IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-47380; IDA-49900) PROGRAMMATIC CREDITS IN THE AMOUNT OF SDR 54.9 MILLION (US$ 85 MILLION EQUIVALENT)

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-47380; IDA-49900) ON PROGRAMMATIC CREDITS IN THE AMOUNT OF SDR 54.9 MILLION (US$ 85 MILLION EQUIVALENT) TO THE REPUBLIC OF SENEGAL FOR THE FOURTH POVERTY REDUCTION SUPPORT CREDIT (PRSC-IV), AND FIFTH POVERTY REDUCTION SUPPORT CREDIT (PRSC-V) September 30, 2012 Poverty Reduction and Economic Management 4 Country Department AFCF1 Africa Region

2 CURRENCY EQUIVALENTS (Exchange Rate Effective as of 09/15/2012) Currency Unit = CFAF US$ 1.00 = 500 FISCAL YEAR (January 1 December 31) ABBREVIATIONS AND ACRONYMS ACAB ANSD APR ARMP ASTER BCEAO CAS CLM CPAR CPS CY DCMP DPES DPO EC ECOWAS FAD FCFA FERA FTI GCC GDP HIPC ICRR IDA IFC IMF MDG MDRI MEF MoH MTDS MOU NCB Framework Agreement for Budget Support (Accord Cadre relatif aux Appuis Budgétaires ) National Agency for Statistics and Demography Annual Progress Report Public Procurement Regulatory Authority (Autorité de Régulation des Marchés Publics) Treasury Service Database (Application des Services du Trésor en Réseaux) Central Bank of West African States (Banque Centrale des Etats de l Afrique de l Ouest) Country Assistance Strategy Committee for Reduction of Malnutrition(Comité de Lutte contre la Malnutrition ) Country Procurement Assessment Review Country Partnership Strategy Calendar Year National Public Procurement Department (Direction Centrale des Marchés Publics) Economic and Social Policy Document (Document des Politiques Economiques et Sociales) Development Policy Operation European Community Economic Community of West African States Fiscal Affairs Department of the IMF Franc CFA Autonomous Road Maintenance Fund (Fonds d Entretien Routier Autonome) Education for All Fast Track Initiative Government Contractors Certificate Gross Domestic Product Heavily Indebted Poor Countries Initiative Implementation Completion and Results Report International Development Association International Finance Corporation International Monetary Fund Millennium Development Goals Multilateral Debt Relief Initiative Ministry of Economy and Finance Ministry of Health Medium-Term Debt Management Strategy Memorandum of Understanding National Competitive Bidding

3 NSBD OHADA PEFA PFM PRSC PRSP PSI SAI SENELEC SIGFIP SIGMAP SME TA WAEMU WBG National Standard Bidding Documents Organization for the Harmonization of Business Laws in Africa Public Expenditure and Financial Accountability Public Finance Management Poverty Reduction Support Credit Poverty Reduction Strategy Paper IMF Policy Support Instrument Supreme Audit Institution (Cour des Comptes) National Power Utility of Senegal (Société Nationale d Electricité) Integrated public finance management system (Système Intégré de Gestion des Finances Publiques) Integrated public procurement management system (Système Intégré de Gestion des Marches Publiques) Small and Medium Enterprise Technical Assistance West African Economic and Monetary Union World Bank Group Vice President : Country Director : Sector Director : Sector Manager : Project Team Leaders : ICR Primary Authors : ICR Team Leader : Makhtar Diop Vera Songwe Marcelo Giugale Miria Pigato Alain D Hoore and Mamadou Ndione Cheikh Ahmed Diop and Philip English Philip English

4 REPUBLIC OF SENEGAL FOURTH AND FIFTH POVERTY REDUCTION SUPPORT CREDITS CONTENTS A. Data Sheet B. Basic Information C. Key Dates D. Ratings Summary E. Sector and Theme Codes F. Bank Staff G. Results Framework Analysis H. Ratings of Program Performance in ISRs I. Restructuring 1. PROGRAM CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES ASSESSMENT OF OUTCOMES ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME LESSONS LEARNED ANNEX 1: BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES ANNEX2: BENEFICIARY SURVEY RESULTS N/A ANNEX 3: STAKEHOLDER WORKSHOP REPORT AND RESULTS N/A ANNEX 4: SUMMARY OF BORROWER'S ICR AND/OR COMMENTS ON DRAFT ICR ANNEX 5: COMMENTS OF CO-FINANCIERS AND OTHER PARTNERS/STAKEHOLDERS ANNEX 6: LIST OF SUPPORTING DOCUMENTS i

5 A. Basic Information Program 1 Country Senegal Program Name Senegal: Fourth Poverty Reduction Support Credit Program ID P L/C/TF Number(s) IDA ICR Date 09/15/2012 ICR Type Core ICR Lending Instrument DPL Borrower Original Total Commitment GOVERNMENT OF SENEGAL SDR 28.40M Disbursed Amount SDR 28.40M Implementing Agencies Ministry of Economy and Finance Cofinanciers and Other External Partners N.A. Program 2 Country Senegal Program Name Senegal: Fifth Poverty Reduction Support Credit Program ID P L/C/TF Number(s) IDA ICR Date 09/15/2012 ICR Type Core ICR Lending Instrument DPL Borrower Original Total Commitment GOVERNMENT OF SENEGAL SDR 26.50M Disbursed Amount SDR 25.30M Implementing Agencies Ministry of Economy and Finance Cofinanciers and Other External Partners N.A. B. Key Dates Senegal: Poverty Reduction Support Credit 4 - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 01/27/2010 Effectiveness: 06/24/ /24/2010 Appraisal: 04/20/2010 Restructuring(s): ii

6 Approval: 06/01/2010 Mid-term Review: Senegal: Poverty Reduction Support Credit 5 P Closing: 03/31/ /31/2011 Process Date Process Original Date Revised / Actual Date(s) Concept Review: 12/07/2010 Effectiveness: 06/29/ /29/2011 Appraisal: 04/18/2011 Restructuring(s): Approval: 05/26/2011 Mid-term Review: Closing: 03/31/ /31/2012 C. Ratings Summary C.1 Performance Rating by ICR Overall Program Rating Outcomes Risk to Development Outcome Bank Performance Borrower Performance Moderately Satisfactory Substantial Moderately Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Moderately Satisfactory Government: Moderately Satisfactory Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: N.A. Overall Bank Overall Borrower Moderately Satisfactory Performance Performance Moderately Satisfactory iii

7 C.3 Quality at Entry and Implementation Performance Indicators Senegal: Poverty Reduction Support Credit 4 - P Implementation QAG Assessments Indicators Performance (if any) Potential Problem Quality at Entry Program at any time No (QEA) (Yes/No): Problem Program at any Quality of No time (Yes/No): Supervision (QSA) DO rating before Closing/Inactive status None None Rating: Senegal: Poverty Reduction Support Credit 5 P Implementation QAG Assessments Indicators Performance (if any) Potential Problem Quality at Entry Program at any time No (QEA) (Yes/No): Problem Program at any Quality of No time (Yes/No): Supervision (QSA) DO rating before Satisfactory Closing/Inactive status None None Rating: D. Sector and Theme Codes Senegal: Poverty Reduction Support Credit 4 - P Sector Code (as % of total Bank financing) Original Actual Central government administration General Education Sector Health Other social services General industry and trade sector Theme Code (as % of total Bank financing) Public expenditure, financial management and procurement Education for all Micro, Small and Medium Enterprise support Vulnerability assessment and monitoring Health system performance iv

8 Senegal: Poverty Reduction Support Credit 5 P Original Actual Sector Code (as % of total Bank financing) Central government administration General Education Sector Health Other social services Rural and Inter-Urban Roads and Highways Theme Code (as % of total Bank financing) Public expenditure, financial management and procurement Education for all Health system performance Infrastructure services for private sector development Environmental policies and institutions E. Bank Staff Senegal: Poverty Reduction Support Credit 4 - P Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Vera Songwe Habib M. Fetini Sector Manager: Miria Pigato Philip English (acting) Task Team Leader: Mamadou Ndione Alain D Hoore and Mamadou Ndione ICR Team Leader: Philip English ICR Primary Author: Cheikh Ahmed Diop and Philip English Senegal: Poverty Reduction Support Credit 5 P Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Vera Songwe Madani M. Tall (acting) Sector Manager: Miria Pigato Miria Pigato Task Team Leader: Mamadou Ndione Alain D Hoore and Mamadou Ndione ICR Team Leader: Philip English ICR Primary Author: Cheikh Ahmed Diop and Philip English v

9 F. Results Framework Analysis Program Development Objectives (from Program Document) The overall objective of the second series of PRSCs (PRSC IV-V) was to contribute to strengthening the Government of Senegal s policy making and institutional capabilities to accelerate broad-based growth, to improve access to social services, to mitigate vulnerabilities, and to foster good governance. Specifically, the development objectives to which the PRSC-5 contributes are to: (1) improve the environment for private investment; (2) improve access to basic services and ensure greater efficiency of public expenditure on human capital formation; (3) mitigate social and environmental vulnerabilities; and (4) promote better governance through public financial management, procurement, debt management and statistical systems reforms. Revised Program Development Objectives (as approved by original approving authority) n.a. (a) PDO Indicator(s) Senegal: Poverty Reduction Support Credit IV and V - P and P Original Target Formally Actual Value Indicator Baseline Values (from Revised Achieved at Value approval Target Completion or documents) Values Target Years Indicator 1 : Time to obtain a construction permit Value (quantitative or qualitative) Date achieved 12/31/ Comments (incl. % achievement) Indicator 2 : Value (quantitative or qualitative) There was a small reduction in the number of procedures from 16 to 13, but the process continued to be very slow and the private sector continued to complain about it. (14% achieved) Sum of budget block transfer and expected annual user charge proceeds to FERA CFAF 19.5 bn CFAF 47 bn, of which CFAF24.5 bn from user charges CFAF 47 bn was budgeted of which CFAF33.5 bn from user charges Date achieved /30/ /31/2011 The target was 100% achieved. However, actual revenue received is probably Comments a better indicator than the budget. The amount received in 2011 was (incl. % CFAF39.8bn of which CFAF 23.5bn came from user fees. By this measure the achievement) target was 74% achieved. vi

10 Indicator 3 : Percentage of education teaching staff in integrated HR/Payroll system Value (quantitative or 0% 100% 100% qualitative) Date achieved /31/2011 Comments (incl. % achievement) Indicator 4 : Value (quantitative or qualitative) An integrated education HR/payroll system was implemented (100% achieved), with the suppression of the Voluntary project and its integration into the Education HR Directorate. Number of mutual schemes covering individuals living in rural area or doing informal work Not known exactly but small 50 over baseline 199 Date achieved Comments (incl. % achievement) The baseline data for 2009 are lacking, but the number in 2010 was 164. It would appear that significant progress was made on this outcome, and the target may have been achieved. Indicator 5 : Hospital efficiency index Value (quantitative or 73% 80% 85% 74% qualitative) Date achieved Comments (incl. % achievement) Indicator 6 : The original target was revised to 85% in PRSC V, because it appeared that the index had already improved to 83% in However, this proved short-lived (staffing levels fell by 17.6% but inpatient cases fell by a similar amount). Percentage of nutrition expenditure funded by the national budget Value (quantitative or 15% 27% 35.3% Qualitative) Date achieved 12/31/ Comments (incl. % achievement) Target exceeded. vii

11 Indicator 7 : Publicly available information on fishing agreements, registry and evolution of both industrial and artisanal fishing capacities Value (quantitative or qualitative) Agreements not public Agreements accessible to the public Bilateral fishing agreements, industrial fishing licenses and data on artisanal fishing capacity are available on a website Date achieved 12/31/ Comments (incl. % achievement) Numerous industrial fishing licenses were signed in late 2011 without the proper consultation or public disclosure, but the new government cancelled them shortly after taking office. Indicator 8 : Number of agencies among the top ten whose budget is accessible to public Value (quantitative or qualitative) Date achieved 12/31/ Comments (incl. % achievement) Indicator 9 : Value (quantitative or qualitative) Summaries of the budgets for the top 5 agencies were included as an annex to the 2012 budget. Ideally a more complete budget would be available. Publicly available information on budget execution Limited to monthly execution tables 12 monthly budget execution tables and 4 quarterly budget reports. Spatial budget data available for 4 ministries 12 monthly budget execution tables, and 12 government fiscal tables published. Spatial budget data available for 4 ministries Date achieved 12/31/ /31/2011 Comments (incl. % achievement) 100% achieved. Indicator 10 : Publicly available information on state land property Value (quantitative or qualitative) none Information available on all transactions Date achieved 12/31/ Comments This topic was a very sensitive issue under the previous regime; therefore, this (incl. % indicator was too ambitious. achievement) none viii

12 Indicator 11 : Delay between the adoption of the law of finance and submission of the budget execution law to the Parliament Value (quantitative or 12 years 2 years 2 years qualitative) Date achieved 12/31/ Comments (incl. % achievement) The budget execution law for 2010 was submitted to Parliament in (100% achieved) Indicator 12 : Percentage of procurement cases handled in a timely manner by Justice in line with the applicable regulations Value (quantitative or 0% 75% 100% qualitative) Date achieved 12/31/ /31/2011 Comments (incl. % achievement) Indicator 13 : All 11 cases contested in 2011 were handled by the justice system within the 2 month time period allowed. In 8 cases, the decision of the ARMP was upheld. DeMPA Indicator for Debt Management Strategy DPI-3 Value (quantitative or D C n.a. qualitative) Date achieved 12/31/ Comments (incl. % achievement) Indicator 14 : Value (quantitative or qualitative) A new DeMPA has not been conducted so this rating cannot be updated, though the progress made suggests that an improved rating may be justified. Public availability of poverty statistics Limited primary poverty data is available Primary data is publicly available Primary data is available on demand but access is not easy. Date achieved 12/31/ Comments (incl. % achievement) It remains fairly difficult to have access to primary data from ANSD. However, the agency will be encouraged to publish the data from the latest poverty survey once it has been properly cleaned and organized. ix

13 (b) Intermediate Outcome Indicator(s) Senegal: Poverty Reduction Support Credit IV - P Original Target Indicator Baseline Value Values (from approval documents) Indicator 1 : Formally Revised Target Values Actual Value Achieved at Completion or Target Years Delay between adoption of budget and submission of budget execution law to Parliament Value (quantitative or 12 years 8 years 4 years Qualitative) Date achieved Comments (incl. % achievement) G. Ratings of Program Performance in ISRs Senegal: Poverty Reduction Support Credit 4 - P No. Date ISR Archived DO IP Actual Disbursements (USD millions) ML-Fourth Poverty Reduction Support Credit - P Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 01/03/2012 Satisfactory Satisfactory H. Restructuring (if any) N.A. x

14 1. Program Context, Development Objectives and Design 1.1 Context at Appraisal 1. Though Senegal continued to enjoy a broadly stable political climate, the context became more complex as the country moved towards the 2012 presidential elections. In March 2009, local elections led to a victory of the opposition parties in the majority of main municipalities, including Dakar and Saint Louis. The new political balance resulting from the outcome of the local elections implied that policies and reforms on which a broad consensus had not been forged could be significantly more difficult to advance. The political economy of reforms was likely to become markedly more complex as the campaign for 2012 presidential elections started prematurely in September 2009, when President Wade announced his intention to run for a third term in In that pre-electoral context, commitment to difficult reforms was becoming more hesitant at a time when a new momentum for reforms was more needed than ever to tackle Senegal's challenges of dealing with shocks, boosting growth, improving public sector governance and addressing regional disparities. There was also a sense that some aspects of governance were deteriorating. Senegal s ranking on the Transparency International Corruption Perception Index fell from 78 in 2005 to 99 in On the economic front, successive external and internal shocks since 2006 slowed the growth process to a near halt. From the mid-1990 s until 2005, Senegal had one of the best economic performances in Sub-Saharan Africa. Though there were brief episodes of slow growth, real GDP grew on average by about 5 percent annually, over 2 percent a year on a per capita basis, contributing to a significant drop in poverty incidence and marking the first sustained increase in average per capita incomes since independence in However, roughly half the population remained below the poverty line in Unfavorable rains prompted a sharp decline in agriculture output during The international food and oil price shocks during slowed the economy down and resulted in a significant deterioration of Senegal s external and fiscal positions. The overall fiscal deficit rose to 4.9 percent in The onset of the global financial crisis in 2008 and its deepening in 2009, together with domestic shocks, including floods in the Dakar region and continued electricity shortages, further contributed to the general economic slowdown. Real GDP growth was 3.2 percent in 2008 and only 2.2 percent in 2009, resulting in zero growth in per capita incomes over these two years. 3. The cumulative impact of repeated shocks on a population with only limited coping mechanisms, dampened some of the gains in poverty reduction of the early decade. A Poverty Assessment prepared by World Bank team 2 estimated that the declining trend in poverty incidence may have reversed, with a possible increase in poverty 1 President Wade won his first term, for a seven year mandate, in A subsequent amendment to the Constitution allows two five-year terms for the Presidency, effective from the 2007 elections, in which President Wade won his second term. 2 Senegal Poverty Assessment, Report No SN, June 25, The report and simulations are based on the last household survey (ESPS 2005). 1

15 incidence by 2½ points from 2005 to In addition, the main structural feature of poverty in Senegal the deepening of entrenched disparities between rural and urban areas remained, even though the successive shocks had disproportionately impacted the urban population, which is overall less poor than rural populations. 4. Despite a 10-year period of strong performance, growth had remained concentrated on the modern, largely urban, services sector and construction, fueled by public works spending and growing remittances. The economy exhibited little diversification, a continued dependence of economic growth on public investment, no export drive and almost no formal job creation. Even Senegal's notable macro-fiscal success, a doubling of public finances in real terms over the decade on a broadly sustainable track, was turning out to constitute a critical challenge on the efficiency, equity and governance fronts, confronting the authorities with the urgent need to strengthen further their public financial management institutions and procedures. 5. Over the medium term, Senegal was expected to regain economic momentum and return to its historical growth trajectory. The IMF approved the third and fourth reviews of the PSI program in June and December 2009, respectively. Performance under the PSI program was broadly satisfactory, with all quantitative assessment criteria met, and most structural benchmarks - mainly in public financial management - met or partially met. The authorities intended to provide a modest stimulus in 2010 to support the recovery, and had committed to maintain a prudent stance beyond. Overall, Senegal s macroeconomic framework provided an adequate basis for the proposed programmatic credits, helping the authorities to sustain their fiscal stance, and pursue structural reforms in a challenging context. 6. PRSC IV-V supported the implementation of the final year of the Government's Second Poverty Reduction Strategy Paper (PRSPII). The operations were also designed to assist in the development and early implementation of the third PRSP, referred to as the Document of Economic and Social Policies (DPES). The PRSP-II ( ) had four strategic pillars: (i) wealth creation; (ii) capacity building and the provision of basic social services; (iii) the protection of vulnerable groups; and (iv) the promotion of good governance and participation. The DPES ( ), which was only finalized in late 2011, was expected to exhibit policy continuity, with many of its components reflecting a range of sector strategies already adopted or being updated by the authorities. 7. The PRSC series has been an integral part of the Bank s Country Assistance Strategy (CAS) for Senegal discussed by the Board of Executive Directors on June The FY07-10 CAS for Senegal was structured around a governance filter and three main pillars: (a) accelerated growth/wealth creation; (b) human development/shared growth; and (c) rural and urban synergy. The 2009 Progress Report confirmed that, despite mixed results, the strategic objectives remained consistent with national priorities. It also presented adjustments to assist the Government in mitigating the impact of the fuel and food price crisis, and the recent global economic downturn. As a result, the PRSC IV was supplemented with additional resources from the Crisis Response Window, equivalent to US$9.4 million. 1.2 Original Program Development Objectives (PDO) and Key Indicators 2

16 8. The objective of this second PRSC series was to contribute to strengthening the Government of Senegal s policy making and institutional capabilities to accelerate broad-based growth, to improve access to social services, to mitigate vulnerabilities, and to foster good governance. Specifically, the development objectives to which the PRSCs intended to contribute were to: (1) improve the environment for private investment; (2) improve access to basic services and ensure greater efficiency of public expenditure on human capital formation; (3) mitigate social and environmental vulnerabilities; and (4) promote better governance through public financial management, procurement, debt management and statistical systems reform. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification N/A 1.4 Original Policy Areas Supported by the Program Policy Area 1: Private Sector Development In this area the PRSC series focused on three domains of the authorities' wealth creation PRSP-II Pillar: investment climate reforms, small business taxation, and road maintenance. The medium-term objectives of the selected reforms were to reduce costs of doing business, reduce tax-related costs of formalization of informal firms and improve funding to maintain the country's road infrastructure. 9. Investment climate reforms aimed at supporting the Senegalese authorities efforts to improve the business environment. Despite substantial progress in trade facilitation and business registration, the reform momentum stalled in while Senegal s investment climate continued to need significant improvement. Senegal s Doing Business ranking in 2009 was 149. In this respect, meetings of the Presidential Investment Council (Conseil Présidentiel de l Investissement, CPI) had underscored the importance of continued investment climate reforms in the areas of issuance of building permits, judicial contract enforcement, and investor protection. Accordingly, the Ministry of Urbanism intended to adopt new procedures for issuance of building permits to reduce the time and cost involved in the process. This policy action was supported through PRSC IV. 10. The small business taxation reform aimed at reducing the cost of formalization for the informal sector. First generation reforms, aiming at strengthening revenue mobilization and modernizing the tax administration of the largest taxpayers, had been largely successful in Senegal. The Government intended to implement second-generation reforms geared to creating incentives or removing marginal disincentives for businesses operating in the informal sector to graduate into the formal sector, and for new entrepreneurs to launch start-up businesses. The immediate focus of the policy action supported by PRSC V was on adopting and starting implementation of an action plan aimed at establishing the Medium Enterprise Center (Centre des Moyennes Enterprises). 11. The road maintenance program aimed at supporting the authorities ambition to maintain the growing road infrastructure. Road maintenance was seriously underfunded leading to deteriorating infrastructure and less cost-effective road rehabilitation. The new road maintenance funding scheme, FERA (Fonds d Entretien Routier Autonome), 3

17 had become operational in The medium term (3 to 5 years) target was for funding through this mechanism to reach a base of 2008 equivalent US$100 million from which it would then grow in line with user consumption. The implementation of the new financing arrangements was phased over a three-year period; in the interim, the FERA was supposed to be funded through a mix of budget appropriations, declining over time, and the user charge, increasing over time. This strategy was supported through both PRSC IV and PRSC V. Policy Area 2: Human Development In this area the PRSC series supported reforms judged critical to improving the authorities education, health and nutrition policies, and management objectives. The medium-term objectives of the selected reforms were to improve human resource (HR) management in education, to expand the coverage of the population by health mutuals and improve public hospital efficiency, and to improve coverage and financial sustainability of the community-based nutrition program through adequate budget allocations. 12. In the education sector, the PRSC supported Government measures to strengthen HR management. Despite a significant commitment of public resources, the view was widely held that progress on grounds of effectiveness, efficiency and equity of spending had fallen short of the government's objectives. With respect to the management of the single largest input in the system (teachers), recruitment and allocation practices lacked transparency and posed numerous risks of misuse of funds. The plan was to eliminate the recruitment of teachers through the safety quota, or quota sécuritaire system. This system permitted various Ministers to nominate candidates for teaching positions with neither entrance exams nor training. Selected measures to strengthen HR management were related to the confirmation of a competitive recruitment system for all contractual teachers, and the adoption of an identification system using an ID number for all contractual teachers consistent with civil service IDs, and the effective integration of the Volunteers Project unit into the HR directorate. 13. In the health sector, reforms supported by the PRSC operations aimed at implementing the strategy for expanding health risk coverage (PRSC IV), and rolling out the new hospital policy (PRSC V). The government was committed to creating appropriate (budget-funded) financing and support mechanisms for extending benefit packages covered through participation in, and strengthening management capacities of, Mutual Health Organizations (MHO) targeted at populations employed in the rural and informal sectors. Moreover, the government engaged in a new hospital policy to address the issues of hospital corporate and financial governance. In Senegal, hospitals account for a significant proportion of the public health budget (about 50% of public health expenditures over the period ). Yet, major concerns had been raised about the efficiency and efficacy of these expenditures. The main objective of the new hospital 3 The implementation of this reform was initiated at end-2007 but it was sidetracked by the authorities 2008 financial difficulties and challenged further by the difficult economic context of The Fund itself was created by decree in October 2007; the road user charge was instituted, again by decree, in early 2008; the chief executive was selected during the year and formally appointed in December 2008; and financial arrangements were finalized in early 2009, supported by the FY09 Public Finance Support Credit. 4

18 policy was to restore sound control (at central or regional levels) of hospital management and financing. 14. The PRSC V also supported the Government s Nutrition Reinforcement Program. The fight against malnutrition in Senegal remains a major national priority and investing in the nutrition of young children had already proven to be a highly cost-effective means to promote long-lasting skills and cognitive developments. Survey data showed that the nutritional status of children under five years of age had improved in recent years. These results were achieved thanks to the successive nutrition programs implemented with support from development partners, particularly the Community Nutrition Project (PNC, ) and the Nutrition Reinforcement Program (PRN, ), implemented by the Government. The Government was encouraged to scale up the PRN towards full national coverage by adequately budgeting resources for the program to accelerate and consolidate recent gains. Policy Area 3: Mitigating vulnerabilities The focus was on the fisheries sub-sector, where the PRSC series supported the introduction of critical measures and regulations needed to help implement a transparent policy of access restriction to the resource. 15. Policy actions supported by PRSC series were concerned with the disclosure to the public of information related to existing fishing agreements, an industrial fishing vessel registry and artisanal vessel registration database. Fishing and related activities represent an important economic activity, accounting for some 20 percent of exports, but one at serious risk in Senegal. One of the key issues affecting the fisheries sector in Senegal is the dwindling size of fish stocks due to overexploitation. In 2008, the Government completed a Letter of Sector Policy for the fisheries, prioritizing the sustainable management and restoration of fish resources and their habitats as the sector's top objective. In particular, the Letter of Sector Policy focused on dissemination of fishing permits to all small-scale fishers, and the establishment of an access rights concession system for the resource. Policy Area 4: Public Sector Governance In this area, the PRSC series intended to support critical reforms to improve economic governance in Senegal, with a focus on public financial management, procurement, debt management and statistics. 16. In public financial management, the selected reforms aimed at improving the transparency of budget execution, fostering demand for reporting and transparency. Recent diagnoses performed by or at the request of authorities had identified a range of weaknesses in Senegal's Public Financial Management (PFM) system. The policy response, in addition to improving budget preparation, included among others (i) to move to a more forceful delegation of the responsibility for budget execution to sector ministries; and (ii) to undertake a full roll-out of the two public financial management systems, SIGFIP and ASTER, both horizontally, across Ministries and regional departments, and vertically, by interfacing the budget and treasury systems. On the external control side, the authorities committed to speed up the transmission of budget execution laws and public accounts to the Audit Office and improve their quality. PFM reforms aimed also at improving 5

19 management of State land property through the adoption of a new Law on Land Ownership (Loi sur le Régime Foncier) that modernizes and clarifies the overall legal framework for land ownership. The non-transparent allocation of public lands by senior members of government had become a recurring source of controversy. 17. In procurement, the series of PRSCs intended to support actions to ensure the sustainability of the legal and institutional framework and uphold the integrity of the system. In recent years, the Government had made substantial progress towards the modernization of the national procurement system. Nonetheless, the procurement, legal, and regulatory framework still provided for provisions that did not promote transparency, limiting competition and the efficiency of operations. Some of these issues started to be addressed under PRSC IV through the adoption by the Board of the regulatory agency (ARMP) of various texts covering the Procurement code, NSBDs and GCCs, and Procurement Units. These issues remained on the agenda, following the revisions by the government of the basic decrees mentioned above. 18. In public debt management, the selected reforms aimed at strengthening the quality and policy relevance of the public debt management strategy and to reinforce the capacity of the debt management entities. Debt management in Senegal had shown strengths relating to the legal framework, macro-policy coordination and cash management. However further progress needed to be achieved in order to ensure sustainability. Debt service levels were starting to rise with the signing of a non-concessional loan with France in 2008, and there was the temptation to take on more loans now that debt levels had been drastically reduced post-hipc/mdri. It was therefore necessary to strengthen the debt management strategy and other ancillary debt management functions. 19. Finally, the PRSC series aimed at supporting continued progress in statistical development and a policy of national dissemination of poverty measurement. Senegal has been at the forefront of a longstanding program of strengthening national statistical systems in francophone Africa. Recent institutional reforms, including the creation of an autonomous National Agency for Statistics and Demography (Agence Nationale pour les Statistiques et la Démographie, ANSD), had gone a long way towards creating a favorable context for the development of a modern public statistical system. Some challenges remained, among which data archiving and a systematic and open dissemination of poverty and other data. 1.5 Revised Policy Areas: N/A 1.6 Other significant changes: N/A 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance 20. The program was supported by two PRSCs. PRSC IV was approved on June 1, The credit became effective on June 24, 2010 and was closed on March, 31, PRSC V was approved on May 26, The credit became effective on June 29, 2011 and was closed on March 31, The prior actions for the two operations are listed in Table 1 below. 6

20 Table 1: Prior actions Private Sector Development PRSC IV PRSC V Comments 1. Adoption by the Ministry of Urbanism of new procedures for issuing a building permit, so as to reduce the time and cost involved in securing a building permit. 2. Inclusion of a CFAF45 billion appropriation for road maintenance in the 2010 Finance Law. 1. Satisfactory execution of the 2010 Finance Law appropriation for road maintenance, and the inclusion of an adequate appropriation for road maintenance in the 2011 Finance Law, including an increase in the share of FERA funding from the road user charge. Completed. Decree signed Prior action for PRSC IV was completed. Trigger for PRSC V was modified as: Issuance of a decree doubling the road user charge transferred to the FERA. The new trigger was completed. 2. Adoption by the Ministry of Economy and Finance and start of implementation of an action plan based on the key recommendations of a Small and Medium Business tax policy and administration reform study. Trigger was dropped. Building on IMF FAD and AFRITAC TA on policy and administration of taxation of SME, the authorities decided to postpone the reform study and prioritize implementation of a key recommendation of the IMF advice to establish a Medium Enterprise Center. This center is now operational. Human Development PRSC IV PRSC V Comments 3. Reconfirmation through issuance of a Ministry of Education Circular of a competitive recruitment system for all contractual teachers, including quantitative benchmarks for the phase-out over three years of the quotas sécuritaire recruitment 4. Adoption of the National Strategy for Extending Health Risk Coverage by an Arrêté inteministériel co-signed by the Ministry of Health, Ministry of Economy and Finance and Ministry of Labor 3. Satisfactory progress made in strengthening human resource management in the education sector, as evidenced by the adoption by the HR department of the Ministry of Education of an identification system using an ID number for all contractual teachers consistent with civil service IDs and the effective integration of the Volunteers Project unit into the HR directorate 4. Satisfactory progress made in the implementation of the government s hospital policy, as evidenced by the preparation and signing by the Ministry of Health of performance contracts with at least 5 Public Hospitals (Etablissements Publics Hospitaliers, EPH) 5. Adoption and initiation of implementation of a medium-term plan for sustainable financing of the Nutrition Reinforcement Program 7 Policy action for PRSC IV Completed. Text calling for a phaseout in three years of the quota securitaire signed. Trigger for PRSC V Completed. The identification of the contractual teachers by an ID is implemented and the Volunteers Project Unit has been officially integrated into the HR directorate. Completed. Text was signed by the MoH and submitted to the MEF and the MoL. Completed. Performance contracts have been signed by the Ministry of Health and the General Managers of EPH for 5 performance contracts. Completed. A medium term strategic plan for has been approved.

21 Mitigating vulnerabilities PRSC IV PRSC V Comments 5. Disclosure by the Ministry of Fisheries of existing fishing agreements (or assimilated contracts) on a government website 6. Establishment by the Ministry of Fisheries of an industrial fishing vessel registry and artisanal vessel immatriculation database accessible to the public on-line. Policy action for PRSC IV Completed. Information on existing fishing agreements (or assimilated contracts) is compiled and available on the website of the MoF. Trigger for PRSC V Completed The register for the industrial fishing vessel has been created as well as the artisanal vessel database (with access available on request). Governance PRSC IV PRSC V Comments 6. Issuance by the Prime Minister of implementing regulations allowing the examination of the approved budgets and of the previous year's financial reports of public entities 7. Instruction by the Ministry of Economy and Finance mandating the publication on its website of budget execution tables on a monthly basis and a budget execution report on a quarterly basis within 30 days of the end of the relevant period, so as to enhance transparency in budget execution. 7. Introduction by the respective Financial Affairs Directorates (DAF) of the Ministries in charge of Education, Health, Justice and Decentralization of the spatial code at, at least, the departmental level in the government s budget classification system (nomenclature) for Education, Health, Justice and Decentralization as evidenced by detailed published SIGFIP reports. Completed. Implementing regulations were signed by the Prime Minister. Policy action for PRSC IV Completed. Instruction has been issued calling for monthly execution tables and a quarterly budget execution report to be published on MEF website. Trigger for PRSC V Modified as: Improve budget reporting to the public by presenting and publishing the 2011 budget envelopes for Education, Health, Justice and Decentralization using the spatial code at, at least, the departmental level as evidenced by detailed SIGFIP reports. Completed. SIGFIP reports available on the MOF s DPEE website. 8. Adoption through an Arrêté of the Minister of Economy and Finance of a new organigram for the Tax Directorate, including the Cadastre and Domaines departments. 9. Submission to the Audit Office (Cour des Comptes) of the execution laws up to 2008 and submission to the Parliament of the execution laws reviewed by the Audit office from 1999 to Adoption by the ARMP Council of the revised procurement regulatory framework (Procurement Code, NSBDs and GCCs, Procurement Units) to address the remaining issues identified in the UCS-stage 1 report 8 Completed. The Arrêté and an issuance by the Director of the Cadastre and Domaines departments are adopted. Completed. The budget execution laws are submitted to the Audit Office (Cour des Comptes) and the Parliament approved the reviewed execution laws from 1999 to Completed. Final texts approved by ARMP council

22 8. Submission to Parliament of a Land Property Code ("Code Foncier") that includes transparent provisions allowing the optimization of public revenue from sales of lands owned by the State. 9. Initiation of the implementation of a debt management policy and institutional strengthening reform plan, as evidenced by the submission to Parliament and publication of a Cabinet-approved MTDS produced following international standards. 10. Adoption by the Council of Ministers of amendments to the Statistics Law that mandate a more open access by users to primary data. Modified as: Adoption of a new Law of Land Ownership that modernizes and clarifies the overall legal framework for land ownership. Completed. The Law has been approved by the National Assembly and the Senate. Dropped. The sequencing of the debt Management reform plan has been revised, based on the recommendations of a joint Bank- Fund TA mission. That mission has identified a range of actions for the authorities. A first step will be the creation of a new debt management office which will be in charge of preparing a MTDS for Cabinet approval. Completed. Law drafted and adopted by the Statistical Technical Committee (CTPS) and the National Committee and approved by the Council of Ministers. 21. There were 10 prior actions for PRSC IV, and 10 triggers for PRSC V. Two triggers for PRSC V were dropped, in both cases in order to reflect the conclusions of IMF technical assistance completed in the period between the two operations, but also the desire of the authorities to adopt a longer time frame for implementation. All remaining prior actions were met. Three triggers were reformulated to improve clarity or ensure feasibility. 2.2 Major Factors Affecting Implementation: 22. Adequacy of government s commitment. The program was implemented in a particularly challenging context where the country was entering a period of political flux, ahead of the 2012 elections, while coping with a series of shocks. There were also signs of deterioration in governance, not uncommon in regimes which have been in power for almost 10 years. In this respect, the fairly successful reform program suggests that the commitment of some senior government officials combined with budgetary constraints and pressure from development partners may have created sufficient incentives to move ahead with a selective reform agenda. However, implementation remained a key issue, and slippage occurred on several fronts. The arrival of a new government provided an important boost to put some of the reforms back on track. 23. Soundness of background analysis. Background analysis underpinning the design of PRSC series appear to have been accurate, relevant and comprehensive. The preparation of the proposed PRSC relied on extensive core diagnostic assessments by the World Bank and other donors in collaboration with the government. In particular, there was core analytical work on public financial management by the EU (2007 PEFA), the IMF (FAD technical assistance), as well as a DeMPA and CPAR. Fisheries sector work had been done for two projects funded by IDA and GEF. The social sector knowledge base had been built through health reform technical assistance and the preparation of an Education For All FTI project. 9

23 24. Synergies between investment projects and budget support. On-going policy dialogue, capacity-building and analytical work in investment projects in the education, transport and fisheries sectors were instrumental in preparing reforms in these sectors, while budget support brought appropriate pressure from the Ministry of Economy and Finance to ensure their implementation. On the other hand, weak support from the IDA private sector project hampered progress on construction permits. 25. Assessment of the operation s design. The design of the second series of PRSC drew from lessons learned in implementing the previous series. In particular, the previous ICRR highlighted the need to focus on limited number of objectives and to reduce the number of non-binding measures additional to the prior actions and triggers, and to use realistic quantitative targets. However some of the outcome indicators have still turned out to be too ambitious or inappropriate. The target for publication of information on public land transactions was not consistent with political realities, while the hospital efficiency index was influenced by factors beyond the control of the hospitals or the state. 26. Risk analysis. Three broad risks were identified: external risks, such as the impact of the global slowdown; political opposition, including from vested interests; and weak administrative capacity. The external and political risks were considered significant; the risk related to administrative capacity was considered low. Key risk mitigating factors integrated in the design of the operation included a focused agenda, high donor involvement, and a built-in process of collaborative analysis, dialogue and stakeholder consultations. Bank engagement by a core team almost entirely field-based was also deemed to enhance the Bank s monitoring of reforms and its ability to take steps to ensure that reform objectives were being followed through. Moreover, Senegal s strong track record in macroeconomic management also would mitigate external risks. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 27. M&E design. The design of the M&E system reflects the team option to support government ownership of the structural reform program. The preparation of the second PRSC series was coordinated, on the government's side, by a newly created Technical Committee for Budget Support, with active participation from line ministry representatives. The entity responsible for the program supported by this PRSC series within the Government was the Ministry of Economy and Finance, in close association with the Ministries of Education, Health, Environment, Justice, Family, and Fisheries. Within the Bank, the series of PRSCs was designed, developed and monitored by a core team that was almost entirely field-based. The team maintained frequent contact with technical counterparts in the Government and development partners. In this context, monitoring of implementation and adjustments to the policy framework were facilitated within the forum for information exchange and dialogue provided by the committee. 28. M&E implementation and utilization. The monitoring of outcomes was expected to be carried out within the M&E framework of the PRSP. The team acknowledged the need to give closer attention to the monitoring of all actions/outcomes included in the policy matrix to mitigate the tendency for ministries and agencies participating in budget support operations to focus on the realization of prior actions, while moving more slowly on implementation, and sometimes overlooking the final outcomes envisaged. This bias 10

24 remained. While monitoring took place on a regular basis, notably by field-based staff, only one implementation status and results report (ISR) was issued (December 2011). 2.4 Expected Next Phase/Follow-up Operation (if any): 29. The preparation of the First Governance and Growth Support Credit for the Republic of Senegal is ongoing. This operation is the first of a new series of three GGSCs, following the completion of PRSCs IV and V. The proposed operation supports the new government s efforts to improve economic governance by strengthening its accountability system, and the efficiency and effectiveness of public expenditure, and to promote growth through energy reforms and private sector development. Policies and reforms supported by this new operation build on the achievements of previous series while shifting the focus to support the new government s priorities including difficult reforms in the governance and energy sectors. The proposed new series is also aligned with Senegal s Document of Economic and Social Policies (DPES) and the new government s General Declaration of Policies. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 30. The objectives of this second PRSC series were relevant to the country s needs and priorities as reflected in the PRSP-II. The operations were fully aligned with the government reform agenda and the FY07-FY10 CAS for Senegal. It addressed key elements of the growth agenda, improving the investment climate, protecting the critical fisheries sector, and preserving road infrastructure. It tackled the need to improve the efficiency of public expenditures in the health and education sectors. The PRSC series was designed to build on, complement and/or leverage existing or planned Bank development policy, capacity building, and investment operations and a broad program of analytical work. The implementation framework supported government ownership, while ensuring continued close Bank engagement by a core team, almost entirely field based. 3.2 Achievement of Program Development Objectives 31. Overall, PRSC series assisted the Government s efforts to achieve results in the four main areas supported by the program. Senegal was able to make progress in wealth creation, access to basic social services, mitigating vulnerabilities and governance, despite several internal and external shocks. Wealth creation 32. The authorities implemented actions that improve the investment climate and foster private sector development. Some progress has been achieved toward the reduction of the time and cost involved in securing a building permit, and new procedures were formally adopted by the Government. Furthermore, the Government launched the computerization of the procedures to obtain a building permit in order to simplify the procedures, increase transparency and reduce the time passed in obtaining building permits. However, according to the Doing Business Report, the time required only fell from 220 days to 210 and the private sector continued to complain about this issue at the Presidential Investment Council of

25 33. More progress has been made in ensuring adequate maintenance of Senegal s road capital. The budget of the Road Maintenance Fund (FERA) more than doubled between 2008 and Actual revenues received in 2011 were somewhat lower, but still twice the level of the 2008 budget. As a result, a total of 662 kilometers (km) of classified non-paved road were recovered in 2010 against 106 km in 2009, exceeding the annual target set at 400 km. Similarly, the maintenance of classified paved roads increased from 689 km in 2009 to 698 km in 2010, for a similar target of 400 km. 34. The authorities eventually made progress in the area of small and medium enterprise (SME) policy. A PRSC V trigger had been identified for the adoption and start of implementation of an action plan based on a study of SME tax reform. The trigger was dropped when the authorities decided to rely on the recommendations of IMF technical assistance and agreed to establish a Medium Enterprise Center (Centre des Moyennes Enterprises) in the General Directorate of Taxation. This unit is now operational. Access to Basic Social Services 35. Concerning education, the government made encouraging progress on human resource management. They moved more quickly than expected to eliminate the recruitment of teachers through the safety quota, or quota sécuritaire, system. Whereas the PRSC IV prior action envisaged a 3-year phase-out, the government eliminated the system in one year. The recruitment of all contractual teachers in 2010 was conducted on a competitive basis at the national level. This method of recruitment led to the recruitment of 2045 teachers in 2010, against roughly 4000 teachers in 2009, and all of these received training. Furthermore, the HR department of the Ministry of Education has adopted an identification system using an ID number for all contractual teachers. Also, the Volunteers Project unit has been suppressed and integrated into the HR directorate. An integrated human resource and payroll system was established and all teachers are now covered by it. 36. In the health sector, the government is implementing the Public Hospital financial recovery plans. First generation performance contracts were signed with five hospitals, which served to bring the Ministry of Health back into the business of controlling the hospitals. Significant reductions in staffing were achieved (17.6%); however, this was offset by declining demand for services. The powers of the MoH hospital directorate have been slightly strengthened but supervision of the hospitals needs to be further improved. As regards the extension of health risk coverage, the National Strategy for Extending Health Risk Coverage has been adopted, and the number of health mutuals grew substantially. In the nutrition sector as well, a medium term plan for a sustainable financing of the nutrition reinforcement program has been drafted for the period The nutrition improvement program (Programme de Renforcement de la Nutrition) has become a model for Africa, reducing the level of underweight children to 15%, which is one of the lowest rates in Africa. In these two areas, progress has been made in setting the institutional framework. But implementation remains the key challenge. Mitigating Vulnerabilities 37. The government continues to implement its strategy for the transparent restriction of access to fisheries resources. The Ministry of Fisheries has disclosed the existing fishing agreements on a government web site and is committed to continue this 12

26 practice for all new fishing agreements or similar contracts. The government started the registration of the industrial fishing vessels and prepared a database for the identification of the artisanal fishing fleet. A database has been set up and is available online. 4 The registration of the artisanal fleet was critical as it proved that the number of vessels had been seriously under-estimated (17,000 instead of the assumed 12,000). This revelation then led to a freeze on the registration of new pirogues, except in the event of replacement, in 2012 an important first step in reducing the pressure on the fishery resource. Two implementation issues have emerged. The first is the need to keep the online data base upto-date. 5 The second, and more serious one, is the award of numerous industrial fishing licenses in a non-transparent manner in early 2012, shortly before the presidential elections. However, the new government cancelled these as soon as they took office. Public Finance and Governance 38. With regards to budget management and reporting, the authorities have taken significant steps. In 2011, the Senegalese Parliament approved five of the six new PFM regulations adopted two years before by WAEMU Commission. These new regulations set objectives, including performance budgeting, decentralization of commitment authority to line ministries, reinforcement and modernization of internal and external control, modernization of expenditures management, implementation of accrual accounting and new budget classifications aligned with international standards. The important, sixth WAEMU regulation concerning a code of transparency was adopted by the Council of Ministers in July Information on budget execution, including fiscal tables, is available to the public on a monthly basis, and spatial data for four key ministries is also available. Summaries of the budgets for the four largest public agencies were attached to the 2012 budget law for the first time. 39. Concerning the external audit system, significant effort has been made to clear the backlog in the review of the Budget Review Acts (Lois de Réglements). By mid February 2012, the Audit Office (Cour des Comptes) completed the audit of the Budget Review Acts for 2008, 2009 and 2010, and submitted them to the National Assembly, thus clearing the backlog that has hampered its effectiveness since the creation of the Court in The arrival of a new government in April 2012 provided fresh momentum to this reform program, as it quickly approved a new law to strengthen the independence of the Audit Office. 40. The PRSC also supported reforms in the area of debt management, public land management and access to statistics. Concerning debt management, the Ministry of Finance consolidated the separate entities in charge of internal and external debt management into a single entity. In addition, the government decided to expand the coverage of the Medium Term Debt Strategy (MTDS) to three years, instead of one. The MTDS was not finalized as quickly as hoped, and so the relevant trigger was dropped, but it is now ready for submission to the National Assembly with the 2013 budget. As for the statistical system, the government prepared a revised statistical law to allow more access to A request to this effect was made in September

27 primary data by the users, and fostered dialogue between providers and users within the national statistical commission. The National Assembly approved the new law in However, access to primary data from the Statistics Agency (ANSD) remains limited as old habits are slow to change. Once the data from the 2011 household survey are cleaned and ready for dissemination, the World Bank will work with ANSD to find an appropriate way to make them widely available. On the management of public lands, small changes were made in the Tax Directorate, but the publication of all transactions proved too politically sensitive. 41. In the area of public procurement, recent developments have raised the need to maintain policy dialogue to ensure the sustainability of reforms. Following several years of procurement system reforms that placed Senegal at the forefront in the region, PRSC IV supported the adoption of a revised regulatory framework by the Authority for the Regulation of Public Procurement (ARMP) after extensive stakeholder consultation. However, the government then decided to revisit several provisions of the original texts, in particular with respect to operations that impinged on national security or were considered urgent. Discussions with the donor community led to the adoption of a new decree that provided a balance between transparency and efficiency, and preserved the integrity of the system. New changes were introduced in January 2012, exempting some activities, notably in the energy sector, from the requirements of the procurement code. These did not follow the agreed participatory process involving central government agencies, local authorities, private sector, civil society and donors, nor the approval of the ARMP. However, the new government is committed to undoing these latest changes. 3.3 Justification of Overall Outcome Rating Rating: Moderately Satisfactory. 42. The outcome in the first component of the program, wealth creation, was moderately satisfactory. Performance on the outcome indicator fell well short of the target for construction permits. Significant progress was made on road maintenance funding, although the revenues finally received were somewhat less than expected. The trigger on SME taxes was dropped, but the action was eventually completed. 43. The outcome of the second component, access to basic social services, was satisfactory. There was good progress in the implementation of reforms of the education sector. In the health and nutrition sectors, prior actions laying the institutional ground for reform implementation were completed. Performance on most outcome indicators was met. The one indicator missed (on hospital efficiency) was probably inappropriately defined. 44. The outcome in the third component, mitigating vulnerabilities, was satisfactory. The outcome of a more transparent framework in fisheries resources was achieved. There were slippages but the arrival of the new government provided new resolve to maintain the reform program. 45. The outcome of the fourth component, public finance and governance, was moderately satisfactory. There was good progress in improving budget preparation, execution and reporting, and external control. Progress in debt management was slower than envisaged, but achievement of the expected results was finally expected in late Progress in transparency of public agencies and access to statistics was more limited. The 14

28 situation with regards to public land transactions did not change. The area of public procurement was probably the most sensitive, and most important, one in terms of improving governance. The two episodes of slippage are of concern but do not appear to be significant beyond the short-term. In fact, the outcome indicator was exceeded. 3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 46. This PRSC series is expected to have a positive impact on the medium-term poverty reduction trend. This impact would be through an expected strengthening of the government s policy making and institutional capabilities to ensure an enabling environment for the private sector (component 1), improve the State s ability to provide basic services efficiently and equitably (component 2), preserve the viability of fishing as a livelihood (component 3), and improve governance in the management of public resources (component 4). However, an intermediate outcome should materialize with growth returning to its long term performance of around 5 percent per year. 47. As of now, poverty incidence is not declining significantly. The last poverty estimates, based on a household survey conducted in 2011, showed the incidence of poverty at 46.7 percent of the population more than 6 million Senegalese people living on a household income below the national poverty line. At the same time, inequality appears to have risen, with the ratio of consumption in the top quintile relative to the bottom quintile doubling from 5 to 10 between 2006 and Also, geographical disparities remain broadly unchanged with two thirds of the poor households living in rural areas. 48. Policies supported by PRSC operations in the area of fish resources management may have the most significant positive impact. The objective is to prevent additional artisanal fishermen from entering the sector and further reducing the catches and incomes of those already there. In addition, the plan is to reduce the industrial fishing fleet over time, which should gradually lead to higher catches for the artisanal sub-sector. Stabilizing and eventually expanding the artisanal fishery will also have beneficial impacts for the many women who tend to dominate the processing and distribution of fish. (b) Institutional change/strengthening 49. The program has supported relevant institutional change in the four areas that were covered. The largest impact was probably on the road maintenance fund (FERA) which obtained a doubling of its budget, over half of which derived directly from user fees. This placed the fund on a much more solid and sustainable financial footing. In addition, the series has supported a continued reform program on PFM. To move more forcefully on PFM reforms, the MEF has developed an overall action plan that was adopted in October The PFM action plan is a comprehensive attempt by the authorities to address the weaknesses of their PFM system. Overall, the Bank has judged implementation performance of the PFM reform program to date and Government s commitment to its improvement as satisfactory. (c) Other Unintended Outcomes and Impacts: N/A 15

29 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 4. Assessment of Risk to Development Outcome Rating: Substantial 50. Major risks threatening development outcomes are related to Senegal s vulnerability with respect to external crises, both regional and international, and to climatic conditions. Senegal s short-term prospects continue to depend on developments in the global economy. A slower normalization and/or longer macroeconomic downturn in the current global context than anticipated still represent a significant risk, contingent on developments in partner country economies, mainly in Europe. The political crises in Mali and Guinea Bissau will also have a negative effect on the economy. Mali is the largest single export destination for Senegal, while instability in Guinea Bissau will make it more difficult to end the violence in the Casamance. While the poor rainfall of 2011 caused a serious setback for the rural economy, flooding in 2012 is causing major damages in urban areas, especially in the main city, Dakar. Increases in global food and fuel prices would put further pressure on macroeconomic management. Political opposition, including from vested interests such as protected industries and labor unions, represents another potential obstacle to pursuing difficult but necessary reforms ensuring sustainability of fiscal policy and improvement of governance. 51. On the other hand, the change in government has brought a new commitment to reform. The appetite for reform was clearly diminishing under the previous regime, while governance problems were rising. The new government was elected on the basis of their promise to improve transparency and accountability in the management of public resources, and to address the needs of the rural poor. Earlier indications are that some difficult reforms are now moving forward. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 52. The quality at entry is assessed as moderately satisfactory. The design of the second PRSC series has drawn on the PRSP-II which benefited from broad stakeholders consultations. Additional consultative inputs were drawn from budget support policy matrix reviews and the recent PRSP II implementation completion and diagnosis assessment. The program has also benefited from lessons learned through the preparation of the ICRR on the first series of PRSCs. However, some indicators were probably overambitious, notably in the area of transparency in public land transactions (for political economy reasons) and hospital efficiency (due to the importance of exogenous factors). 53. A decision was made to incorporate the difficult energy reform dialogue into this series for the second operation. An energy sector investment project had proven unable to promote some key reforms, resulting in the cancellation of part of that loan. It was agreed with the government that this amount could be added to the PRSC series if 16

30 similar reforms could be implemented on a somewhat different time line. In the end, this too proved impossible and the idea was dropped. However, this issue dominated the ROC meeting for PRSC V and distracted attention from the rest of the reform program. (b) Quality of Supervision Rating: Moderately Satisfactory 54. The supervision of PRSC IV and V is rated moderately satisfactory. Although no ISR was issued for PRSC IV, the results framework was updated through the PRSC V Program Document. Further updating was achieved through the ISR issued for PRSC V. However, emphasis was put on the completion of prior actions while the results indicators deserved closer attention. The Bank s private sector project could have provided stronger support on the construction permit reforms. Staff could have followed up more closely with the statistics agency to ensure better public access after the law was amended. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 55. The overall Bank performance was satisfactory. As a result of the good preparation of the series, and a strong team in the field. 5.2 Borrower Performance (a) Government Performance Rating: Moderately satisfactory (b) Implementing Agency or Agencies Performance Rating: n.a. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately satisfactory 56. The performance of the borrower is rated moderately satisfactory. While most triggers for PRSC V were completed, two were dropped, and there was some back-sliding on one of the PRSC IV prior actions (related to procurement). Seven out of fourteen results indicators met the targets set for Substantial progress was made on another three (road maintenance, health mutuals and debt management), while little or nothing was achieved on the remaining four (construction permits, hospital efficiency, land transactions, access to data). Some of this reflects over-ambitious targets, and some reflects insufficient commitment to follow-up. More attention should be devoted to the results framework. 6. Lessons Learned 57. Budget support can be an effective tool to mobilize the ministry of finance on sectoral reform, under the right circumstances. This finding is supported by the case of the road maintenance fund (FERA), the sustainable management of fisheries, teacher recruitment, and public hospitals, which demonstrated increased mobilization and greater involvement of the line ministries and smoother relations between the ministry of finance 17

31 and line ministries. In each case, sector investment projects and/or technical assistance complemented budget support, and the combination served to promote reform. 58. Policy-based lending under a harmonized approach among donors can be an effective tool to strengthen the country-based development model. The implementation of an enhanced harmonization framework for budgetary support, with the Bank having a particular focus on the design of policy reforms, can provide a mechanism for effectively coordinating expanded donor budgetary support, unifying donor assistance around a coherent set of policy actions, lowering government transaction costs from dealing with multiple donors, and generating reform momentum. This was particularly true in the case of PFM reform, where a common action plan was adopted, and in the case of the procurement code, where donor coordination helped to correct slippage. However, the approach based on government ownership, a focused and coherent policy action matrix, and flexibility in implementation should not undermine the objective of targeting critical reforms and effectively monitoring results and outcomes. In this respect, some other lessons need more emphasis. 59. Ministries and agencies participating in budget support operations have a tendency to focus on the realization of prior actions, so systematic follow-up actions are needed. Other measures and the final outcomes receive less attention. This emphasis has to be expected in view of the nature of the Bank s instrument. Yet, it can be detrimental to progress over time. In this respect, attention should be paid to the quality of outcome indicators at the outset, making sure that these indicators are relevant to the objectives, that they can be measured at every step of implementation, and that the authorities fully own them. It is crucial to align closely performance indicators for the PRSCs with those for the PRSP and the CAS. 60. More attention to political economy considerations may be needed to better understand opposition to reform, particularly in sensitive areas. Adequacy of government s commitment is essential for introducing major reforms. Implemented reforms are not immune to the risk of reversal. Some influential interest groups may resist any reform that would reduce their privileges, even if it would benefit a large part of the population. Thus, 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies We thank the authorities for their detailed response (see Annex 4) and we appreciate the continued commitment of the new government to the reform agenda supported by this series. (b) Cofinanciers (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 18

32 Annex 1: Bank Lending and Implementation Support/Supervision Processes (a) Task Team Members Names Title Unit Lending/Supervision PRSC 4 Coste, Charles Consultant AFTFM D' Hoore, Alain W. Lead Economist AFTP4 Durand, Philippe J-P. Program Coordinator AFTG2 Gonzalez, Alvaro S. Lead Economist ECSF1 Ndione, Mamadou Senior Economist AFTP4 Seck, Atou Sr Education Econ. AFTEW Simonpietri, Antoine Senior Statistician AFRCE Subran, Ludovic Social Protection LCSHS Economist Wodon, Quentin T. Adviser, Poverty HDNED Maimouna Mbow Fam Senior Financial AFTMW Management Specialist Wolfgang M. T. Senior Finance Officer CTRLA Chadab Louis Jean De Finance Analyst CTRLA Marigny Lydie Madjou Finance Assistant CTRLA Valerie Asfour Portfolio Officer CTRNF Khady Fall Lo Team Assistant AFCF1 PRSC 5 Lending/Supervision Mamadou Ndione Senior Economist AFTP4 Alain D' Hoore Lead Economist AFTP4 Maimouna Mbow Fam Senior Financial AFTMW Management Specialist Eric Jean Yoboue Senior Procurement AFTPW Specialist Wolfgang M. T. Senior Finance Officer CTRLA Chadab Louis Jean De Finance Analyst CTRLA Marigny Lydie Madjou Finance Assistant CTRLA Valerie Asfour Portfolio Officer CTRNF Boubker Abisourour Research Analyst AFTP4 Seck, Atou Senior Education Econ. AFTEW Durand, Philippe J-P. Program Coordinator, AFTG2 Energy Fernandes, Judite Language Program Assistant AFTP4 19

33 Garnier, Stephan Senior Energy AFTG2 Claude Frederic Specialist Giles, John T. Senior Labor DECHD Economist Iacovone, Leonardo Economist AFTFP Sissoko, Fily Lead Financial AFTMW Management Specialist Subran, Ludovic Social Protection LCSHS Economist Khady Fall Lo Team Assistant AFCF1 Van Der Linde, Gert Johannes Alwyn Lead Financial Management Specialist AFTME (b) Staff Time and Cost Stage Lending/Supervision Staff Time and Cost (Bank Budget Only) No. of staff weeks USD Thousands (including travel and consultant costs) FY10 - P PRSC , FY11 P PRSC , Total for FY , FY , Total for FY , Total: ,

34 Annex2: Beneficiary Survey Results N/A Annex 3: Stakeholder Workshop Report and Results N/A 21

35 Annex 4: Summary of Borrower's ICR and/or Comments on Draft ICR Madame Director, I would like to indicate that we share the principal conclusions of the evaluation. This support enabled us to achieve fairly substantial progress in different areas and we are working to consolidate these and to accelerate reforms in other areas where the results were less successful. In particular I would like to recall the notable progress in human resource management in the education sector, where the recruitment of teachers became more transparent, and an audit of personnel will be completed in October In the area of infrastructure, the implementation of a better system for road maintenance became effective with the creation of FERA and the important evolution in the resources allocated to it. Concerning SME taxes, a medium enterprise center was created in the Tax Department and it is now operational. The policy of performance contracts begun in the health sector will be pursued in order to improve the performance of hospitals. In the fisheries sector, which employs a significant share of the coastal population, the registration of pirogues should lead to more rational management and reduce pressure on fish resources. Concerning construction permits, the legal and regulatory texts have been prepared and the government is working to implement them, albeit with a certain delay. Turning to public finance, the delays observed in the production of budget execution laws have been removed. Thus, this year, the budget execution law for 2011 has already been sent to the Auditor s Office. A monthly statement of budget execution is now available on the Ministry s website. This demonstrates the importance placed on external control, reporting and public information. Also we are going to rationalize agencies and improve their governance. A special commission set up for this purpose will soon submit its conclusions. I should also recall that the government has begun to implement gradually the WAEMU directives. It has adopted the code of transparency in public finance and the draft organic law on the Auditor s Office. Budget support is for us a key instrument to accompany reforms aiming to reinforce our institutions. In addition, it is perfectly aligned with our national procedures. The support of the World Bank through this modality has been critical to the progress achieved. This is why I would like to transmit the thanks of the government and at the same time request the reinforcement of this instrument in the Bank s portfolio for an even better alignment with national priorities. Please accept, Madame Director, my best regards. Minister of Economy and Finance 22

36 Annex 5: Comments of Co-financiers and Other Partners/Stakeholders N/A Annex 6: List of Supporting Documents N/A 23

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