007 (see Press Release No. 07/309) in an amount equivalent to SDR 48.195 mi l l ion (about U S 7 8 . 5 million). With the Board’s approval o f the augmentation today, the total amount o f the arrangement will be equivalent to SDR 69.615million (about U S 1 1 3 . 4 million).

Following the Executive Board’s discussion, Mr. Mur i lo Portugal, Deputy Managing Director and Acting Chair, said:

“Guinea’s economic stabilization policies were successful in 2007. Inflation fe l l significantly and the economy began to recover from social turmoil early in the year. The basic primary fiscal surplus improved, and the authorities refrained from recourse to Central Bank financing.

“The large international fuel and food price shock is creating serious challenges to the short term outlook. The government courageously raised local petroleum prices substantially early in the year and further measures to ensure the pass-through o f world o i l prices are planned for the

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period ahead. I t wil l be important to target measures to alleviate the impact o f higher food prices on the most vulnerable.

“To help absorb the effect o f higher food and fuel prices on the balance o f payments and accomplish the program objectives in 2008, including the rebuilding o f foreign reserves, well- coordinated economic policies, and the mobilization o f additional external assistance wil l be needed. The Fund has augmented financial resources to Guinea’s PRGF arrangement. This, in conjunction with other donors’ support, wil l help in mitigating the impact o f the surge in o i l and food prices.

“A proactive monetary policy will help manage liquidity growth and contain inflationary pressures. Continued fiscal adjustment can be achieved through improving revenue collection and containing the budget’s exposure to loss-making public enterprises. Non-priority expenditures need to be curtailed to create the fiscal space for increased pro-growth and pro poor spending.

“It wil l be important to accelerate structural reforms to achieve sustained private sector- and foreign direct investment-led growth and reduce poverty. Efforts to improve the management o f Guinea’s abundant natural resources will help the country benefit from the world wide boom in commodity prices. The plans to improve public financial management, and to reform the Central Bank and enhance i t s independence are also important priorities.

“Continued implementation o f the PRGF-supported program wil l help pave the way for Guinea to achieve the Completion Point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative and benefit from the Multilateral Debt Relief Initiative (MDRI). It wil l be important for the authorities to strengthen foreign exchange and debt management to avoid the recurrence of external arrears, and safeguard debt sustainability,” Mr. Portugal said.

The PRGF i s the IMF’s concessional facility for low-income countries. PRGF loans carry an annual interest rate o f 0.5 percent and are repayable over 10 years with a 5%-year grace period on principal payments.

ATTACHMENT 2: EMERGENCY PROJECT PAPER FOR A PROPOSED ADDITIONAL FINANCING GRANT TO PHASE I1 OF THE THIRD URBAN

DEVELOPMENT PROJECT AND A GRANT FOR AN AGRICULTURAL PRODUCTIVITY SUPPORT PROJECT

A. INTRODUCTION

1. This Emergency Project Paper (EPP) provides a detailed description o f the two investment grant components o f the Guinea Emergency Food Crisis Response Program (GEFCRP) described in Section one o f this document. These include: (i) an additional financing grant o f US$2.5 mi l l ion to the Third Urban Development Project to support a Labor-Intensive Public Works Program; and (ii) a new grant o f US$5.0 mi l l ion to support an Emergency Agricultural Productivity Support Project. The proposed interventions are being undertaken under the Global Food Crisis Response Program (GFRP), which was endorsed by the Board on M a y 29, 2008, and wil l be financed out o f the Food Price Crisis Response (FPCR) Trust Fund (TF).

2. The overarching program objectives, rationale, risks, country context, and l i n k s to the country strategy for the GEFCRP as they relate to these two investment components are described in detail in the first section o f the GEFCRP document and wil l not be repeated in this EPP. The EPP instead provides information specific to each project o n appraisal, objectives, implementation, fiduciary arrangements, and monitoring and evaluation. Detailed financial management and procurement assessments covering both components are provided in Annex 1 to this Attachment.

B. LABOR-INTENSIVE URBAN PUBLIC WORKS PROGRAM (US$2.5 MILLION)

3. Objective and Rationale. This component seeks to provide additional financing to the existing third Urban Development Project to put in place an emergency labor intensive urban public works program to quickly help the most vulnerable people to gain access to temporary jobs that will put money directly in the pockets o f those who get such employment. This will help reduce the effects o f the food price crisis on the poorest consumers in the most vulnerable areas o f Conakry where unrest i s most l ikely to occur. The project wil l use existing implementation mechanisms o f the parent project - the Third Urban Development Project (PDU3) - building on i t s past success and capacity in carrying out private-sector led implementation o f public works programs.

4. The development objectives o f PDU3 phase I1 are: (a) to improve the provision o f infrastructure and services in Conakry and secondary cities; and (b) to improve the financial and organizational management o f municipalities in support o f the decentralization process. The objectives remain the same for the additional financing being requested for this component o f the emergency project.

5. The achievement o f this objective would contribute to supporting Government’s efforts in improving access o f the population to basic infrastructure services including access to all-year

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passable secondary and tertiary roads, reduced number o f households flooded every year, but in particular an increased number o f unskilled people gaining immediate access to temporary employment during a very fragile time in Guinea. The identification o f the specific secondary and tertiary roads, sidewalks and drains to be rehabilitated have been based on keeping the project focused on the very poor and vulnerable people and will be implemented in areas in all five communes (municipalities) o f the city o f Conakry that are affected badly by flooding and which have roads that are badly deteriorated. The project aims to rapidly implement works (drainage, fill in potholes in secondary and tertiary urban roads and rehabilitate sidewalks) in about 40 neighborhoods within a period o f 6-8 months. This approach permits rapid generation o f additional employment and income for the poor.

6. Rationale for Additional Financing. This operation scales up the existing public works program under the Third Urban Development Project, utilizing a labor-intensive approach within the existing project modalities to provide quick employment in these programs in response to the food price crisis.

7. Current Project Performance. The Third Urban Development Project i s a phase I1 APL which was approved by the Board in August 2007 with current satisfactory implementation ratings. The project has been particularly successful in improving local government capacity to mobilize resources and target expenditures toward priori ty infrastructure and services, determined in consultation with local populations in Conakry as well as in 10 secondary cities. However, i t must be noted that the city o f Conakry partially fulfil led its commitments for waste collection and transfer and accumulated arrears o f payment over time. The f i rst phase o f PDU3 started in 2000 using an implementation mechanism that has evolved and been fine-tuned for over eight years. The original implementing entity has remained in place, thus providing the project with the expertise gained from many years o f experience managing urban works under a World Bank-financed program. This wil l provide a known methodology and start-up speed that wil l allow this additional financing component to be implemented rapidly with existing procedures and mechanisms.

8. Technical. The program will draw on the PDU3 and other in-country expertise, while also utilizing global best practice lessons from public works programs across Africa (including in Benin, Central Afr ica Republic, Burundi and others). The labor intensive works are drawn from existing PDU3 project areas using existing private sector contracting mechanisms. This use o f existing mechanisms and capacity will allow for quick implementation, eliminating the need to devise new methodologies or contracting arrangements. However, this means that only about 50% o f the benefits wil l be transferred directly to participants in the form o f wages. Although this i s not as high as might normally be desired in this type o f program (often between 60% and 70%), i t i s deemed acceptable considering the greater speed o f response it allows by using existing PDU3 methodology. I t is expected that bids can be let out quickly for al l o f Conakry and the f i rs t contracts signed by late September /early October.

9. Regarding site selection, a recent audit o f five Conakry communities already identified a l i s t o f priority secondary roads and drainage for rehabilitation using technical analysis and participatory methods. The work areas proposed in this program have been selected in accordance with the following criteria:

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Road rehabilitation to take place mostly in areas o f Conakry known to be vulnerable to flooding according to recent technical analysis and demanded by communities and municipal governments;

0 Areas where drainage works were previously implemented and can be consolidated per recommendation by affected communities.

10. The proposed project wil l mostly benefit poor, disadvantaged communities in Conakry and peri-urban neighborhoods. The project wil l use labor intensive methodology with execution primarily through the types o f small and medium enterprises that carry out programs under the existing projects. The program wil l finance small works projects over a 6-8 month period. The project wil l provide approximately 5300 jobs, o f around 2-3 months each, to unskilled workers and direct and indirect benefits to a total population o f around 300,000 people in 40 o f the poorest neighborhoods in Conakry whose neighborhoods wil l be targeted for the labor-intensive works. The program wil l utilize self-targeting labor hiring techniques by applying a slightly below-market wage rate in order to attract the neediest to the program and avoid poachingldiverting individuals from other productive activities. The wage rate will be adjusted according to the market conditions in the program areas. The targeting specifications wil l be included in the bidding documents and used as evaluation criteria.

11. Implementation Arrangements. The labor intensive public works component o f the program wil l be implemented through the Third Urban Development Project (PDU3), a well- performing APL that just began i t s second (and final) phase. Technical implementation (monitoring and control o f the work) wil l be handled by the division in charge o f secondary roads (Cellule de Voirie Secondaire or CVS), a division o f the Regional Directorate o f Urban and Housing Development for the Ci ty o f Conakry. CVS i s the division responsible for PDU3 monitoring and control o f road maintenance operations. It wil l be responsible for a l l technical aspects o f the program and wil l manage overall works under the supervision o f the Project Coordination Unit o f the PDU3, and in partnership with the urban municipalities. I t has more than 10 years o f experience managing labor intensive urban roads works under the supervision o f PDU3. CVS wil l recruit two consultants, for a period o f eight months each, to help manage this component.

12. Financial Management, Procurement and Disbursement Arrangements. Arrangements will follow the one used for the Urban Development Project 3. The FM unit o f the Project Coordinating Unit (PCU) for PDU3 is responsible for running the financial management arrangements and for facilitating the audit o f the financial statements. The P C U i s headed by the National Coordinator who is also the overall executive officer for al l operations under the project which includes authorization (ordonnateur) o f eligible expenditures under Component 2. The FM staff is comprised o f the Finance and Administration Director, a Senior Accountant and a couple o f Accounting Technicians who also take charge o f the administrative hnc t i on in the PCU. Financial records and al l the transactions under the component shall be in accordance with the guidelines in the financial procedure detailed in Operations Manual which are based on generally accepted accounting principles. The annual financial statements prepared by the FM unit o f PDU3 are audited annually by an independent external auditor acceptable to the Bank. The FM unit o f PDU3 wil l continue to prepare the Interim Un-Audited Financial Reports (IFRs) as part o f the reporting arrangements. The Bank’s FM team will continue i t s supervision and

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provide guidance and support to the project staff and ensure that established financial procedures are complied with at al l times during the l i fe o f the project.

. Percentage o f the population o f Conakry and selected cities getting access to services through the project.

13. Disbursements for the eligible expenditure under this component will be on the same framework used for disbursing PDU3 proceeds. As such disbursement wil l follow the traditional (transaction based) disbursement arrangement. Details o f the FM and Disbursement arrangements are provided in Annex 2 o f this Attachment. The labor-intensive urban c iv i l works contracts wil l generally be below US$lOO,OOO equivalent and wil l be procured through Shopping. The first request for proposals wil l be subject to prior review by the Bank. All subsequent requests for proposals wil l fol low this model and are subject to ex-post review. The procurement risk for this component is high (see Annex 3 o f this Attachment).

. To assess improvement in service delivery.

14. Environmental and Social: The urban labor intensive public works program component i s being implemented through the implementation arrangements already existing for the Phase I1 o f the Third Urban Development Project which i s in the safeguard screening category S2 and the environmental category B. Both an ESMF and RPF were prepared. The parent project became effective in January 2008 and the most recent ISR o f June 2008 rated safeguard compliance as “satisfactory”. No additional safeguards wil l be triggered under the additional financing grant.

. Increase in municipal revenues.

15. Project Development Objectives and Outcome Indicators. The development objectives o f phase I1 o f the PDU3 are: (a) to improve the provision o f infrastructure and,services in Conakry and secondary cities; and (b) to improve the financial and organizational management o f municipalities in support o f the decentralization process. The objectives remain the same for the additional financing being requested for this component o f the emergency project, in that the works will focus on physical infrastructure improvements, but with an overarching objective o f generating employment for the poorest and most vulnerable. Outcome indicators wil l be added to capture the expected outcome o f this component as indicated in Table 1 below.

To assess improvement in revenue mobilization.

16. Monitoring and Evaluation Arrangements. The urban labor intensive works program wil l be folded into the existing monitoring and evaluation arrangements for PDU3 Phase 11. Monitoring wil l cover both employment as wel l as works undertaken (although the latter is not a primary development objective o f the project.

Table 1 : Results Framework for Labor-Intensive Public Works

I PDO

Improve provision o f infrastructure and services in Conakry and secondary cities, and improved financial and organizational management o f municipalities in support o f the decentralization process.

Project Outcome Indicators I Use o f Project Outcome Information

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1 To assess number o f beneficiaries receiving increased income

Intermediate Outcomes

Urban labor intensive public works

I

Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring

1 5300 temporary jobs created for a period o f 2-3 months (300,000 beneficiaries) 7 bil l ions GNF (1M US$) distributed in wages to workers in the program 55km o f drains cleaned and neighborhood roads rehabilitated

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1

I

17. Risks and Mitigation Measures. The targeting for the labor-intensive public works program may raise sociaVpolitica1 tension in untargeted areas or particular groups being le f t out in targeted areas. This risk i s being mitigated by the existence o f an operations manual including criteria for appropriate targeting o f beneficiaries and also include performance contracts to ensure that wages are set at appropriate levels to target the poorest.

18. Implementation capacity i s generally weak reflecting the l ow levels o f ski l ls within the public sector increasing the risk o f supervision overload. The existing P C U could inadequately handle the additional demands under the emergency program. Also, there i s a possibility that the SMEs have not the capacity to provide services within the required time frame. These r isks are being addressed by using implementation mechanisms o f PDU3 that have already been tested and rated satisfactory. The FM arrangements for the existing PCUs have been fully assessed and reinforced. External Auditors have been recruited, the manual o f procedures have been finalized and are operational, and competent and experienced staff i s on board. Also two engineers wi l l be added to the implementing agency to manage the new component and the Bank will increase supervision intensity.

19. Implementation Period. Works are expected to start in late October 2008. Preparation o f request for quotations (for works under US$lOO,OOO) and bidding documents (for works over US$lOO,OOO) are already underway. Works wil l be carried out in phases in different areas and expected to continue for about 7-8 months.

C. AGRICULTURAL PRODUCTIVITY SUPPORT PROJECT (US$5.0 MILLION)

20. Background: Guinea, in the middle o f the traditional West African “rice belt”, has a long history o f low input traditional paddy production and a diversified set o f production environments, each o f which has a different mix o f issues in terms o f potential benefits to the intensification o f production (see Table 3 below). Only about 5 percent o f producers use improved seed varieties and the use o f fertilizer i s even less. A concerted effort i s needed to increase the productivity o f these systems.

- 47 -

Table 3: Principal Rice Production Systems in Guinea

3. Bas-fonds

I

63

1. Hillside rainfed

(riz de coteau) 448

4. Mangrove

2. Plains

56

1 133

I

Total I 700 urces: MAE BCEPA, 2005 a

rea

%

64 %

19 %

9 %

8 %

100 % Brossier, 2

Percent Improved

Water Management

Does not apply to hillside r ice

production system ;

although field agronomy can

be improved and anti-erosion

practices used

6 %

20 %

7 %

8 % 17.

Location

Al l regions but most important in GF, center- north BG, south HG

Mostly HG, some in BG

HG, MG, BG

100 % BG

Yield and other factors

Yields average 0.8-1.0 tha . With improved seed (e.g. NERICA) and fertilizer can increase to about 2.5 tha. Traditionally this system i s a slash and bum which has environmental concerns, but efforts are being made to discourage cultivation on steep hillsides.

Average yields 0.8-1.2 tonsha. With improved water management and inputs can get yields of 3.5-3.9 tonsha. Includes flood recession, irrigation from river, production in depressions (like bas-fonds).

Generally low, swampy areas, often without an exiting or transiting watercourse. Yields 1.5-2.0 t/ha; can increase to 3.5 tha with improved input use and more complete water control

~~

N o fertilizer input used in mangrove system. Yields increase from 1.5 to 3.0-4.0 tha with the use of improved seeds, herbicides and better agronomic practices.

Regions : GF : Guinee Forestiere ; BG : Basse Guinte ; MG : Moyenne GuinCe; HG : Haute GuinCe

21. Hillside rice makes up over 60 % o f estimated paddy area. The other, “non-hillside” production systems (numbers 2-4 in Table 3) should al l be thought o f as “partially irrigated” or “partial water control” systems, even when improved water control i s not used in that system. In some o f these systems i t may be possible over time to develop full or nearly full water control, which can allow for paddy yields o f up to 5 or 6 tons per hectare (or more) when using improved seed and substantial doses o f concentrated nitrogen-rich fertilizers such as urea (as regularly demonstrated at the Office du Niger in Mali). Thus, if all the “improvable areas” (from the 2001 Small Scale Irrigation study) were actually improved and producing, for example, an average o f 3 or 4 tons per hectare, total national rice production could be substantially increased and the most environmentally negative and low-yielding hillside sites could be l e f t permanently fallow or changed to other, less erosion-prone crop uses.

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22. Objective and Rationale: This objective o f this component i s to increase rice yields by 30% on 1,000 hectares o f irrigated rice during the 2008-09 dry season (contre-saison, i.e. November 2008 - March 2009) and 35,000 hectares or rain fed rice during the 2009-10 cropping season (June-October 2009). This wil l result in an additional 70,000 tons o f paddy rice production - about a 10% increase in overall production - increasing smallholder incomes and increasing the availability o f locally-grown rice. To achieve this objective three sets o f activities are envisioned:

(i) Support for the production o f 2000 tons o f improved and certified seed during the 2008-09 rainy and contre-saison through a scaling up o f the existing farmer seed multiplication network and the purchase, treatment, and stocking o f the seed for distribution during the 2009- 10 cropping season;

(ii) Purchase o f 2000 tons o f fertilizer and 20,000 liters o f herbicides and pesticides;

(iii) Distribution o f input packets (seed, fertilizer, herbicide/pesticide) though the existing farmer organization networks and support for advisory services necessary.

23. Through these activities, this component aims to deliver immediate benefits while simultaneously preparing the groundwork for a longer-term support to crucial agriculture-related institutions

24. Technical. The appraisal mission held extensive discussions with representatives o f the Ministry to assess the technical and economic feasibility o f the Government’s proposed Food Security Program particularly centering on the following issues:

By laying out a food security strategy that covers the period 2008-2015, the proposed actions under the strategy present a good balance between addressing immediate needs on an emergency basis and tackling the more structural problems o f the sector in the medium run.

Crop budgets, jo int ly prepared by the counterpart team and the appraisal mission team, indicate that technology packages proposed under the strategy need to include a combination o f improved seed and fertilizers as response o f traditional varieties to fertilizer application does not appear to be financially attractive at current fertilizer prices. This implies that besides fertilizer availability, domestic seed multiplication capacity i s a critical factor determining the feasible scope o f Government’s food security program, at least in the short run. . Crop budgets also indicate that pay-offs from proposed technology packages are particularly attractive in mangrove systems, followed by “bas-fonds” and plains based systems and ultimately hillside rain-fed systems. This implies that efforts aimed at improving water management will need to constitute a critical element o f the proposed food security program. At the same time, given that hill-side rain-fed systems make up 64% o f Guinea’s paddy production systems, there i s a need for further analysis on how to boost the financial feasibility o f improved technologies under these conditions.

- 49 -

25. Program. Four strategic choices were weighed as a part o f this process:

The project was designed to specifically address the Government’s Food Security

(i) Inputs versus infrastructure: Although investment in water management infrastructure i s a necessity to increase rice productivity in Guinea in the medium to longer term, immediate investments in improved inputs and better cropping practices will have a substantial payoff - particularly for smallholders - in the short run,

(ii) Rice versus other food crops: Although food diversification is an important element o f a longer run food security strategy in Guinea, the focus o f this emergency intervention is on rice productivity given the importance o f rice in household consumption and i t s share in overall production patterns

(iii) Emergency implementation versus sustainable implementation mechanism: A decision was taken to make sure this would not be simply a ‘one-off emergency effort - to that end, the implementation arrangements and design rely on sustainable institutional structures and lay the foundation for more sustainable input distribution going forward.

(iv) 2008/09 versus 2009/10 cropping season: A decision was made to focus on the preparation o f the 2009-10 cropping season. Given that the 2008-09 cropping season is already wel l underway inputs could not be procured and distributed to farmers in time to have a real impact on yields and production this cropping season given the absence o f organized input distribution systems. To prepare for the 2009-10 season it i s urgent that seed multiplication activities begin now. The purchase o f these seeds wil l provide an immediate boost to smallholder incomes in the 2008/09 season.

(v) Producer organizations versus individual smallholders: Approximately forty percent o f smallholders are members o f producer organizations. In the absence o f functioning private sector input distribution systems and limited access to rural finance, and in the presence o f weak and non-transparent public distribution channels, a decision was made to focus on organized smallholders as an entry point to building a sustainable and transparent system.

26. Implementation Arrangements: The agricultural productivity component is a new project but relies on the Project Coordination Unit o f the existing World Bank-funded Village Communities Support Program (VCSP) for management o f al l fiduciary matters The VCSP has a strong track record in overall project and financial management for the existing project. Overall coordination and technical responsibility for the component rests with the National Directorate o f Agricultural Advisory Services (SNPRV) which has already managed a successful seed multiplication system under previous World Bank and other donor financing. Implementation wil l be carried out by technical services o f the Ministry o f Agriculture and the National Confederation o f Producer Organizations which benefits from funding and technical assistance from other donors active in the sector (AFD and EU). Specific responsibilities are outlined in the attached action plan. Operating funds will be transferred to relevant technical departments o f the Ministry o f Agriculture on the basis o f budgeted work programs acceptable to

- 50 -

the Bank and approved by a steering committee composed o f Ministry o f Agriculture, producer organizations and private sector members.

27. The project wil l focus i t s interventions on Guinea’s three major rice producing areas - lower Guinea, Upper Guinea and Forest Guinea. The project wi l l work through the Confederation Nationale des Organisations Paysannes de G u i d e (CNOP-G) and i t s member federations and unions. The CNOP-G wil l be responsible for the distribution o f the input packages. Inputs wil l be sold to members on a “cropping-season” credit basis where the terms, conditions, and procedures wil l be defined in the operations manual. Recovered funds will be used to capitalize a revolving fund for the purchase o f inputs in future seasons. The management and use o f this fbnd, including annual audit procedures, wil l also be defined in the project operational manual.

28. To ensure that the poorer fanners benefit from the project, inputs wil l only be available to smallholders with a minimum number o f hectares. The exact methodology and criteria wil l be established as part o f the project operational manual. Additionally, each beneficiary will only have access to an input package sufficient for half hectare to ensure the largest possible number o f farmers are covered.

29. Financial Management, Procurement and Disbursement Arrangements: As noted above, financial management, procurement and disbursement will be handled by the Project Coordination Unit (PCU) o f the VCSP. This i s the second phase o f a highly successful APL program - it was approved by the Board in July 9, 2007 and became effective on March 26, 2008. The P C U has implemented an action plan for strengthening i t s financial management capacity (selection o f a new external auditor, recruitment o f a procurement assistant and an additional accountant, installation o f updated project software and training o f all staff on the use o f the software). I t wil l be in charge o f preparing the financial statements and maintaining sound systems and procedures acceptable to the Bank.

30. The Director General o f the SNPRV will be the authorizer (ordonnateur) o f expenditures o f Component 3 given his prime responsibility in executing and monitoring annual activity programs and related budgets. H e wil l approve related commitment documents and warrants. Proper and accurate records will be kept for al l component-related expenditures following the generally accepted accounting principles. The annual financial statements prepared by the financial management unit o f the VCSP shall be audited annually, in accordance with the international standards on auditing, by an independent auditor acceptable to the Bank. The financial management unit o f the VCSP wil l also prepare quarterly Interim Un-Audited Financial Reports (IFR). The Bank’s financial management team wil l continue to monitor the agreed risk mitigation measures, and ensure the project i s supported by intensified supervision. Disbursements for eligible expenditures under Component 3 shall be made under existing disbursement arrangements for the VCSP. The FM staff the VCSP will be in charge o f preparing payments to suppliers o f CNOP-G (seeds, fertilizers etc.). CNOP-G wil l manage revenues from the sales according to a procedures manual approved by the steering committee and satisfactory to the Bank.

31. Small c iv i l works wil l be procured, mainly for rehabilitation, and suppliers for small goods contracts selected, mainly for motor bikes and office furniture and equipment. Larger

- 51 -

contacts for goods are planned for fertilizers and pesticides which will be procured through international competitive bidding.

32. Environmental and Social. From an environmental and social safeguard standpoint, the Guinea Emergency Agricultural Productivity Support Project is a Category B project. This suggests that environmental and social impacts o f the project, for the most part, wi l l be minimal, site-specific and manageable to an accepted level. This emergency operation triggers two safeguard policies: the Environmental Assessment Policy (OP 4.01) and the Pest Management Policy (OP 4.09), based on program objectives to increase agricultural production and productivity with the provision o f certified seeds and fertilizers to rice producers. The required safeguards document - a combined Environment and Pest Management Plan - wil l be submitted to the Bank within 90 days o f signing the legal agreement.

33. Project Development Objectives and Outcome Indicators: The development objective o f this component i s to increase smallholder rice productivity on 35,000 hectares. This project wil l support the production o f 2000 tons o f certified seed through a smallholder seed multiplication network and provide input packages and technical assistance to 70,000 smallholders to increase their productivity. Outcome indicators are noted in the results framework.

Table 4: Results Framework for Emergency Agricultural Productivity Project

PDO

To increase smallholder rice productivity on 35,000 hectares

Intermediate Outcomes

Component 3.1 - Production and procurement of improved seed

Improved capacity of smallholder seed multiplication system

Sufficient certified seed stocks for 35,000 hectares

Component 3.2 - Procurement of fertilizer and herbicides

Sufficient fertilizer and herbicide for 35,OO hectares

Project Outcome Indicators

30% increase in r ice yields on beneficiary fields using improved input packages

Intermediate Outcome Indicators

2000 tons of improved seed for rain fed rice systems (mangrove, bas-fond and inland plains) produced, certified, purchased, treated and stocked

2000 tons of fertilizer and 20,000 liters of herbicides and pesticides procured

Use of Project Outcome Information

To inform policymakers on progress on achieving outcome indicator

To document the potential smallholder supply response with the use o f improved technologies

Use of Intermediate Outcome Monitoring

To validate availability o f sufficient quantities o f certified seed to achieve project outcome

To validate availability o f sufficient quantities of fertilizer and herbicides to achieve project outcome

- 52 -

Component 3.3 - Distribution of - input packages and provision of advisory services

Inputs available and distributed in timely and transparent manner for the 2009-10 cropping season

70,000 smallholders have received input packages and adequate technical advisory services for the 2009-1 0 cropping season

To validate progress in the distribution of input packages and targeting of smallholders

34. Monitoring and Evaluation Arrangements. The monitoring and evaluation wil l be carried out at two levels. At technical level - tracking actual input use and results on farmers fields - the CNOP-G and the National Direction o f Agriculture’s regional staff. Data will be transmitted to the National Directorate for Studies and Planning for consolidation and reporting.

Project Outcome Indicators

% increase in rice yields o f targeted smallholders

Intermediate Outcome Indicators

Table 5: Data Collection and Reporting

Data

Instruments Base- 2009 2010 andReports Frequency Collection line

0 0 30 Annual Survey

Tons o f improved seed produced, 0 1500 500 Annual Report DNA purchased, certified and stocked

Responsibility for Data

CNOP-G, DNA

# of famers receiving seed multiplication training

SNPRV, IRAG 0 150 250 Annual Report

0 500 Tons of fertilizer procured

Component 3.3

# o f smallholders receiving improved 0 2000 input packets and advisory services

35. Risks and Mitigation Measures: The risk o f required inputs not available in time due to l ow in-country stocks is being mitigated as the operation targets the 2009-10 cropping season and the 2008/09 dry season to allow sufficient time for inputs to be produced and procured. Also, to mitigate the possibility o f the program not being sustainable after close o f project, efforts will be made to ensure sustainability. Risks remain, but the food crisis situation presents window o f opportunity to try innovative approach that could also make a difference over the longer term.

1500 Annual Report

68,000 Annual Report SNPRV, CNOP-G

36. There i s a risk o f a lack o f transparency in the targeting o f beneficiaries but it i s being mitigated through the full participation o f the National Federation o f Producer Organizations

- 53 -

(CNOP-G) and i t s member federations and unions in the process. There is also a risk that achievements are not sustained after close o f project. This risk i s being partially mitigated by relying on, and building the capacity in, existing government structures and producer organizations for implementation.

37. There is also a risk that the P C U o f the VCSP2 wil l not unable to adequately handle the additional financial management demands under the emergency program. To mitigate this risk, an additional accountant wil l be recruited on a consulting basis for the duration o f the emergency project.

38. September 2008 to March 2010. A detailed action plan is attached below.

Implementation Period: The project wi l l be implemented over a 19-month period from

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ANNEX 1 : FINANCIAL MANAGEMENT AND DISBURSEMENT ARRANGEMENTS

Summary of Financial Management Assessment

1. Financial management assessments were carried out in accordance with the Financial Management Practices Manual issued by the Financial Management Board on November 3, 2005. The objective o f the assessments was to determine whether the financial management (FM) arrangements for phase I1 o f the Third Urban Development Project (PDU3) which will apply to Component 2, and the FM arrangements for phase I1 o f the Village Communities Support Program (PACV2) and the National Confederation o f Farmer Organizations (CNOP-G) for Component 3 are sufficient to ensure: (1) the funds are used only for the intended purposes in an efficient and economical way; (2) the preparation o f accurate, reliable and timely periodic financial reports; and (3) safeguard the implementing entities’ assets.

2. The FM team assessed the capacity o f the P C U o f the PDU3 and the FM unit o f the PACV2, and established that the existing FM arrangements (validated by the recent effectiveness declarations o f the respective projects on December 10, 2007 and March 26, 2008) are adequate and appropriate for the implementation o f Component 2 and Component 3 respectively. Action plans for strengthening FM capacity were fully implemented prior to the effectiveness o f the second phase o f each o f these APLs. The respective heads o f the FM uni ts have previous experience in World Bank FM procedures and the accountants supporting them also have good experience and competence in accounting. The FM procedures manuals and accounting software (SUCCESS platform) are already in place. This framework provides a robust FM system that f u l f i l l s the minimum fiduciary requirements.

3. Given their role in implementing Component 3, the FM capacity o f the Confederation Nationale des Organisations Paysannes de G u i d e (CNOP-G) was also assessed. I t was noted that the CNOP-G i s wel l staffed with both a senior and a junior accountant, however the overall FM system i s in need o f some improvements and updates (e.g. purchase o f accounting software, update o f policies and procedures, and training o f accountants). These activities are being funded with the assistant o f the European Union which has a technical assistant in place. They wil l be further supported through Component 3. At the level o f i t s member organizations (regional federations and unions o f producer organizations), procedures for procurement, inventory management and delivery o f inputs, and cash recovery (from sales o f fertilizers, seeds etc.) are not well documented. A procedures manual wil l be developed for component 3 within 60 days o f effectiveness and wil l include a simplified manual o f procedures for the CNOP-G and i t s member organizations. The CNOP-G produces annual financial statements. The FY 2006 auditor’s opinion was qualified and the related shortcomings on accounting procedures are being addressed. Minor internal control weaknesses were also identified and these are being addressed in the procedures manual.

4. The conclusion o f the assessments i s that the financial management capacity o f the PDU3, the PACV2, and the CNOP-G meet the World Bank’s minimum requirements under OP/BP 10.02 and are therefore adequate to provide, with reasonable assurance, accurate and

- 59 -

timely information on respectively the status o f Component 2 and Component 3 as required by the Bank.

Risk Mitigating Measures Incorporated into Project Design Risk 1

rating

5. As indicated above, in the longer term, the FM capacities o f CNOP-G and i t s regional members wil l need to be strengthened by updating the accounting arrangements, providing training, and developing a simplified procedures manual. Considering the existing FM arrangements, the overall residual control risk i s moderate for the PDU33, moderate for FM unit o f PACV2 and substantial for CNOP-G and i t s regional members. The PDU3 and the PACV2 wil l be the budget management and accounting centers for Component 2 and Component 3 respectively. For Component 3, the CNOP-G and i t s regional member organizations wil l maintain satisfactory controls over the procurement and distribution o f inputs and collection o f cash receipts. Their capacity will be strengthened with a procedure’s manual and training to carry out these functions adequately. All duties and procedures wil l be carried out in accordance with an operational manual satisfactory to the Bank and approved by the Steering Committee.

Overall Residual

Risk rating

Table Al.1: Risk Assessment and Mitigation

S

Risk

S

Two IDF grants for strengthening procurement and reinforcement of public expenditure management have been approved and are being implemented.

Inherent risk

Country level . Quality o f PFM, standard of financial accounting, reporting and auditing; and quality of accounting profession. The IDF grant for enhancement o f external auditor’s

capacities has been also approved and i s being implemented.

A CPPR was conducted in December 2006 and recommendations are being implemented. Multiple Ministries (Economy and Finance, Agriculture, Decentralization, Urbanism and Works etc.) are involved in Guinea GFCRP. But, each entity’s responsibility i s clearly defined according to the Component in which it i s involved. Also, implementation o f PFM reform program in Guinea i s underway and will contribute a lot to address related

Entity level . Independence o f entity’s management and appropriateness of organizational structure

I

Project level . Component 3 involves the procurement and distribution of seeds, fertilizers, etc. to dispersed locations and cash collections

S

Control risk

issues. T h e Component 2 will be executed by PDU3 which has a satisfactory experience in implementing Bank- assisted projects. The same strength exists for

but it does not for the CNOP-G and its regional members for which an agreed action plan i s hereby designed.

Component 3 with regard to the FM unit of PACV2, S

H

M

M I I M

- 60 -

Budgeting I Lack o f clear definition of budget

preparation process I Absence o f authorization and

monitoring o f budget variations with a view to making decision

Accounting I Delays in bookkeeping I

I

Lack of compliance with acceptable accounting standards Lack of adequate policies and procedures, including chart of accounts Software not customized on the basis of the project’s accounting needs

Lack o f quality and document o f policies and procedures, including segregation of duties and for procurement Delays in preparation o f bank reconciliations Non maintenance records for fixed assets and inventory Absence o f internal audit functions

Cash flow constraints due to delayed fund flows affect project implementation;

arrangements not functioning well

I

lnternal Controls

.

.

. Funds Flow . . Complicated fund flow

Financial Reporting . Lack of quality and documentation o f FM reporting responsibilities,- form, content and periodicity o f IFRs and annual financial reports

production o f IFRs and annual financial reports

. Delays in preparation and

Auditing a Inadequate institutional

arrangements in place for the appointment of external auditors Limited capacity o f national external auditors

a

Overall FM Risk Rating

M for PDU3, PACV2 and the

CNOP-G

M for PDU3,

and PACV2

S for the CNOP-G

M for PDU3,

and PACV2

S for the CNOP-G

M for PDU3, PACV2 and the

CNOP-G

M for PDU3, PACVZ and the

CNOP-G

~

M for PDU3, PACV2 and the

M for PDU3,

and PACV2

S for the

CNOP-G

CNOP-G

Related procedures are documented in the FM procedures manuals and the existing accounting software are customized accordingly. The first IFRs to be developed by both F M units are underway.

For the CNOP-G and i ts regional members, related arrangements will be modernized and fixed-up (purchase and customization of accounting software, update of policies and procedures, and training of accountants).

For the CNOP-G and its regional members, their arrangements of accounting, inventory and distribution management and collection of cash receipts will be modemized and fixed-up (purchase of sohare, documented and updated procedures and related training).A simplified procedure manual will be developed for regional members.

T h e grant proceeds will be deposited in each designated bank account under control of respective FM units. The revenues received by CNOP-G and its regional members from sale operations will be deposited in a separate account. Related procedures are already documented in the manuals.

Preparation o f the first IFRs i s underway at the level of the FM units and the budgetary accounting handled by CNOP-G i s acceptable. Al l prepare their annual financial statements on a regular basis.

Al l the auditors are already appointed. They are private firms based in Conakry. The Court o f Accounts i s being strengthened.

The functioning of all these FM arrangements will be followed-up during upcoming supervisions.

M

M

M

M

M

M

M

- 61 -

Strengths

Action

Purchase and customize a simple and modem software suitable for

operation, update policies and procedures, and enhance staff training

CNOP-G’s level o f

6. The FM units o f the PDU3 and the PACV2, as the main budget management and accounting centers, are composed o f qualified and experienced staff. Both entities have FM procedures manual and software in place that can be relied upon to produce accurate and timely financial reports. Their recent declaration o f effectiveness is evidence that they have satisfactorily implemented their respective action plans. The CNOP-G i s now wel l staffed to meet the fiduciary requirements. It has useful experience in managing donor funds (FIDA, AFD, EU, etc.) through various bank accounts. It operates i t s FM activities by using a FM manual and its 2006 financial statements have been audited, resulting in a qualified opinion as a result o f shortcomings related to accounting procedures, a weakness that i s presently being addressed.

Responsible body

CNOP-G

Weaknesses and Action Plan (for the CNOP-G)

Table A1.2: Financial Management Action Plan

Weaknesses

Outdated accounting arrangements for budget, funds and inventories

Weak systems for managing operations o f CNOP-G at regional level

Develop a simplified procedure manual for regional federations and unions o f producer organizations (as a component o f overall project implementation manual)

CNOP-G, SNPRV

Completion

This work i s already in progress with EU

funding and expected to be completed by

September 30, 2008.

60 days after effectiveness

Implementing Entity/Staffing

7. The FM arrangements for the grants for Component 2 and Component 3 would be based on the existing framework under the on-going PDU3 and PACV2 respectively. Under the guidance and responsibility o f their respective overseeing ministries, their FM units will be responsible for financial management and for preparing audits o f account with systems and procedures acceptable to the Bank. The CNOP-G and i t s regional member organizations will manage the (i) procurement o f seeds, and inventory and distribution o f fertilizer and seeds and (ii) cost recovery from the sale o f inputs.

8. A training program wil l be drawn up to continue to strengthen fiduciary management capacity. Training i s mainly conducted through the World Bank’s local or sub-regional training institutions (CESAG and ISADE in Dakar). The CNOP-G and i t s regional members will require

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a consultant to update their accounting system (installation and customization of software, update o f policies and procedures and related training).

Work programs and budgets

10. The budget preparation process and i t s monitoring are clearly defined and documented in the FM manuals o f the two FM units and the CNOP-G. Each FM unit wil l develop Annual Work Programs and Budgets (AWPB) and wil l send them to the Steering Committee and Bank for review. For Component 3, the National Directorate for Advisory Services wil l consolidate the work programs and budgets o f the technical departments involved in implementation (including the CNOP-G) and submit the approved AWPB to the PACV2 FM unit for the transfer o f funds.

Accounting Policies and Procedures

11. Accounting standards applied by the two FM units and CNOP-G are similar to the International Public Sector Accounting Standards (IPSAS) issued by the Public Sector Committee o f the International Federation o f Accountants (PAC-PSC). Any significant difference will be adequately disclosed and explained in the notes o f the financial statements. The FM uni ts will prepare their project financial statements for auditing. A computerized financial management system i s place at the two FM units. Both units use a satisfactory accounting package capable o f producing al l the accounting and financial data required, including financial statements, bank reconciliation statements, and al l financial reports, such as the Interim Un-Audited Financial Reports (IFRs). The books o f accounts also are maintained electronically in this software.

Internal auditing

12. The Public Sector Internal Audit Bodies o f Guinea wil l retain the right to carry out any internal reviews at the levels o f the FM units o f PACV2 and PDU3 and CNOP-G. They would carry out reviews o f transactions from time to time, based on their mandate.

Internal control

13. As stated above, the CNOP-G needs an updated accounting system and improved internal control procedures. Regional organizations o f CNOP-G involved in the distribution o f inputs, management o f stocks, and cash recovery from sales wi l l also need to strengthen the FM procedures in place to ensure robust internal control arrangements. These procedures wil l be documented in the simplified procedures manual.

This work is on-going under EU funding.

Fund Flows and Disbursements arrangements

14. The amounts and percentages to be financed through the trust fund are detailed for each component in Table 2a and 2b below. The grant for Component 2 wi l l be disbursed over a 13 month period (September 2008 through September 2009). The grant for Component 3 wil l be disbursed over a 19 month period (September 2008 to March 2010). The grant closing dates are

- 63 -

September 30, 2009 and March 31, 1010 for Components 2 and 3 respectively. Disbursement methods include: reimbursement, advance, direct payment and special commitment.

(US%) percentages 2,445,000 100%

Table A1.3a: Disbursement by category for Component 2

I A. U W U U D I 20,000

Allocated Amount I Disbursement Disbursement Categories

1. Civil works P---.-l- 100%

ant's services, ,orkshops

4. Incremental operating costs 'Pl.4C.l

2 . L W I I S U I L ~ 35,000 100%

0 100%

Disbursement Categories 1. Civil works 2. Goods

Table A1.3b: Disbursement by category for Component 3

Allocated Amount Disbursement

240,000 100% 4.000.000 100%

(US%) percentages

3. Consultant's services, training, workshops

Total 4. Incremental operating costs

540,000 100%

230,000 100% 5,000,000

U s e o f statements o f exDenditures (SOEs)

15. Disbursements for al l expenditures will be made against full documentation, except for items claimed under the Statement o f Expenditures (SOE). For Component 2, SOEs wil l be used for payments claimed under contracts for: (a) works in an amount inferior to US$500,000; (b) goods in an amount inferior to US$250,000; (c) consulting f i r m s in an amount inferior to US$lOO,OOO; and (d) individual consultants in an amount inferior to US$50,000 as well as small equipment, office supplies and training. For Component 3, SOEs wil l be used for payments claimed under contracts for: (a) works in an amount inferior to US$250,000; (b) goods in an amount inferior to US$250,000; (c) consulting f i r m s in an amount inferior to US$200,000; and (d) individual consultants in an amount inferior to US$lOO,OOO as wel l as small equipment, office supplies and training. Documentation supporting al l expenditures claimed against SOEs wil l be retained by each FM unit and made available for review when requested by IDA during supervision missions and by project external auditors. All disbursements are subject to the conditions o f the Financing Agreement and the procedures defined in the Disbursement Letter.

Designated account and Funds Flow Arrangements

16. The PDU3 and the PACV2 wil l each maintain and manage a Designated Account in U S Dollars with respective equivalent in current accounts in Guinean Francs. The grant proceeds wil l be deposited in these Designated Accounts. Funds wil l be used to make payments to

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suppliers in the respective contract currencies. Interest income received o n these accounts wil l be deposited to a separate account o f the Government. The revenues received by CNOP-G and i t s regional members from sale o f inputs wil l be deposited in a separate account. Related procedures are documented in the CGOP-G’s manuals.

17. The Designated Account in U S dollars would be opened by each FM unit in a reliable commercial bank on terms and conditions acceptable to the Bank. The authorized allocations would be US$1,250,000 and US$2,000,000 respectively for Component 2 and Component 3. The respective allocations wil l cover about six months o f eligible expenditures. The Designated Accounts wil l be replenished through the submission o f Withdrawal Applications on a monthly basis and wil l include reconciled bank statements and other documents as required until such time as the borrower may choose to convert to report-based disbursements. The Recipient may also choose to pre-finance project expenditures and seek reimbursement from the Bank as needed.

18. Upon grant effectiveness, the Bank will deposit the init ial advance into each o f the Designated Accounts upon receipt o f Withdrawal Applications from the Grant recipient. The Accounts wil l be used for al l payments inferior to twenty percent o f the authorized amounts for the respective Components 2 and 3, Replenishment o f the Accounts wil l be on a month by month basis. Designated Accounts remaining inactive for six consecutive months risk being considered for closure and the balance o f advance therein refunded to the Bank. Further deposits by the Bank into the Designated Accounts wil l be made against withdrawal applications supported by appropriate documents.

Financial Reporting and Monitoring

19. The FM units o f PDU3 and PACV2 wil l be responsible for the overall financial management reporting o f Component 2 and 3 respectively. They wil l produce interim un-audited financial reports (IFRs) on a quarterly basis, and the annual financial statements requested. The accounting software already installed at each FM unit level wil l provide these financial reports. The CFO o f each FM unit would make sure that these are produced and transmitted to the Bank on time for review, as requested by related reporting procedures o f the existing FM manuals. The reporting format and procedures documented in the FM Manual are composed o f financial reports such as (i) sources and uses o f funds by funding source and nature o f expenditures; and (ii) uses o f funds by components/activities o f the project.

20. IFRs and annual financial statements wil l cover al l activities financed through each Component (2 or 3). The annual financial statements wi l l be subject to external audit as described below. The two FM uni ts are required to produce, not later than June 30 o f the following borrower fiscal year, audited annual financial statements. The World Bank staff wil l provide implementation support to the FM units during desk reviews, supervision missions or through seminars in order to improve the quality o f IFRs (Interim Unaudited Financial Reports).

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External Audit Arrangements

Audit Report

21. External independent auditors hired from the private sector will be expected to audit the financial activities o f the individual respective Components in accordance with International Standards on Auditing or other standards that are acceptable to the Bank. Each implementing entity (the PDU3 P C U in the case o f Component 2 and the FM o f the PACV2 for Component 3) wil l be responsible for the preparation the annual financial statements and present them to the auditors. Audited project financial statements are expected to be submitted by the Grant Recipient to the Bank within six months after end o f the financial year to which they relate. The CNOP-G internal control review wil l be included in the overall Component 3 audit report. In addition to the opinion on Financial Statements, the CNOP-G internal control review wil l put emphasis on implementation o f procedures for inventory and delivery management and cost recovery from sales o f inputs.

Table A1.4: Audit Reports

Due Date

FM unit o f PACVZ: External auditors’ one opinion on Financial Statements (annual financial statements and IFRs), Letter to Management prepared by the external auditors and containing findings and recommendations on internal controls for the new project and the CNOP-G would also be submitted.

FM unit o f PDU3: External auditors’ one opinion on Financial Statements Submitted within six months after the end o f (annual financial statements, designated account statements and IFRs). Letter to Management prepared by the external auditors and containing findings and recommendations on internal controls would also be submitted.

ach financial year. I Submitted within six months after the end o f each financial year.

t I

Financing conditions and legal covenants

22. Dated covenants: A dated covenant wil l be included in the Grant Agreement for the development o f a Project Implementation Manual for Component 3. A simplified procedures manual to strengthen the FM arrangements o f the CNOP-G and their capacity to establish and manage a revolving fund wil l be included as a component o f this procedures manual. The manual wil l be submitted to the Bank for review within 60 days o f effectiveness.

23. Leaal Covenants: The following standard financial management covenants would be stated in the Financing Agreements: the Borrower (i) to be compliant with al l the rules and procedures required for disbursements in each Segregated Designated Account for each Component (2 or 3); (ii) to maintain the financial management system including records, accounts and preparation o f related financial statements in accordance with accounting standards ( I A S or IPSAS) acceptable to the Bank and to be audited; and (iii) to prepare and furnish to the Bank Interim Un-Audited Financial Reports (IFRs).

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Supervision plan

24. Given the urgency o f the GFCRP operational response needed, Component 2 and Component 3 wil l require intensive supervision arrangements o f the financial management to ensure the FM system i s in the whole robust and in tandem with fiduciary requirement o f O P B P 10.02. Risks wil l be assessed and mitigated accordingly during the formal supervision which shall be at the interval o f six month for the Components 2 and 3. The intensity o f supervision may reduce with time if r isks are considered to be modest and under control. The FM team in Guinea will factor this demand in developinghevising the Country Financial Plan for Guinea for FY09 and subsequent years.

Conclusion

25. The FM assessment together with the suggested mitigation measures confirm that the FM arrangements for Components 2 and 3 respectively are robust enough and comply with the minimum requirements under O P B P 10.02. The overall FM risk i s rated Moderate for Component 2 and Substantial overall for Component 3, in view o f a r isky environment in a weak CNOP-G.

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ANNEX 2: PROCUREMENT ARRANGEMENTS

General

1. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004 and revised October 2006; the "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated M a y 2004 and revised October, 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan.

2. For the quick delivery o f results and to facilitate project implementation, rapid and simplified procurement procedures wil l be used in response to the new framework for rapid response contained in OP8.00, Rapid Response to Crises and Emergencies, o f the World Bank's Operational Manual. When agreed to by the Bank, for goods and works this may consist o f shopping or direct contracting; engaging the services o f qualified suppliers or contractors already mobilized and active in the emergency area; using l i s ts o f pre-qualified contractors with good track record to whom periodic invitations are issued; using N C B with accelerated bid times not below 15 days; and applying Bank provisions on the use o f bid-securing declarations and the elimination or waiving o f bid bond or bid securities for small contracts.

3. For Consultants this may include single-sourcing consulting f i rms, where i t presents a clear advantage over competition. Firms may be selected which are already working in the area and which have a proven track record on similar assignments or may be selected through the method o f Consultants' Qualification (CQS).

Component 2: Labor-intensive public works

4. Procurement o f Works: This component will be implemented through additional financing to the ongoing Third Urban Development Project and wil l consist o f small labor-intensive c iv i l works for drainage, spot improvement o f urban roads, and pavement repair in five Districts o f Conakry. The difference between this activity and the ones in the ongoing project i s the stipulated large labor content o f the works contracts, with the aim o f providing cash payments rapidly to low-income people o f Conakry. Contracts below an estimated value o f US$lOO,OOO equivalent wil l be procured through Shopping, involving the comparison o f at least three quotations from qualified contractors. C iv i l works contract o f US$lOO,OOO and above wil l be procured through NCB, using bidding documents satisfactory to the Bank.

5. A l i s t o f qualified small contractors wil l be prepared, from which the ones to be asked for quotations wil l be selected, depending on their interest in participating in the competition for the District concerned. The request for quotations (RFQ) for Shopping wil l include the requirements

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for the use o f labor-intensive methods, technical specifications, and the form o f contract. The f i rst RFQ to be disseminated for this component wil l be subject to prior review by the Bank. Subsequent RFQs wil l follow the same format as the f i rst and wil l be subject to ex-post review. The works contracts wil l contain clauses for measures against fraud and corruption, if determined to have occurred during the selection process and or having occurred during the execution o f the contract.

6. Goods procured under this component consist o f motorbikes, computers, and office supplies. All are estimated to cost less than US$lOO,OOO and wil l be procured through Shopping, involving the comparison o f at least three quotations from qualified suppliers.

Procurement o f Goods:

7. Procurement o f Consultant Services: The works contracts wil l be procured - and their implementation managed - by the secondary roads unit (Cellule de Voirie Secondaire) with assistance from the technical units o f the city government o f Conakry. These agencies are implementing a similar component in the ongoing Third Infrastructure Development Project. Two additional engineers wil l be recruited through competition in the secondary roads unit for this component. The external auditor who has been auditing the accounts o f the Third Infrastructure Development Project will also do the audits for the additional financing under an addendum to his contract.

8. Individual Consultants wil l be selected through the comparison o f at least three CVs. Contracts with individual consultants estimated to cost US$lOO,OOO or more wil l be subject to prior review by the Bank, as wel l as al l terms o f reference regardless o f the value o f the contract. In exceptional cases and with the prior approval o f the Bank, single source selection may be used in accordance to the provisions o f the Consultant Guidelines.

Component 3: Agricultural Productivity Support

9. Procurement o f Works: Small c iv i l works wil l be carried out under this component wil l include the rehabilitation o f approximately 250 hectares o f water management structures in for prefectures for dry-season seed and paddy production. Contracts estimated to cost less than US$lOO,OOO will be procured through Shopping, involving the comparison o f at least three quotations from qualified contractors. Contracts with an estimated value o f US$lOO,OOO equivalent and above wil l be procured through NCB, using documents satisfactory to the Bank. No works contract wil l exceed a value o f US$500,000 per contract.

10. Procurement o f Goods: Goods procured under this component will mainly consist of fertilizers, herbicides, vehicles and motorbikes, computers, and office furniture and equipment. Contracts estimated to cost less than the equivalent o f US$150,000 wil l be procured through Shopping, involving the comparison o f at least three quotations from qualified suppliers. Goods contracts o f US$150,000 or more wil l be procured through NCB, using documents satisfactory to the Bank. Goods contracts o f US$250,000 and above will be procured through ICB, using the Bank’s standard bidding documents, and wil l be subject to prior review. Procurement from IAPSO may be used for vehicles and office equipment with the prior agreement o f the Bank. Seeds wil l be purchased from seed multipliers who have been designated in advance by the National Federation o f Producer Organizations, without competition.

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1 1. Procurement o f non-consulting services: Non-consultant services procured under the project include a limited number o f study-tours, surveys and surveillance. They wil l usually be procured by direct contracting.

12. Selection o f Consultants: The services o f consulting f i r m s wil l be sought to identify improved mechanisms for the reliable supply o f agricultural inputs and for external audits. Consulting f i r m s for contracts estimated to cost less than US$lOO,OOO may be selected by using the method o f Consultants’ Qualifications. Auditors may be recruited through Least Cost Selection. The short l i s t o f consulting firms for services estimated to cost less than US$50,000 may consist entirely o f national consultants. All consulting contract with f i r m s estimated to cost US$200,000 or more are subject to prior review by the Bank.

13. Individual Consultants wil l be selected through the comparison o f at least three CVs. Contracts with individual consultants estimated to cost US$50,000 or more will be subject to prior review by the Bank, as well as al l terms o f reference for firms and individual consultants regardless o f the value o f the contract. In exceptional cases and with the prior approval o f the Bank, single source selection o f f i r m s or individual consultants may be used in accordance to the provisions o f the Consultant Guidelines.

14. The Project will enter into agreements with Government and/or donor supported institutions for specific implementation support. As no competitive process would be possible, the Project would only fund incremental costs. In addition, where capacities are weak, the Project may enter into contractual arrangements with NGOs for certain aspects o f implementation (beneficiary training, participatory analyses, etc.).

15. agencies. Normally, shopping procedures would apply.

Operating Costs: The Project wil l fund incremental operating costs o f the implementing

16. The procurement procedures and SBDs to be used for each procurement method, as wel l as model contracts for works and goods procured, are presented in the Project Implementation Manual.

Assessment of Procurement Capacity

17. Procurement Reforms: In July 1996 the Government o f Guinea launched a reform program to improve the transparency and efficiency o f Guinea’s public procurement. The first phase o f reforms resulted in (i) the enactment o f a revised Government Procurement Code; (ii) the publication o f documents (including regulations, implementation decrees; standard bidding documents, and general conditions), and (iii) the introduction o f a computerized tracking procurement system. Following the 2002 Country Procurement Assessment Review (CPAR) the Bank approved an IDF Grant to support phase 2 o f the reforms, aiming at (i) fighting corruption; (ii) strengthening transparency and competition, and increasing quality and efficiency. I t wi l l specifically help improve the efficiency, quality and transparency o f Guinea’s procurement system and strengthen Guinea’s national, and institutional, procurement management capacity.

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Activities under Phase 2 have been implemented slowly and are expected to be completed by the end o f 2008.

18 I Component 2: Labor-intensive public works. The institutional arrangements for procurement wil l be the same as for the ongoing Third Infrastructure Development Project. The procurement performance o f this project has been satisfactory. Due to the nature o f the small labor-intensive contracts - and their dual objective o f infrastructure rehabilitation and employment generation - the procurement risk for this component is high. Collusion could take place among the selected contractors during the selection; major delays may occur in the selection o f contractors and the implementation o f contracts; and payments may not reach the intended beneficiary workers at the planned rate and in a timely manner. The agreed mitigating measures are: (i) periodic meetings with the contractors to sensitize them about their expected performance and sanctions in case o f infringements, and to assist them in contract implementation; and (ii) an impact evaluation wil l be carried out by the City Government o f Conakry near the end o f the project to determine the technical and financial results o f this component.

19. Component 3: Anricultural productivitv support. The institutional arrangements for procurement will be the same as for the ongoing Village Communities Support Program - the second phase o f a 12-year APL program.. The procurement performance o f this project has been satisfactory.

Procurement Plan

20. The Borrower, at appraisal, developed procurement plans for project implementation which provide the basis for the procurement methods. These plans were agreed between the Borrower and the Project Team on August 20 and 21, 2008 and are available in the project’s database and in the Bank’s external website. The Procurement Plan wil l be updated in agreement with the Project Teams as required to reflect the actual project implementation needs.

Frequency of Procurement Supervision

21. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended two supervision missions per year to carry out post review o f procurement actions.

Details of the Procurement Arrangements Involving International Competition

1. Goods, Works, and N o n Consulting Services

(a) List o f contract packages to be procured following I C B and direct contracting:

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1

Ref. No.

1

(b) I C B contracts for works estimated to cost US$500,000 or above per contract, good contracts for US$250,000 or above, and al l direct contracting wil l be subject to prior review by the Bank.

2 3 4 5 6 7 8 9

Contract Estimated Procur P-Q Domestic by Bank Expected Com (Description) Cost, US$ ement Preference (Prior/ Bid-Opening ments

Fertilizer & 1,800,000 ICB N o N o Prior November 2008 pesticides

Review

Method (yedno) Post) Date

2. Consulting Services

(a) L i s t o f consulting assignments with short-list o f international firms. None

(b) Consulting services estimated to cost US$200,000 above per contract, a l l single source selection o f consulting f i r m s and individual consultants, and al l terms o f reference regardless o f the value o f the contract wil l be subject to prior review by the Bank.

(c) Short lists composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$50,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

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ANNEX 3: PROJECT PREPARATION AND APPRAISAL TEAM MEMBERS

Name

Key institutions responsible for preparation of the Program: Ministry o f Agriculture, Ministry o f Urban Affairs, PACV2 project team, PDU3 project team, National Confederation o f Producer Organizations (CNOP-G)

Title Unit

Kwabena Amankwah-Ayeh Barbry Keller Julie Ballard Mamadou Yaro John Ngaya A h h a Mamadou Bah

Sr. Urban Specialist AFTU2 Senior Country Officer AFCGH Jr. Professional Associate AFCGH Senior Financial Management Specialist AFTFM Senior Financial Management Specialist AFTFM Procurement hec ia l is t AFTPR

1 Aissatou Dial lo

Ir ina Kichigina Nathalie Munzberg

Senior Counsel Senior Counsel

Ir ina Kichigina Senior Counsel LEGEM LEGEM

LOAFC Nathalie Munzberg Aissatou Dial lo

Senior Counsel LEGAF Finance Officer LOAFC

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I Finance Officer

GUINEA AT A GLANCE

Guinea a t a glance 7/24/08

K e y Develo pin en t I n d i c a t o r s

(2007)

Population, mid-year (millions) Surface area (thousand sq. km) Population growth (Oh) Urban population ( O h of total popuiation)

GNI (Atlas method. US$ billions) GNI percapita [Atlas method, US$) GNI percapita (PPP, international$)

GDP growth (%) GDP per capita growth (%)

(most recent estimate, 2000-2007)

Poverty headcount ratioat 5 1 a day (PPP, YO) Poverty headcount ratioat 5 2 a day [PPP, Oh) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Chiid malnutltion (% of children under 5)

Adult literacy, male ( % of ages 15 and older) Adult literacy, female (% of ages 15 and older) Gross primary enrollment, male (% of age group) Gross primary enrollment, female (% of age group)

Access to an improved water source (% of population) Access to improved sanitation faalities (%of population)

Guinea

9.4 246 2.2 33

3.8 410

1,130

1.8 2.8

56 98 23

43 18 96 81

50 18

Sub- Saharan

Africa

782 24,270

2 5 36

648 829

1,681

5 6 3.0

50 94 27

69 50 99 87

56 37

LOW income

2,420 29,220

1.8 30

1,571 649

1,860

8.0 6 1

60 74 35

72 50

106 98

75 38

Net A i d Flows

(US $ millions) Net ODA and official aid Top 3 donors (in 2006):

United States European Commission France

Aid ( % o f GNI) Aid percapita (US$)

L o n g - T e r m E c o n o m i c T r e n d s

Consumer prices (annual % change) GDP implicit deflator (annual % change)

Exchange rate (annual average, local per US$) Terms of Wade index (2000 = 100)

Population, mid-year (millions) GDP (US5 millions)

Agriculture Industry

Services

Household final consumption expenditure General gov't final consumpaon expenditure Gross capital formation

Exports of goods and services Imports of goods and services Gross samngs

Manufacturing

1980

69

8 21

Q

19

190

4 6

1990

292

0 33 87

10.9 48

22.7 23 8

660 2 153

6.0 2,818

2000 2007'

153 164

26 35 16 21 20 21

5 1 5 3 19 18

31 7 22 9 10.8 16 3

1,746.9 4,174 5 100 100

8.2 9.4 3,102 4,157

(% of GDPj 23 8 208 22 6 33 3 325 3 6 2 4 6 4 0 3 9

42 9 46 7 41 0

73 4 77 7 87 2 8 9 6 8 6 7

17 5 I 9 8 2 4 5

73 4 77 7 87 2 8 9 6 8 6 7

17 5 I 9 8 2 4 5

30 9 23 7 29 1 30 6 28 0 32 1 10 4 13 3 5 4

Age distribution, 2006 I Male Female

7074 6 0 6 1

5 0 5 1 4044

3 0 % 2 0 1

1014 0 4

0 10 20

percent

(Under4 mortalltyrate (per 1,000)

1990 1885 ZOCC 2005

nGuinea gSubSaharanAfrica

Growth of GDPand GDP per caplta (%)

Eo 95 00 05

--O-GDP ___ GDP Der caDita

1980-80 1990-2000 2000-07 (average annual growth % j

2.8 3.1 1.9 4 3 3. 1

4 3 4 0 4 9 3 7 4 0 2 5 3 8 1 9

5 2 4 0 -3 4 -0 9 2 3 -5 6

0 4 1 3 -0 8 -1 6

Note Figures i n italics are for years otherthan those specified 2007 data are preliminary Group data are through 2006 a Aid data are for2006

Development Economics, Development Data Group (DECDG)

indicates data are not available

- 74 -

Guinea

Balance of Payments and Trade

(US$ millions) Total merchandise exports (fob) Total merchandise imports (cif) Net b-ade in goods and services

Current account balance as a % of GDP

Workers' remittances and compensation of employees (receiph)

Reserves, including gold

Central Government Finance

(% o f GDP) Current revenue (including grants)

Current expenditure

Overall surpluddefidt

Highest marginal tax rate (%)

Tax revenue

individual Corporate

External Debt and Resource Flows

(US$ millions) Total debt outstanding and disbursed Total debt service Debt relief (HIPC, MDRI)

Total debt (% of GDP) Total debt service (% of exports)

Foreign direct investment (net inflows) Portfolio equity (net inflows)

2000

418 563

-133

-200 -6.4

1

150

11.0 10.0 5.8

-2.0

3.388 120 716

109.2 16.3

-47

2007

1,145 1,030

-66

-105 -2.5

42

170

15.1 10.3 11.3

3.7

3,027 166

66.3 14.6

173

Composition of total external debt, 2007

US$ mllims

Private Sector Development

Time required to start a business (days) Cost tostarta business (% of GNI percapita) Ttme required to register property (days)

Ran ked as a major constraint to business (% of managers surveyed who agreed)

Electridty Transport

Stock market capitalization (% of GDP) Bank capital to asset ralio (%)

2000 2007

- 41 - 136.3 - 104

.. 61.0

.. 9 5

Governance Indicators, 2000 and 2006

Vace and accountability I

Pdlbcal stability

Regulatay quality

Rule of iaw

Contml of corrupucm I

O 25 50 75 100

0 2 W 6 Country's percentle rank (0.100) 02WO h g b r vdws i rrplytener r a f m g

Source KaUfmann-KraayMastwal Worn Bank

Tech no logy and Infrastructure

Paved roads (% of total) Fixediine andmobile phone

High technology exports subsatbers (per 100 people)

(% of manufachrred exports)

Environment

Agriculhrrai land (% of land area) Forest area (% of land area) Nationally protected areas (% of land area)

Freshwater resources per capita (cu. meters) Freshwater withdrawal (% of internal resources)

CO2 emissions per capita (mt)

GDP per unit of energy use (2005PPP $per kg of oil equivalent)

Energy use percapita (kg of oil equivalent)

2000

16.5

1

0.1

50 28.1

0.7

0.16

2006

9.8

2

51 27.4

6.4

25,104

0. I 5

Note: Figures in italics are for years otherthan those specified. 2007data are preliminary .. indicates data are not available. - indicates observadon is not applicable.

Development Economics. Development Data Group (DECDG)

6/25/08

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Millennium Development Goals G uin ea ~- ~~~

W#h selected targets to achieve between 1990 and 2015 (esfmate closest to date shown, +/- 2 years)

Goal 1: halve the rates for $1 a day poverty and malnutrition Poverty headcount rabo at $1 a day (PPP, %of population) Poverty headcount rabo at national poverty line (% of population) Share of income or consumption to the poorest qunitile (%) Prevalence of malnutrition (% of children under 5)

Goal 2 ensure that children are able to complete primary schooling Primaryschool enrollment (net, %) Primarycompletion rate ( X of relevant age group) Sewndary school enrollment (gross, %) Youth literacy rate (% of people ages 15-24)

Goal 3: eliminate gender dispartty in education and empowerwomen Ratio of girls to boys in primary and secondary educabon (%) Women employed in the nonagricultural sedor (% of nonagricultural employment) Proportion of seats held by women in nabonal parliament (%)

Goal 4 reduce under5 mortality by two-thirds Under-5 mortality rate (per 1,000) Infant mortality rate (per 1,000 live births) Measles immunizabon (proportion of one-year olds immunized, %)

Goal 5: reduce maternal mortality by three-fourths Maternal mortality rabo (modeled estimate. per 100,000 live births) Births attended by skilled health staff (% of total)

Goal 6 haR and begin to reverse the spead of HIWAIDS and other major diseases Prevalence of H N (% of population ages 15-49) Contracepbve prevalence (% of women ages 15-40) Incidence of tuberculosis (per 100,000 people) Tuberculosis cases detected under DOTS (%)

Goal 7: halve the proportion of people without sustainable access to basic needs Access to an improved water source (%of population) Access to improved sanitation facilities (YO of population) Forest area (% of total land area) Nationally protected areas (% of total land area) CO2 emissions (metric tons per capita) GDP per unit of energy use (constant 2005 PPP $ per kg of 011 equivalent)

Goal 8: develop a global partnership for developnenl Fixed line and mobile phone subsaibers (per 100 people) Internet users (per 100 people) Personal computers (per 100 people) Youth unemployment (% of total labor force ages 15-24)

fducation indicators (Yo)

'0° 1 50 75 1 25 i

zom 2 o a zoc6

-0- Primary netenroltnent ratio

--U---Ratioofgids to boysinprimry& secmdary educaticn

Measles immunization (%of 1 - 9 a r olds)

loo 1 71 J

UGuinea !:]Sub-Saharan Africa

CT indicators (per 100 people)

I O :

OFixed + mo3ile subscribers mlnternet USHS

Note Figures in italics are for years otherthan those specified . indicates data are not available.

Development Economics, Development Data Group (DECDG).

6125108

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M A P SECTION

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G U I N E EG U I N E EM A R I T I M EM A R I T I M E

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F O R E S T I E R EF O R E S T I E R E

M O Y E N N EM O Y E N N E

G U I N E EG U I N E E

H A U T EH A U T EG U I N E EG U I N E E

Kole

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Bafin

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fing

Sank

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Sank

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TTiinnkkiissssooKKoogg

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NNiiaanntt

aann DDiioonn

SSaannkk

aarraann

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MMiilloo

TToommiinnéé

SansalSansalééSangarSangaréédidi

CoyahCoyah

BissikrimaBissikrima

NyagassolaNyagassola

MoribayaMoribaya

FoulamFoulamôôriri BalakiBalaki

KintinianKintinian

TTiroiro

SibiribaroSibiribaro

BoolaBoola

DiDiéékkéé

SokouralaSokourala

NiandankoroNiandankoro

DokoDoko

FriaFria

BokBokéé

PitaPita

MaliMali

YYomouomou

BeylaBeyla

BofBoffafa

MamouMamou

LLééloumalouma

DalabaDalabaDabolaDabola

TTongueongue

GaoualGaoual

MacentaMacenta

FaranahFaranah

SiguiriSiguiri

KKéérouanerouane

TTéélimlimééllééee

KoundaraKoundara

LolaLola

GuGuééckckéédoudou

KouroussaKouroussa

ForForéécariahcariah

DinguirayeDinguiraye

KissidougouKissidougou

MandianaMandiana

LabLabéé

KindiaKindia

KankanKankan

NzNzéérréé-kor-koréé

GUINEA-BISSAU

S E N E G A L

M A L I

C Ô T ED ' I V O I R E

S I E R R A L E O N E

L I B E R I A

TTo o BafatBafatáá

TTo o TTambacoundaambacounda

TTo o TTambacoundaambacounda

TTo o TTambacoundaambacounda

TTo o KayesKayes

TTo o KayesKayes

TTo Bamakoo Bamako

TTo Bougounio Bougouni

TTooKorhogoKorhogo

TTooSSééguguéélala

TTooManMan

TTooMagburakaMagburaka

TTooMagburakaMagburaka

TTooFreetownFreetown

G U I N E EM A R I T I M E

G U I N E E

F O R E S T I E R E

M O Y E N N E

G U I N E E

H A U T EG U I N E E

Kamsar

SansaléSangarédi

CoyahDubréka

Bissikrima

Nyagassola

Moribaya

Foulamôri Balaki

Kintinian

Tiro

Sibiribaro

Boola

Diéké

Sokourala

Niandankoro

Doko

Fria

Boké

Pita

Mali

Yomou

Beyla

Boffa

Mamou

Lélouma

DalabaDabola

Tongue

Gaoual

Macenta

Faranah

Siguiri

Kérouane

Télimélée

Koundara

Lola

Guéckédou

Kouroussa

Forécariah

Dinguiraye

Kissidougou

Mandiana

Labé

Kindia

Kankan

Nzéré-koré

CONAKRY

GUINEA-BISSAU

S E N E G A L

M A L I

C Ô T ED ' I V O I R E

S I E R R A L E O N E

L I B E R I A

Niger

Kole

nté

Bafin

g

Sank

aran

i

Nig

er

Gambia

Ko nk ouré

Tinkisso

Makona

Kogon

Niant

an Dion

Sank

aran

i

Milo

Tominé

A T L A N T I C

O C E A N

To Bafatá

To Tambacounda

To Tambacounda

To Tambacounda

To Kayes

To Kayes

To Bamako

To Bougouni

ToKorhogo

ToSéguéla

ToMan

ToMagburaka

ToMagburaka

ToFreetown

Nim

ba Mts. Mt. Nimba(1752 m)

12°N

10°N

12°N

10°N

8°N

14°W

14°W

12°W 10°W 8°W

12°W 10°W 8°W

GUINEA

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.

0 20 40 60 80

0 20 40 60 80 Miles

100 Kilometers IBRD 33414

NO

VEM

BER 2004

GUINEASELECTED CITIES AND TOWNS

PREFECTURE CAPITALS

REGION CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

PREFECTURE BOUNDARIES

REGION BOUNDARIES

INTERNATIONAL BOUNDARIES