REPUBLIC OF COTE D IVOIRE PROJECT COMPLETION REPORT OF THE MACRO-ECONOMIC AND STRUCTURAL ADJUSTMENT PROGRAMME (MESAP) COTE D IVOIRE

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1 AFRICAN DEVELOPMENT BANK GROUP REPUBLIC OF COTE D IVOIRE PROJECT COMPLETION REPORT OF THE MACRO-ECONOMIC AND STRUCTURAL ADJUSTMENT PROGRAMME (MESAP) COTE D IVOIRE Country Department, West Region (OCCW) December 2005

2 TABLE OF CONTENTS Summary of the Completion Report Acronyms and Abbreviations, Currency Equivalents Basic Project Data Programme Logical Framework i iv iv viii I. INTRODUCTION 1 II. PROGRAMME OBJECTIVES AND FORMULATION 1 III. PROGRAMME IMPLEMENTATION Effectiveness and Release of the Single Tranche Programme Reports Matrix of Actions and Programme Implementation Procurement of Goods and Services Sources of Finance and Disbursement of the Single Tranche 5 IV. PROGRAMME PERFORMANCE Institutional Performance Economic Performance 7 V. SOCIAL AND ENVIRONMENTAL IMPACTS Social Impacts Environmental Impacts 9 VI. SUSTAINABILITY OF PROGRAMME IMPACTS AND RISKS 10 VII. PERFORMANCE OF THE BANK, THE BORROWER AND THE CO-FINANCIERS Performance of the Bank Performance of the Borrower Performance of the Co-financiers 11 VIII. OVERALL PROGRAMME EVALUATION Implementation Performance Performance of the Bank Impact on Development 12 IX. CONCLUSIONS, LESSONS LEARNT AND RECOMMENDATIONS Conclusion Lessons to be Learnt from the Programme Implementation Recommendations 14 LIST OF ANNEXES 15

3 EXECUTIVE SUMMARY 1. Despite the implementation of several structural and sector adjustment programmes between 1980 and 1994, the situation of the Ivorian economy has remained difficult and characterised by strongly marked internal and external imbalances. Faced with the persistent economic difficulties, action on the exchange rate, notably the 50% devaluation of the CFA Franc in relation to the French Franc in January 1994, proved necessary to intensify the adjustment efforts. This devaluation was accompanied by appropriate economic policies through the introduction of the macro-economic and structural programme (MESAP). The objectives of the macro-economic and structural programme were to: i) restore the conditions for strong and diversified growth: GDP was to increase in real terms by 6% per annum during ; ii) speed up the recovery of the internal and external financial viability of the country; iii) improve the standard of living of the population while reducing social disparities and protecting the natural resources of the country. 2. To sustain this programme whose gross financing requirements were relatively significant, the Government sought the financial assistance of its leading development partners, including the Bank Group. They responded favourably by contributing to the financing of the programme with UA million: UA million for the World Bank; UA million for the IMF; UA million from the other multilateral donors and UA million from bilateral sources. The Bank Group had to reallocate UA million released from its ongoing loan portfolio, in view of the non-availability of ADF VII resources for Côte d Ivoire. 3. The amount of the resources reallocated to the MESAP was approved by the Board of Directors of the Bank on 20 September The related consolidation agreements were signed on 24 October These agreements entered into force on 24 October 1994, i.e. one month after Board approval of the operation. This exceptionally short time reflected the determination of the Ivorian Government to cooperate with the Bank Group in the implementation of the country s macro-economic and structural adjustment programme. 4. Overall, the programme performance was satisfactory. Out of the 67 programme measures, 63 have been implemented, representing an implementation rate of 94 %. Some of them were implemented intensively. The same applies to VAT the number of whose rates dropped from five to two (normal rate 20% and reduced rate 11.11%) against a target of four for the programme. At the end of 1996, the key measures renewed and implemented in were: i) The clearance of all external and domestic arrears; ii) The removal of all non-tariff barriers; iii) The strengthening of family planning services in the public health service through counselling and the supply of contraceptives. 5. The economic growth and internal and external financial viability objectives of the country were achieved over the period However, the implementation of certain measures was not satisfactory considering the specific objectives assigned. Likewise in the

4 ii social sectors whose share in the operating budget shrank between 1995 and 1996 in spite of the nominal increase in the resources allocated. The same applies to the privatisation of enterprises where only 60% of the targets set for the period were achieved. 6. The implementation of the programme helped revive growth and restore the internal and external viability of the Ivorian economy. Out of the seven indicators selected, four attained satisfactory levels in , namely: i) The GDP growth rate was on average 5.3% per annum compared with an expected result of 4.6% over the programme period. This rate fell off to 3.8% in ; ii) The share of primary public expenditure in the GDP dropped significantly from 23% in 1993 to 17.2% in 1996 (as against a target of 18% for the last year); iii) The trade balance surplus reached 13% of GDP in 1994 and 15% in 1996 compared with the expected results of 11% and 8% respectively for the above years. iv) The inflation rate showed a very favourable trend, down from 32.5% in 1994 to 4.6% in 1996 in relation to the fixed targets of 35% and 6% respectively for the two years. These performances remain nonetheless weak in view of their trend in This weakness raises the issue of sustainability of the programme effects. 7. The increase in the producer prices of coffee and cocoa improved agricultural incomes considerably. The programme implementation, particularly implementation of the measures concerning public sector reforms, gave rise to staff reduction in the privatised enterprises and the civil service. The unemployment rate in 1998 rose to 14.6 % with a strong emphasis on Abidjan where it attained 16.8% overall and 19.4% among women. Job offers were largely below job applications, as they covered only 9.8% of the applications in and 15.2% in The supporting measures were not enough to reduce poverty, which affected a large proportion of the population. CONCLUSIONS AND RECOMMENDATIONS Conclusion 8. The macro-economic and structural adjustment programme marked, through the devaluation of the CFA franc, an important turning point in the utilisation of the economic policy instruments of WAEMU in general and Côte d Ivoire in particular. The implementation of this programme helped achieve high GDP growth rates and restore the internal and external financial viability of the country. It should be underscored that the performances of the financial bodies, thanks to the structural measures, were satisfactory during the programme implementation period. These performances, in fact satisfactory over the

5 iii programme period, could not be maintained and therefore deteriorated in the subsequent years with the enduring socio-political and military crisis. The proportion of the population living below the poverty line is still high, in the region of 33% in This threshold affects at present nearly 40% of the population owing to the persistence of the socio-political crisis in Côte d Ivoire. Recommendations 9 It is recommended to the Bank to: i) Prepare SAP completion and audit reports within a reasonable period of time in line with the existing procedures; ii) iii) iv) Participate regularly in joint SAP preparation and mid-term review missions with the co-financiers; Maintain the initiative of appraising SAPs with adequate multidisciplinary teams; Centralise the data on structural adjustment programmes, particularly the supervision and mid-term review reports; v) Regularly organise supervision and mid-term review missions of the programmes. 1. It is recommended to the Government to: i) Strengthen poverty reduction measures and pursue structural reforms by involving the beneficiary populations in the implementation of the programmes; ii) iii) iv) Make the necessary arrangements to computerise and centralise the data on structural adjustment programmes and facilitate access to the said data; Take adequate steps to conduct the studies and audits necessary for the public enterprises; and Take appropriate steps to improve programme monitoring and furnish the Bank with the completion and audit reports on the said programmes.

6 iv ACRONYMS AND ABBREVIATIONS ADB : African Development Bank ADF : African Development Fund AGEFOP : National Agency for Vocational Education AGEPE : Agency for the Study and Promotion of Employment ANDE : National Environment Agency BCEAO : Central Bank of West African States CFA : Communauté financière africaine (African Financial Community) COMFESIP : Committee on the Mobilisation of External Financing and the Monitoring of Public Investment EU : European Union FISAP : Financial Sector Adjustment Programme GDP : Gross Domestic Product IMF : International Monetary Fund MESAP : Macro-economic and Structural Adjustment Programme PASCO : Competitiveness Sector Adjustment Programme PNAE : National Environmental Plan SAP-HR : Health and Human Resources Sector Adjustment Programme UNDP : United Nations Development Programme WAEMU : West African Economic and Monetary Union CURRENCY EQUIVALENTS July 1994 December 1996 UA 1= US$ US$ UA 1= CFAF CFA.F BASIC PROGRAMME DATA 1. Name of Programme : Macro-economic and Structural Adjustment Programme (MESAP) 1. Number of consolidation agreements B/CIV/PAM/94/25 et FAD/CIV/PAM/94/6 2. Borrower: Government of the Republic of Côte d Ivoire 3. Beneficiary: Government of the Republic of Côte d Ivoire 4. Executing Agency: Exceptional Financings Mobilisation Committee

7 v 2. Data on the resources Data on the resources Estimated Actual 1. Amount reallocated UA million UA million 2. Appraisal date 20 June to 4 July Negotiation date Not applicable 4. Date of Board presentation September September Approval date: September September Signing date: October October Effectiveness date October October Supervision mission date Not indicated 20 Sept-5 Oct Mid-term review date June 1995 Not carried out 10. Audit mission date Not indicated Not carried out 11. Date of Government Not indicated Not carried out completion report 12. Completion mission date Not indicated September Start-up date January December Closing date 31 December December Data on the Sources of Finance 3.1 Financing of all the Donors Financing Plan Estimated % Actual ADB Group UA * million (5.6%) UA 59.38* million (3.6%) World Bank UA million (36.6%) UA million (36.4%) IMF UA million (17.6%) UA million (20.4%) Other multilaterals Bilaterals Total UA million (5.9%) UA million (34.3%) UA million (100.0%) UA million (13.5%) UA million (26.1%) UA million (100.0%) (*) including the disbursement of the third tranche of SAP-HR in 1994, estimated at UA 16.4 million.

8 vi 3.2 Disbursement of ADB Group Reallocated Resources Dates Tranche Estimated (in million UA) - Before end of December Single tranche November-Dec November- Dec November- Dec Actual (in million UA) Gap Total Total cost (gross financing requirements): USD 5.10 million, i.e. UA 3.52 billion. 4 Performance Indicators 1. Balance 0 2. Time overrun/underrun - Slippage on effectiveness - Slippage on the completion date - Slippage on the last disbursement months 3. Programme implementation status Satisfactory 4. Completion indicator Satisfactory 5. Institutional performance Partly satisfactory 6. Completion report Not prepared 7. Audit report Not applicable

9 vii 5. Information on the Missions Missions Number of Missions Number of Persons Composition Identification Preparation Appraisal 1 6 Macro-economist Agronomist, Agriceconomist, Education-health Economist, Finance officer; financial policy analyst Staff/Weeks 12 Mid-term review Not carried out Supervision 1 1 Macro-economist 2 Audit Not carried out Completion report 1 1 Macro-economist 2 6. Status of Disbursements (in million UA) Disbursement Estimated at Appraisal Actual 1- Total disbursed Annual disbursement

10 viii PROGRAMME LOGICAL FRAMEWORK Sector Goal Objectively Verifiable Indicators (OVI) Indicator Level at Completion -Restore the conditions for strong, diversified growth; -speed up the restoration of internal and external financial viability; -improve the standard of living of the population while reducing social disparities and protecting natural resources. - GDP growth rate of 1.7 % in 1994 and 6% in ; - A primary surplus of 1.3 % of GDP in 1994 and 3% in 1996; - investment rate from 10% of GDP in 1993 to 16% in 1996; - maintenance of the global tax rate at an average level of 21.5% of GDP from 1994 to 1996; - reduction of the share of primary public expenditure in GDP from 23% in 1993 to 18% in 1996; - trade balance surplus from 1% of GDP in 1993 to 11% in 1994 and 8% in 1996; - privatisation of 41 public sector enterprises between 1994 and % in 1994; 7.1% in 1995; 6.8% in % in ; -1.8 % in % of GDP in 1994; 2.3% in 1995; 2.8% in 1996; 1. 5% in % in 1995; 13.7% in 1996; 14.6% in % of GDP in % in % of GDP in 1996; 16.7% of GDP in % of GDP in 1994; 15 % in 1996; 14.9 % in enterprises in Underlying Assumptions and Observations -3% of GDP in 1993 Assumption 1: continuation of the macro-economic and structural reform programme undertaken since the change of the CFAF parity on 12 January This assumption is confirmed by the economic policies implemented

11 ix Sector Goal Objectively Verifiable Indicators (OVI) Indicator Level at Completion Project Objective Underlying Assumptions and Observations -Improve the external competitiveness of the country; -improve the mobilisation of its internal resources; - Limitation to 35% of the aggregated maximum rate of customs duties and fiscal import duty; - reduction of the number of VAT rates from 5 to 4 with the abolition of the 35% increased rate; - increase in the special tax on alcohol, tobacco and cigarettes and adoption of the ad valorem system; - replacement of the occupation and business tax, the tax on business profits VAT for low income taxpayers with a global tax on turnover at a rate of 6.5 % or 7.8%; 33% at present 4 in since 1996 Assumption 1: improvement of the taxation and tax collection system; primary expenditure control and drawing up of a public investment programme. This assumption is confirmed by the performance of public finance in and in recent years. - gradual reduction of overstaffing in the civil service by 1.5% on average per annum; - reduction of the wage bill from 75% of tax revenue in 1993 to less than 50% in 1996; - restructuring of the external public debt through the Paris Club and London Club; - Curbing of the inflation rate to less than 35% end 1994 and 6% in 1996; - adoption of new labour and investment codes; - intensification of reforms in agriculture and the financial sector; - privatisation of 17 public enterprises in 1994; - adoption of social support measures by introducing competition in the import and distribution of essential commodities. - increase in the budget allocation of the social ministries in real terms. - programmes targeted for the most vulnerable segments of the population, including women. 48.3% in 1994; 38.5 % in ; 37% in % in 1994; 4.6 % in 1996; 3% in enterprises in 1994; 23 enterprises in Education: 6.6 % in 1996 and 7.4% in (nominal terms) Health: 4.6% in 1996; 1.7% in Assumption 2: Timely mobilisation of the expected, exceptional financial assistance and support of the social partners to the Government s macroeconomic and structural reform programme. Implementation: effective resources: 92% of the projections, part support of the population for the reforms. Assumption 3: Strict compliance with the schedule of reforms contained in the economic policy framework paper. Large majority of the measures implemented in HIV and development programme; Micro-enterprise and micro-credit development programme.

12 x Project Outputs - Improvement of the competitiveness of the Ivorian economy; - Restoration of the internal and external financial viability of the country through allocation of the resources from the restructuring and resizing of the ADB Group portfolio. - Net positive transfers of UA 1.08 million in Control of the country risk ratios before and after the country s external debt restructuring; Project Activities Estimates (in thousand UA) At completion (in thousand UA) - Control of the inflation rate; - Programming of public investments; -Restructuring of external public debt; - Strengthening of the monetary and credit policy; - Reforms of the structures relating to the regulatory framework and the financial sector; - Implementation of support measures following the change of CFAF parity ADB Group * World Bank IMF: Other multilaterals Bilaterals Total * Assumption 1: Disbursement, in one single tranche, of ADB Group resources in view of the new prospects of high and diversified growth of the new macroeconomic focusing. 98.6% of the resources disbursed before end of 1994 Assumption 1: Government s commitment, coordination of the external assistance and support of the donor community. Assumption confirmed by the implementation of the measures in the required time; effective resources representing 92% of the projections and the setting up of the Committee on the mobilisation of external financing and the monitoring of public investment. * including disbursement of the third tranche of SAP-HR in 1994

13 I. INTRODUCTION 1.1 Despite the implementation of several structural and sector adjustment programmes between 1980 and 1994, the situation of the Ivorian economy has remained difficult and characterised by strongly marked internal and external imbalances. Faced with the persistent economic difficulties, action on the exchange rate proved necessary to intensify the adjustment efforts focused on the internal variables. To that end, the Ivorian Government decided, in consultation with its African partners of the Franc zone, to devalue the CFAF by bringing its parity, which had remained stable for nearly five decades, to 100 CFAF for 1 FF in January The devaluation was accompanied, through the macro-economic and structural adjustment programme, by appropriate budgetary, monetary and structural policies aimed at restoring the international competitiveness of the economy and ensuring the conditions of a sustainable growth. 1.2 To sustain this programme whose gross financing requirements were relatively significant, the Government sought the financial assistance of its leading development partners, including the ADB Group. They responded favourably by contributing to the financing of the programme with UA million: UA million for the World Bank, UA million for the IMF, UA million from the other multilateral donors and UA million from the bilateral sources. The Bank Group had to reallocate UA million released from its ongoing loan portfolio, in view of the non-availability of ADF VII resources for Côte d Ivoire. A part of these resources was earmarked for the payment Côte d'ivoire s arrears of UA 26.1 million to the Bank Group falling due as at , according to an agreement concluded between the two parties. Under the combined effects of the economic and political crises, the accumulation of arrears has become more marked in recent years. Côte d'ivoire s arrears to the ADB Group therefore amounted to UA million in October The present completion report results from a mission to Côte d Ivoire in October It gives account of the implementation of the MESAP co-financed by the ADB Group, which spanned the period. In addition to the introductory chapter I, it comprises eight other chapters. Chapter II recalls the programme objectives and highlights its formulation and description. Chapter III analyses the implementation status of the programme by emphasizing the date of effectiveness, the successes and failures of the actions undertaken, as well as the procurement of goods and services and disbursement procedures. Chapter IV analyses the institutional, economic and financial performance of the programme. Chapter V deals with the social and environmental impacts. Chapter VI examines the sustainability of the programme effects. Chapter VII is devoted to the performance of the Bank, the Borrower and the other donors in the preparation and implementation of the programme. Chapter VIII evaluates the overall programme performance. Chapter IX draws the conclusions and lessons and makes recommendations to the Bank and the Government.

14 2 2 II. PROGRAMME OBJECTIVES AND FORMULATION 2.1 The trend of the Ivorian economy over the period was marked by many weak performances, notably a recession accompanied by financial imbalances that gave rise to the accumulation of an unsustainable debt, in spite of the implementation of several structural and sector adjustment programmes: the Competitiveness Sector Adjustment Programme (PASCO), the Financial Sector Adjustment Programme (PASFI) and the Health and Human Resource Adjustment Programme (PAS-RH) sustained by sizeable exceptional financings. The last two programmes benefited from Bank Group support These financial imbalances were characterised notably by the persistence of the primary deficit, the deterioration of current account transactions and the worsening of the ratio of indebtedness and the debt service ratio during the period To surmount these persisting difficulties, the objectives set for the Macro-economic and Structural Adjustment Programme covering the period , were: i) Restore the conditions of a high and diversified growth. The GDP should increase in real terms from 6% per annum during ; ii) iii) Accelerate the restoration of the internal and external financial viability of the country; Improve the standard of living of the population while reducing social disparities and protecting the natural resources of the country. 2.2 Preparation, Appraisal, Negotiation and Approval of the Programme For the Bank: unlike the other programmes, which were in most cases jointly prepared with the World Bank, there was no specific preparation for the MESAP. However, the assessment of the impact of the devaluation on ADB Group operations and its consequences for the 14 countries was determining for the Bank s intervention in this programme. This assessment carried out immediately after the devaluation underscored the necessity for the ADB Group to provide, in the short term, exceptional financing facilities in order to ensure the success of the economic programmes adopted for each of the Franc zone countries The programme was appraised from 20 June to 4 July 1994 under the Bank Group loan portfolio restructuring and resizing mission. This multidisciplinary mission was comprised of six persons: one macro-economist, one education and health economist, one agronomist, one agro-economist, one finance officer and one financial policies analyst. In view of the programme components, external debt and operations problems - origin of the resources to be reallocated - the composition of the mission was qualitatively appropriate The resources allocated to the programme did not constitute a fresh loan granted by the ADB Group to the beneficiary. Consequently, two consolidation agreements were signed on them in place of the loan agreement. The memorandum relating to the macro-economic and structural adjustment programme was submitted to the ADB Board of Directors in September The amount of the reallocated resources was approved by the Board on 20 September 1994.

15 3 3 III PROGRAMME IMPLEMENTATION 3.1 Effectiveness and Release of the Single Tranche The consolidation agreements relating to the reallocated resources were signed on 24 October The specific conditions, namely the three undertakings of the Ivorian Government and the opening of the special MESAP account with the Central Bank of West States (BCEAO), to enable the implementation of the consolidation agreements, were fulfilled between 16 September and 10 October These agreements were implemented on 24 October 1994, i.e. one month after approval of the operation by the Board of Directors. This exceptionally short time translated the willingness of the Ivorian Government to cooperate with the Bank Group in the implementation of its macro-economic and structural adjustment programme. 3.2 Programme Reports During programme implementation, the transmission of reports to the Bank was irregular. In the last two years of the programme, this irregularity became more pronounced. The reports of the meetings of the Exceptional Financings Mobilisation Committee and the MESAP Steering Committee were rarely transmitted to the Bank. 3.3 Matrix of Actions and Programme Implementation The programme comprised about 67 actions or measures 19 of which were implemented during the programme appraisal, likewise the real exchange rate. The 48 other measures were to be implemented. These last measures supported by Bank Group interventions under the programme, are broken down as follows: i) Nine (9) measures for the budget; ii) iii) iv) Eight (8) measures for the reform of the public sector, including public enterprises; Six (6) measures for the monetary and financial sector; One (1) measure for the external and commercial policy sector; v) Eight (8) for the pricing policy; vi) vii) Ten (10) for the private sector, including the agricultural and industrial policies; Six (6) for the social and environmental sectors.

16 Out of these 48 measures, 43 were fully implemented during the period. Some of them were intensively implemented, for example the VAT whose rate dropped from five to two (20% normal rate and 11.11% reduced rate) in relation to a target of four for the programme. Taking into account the outputs prior to the appraisal date of the programme by the Bank, the number of effective measures was 63 out of a total of 67 for the whole programme, i.e. an implementation rate of 94 %. The implementation of the measures by sector is summarised in the following paragraphs: Budget: the main objective was to restore the viability of public finance by generating a primary surplus of 1.3% of GDP in 1993 and of 3% of GDP in Ten (10) measures were implemented in and one renewed and implemented in This last measure had to do with the clearance of all the external arrears. The Government has made great efforts to achieve this objective, but the difficult economic and socio-political situation, which has continued since 1999, is unfavourable Reform of the Public Sector (including the reform of public enterprises): the objective was to improve the efficacy of public savings and service delivery. All the eleven (11) measures were implemented in However, two (2) of them did not achieve the targeted objectives, namely the privatisation of 47 enterprises for the three-year period; only 28 enterprises were privatised. The situation was favoured by the lack of prior audits. This negative factor was aggravated in subsequent years by a tense socio-political climate not conducive to private investment. There was also the conduct of studies and audits, a process slowed down by inadequate financial resources Monetary and Financial Sector: the key objective was to reduce the country s net external commitments in order to rebuild its exchange reserves and increase the coverage rate of the currency issue to a level higher than the statutory minimum of 20% within WAEMU. All the measures are implemented. But as the clearance of the domestic arrears was not total, the measure is still current, in spite of the huge efforts deployed by the Government, as shown by the trend of the ratio of internal indebtedness. This ratio plunged from 44.6% of GDP in 1993 to 20.3% in External Sector and Commercial Policy: the objective was to restore external competition, on the one hand, and reduce debt service to sustainable levels, on the other. All the measures have been implemented. Since 1999, Côte d Ivoire is eligible for the HIPC initiative, but still does not benefit from it owing to the enduring socio-political crisis. Côte d Ivoire has not yet reached the completion point Pricing Policy: the aim was to increase price flexibility and efficient allocation of resources. The three (3) measures have been implemented. The number of the categories of products under price control has increased to six since Commercial Reform: five (5) measures were fully implemented in One (1) measure (the removal of all non-tariff and unjustified barriers) was renewed and implemented in owing to the existence of four barriers of this type.

17 Private Sector Development: the specific objectives were to promote industrial restructuring, growth and employment in agriculture, increase flexibility on the labour market and reduce the cost of domestic and international transport. All the eleven (11) measures were implemented in The VAT comprises only two rates (normal rate and reduced rate); the liquidation of the Stabilisation Fund, initiated in 1995, is completed Social Sectors: in the health sector, the objective was to improve health coverage and quality, especially in the underprivileged rural and urban areas, and access to medicines at a high cost. All the five (5) measures have been implemented. In the population sector, the purpose was to curb population growth and the spread of AIDS. The single measure (strengthen the family planning services in the public health-care services through counselling and the distribution of contraceptives) was implemented during the programme and renewed in because of its importance to the population and the HIV/AIDS prevalence rate in Côte d Ivoire. In the education sector, the objective was to improve the efficiency and quality of the education system, as well as access to textbooks at reasonable prices. All the measures have been implemented. But the implementation of the measure (reallocation of education expenditures in favour of basic education) was unsatisfactory owing to the downward trend of the share of basic education in the education budget (47.4% in 1995, 44.6% in 1996, 43.9 % in 1997, 43.7% in 1998 based on the data of the social performance chart 1999). All the emergency social programmes, aimed to protect the underprivileged social segments in the urban areas from the adverse effects of the adjustment process, have been implemented Environment: the purpose was to develop, at a viable rate, the natural resources of the country, particularly the dense equatorial forests. All the measures have been implemented. The national environmental plan has been submitted to the donors for financing At the end of 1996, the principal measures, ongoing or renewed in for failure to achieve the fixed objectives, were as follows: i) Clearance of all the external and internal arrears; ii) iii) Removal of all the non-tariff barriers; Strengthening of family planning services in the public health-care services through the provision of contraceptives. 3.4 Procurement of Goods and Services The amounts reallocated were used to finance the imports of eligible goods and services of the private operators, in keeping with the third modality among the three procurement modes selected by the consolidation agreement. For this modality, it is stipulated that private goods contracts will be signed in keeping with the Government s usual commercial practices and acceptable to the Bank.

18 The examination of the invoices relating to the expenditures incurred from the ADB Group resources showed that these goods are eligible in terms of their geographical origins and that they are not on the negative list. Category II, which concerns oil products, represents 39% of the expenditures compared with 61% for category I (food commodities) and category III (other goods) put together. 3.5 Sources of Finance and Disbursement of the Single Tranche Unlike most of the structural adjustment programmes, the total amount reallocated was to be disbursed in a single tranche before end Bank Group financial support to structural adjustment programmes was always mobilised in several tranches in order to induce or get the beneficiary to implement the programme satisfactorily and within the stipulated deadline The effective provision of funds in favour of the beneficiary was done in several transactions: i) Transfer of UA 26,097, to the ADB account to mop up the debts due as at , as agreed by the two parties (request made on 27 September and 24 October 1994); ii) Transfer of UA 16,182, to the Ivorian Government (request made on 27 September and 24 October 1994); iii) Transfer of UA 700,000 to the Ivorian Government account for the full settlement of the MESAP programme (request made on 30 November 1995) The Bank co-financed this programme with several development partners. They are primarily the World Bank (UA million), the IMF (UA million), other multilateral donors, including the EU, (UA million) and bilateral sources (UA million). IV PROGRAMME PERFORMANCE 4.1 Institutional Performance Preparation phase: the design and implementation of the macro-economic and structural adjustment programme enabled Côte d Ivoire to return to strong economic growth and ensure the internal and external financial viability of the country. During this programme, the consistency of economic policies was a major concern to the Government, which prepared several papers the most important of which were: i) The Elephant of Africa paper, which outlined Côte d Ivoire s development goals and strategies during the period; ii) The Côte d Ivoire 2025 prospective study, which defined the economic and social development path of the country over a long period.

19 Implementation phase: indeed, the economic growth and internal and external financial viability goals of the country were achieved over the period However, the institutional performance was partly satisfactory for the beneficiary during the programme implementation owing to the following factors: i) The reallocated resources were not fully disbursed before the end of 1994 as planned. The last disbursement request of UA 700,000 to finalise the funding of MESAP was made on 30 November 1995; ii) iii) The investment rate (13% of GDP on average), despite its improvement, remained markedly below the savings rate (21.6% of GDP on average), thus reflecting in part the difficulties in absorbing the available resources; Non-achievement of the objectives in some important sectors, notably privatisations, where only 28 enterprises out of the 47 projected for the period were privatised The monitoring of the programme by the beneficiary focused more on the financial aspects (disbursements) than on the implementation of the measures. The latter were considered only if they explicitly constituted a conditionality for the disbursement of the allocated resources. The meetings of the external financings mobilisation and monitoring committee were sporadic. The reports of the meetings of this committee were seldom transmitted to the Bank during the last two years of the programme, which limited the possibilities of the Bank to monitor the programme. It should be recalled that the said committee was responsible, among others, for monitoring structural adjustment loans and project financings, and also for preparing certain economic policy papers. 4.2 Economic Performance The assessment of the economic performance and outputs will be based on the key indicators coupled with the programme objectives. At the macro-economic level, seven indicators have been selected apart from the reasons for dependence. They are the real GDP growth rate, the primary surplus in relation to GDP, the investment rate, the tax burden, and the share of primary public expenditures in the GDP, the trade balance surplus in relation to GDP and the inflation rate Out of the seven indicators, four reached satisfactory levels in : i) The GDP growth rate was on average 5.3 % per annum compared with the expected result of 4.6% over the programme period. This rate sagged to 3.8% in to become negative in ii) The share of primary public expenditures in the GDP dropped significantly from 23% in 1993 to 17.2% in 1996 (as against a targeted objective of 18% for this last year) before falling to 16.7 % in

20 8 8 iii) The trade balance surplus reached 13% of GDP in 1994 and 15% in 1996 in relation to expected results of 11% and 8% for the above two years respectively. iv) The inflation rate showed a highly favourable trend down from 32.5% in 1994 to 4.6% in 1996 against fixed objectives of 35% and 6% for the two years above, before falling off to 3% in Moreover, the public enterprises privatisation process generated substantial resources for the Government. Over CFAF 1,000 the Government collected billion in taxes. Incomes from the transfer of Government shares increased very sharply from CFAF 6.57 billion in 1994 to CFAF 53.6 billion in At the end of 1996, the process generated net cumulative revenue of CFAF billion, of which CFAF billion from the privatisation of Palmindustrie in Net revenue for the period amounted to CFAF billion, representing 96.5 % of net cumulative revenue These performances remain nonetheless weak considering their trend in or in view of the narrow gaps between the expected results and actual outputs. This weakness poses problems of sustainability of the programme impacts. Concerning the other indicators, a very positive trend of the objectives was recorded with regard to the share of the wage bill in tax revenue. This share dropped from 75 % in 1993 to 48.3 % in 1994 and to 38.5 % in V SOCIAL AND ENVIRONMENTAL IMPACTS 5.1 Social Impacts At programme start-up, many constraints weighed on the economic and social management of the country. In the social management, these constraints comprised, among others, discontinuity and significant delays in the production of statistics, the inadequacies (or even absence) of the labour market monitoring mechanism, and training-job matching. Most of these problems have received part or full solutions and are already operational. The same applied to the ECODIV model used for the macro-economic projections, the periodic drawing up of a social performance chart to analyse the social impact of structural adjustment programmes. The first copy of this chart published in March 2002 covered the period Of course, the improvements in economic and social management, through utilisation of the integrated management models and systems, are noticeable. However, these performances during the programme period and beyond were partly satisfactory in view of the fact that the social statistics and the data of the national accounts are still published very late, thereby somewhat limiting the scope of the decision-making support tool likely to affect the socioeconomic variables The implementation of the programme, in particular the implementation of the public sector reform measures, gave rise to staff reduction in the privatised enterprises and the civil service. The unemployment rate in 1998 rose to 14.6 % mostly in Abidjan where it reached 16.8% globally and 19.4% among women. These rates are far from the realities considering that most of the job seekers seldom go through the official labour pool services. Pursuing a downward trend, the civil service staff decreased from workers in 1997 to in 1998.

21 The analysis of the statistics published in the 1999 social performance chart shows the following trends: i) The shrinking of job opportunities in the urban area; despite a rise in job offers in 1997 and 1998, these were lower than their 1995 level, which was 5,858 jobs; ii) In spite of a slight improvement, job offers were significantly fewer than job applications. Apart from the close match between the jobs offered and available applications, job offers covered only 9.8% of the applications in and 15.2% in The increase in the producer prices of coffee and cocoa improved agricultural incomes significantly. Nevertheless, the support measures were not enough to reduce poverty at the national level. Consequently, the proportion of the population living below the poverty line increased from 31% in 1993 to 37% in 1995 before dropping to 33% in 1998, thanks in part to the increases in agricultural incomes. This level was still high and reflected an uneven distribution of the fruits of economic growth, which was 5.4% on average per annum during the period The increases in real terms of the budget allocations of the social sectors were not substantial enough to provide adequate education and health services to the populations. The human development index did not improve over this period, but stood at and Côte d Ivoire was ranked 145th out of 174 countries in Extending the emergency social programmes undertaken under the MESAP, a national poverty reduction plan, priority thrusts of poverty reduction, was adopted in Under this plan, a study Survey on Household Living Conditions was conducted in 1998 to better target the poverty reduction strategies. Several programmes to reduce unemployment had been undertaken since 1997 at the level of AGEPE and AGEFOP. These programmes have been strengthened or revised owing to the socio-political crisis and its consequences on public finance Environmental Impacts Unlike development operations with a physical base and immediate impacts on the environment, the environment is only indirectly affected by the MESAP, thanks to the measures recommended and implemented. Two packages of measures envisaged by the programme are recalled hereunder: i) draw up and implement a national environmental action plan; and ii) improve the regulatory framework for environmental protection The implementation of these actions has been effective since Thus the national environmental action plan (NEAP) was adopted in Its implementation started with such operations as the creation of the national environmental agency (ANDE) and the adoption of the environmental code in It is to be noted that NEAP whose first phase covered the period had been submitted to the donors and that its implementation necessitated CFAF 155 billion. These actions supplemented by other measures will help limit the uncontrolled tapping of natural resources.

22 10 10 VI SUSTAINABILITY OF PROGRAMME IMPACTS AND RISKS 6.1 The growth, competitiveness and internal and external financial viability of the country were restored during the period through the implementation of the programme. The gradual utilisation of the macro-economic and financial models by the national structures highlights the country s ability to consolidate the achievements of the structural adjustment programmes. The withdrawal of the Government from the productive sectors through the privatisation of public enterprises and the deregulation of several agricultural subsectors, constitutes an irreversible movement that tends to give fresh impetus to the growth and job creation process in the private sector. 6.2 Notwithstanding these positive results, the sustainability of the programme is limited by the weak performance and inadequate support of the populations to the structural adjustment measures. The strong growth recorded in weakened considerably in the subsequent five years, thereby preventing any increase in real per capita incomes. The farmers experienced the liberalisation of the agricultural sub-sectors not as a necessity, but rather as an action imposed from the exterior, a situation aggravated by the co-existence of several intervention structures. 6.3 Concerning the risks, the delay in the mobilisation of the exceptional financial assistance, the exogenous factors (social and political or the fall in the prices of raw materials) and the dependence of the country on coffee and cocoa prices were identified as obstacles to seeing the programme through. With regard to the first risk, the Government s determination to carry its programme to a successful completion earned Côte d Ivoire a substantial financial support. The Ivorian economy is not totally free from the dependence on coffee and cocoa prices. Indeed, after a period of strong growth sustained mainly by the export of cash crops and the inflow of foreign private investments, the political factor, rekindled by the problems of governance, came into play end of December 1990, to interrupt the upturn in the economy just after the devaluation. VII PERFORMANCE OF THE BANK, THE BORROWER AND THE CO-FINANCIERS 7.1 Performance of the Bank Identification and preparation: There were no specific identification and preparation missions of the MESAP. However, the study relating to the impact of the devaluation on ADB Group operations and its consequences on the 14 countries of the Franc zone, contributed to the identification of the exceptional financing requirements and helped examine, in anticipation, the most suitable intervention modalities Appraisal: carried out with an appropriate multidisciplinary team, the appraisal of the MESAP by the Bank was satisfactory overall. The few conditions precedent were clearly and accurately spelt out. The Bank had, however, little influence on the formulation of the measures, as its appraisal took place six months after the commencement of the programme.

23 Supervision: monitoring was less rigorous than usual. One supervision mission was organised. The Bank did not carry out mid-term review missions individually or jointly. The utilisation of policy framework papers and the World Bank and IMF memoranda helped, in part, fill these gaps. It should be stressed that in spite of the single tranche of the reallocated resources, a mid-term review mission of the programme was more useful considering the programme duration, which spanned three years Performance of the Borrower Compliance with the programme implementation schedule: Overall, the programme was implemented almost within the required time. 94 % of the measures were implemented during the period % of the reallocated ADB resources were disbursed before the end of 1994; the disbursement request of the residual amount was made in November 1995, i.e. almost one year after the estimated date. Nevertheless, within this period, some delays were recorded in the implementation of certain measures. Some measures were renewed after this period. The performance of the borrower is considered satisfactory with a rating of 2 for the above criterion Compliance with the covenants and programme monitoring: the covenants were partly complied with. The programme implementation reports were seldom transmitted to the Bank. Monitoring was not rigorous; the few monitoring reports of the Borrower focused more on the financial aspects than on the implementation of the programme measures, unless where these measures were explicitly tied to a condition precedent. Specifically, there was no audit of the MESAP. However, audits were performed under the loans from the reallocated resources. The mid-term review reports of the other co-financiers were not transmitted to the Bank; neither was the borrower s completion report prepared. The performance of the borrower is deemed satisfactory with a rating of 2 for this criterion. 7.3 Performance of the Co-financiers Regular exchanges between the Ivorian Authorities, on the one hand, the cofinanciers, particularly the World Bank and the IMF on the other, helped reach a consensus on the economic policy measures of the period The policy framework paper, basis of the present programme, was negotiated with the IMF and the World Bank in early Substantial resources were disbursed within the required time. For the period , the resources effectively disbursed amounted to UA million compared with UA million projected, representing a financial implementation rate of 92%. The programme was regularly monitored through the World Bank and IMF supervision and mid-term review missions. The programme was also monitored through works relating to the economic policy framework paper, the last of which covered the triennial period and was negotiated during a joint World Bank and IMF mission in March The performance of the co-financiers was all in all satisfactory.