Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H9370 AND IDA-D0830) FOR AN ECONOMIC GOVERNANCE REFORM OPERATION

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1 Public Disclosure Authorized Document of The World Bank Public Disclosure Authorized Public Disclosure Authorized Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H9370 AND IDA-D0830) FOR AN ECONOMIC GOVERNANCE REFORM OPERATION (US$3.8 MILLION) AND A SECOND ECONOMIC GOVERNANCE REFORM OPERATION (US$3.0 MILLION) TO THE UNION OF THE COMOROS Public Disclosure Authorized December 15, 2017 Macroeconomics and Fiscal Management Global Practice Comoros Country Management Unit Africa Region i

2 THE UNION OF THE COMOROS GOVERNMENT FISCAL YEAR January 1 December 31 CURRENCY EQUIVALENT (Exchange Rate as of November 30, 2017 Currency Unit = Comorian Franc (KMF) US$1 = KMF 418 ABBREVIATIONS AND ACRONYMS BCC CPS CREF DGCPT DGRH DeMPA DPO DSA ECP EDA EGRG ERDPG ESRP GB GDP HIPC ICT IDA IFC IMF INSEED MA-MWE MOF PDOs PFM RCIP-4 SCADD TSA Central Bank of the Comoros Country Partnership Strategy Economic and Financial Reforms Unit Direction Générale de la Comptabilité Publique et du Trésor (Office of Public Accounting and Treasury) Direction Générale des Resources Halieutiques Debt Management Performance Assessment Development Policy Operation Debt Sustainability Analysis Economic Citizenship Program Electricité de Anjouan (Electricity Company of Anjouan) Economic Governance Reform Grant Economic Reform Development Policy Grant Electricity Sector Recovery Project Gigabyte Gross Domestic Product Heavily Indebted Poor Countries Information and Communications Technologies International Development Association International Finance Corporation International Monetary Fund National Institute of Statistics and Economic Studies and Demographic Gestion de l Eau et l Electricité aux Comores (Water and Power Utility in Comoros) Ministry of Finance Program Development Objectives Public Financial Management Fourth Phase of the Regional Communication Infrastructure Program Sustainable Accelerated Growth and Development Strategy Treasury Single Account Vice President: Makhtar Diop Country Director: Mark R. Lundell Resident Representative: Rasit Pertev Global Practice Senior Director: Carlos Felipe Jaramillo Practice Manager: Mathew Verghis ICR Team Leader: Shireen Mahdi ICR Author: Ana Lucia Armijos ii

3 UNION OF THE COMOROS Economic Governance Reform Operation (P131688) Second Economic Governance Reform Operation (P150924) CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Program Performance in ISRs H. Restructuring 1. Program Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Policy and Result Matrix Annex 2 Bank Lending and Implementation Support/Supervision Processes Annex 3. Borrower's Comments Annex 4. Comments of Cofinanciers and Other Partners/Stakeholders Annex 5. List of Supporting Documents MAP iii

4 A. BASIC INFORMATION Program 1 Country Comoros Program Name: Comoros Economic Governance Reform Grant Program ID: P L/C/TF Number(s) IDA-H9370 ICR Date: 12/15/2017 ICR Type: 12/15/2017 Financing Instrument: DPL Borrower Original Total Commitment GOVERNMENT OF COMOROS USD 3.80M Disbursed Amount USD 3.85M Implementing Agencies: Vice-Presidency in charge of Finance of the Union of the Comoros. Co-financiers and Other External Partners: Program 2 Country Comoros Program Name: Comoros Second Economic Governance Reform Grant Program ID: P L/C/TF Number(s) IDA-D0830 ICR Date: 12/15/2017 ICR Type: 12/15/2017 Financing Instrument: DPL Borrower Original Total Commitment Moderately Satisfactory iv GOVERNMENT OF COMOROS USD 3.00M Disbursed Amount USD 3.09M Implementing Agencies: Vice-Presidency in charge of Finance of the Union of the Comoros. Co-financiers and Other External Partners: B. KEY DATES Comoros Economic Governance Reform Grant P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 11/06/2013 Effectiveness: 05/16/2014 Appraisal: 02/10/2014 Restructuring(s): Approval: 04/29/2014 Mid-term Review: Closing: 12/30/ /30/2014 Comoros Second Economic Governance Reform Grant P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 09/02/2014 Effectiveness: 06/12/ /16/2015 Appraisal: 03/16/2015 Restructuring(s): Approval: 06/02/2015 Mid-term Review: Closing: 12/31/ /31/2016 C. RATINGS SUMMARY C.1 Performance Rating by ICR Overall Program Rating Outcomes

5 Risk to Development Outcome Bank Performance Borrower Performance Substantial Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Moderately Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Overall Bank Performance Satisfactory Overall Borrower Performance Moderately Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Comoros Economic Governance Reform Grant P Implementation Performance Potential Problem Program at any time (Yes/No): Problem Program at any time (Yes/No): DO rating before Closing/Inactive status Indicators QAG Assessments (if any) Rating No Quality at Entry (QEA) None No Moderately Satisfactory Quality of Supervision (QSA) None Comoros Second Economic Governance Reform Grant P Implementation Performance Potential Problem Program at any time (Yes/No): Problem Program at any time (Yes/No): DO rating before Closing/Inactive status Indicators QAG Assessments (if any) Rating No Quality at Entry (QEA) None No Quality of Supervision (QSA) None D. SECTOR AND THEME CODES Comoros Economic Governance Reform Grant P Original Actual Major Sector Agriculture, Fishing and Forestry Livestock 6 6 Fisheries 6 6 Public Administration Central Government (Central Agencies) Information and Communications Technologies v

6 ICT Infrastructure Energy and Extractives Other Energy and Extractives Major Theme/Theme/Sub Theme Economic Policy 6 6 Fiscal Policy 6 6 Fiscal sustainability 6 6 Private Sector Development 4 4 Jobs 4 4 Job Creation 4 4 Public Sector Management Public Administration State-owned Enterprise Reform and Privatization Transparency, Accountability and Good Governance Public Finance Management Debt Management 6 6 Public Expenditure Management Urban and Rural Development 8 8 Rural Development 4 4 Rural Infrastructure and service delivery 4 4 Urban Development 4 4 Urban Infrastructure and Service Delivery 4 4 Comoros Second Economic Governance Reform Grant P Original Actual Major Sector Public Administration Central Government (Central Agencies) Information and Communications Technologies ICT Infrastructure Energy and Extractives Other Energy and Extractives Major Theme/Theme/Sub Theme Economic Policy 6 6 Fiscal Policy 6 6 Fiscal sustainability 6 6 Public Sector Management Public Administration Administrative and Civil Service Reform E-Government, incl. e-services Transparency, Accountability and Good Governance Public Finance Management Debt Management 6 6 Public Expenditure Management vi

7 E. BANK STAFF Comoros Economic Governance Reform Grant P Positions At ICR At Approval Vice President: Makhtar Diop Makhtar Diop Country Director: Mark R. Lundell Mark R. Lundell Practice Manager/Manager: Mathew A. Verghis John Panzer Task Team Leader: Shireen Mahdi Rafael Munoz Moreno ICR Team Leader: Shireen Mahdi ICR Primary Author: Ana Lucia Armijos Comoros Second Economic Governance Reform Grant P Positions At ICR At Approval Vice President: Makhtar Diop Makhtar Diop Country Director: Mark R. Lundell Mark R. Lundell Practice Manager/Manager: Mathew A. Verghis Mark Roland Thomas Task Team Leader: Shireen Mahdi Shireen Mahdi ICR Team Leader: Shireen Mahdi ICR Primary Author: Ana Lucia Armijos F. RESULTS FRAMEWORK ANALYSIS Program Development Objectives (from Program Document) The Development Objective of this DPO series is to strengthen economic management, promote transparency, and enhance performance in the electricity and ICT sectors. The operation is designed around three pillars: (i) strengthening economic management; (ii) improving transparency in economic management; and (iii) improving competition and management in key infrastructure sectors. Indicator(s) P Comoros Economic Governance Reform Grant P Comoros Second Economic Governance Reform Grant Original Target Indicator Baseline Value documents) Values (from Formally Revised approval Target Values Indicator 1: Value quantitative or Qualitative vii Actual Value Achieved at Completion or Target Years Cash management plans integrating the Union and island treasuries are operational No integrated plans Integrated plan updated Date achieved 12/31/ /31/ /31/2016 Cash management plans integrating the Union and Island Treasuries are operational and have been incorporated to the budget law.

8 Comments (incl. % achievement) Indicator 2: Value quantitative or Qualitative Achieved (100%) Treasury cash management plans are in place. The computerization of public finances is a recent reality (2017) through the Integrated Financial Management Information System (IFMIS) rollout with the accounting software SIMBA used since mid for implementation by the Union and Island Governments of automate budget execution, accounting, and reporting. Number of non-project central government bank accounts outside of the single account framework reduced 64 accounts Less than 10 accounts Date achieved 12/31/ /31/ /31/2016 Comments (incl. % achievement) Indicator 3: Value quantitative or Qualitative Starting in 2016 there are no central government accounts outside the Treasury Single Account (TSA) Achieved (100%). The Memorandum of Understanding signed between the Ministry of Finance and the Central Bank in November 2014, prohibited the opening and operating of new bank accounts unless prior authorization from the vice-president responsible for finances has been given. The implementation of this agreement played an important role towards the elimination of accounts A computerized wage management system that integrates union and island civil service operational Separate systems operated for the Union and Islands An integrated system that consolidates union and islands civil service operational Date achieved 12/31/ /31/ /31/2016 Comments (incl. % achievement) An integrated civil service wage management system for the Union and Islands is operational Achieved (100%). The integrated personnel and payroll management system for the Union and Island Governments is functioning since January 2016 through the operationalization of the Government Human Resource Management Information System (GISE). However, the gains in efficiency have not been fully obtained yet. As of March 2017, more than 95 percent of civil servants are paid through the automated payroll system. Indicator 4: Public budget that includes detailed information on investment and recurrent expenditures adopted Value quantitative or Qualitative There is no public budget with detailed information on investment and recurrent expenditures Public budget with detailed information on investment and recurrent expenditures adopted The Public Investment Plan (PIP) is included in the budget law starting with 2015 budget law Date achieved 12/31/ /31/ /31/2016 Comments (incl. % Achieved (100%)The Public Investment Plan (PIP) is annexed in the budget law, starting with the 2015 budget law achievement) Indicator 5: Transparency and accountability of debt management has improved. viii

9 Value quantitative or Qualitative No regular debt reports produced and debt management framework incomplete Annual debt reports produced & all new loans, guarantees/loan renegotiations conducted in line with debt management law Date achieved 12/31/ /31/ /31/2016 Comments (incl. % achievement) No self-standing debt reports have been published but an annual debt report has been included in the budget law since Partially achieved. The debt management bill was not adopted by the parliament. Since the debt management bill was prepared and submitted to the National Assembly on October 13, 2014, an annual debt report has been prepared and included in the annual budget laws of 2015, 2016 and Indicator 6: Value quantitative or Qualitative National Accounts prepared using the 1993 methodology and National Statistics Institute operational. Draft national National accounts National Statistics Institute accounts for year for 2013 using is operational and has 2007 using the the 1993 completed the GDP 1993 methodology methodology database for prepared adopted using the SNA 93 in 2016 Date achieved 12/31/ /31/ /31/2016 Comments (incl. % achievement) Achieved (100%) The National Accounts until 2015 have been validated and adopted by the Government in September INSEED has also delivered the preliminary NA for 2016 with the SNA 93 methodology. Indicator 7: Number of cases completed by the anti-corruption commission and brought to court. Value quantitative or Qualitative 15 cases 20 cases The anti-corruption commission was dissolved in September 2016 Date achieved 12/31/ /31/ /31/2016 Comments (incl. % achievement) Indicator 8: Value quantitative or Qualitative Not achieved (0%) The new President that assumed power in May 2016 eliminated the Anti-Corruption Commission on the grounds of inefficiency. However, the government has not put in place a credible system for pursuing the fight against corruption nor has taken specific measures to combat corruption. Information on access granted for fishing activities systematically disclosed, with revenue and its use Information not Access to Information on fishing systematically information on activities is systematically available revenue and its prepared and disclosed use regularly documented and disclosed Date achieved 12/31/ /31/ /31/2016 Comments (incl. % achievement) Achieved (100%) The Direction Generale des Ressources Halieutiques (DGRH) systematically prepares the fishing activities information that is sent to the Economic and Financial Refor Unit (CREF) for disclosure. The revenue generated by the fishing activities is included in the budget law of 2015 and 2016 ix

10 Indicator 9: Increase in the number of Telecom operators with a service license and reduction in the monthly price per 1 GB of mobile data Value quantitative or Qualitative 1 Telecom operator and KMF 10,000 price At least 2 Telecom operators and KMF 7,500 price There are two telecom operators: Comores Telecom (national) and Telma (private). Telma s price per 1GB per month is 5000 KMF while the Comores Telecom price is 5250 KMF p/month for 1GB Date achieved 12/31/ /31/ /31/2016 Comments (incl. % achievement) Achieved (100%) Telma Comores (private company) was awarded a license in December 2015 and began operations in Telecom was opened to the new operator but the process was quite complicated and delayed. Indicator 10: Increase in MA-MWE collection rates Value quantitative or Qualitative 55 percent 65 percent The collection rate reached 79 percent and represents the total amount collected for electricity sales billed in 2016 Date achieved 12/31/ /31/ /31/2016 Comments (incl. % achievement) Achieved (100%). The collection rate of the Electricity Company surpassed the expected at end 2016, despite the low pace of reform. However, to make the gains sustainable, the government,, is working with the World Bank and African Development Bank on a longer-term strategy to strengthen the technical, management, and commercial capacity of the entity. G. RATINGS OF PROJECT PERFORMANCE IN ISRs Comoros Economic Governance Reform Grant P Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 10/13/2014 Moderately Satisfactory Satisfactory 3.85 H. RESTRUCTURING (IF ANY) Not Applicable x

11 1. Program Context, Development Objectives and Design 1.1 Context at Appraisal Country context Comoros had been undergoing a prolonged period of political instability since its independence from France in 1974, defined by struggles for political power and strained relations between the national and island governments. Dialogue and constitutional reforms in the 2000s paved the way for a gradual move to political stability, allowing three democratic transitions of power to occur in the last decade. The return of political stability had been instrumental for building more stable institutions and opened a window of opportunity for reform. Thus, since 2009, Comoros has implemented a series of macro-stabilization and structural reform programs with support from development partners, securing gains in fiscal consolidation and macroeconomic stability and making advances in public financial and debt management reforms. These measures enabled the country to reach the Heavily Indebted Poor Countries Initiative (HIPC) completion point in December 2012 and allowed it to benefit from debt cancellation. However, Comoros continued to be a poor and fragile island state with substantial coordination challenges between the Union government and the three islands governments, a delicate political context and significant political economy constraints. Also, the economy began stabilizing but has weak growth due to its limited sources of growth, weak fiscal footing: low revenues, high recurrent costs, a rising public wage bill, fiscal risks from weak public utilities and infrastructure deficiencies. Poverty was, and still is, widespread and was estimated at 42.3 percent in The narrow economic base and the low institutional capacity are major challenges to poverty reduction. Much of the poverty problem lies in high unemployment, exacerbated by a high prevalence of informality and low productivity of the economy, centered primarily on the export of a few agricultural commodities, subject to terms of trade and price shocks associated with global market fluctuation. It was against this backdrop that the World Bank s support to economic governance reforms was conceived through a programmatic series of two development policy operations (DPO) aimed at improving economic management and transparency and enhancing performance in key infrastructure sectors. This was the first programmatic DPO for Comoros and followed a standalone DPO approved in November This Implementation Completion and Results Report (ICR) assesses the achievements of the expected results of the programmatic series of Economic Governance Reform Development Policy Operations to the Union of the Comoros. The DPO series intended to support the Government of Comoros to strengthen economic management, improve transparency and improve competition and management in key infrastructure sectors. The first operation (DPO1) of US$3.8 million was approved by the World Bank s Board of Directors on April 29, 2014 and disbursed upon loan effectiveness on May 16, The second operation (DPO2) of US$3.0 million was approved on June 2, 2015 and disbursed upon loan effectiveness on June 12, The second and last operation in the series closed on December 31,

12 Macroeconomic context At the inception of the DPO series, economic activity in Comoros had improved slowly since bottoming out in 2009 and real GDP growth reached 3.5 percent in 2013 mainly driven by a good agricultural harvest and increased investments in infrastructure and construction (Table 1). However, the fiscal position continued to be fragile with limited room for maneuver, weak public finance management systems, while transparency and accountability remained key constraints to the development agenda. Fiscal performance remained too dependent on non-tax revenues and grants, and the lack of a broader improvement in reducing major public expenses such as the wage bill and in collecting taxes did not ensure fiscal sustainability in the medium term. Moreover, growth and job creation continued to be held back by a high cost environment, particularly in relation to securing reliable access to electricity and connectivity through modern telecommunication services. Pressures relating to these factors, particularly difficulties in the electricity sector, reduced the rate of economic growth to 2 percent in Growth, deteriorated even further to 1 percent in 2015 due to electricity shortages and cuts to investment when the non-tax revenues from the Economic Citizenship Program (ECP) 1 declined, placing further pressure on the overall envelope. The weak fiscal management and over reliance on non-tax revenue from the economic citizenship program, the growing wage bill, added to the ongoing crisis in the electricity sector and the slower-than expected implementation of the public investment program, were the main factors behind the growth deceleration in 2015, below the annual population growth rate of 2.5 percent. The government also started accumulating civil service salary arrears as the public-sector wage and salary bill continued its upward trend reaching 9.1 percent in An unforeseen disbursement of a Saudi budget support grant of 40 million by mid-december 2015, changed the fiscal picture for the year. It enabled the authorities to clear the wage and salary arrears before the end of the year and record an overall fiscal surplus of 2.9 percent of GDP. This was a one-off disbursement; a fiscal deficit driven by underlying revenue and expenditure pressures was expected in the subsequent years. Following presidential elections in April 2016, a new president of the Union of Comoros was sworn in late May. President Azali had been previously head of state during and had repeatedly declared that poor revenue collections, a high public sector wage bill, and corruption are major challenges for his administration, thus, highlighting some of the challenges that the economic governance DPO series had been seeking to tackle. He has also declared that he was aware that persistent electricity shortages were significant obstacles to economic growth and development in Comoros and that his administration was determined to overcome them as soon as possible. 1 The Economic Citizenship Program (ECP) allows Comoros to offer citizenship to foreigners who reside in partner countries. The partner government selects the candidates following a background check conducted by the partner government. In exchange, Comoros receives a fee for each passport issued. In the years, before the Economic Governance Reform DPOs were implemented, the revenue from the ECP had become significant in relation to Comoros GDP. In 2012 it reached an impressive 5.6 percent of GDP. 2

13 Table 1: Comoros Main Economic Indicators and Central Government Operations Main Economic Indicators (% of GDP) Actuals Projections National Income and Prices Real GDP growth (% change) Real GDP per capita (% change) Inflation (% change, annual average) Public Finance Domestic Revenue (excl. grants) Grants Total expenditures (incl. net lending) Domestic primary balance Overall balance (incl. grants) External Sector Current account balance Exports of goods and services Imports of goods and services Remittances Gross reserves (months of imports) External debt External debt (in percent of GDP) External debt service (in % of exports) Central Government Operations (% of GDP) Revenue and grants Revenue Tax revenue Non-tax revenue Grants Of which: Budget support Project grants HIPC grants 18.2 Total expenditure Current expenditure Wages and salaries Goods and services Transfers and pensions Capital expenditure and net lending Capital expenditure Net lending Overall balance w/ grants (commitment) Domestic primary balance Change in net arrears Overall balance w/grants (cash) Financing Domestic financing (net) Foreign financing (net) Drawings Amortization Sources: Government of Comoros; WB and IMF staff estimates. 3

14 1.2 Original Program Development Objectives (PDO) and Key Indicators The original program development objective specified in DPO1 was: to (i) improve economic management and transparency, and (ii) enhance competition and improve development performance in key infrastructure sectors (ICT and electricity). The operation was designed around three pillars: (I) Strengthening economic governance; (II) improving transparency in economic management; and (III) improving competition and management in key infrastructure sectors. (Table 2) 1.3 Revised PDO and Key Indicators, and Reasons/Justification There were no revisions to the PDOs. But in the second operation (DPO2), the wording of the PDO was more specific and better aligned with the three pillars of the operation. Moreover, the reform focus was broadened to include two new indictors aimed at better coordinating the treasury and cash management and strengthening the wage bill management. The second operation kept the three pillars: (I) strengthening economic management; (II) improving transparency in economic management; and (III) improving competition and management in key infrastructure sectors. The outcome indicators expected to be achieved by the end of DPO1 and DPO2 series follows: Table 2: DPO Key Outcome Indicators Original (DPO1) and Revised (DPO2) DPO1 Indicators DPO2 Indicators Pillar A: Strengthening economic management Coordinating treasury and cash management 1. Cash management plans integrating the Union and island treasuries are operational. (Baseline: No integrated plans (2013); Target: Integrated plan updated monthly (2015) 1.Cash management plans integrating the Union and island treasuries are operational. (Baseline: No integrated plans (2013); Target: Integrated plan updated monthly (2016). 2. Number of non-project central government bank accounts outside of the single account framework reduced. (Baseline: 64 (2013; Target: Less than 10 (2016) Strengthening the wage bill management Improving budget comprehensiveness 2.Public budget that includes detailed information on investment and recurrent expenditures adopted. (Baseline: No public budget with detailed information on investment and recurrent expenditures (2013); Target: Public budget with detailed information on investment and recurrent expenditures (2015) 3.A computerized wage management system that integrates union and island civil service operational. (Baseline: Separate systems operated for the Union and Islands (203); Target: An integrated system that consolidates union and islands civil service operational (2016) 4.Public budget that includes detailed information on investment and recurrent expenditures adopted. (Baseline: No public budget with detailed information on investment and recurrent expenditures (2013); Target: Public budget with detailed information on investment & recurrent expenditures (2016) 4

15 Improving debt management 3.Transparency and accountability of debt management has improved. (Baseline: No regular debt reports produced and debt management framework incomplete (2013); Target: Annual debt reports produced & all new loans, guarantees and loan renegotiations conducted in line with debt management law (2015) Strengthening statistical system 4.National Accounts prepared using the 1993 methodology and National Statistics Institute operational. (Baseline: Draft NA for year 2007 using the 1993 methodology prepared (2013) and no autonomous National Statistics Institute 0perational. Target: NA for year 2012 using the 1993 methodology adopted (2015) and autonomous National Statistics Institute is operational 5.Transparency and accountability of debt management has improved. (Baseline: No regular debt reports produced and debt management framework incomplete (2013); Target: Annual debt reports produced and all new loans, guarantees and loan renegotiations conducted in line with debt management law (2016) 6.National Accounts prepared using the 1993 methodology and National Statistics Institute operational. (Baseline: Draft national accounts for year 2007 using the 1993 methodology prepared (2013); Target: National accounts for year 2013 using the 1993 methodology adopted (2016) Supporting the fight against corruption 5.Percentage of senior officials who filed their Asset Declaration Form, publicly available on the CNLPC website and/or in a national newspaper. (Baseline: 30% (2013); Target: 80 % (2015) Pillar B--- Improving transparency in economic management Enhancing transparency in the management of fisheries resources 6.Information on access granted for fishing activities systematically disclosed, with revenue and its use documented in the budget law. (Baseline: Information not systematically available and included in the budget law (2013); Target: Access to information on revenue and its use regularly documented and disclosed (2015) 7.Number of cases completed by the anti-corruption commission and brought to court. (Baseline:15 (2013); Target: 20 (2016) 8.Information on access granted for fishing activities systematically disclosed, with revenue and its use documented. (Baseline: Information not systematically available (2013); Target: Access to information on revenue and its use regularly documented and disclosed (2016) Pillar C--- Improving competition and management in key infrastructure sectors Enhancing competition in the ICT sector 7. Increase in the number of Telecom operators with a service license and reduction in the monthly price per 1 GB of mobile data (3G). Baseline: 1 Telecom operator and US$20.81 price (2013); Target: 2 Telecom operators and US$15 price (2015) 9.Increase in the number of Telecom operators with a service license and reduction in the monthly price per 1 GB of mobile data (3G). Baseline: 1 Telecom operator and KMF 10,000 price (2013); Target: At least 2 Telecom operators and KMF 7,500 price (2016) Improving performance in the electricity sector 8.Reduction in total losses in the electricity sector. (Baseline: 45% (2013). Target: 40% (2015) 10. Increase in MA-MWE collection rates. (Baseline: 55 percent (2013); Target: 65 percent (2016) 5

16 The reasons for the adjustments made to the outcome indicators under DPO2 are below: Table 3: DPO1 and DPO2 Outcome Indicators - Reasons for the Adjustments 2 DPO1 Results Indicators DPO2 Results Indicators Notes Pillar A: Strengthening economic management Consolidating treasury and cash management Number of non-project central government bank accounts outside of the single account framework reduced. (Baseline: 64 (2013; Target: Less than 10 (2016) Strengthening the wage bill management A computerized wage management system that integrates union and island civil service operational. (Baseline: Separate systems operated for the Union and Islands (203); Target: An integrated system that consolidates union and islands civil service operational (2016) Pillar B--- Improving transparency in economic management Supporting the fight against corruption Percentage of senior officials Number of cases completed by the anticorruption commission and brought to who filed their Asset Declaration Form, publicly court. (Baseline:15 (2013); Target: 20 available on the CNLPC (2016). website and/or in a national newspaper. (Baseline: 30% (2013); Target: 80 % (2015) This indicator was introduced to measure the results of the functioning & administration of a Treasury Single Account (TSA) created following the signing of a MOU between MOF and CB in Nov This indictor reflects a stronger policy measure for deepening treasury coordination, namely the TSA framework that prohibits the opening & operating of new bank accounts The wage bill indicator was introduced because wage bill management was added as an area of reform in DPO2, in response to increased wage bill pressures affecting the fiscal position. The corruption indicator was changed because the original one was too close to the actual prior action. The revised indicator is more closely aligned to the objective of the pillar. Pillar C--- Improving competition and management in key infrastructure sectors Improving performance in the electricity sector Reduction in total losses in the Increase in MA-MWE collection rates. electricity sector. (Baseline: 55 percent (2013); Target: 65 (Baseline: 45% (2013). percent (2016) Target: 40% (2015) The electricity indicator was changed to be more aligned with the expected outcome of the reforms under the electricity sector recovery plan, which had a strong focus on improving commercial management. So, the new indicator aimed at increasing the collection rates, linked to improved commercial management. 2 The remaining four indicators (indicators #1, #4, #5, #6, #8 and #9 in DPO2) did not change. The language of these indicators was amended to make them more specific or reflect the availability of the new information on the baseline and target values (e.g., indicator #1, #6 and #8 in DPO2). 6

17 1.4 Original Policy Areas Supported by the Program: 1. Strengthening economic management In support of strengthening economic management under the first pillar, the DPO series sought to support the implementation of the government s reform program, aligned with the strategic direction on the SCADD and other key strategies underpinning the government s reform program through: Improving treasury coordination between the Union and Island governments through a coordinating directorate for public accounts and treasury Enabling better cash management by introducing a Treasury Single Account (TSA). Strengthening the wage bill management by adopting harmonized computerized wage management system for the civil services of the Union and Island governments Improving budget comprehensiveness by integrating more information on revenues, recurrent spending, budget execution and the public investment program in the budget law; Strengthening debt management through a debt management law; and Strengthening statistical institutions and upgrading national accounts system to SNA Improving transparency in economic management Under the second pillar, the DPO series sought to advance the transparency and anti-corruption agenda by: Publishing the list of public officials who have filed an asset declaration; Giving more legal power to the anti-corruption commission to fight corruption by strengthening the anti-corruption law; and Systematizing the disclosure of fishing activities: licenses, access rights to national waters, as well as related revenues and its allocation. 3. Improving competition and management in key infrastructure sectors Under the third pillar, the DPO series sought to improve competition in the telecom sector and strengthen management in the electricity sector by: Enhancing competition in the telecommunication sector by launching a bidding process for a second full-service license; and Improving the performance of the electricity sectors by adopting a recovery and development plan for the national electricity company MAMWE, that includes commercial recovery and performance framework. 1.5 Revised Policy Areas Policy areas were not revised 7

18 1.6 Other significant changes The changes occurred are mentioned in section 1.3 under reasons for adjustments 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance The programmatic series consisted of two single-tranche Development Policy Operations disbursed upon effectiveness, in the total amount of US$6.8. Table 4 provides key dates for the DPO series. Table 4. Key Dates of the DPOs Operation Disbursed Amount Expected Release Date Actual Release Date Release DPO1 (P ) XDR 2.5 M 05/16/ /16/2014 Regular DPO2 (P150924) XDR 2.2 M 06/16/ /22/2015 Regular All the prior actions for both DPO1 and DPO2 were satisfactorily met before Board approval on April 29, 2014 and June 2, 2015 respectively (see Table 5). The last operation of the series closed on December 31, As the series evolved, the changes made to the policy matrix in DPO2 were limited to two adjustments. Out of the nine indicative triggers identified under DPO1, eight were converted into prior actions for DPO2, one trigger was dropped and a new prior action was added. The new prior action supported the strengthening of the wage bill management 3 in response to mounting wage bill pressures and accumulating salary arrears in The trigger that was dropped was related to the reforms for enhancing transparency in the management of fisheries resources. The authorities had made considerable progress towards improved transparency of fisheries revenue based on the prior action under DPO1; further reforms were not identified as a priority. 3 The prior actions sought to strengthen wage bill management through: (i) the integration of civil service wages in the computerized wage management system; and (ii) the integration of biometric national ID numbers in the computerized wage management system. 8

19 Table 5: DPO1 and DPO2 - Prior Actions and Implementation Status DPO1 - Prior Actions Pillar A: Strengthening economic management Consolidating treasury and cash management: A dedicated budget line for the Directorate of Public Accounts and Treasury is clearly identified in the 2014 Budget Law and the following key staff is appointed in accordance with the Recipient s decree no /PR 29 February 2012 relating to DGCPT, including its General Manager (Directeur Général), Coordinator (Coordonnateur), Managers of the three support services (Chefs des 3 Services d Appui), Treasurer of the Union (Trésorier Payeur Général) and Treasurer of each of the three Autonomous Islands (Trésoriers Payeurs de chacune des trois Îles Autonomes). The Recipient has included in its 2014 Budget Law four (4) previously off-budget accounts (comptes de régies) recorded in the accounts of the Treasury, and has issued a decision (arrêté) containing a complete list of accounts of the administrative entities of the Recipient (at the union and the Autonomous Islands levels) in the Recipient s central bank. Improving budget comprehensiveness: The Recipient has included in its 2014 Budget Law: (i) overall envelopes per ministry; (ii) the state of execution of the 2013 budget until June 30, 2013 presented in the same format as the draft budget; and (iii) data on government revenues (own resources and external resources) in the main headings of the budget nomenclature, including data for Fiscal Year 2013 Improving debt management: The Recipient has included in its 2014 Budget Law a detailed debt report analyzing the debt stock as of October 31, 2013 Pillar B: Improving transparency in economic management Enhancing transparency and efficiency on the fight against corruption: The Anti-Corruption Commission (Commission nationale de prévention et de lutte contre la corruption) has published, on its website and/or in a national newspaper, a list of public officials who have filed their asset declaration, in accordance with the Recipient s Decree no /PR dated September 15, Enhancing transparency in the management of fisheries resources The Recipient has signed and published a presidential decree to systematize disclosure of fishing access rights to national waters attributed and related revenues as well as their allocation. Strengthening statistical systems: The Recipient has signed (after Cabinet review) and published a presidential decree for the establishment of the National Council of Statistics. Pillar C: Improving competition and management in key infrastructure sectors Enhancing competition in the ICT sector: The Recipient s government has prepared and submitted to the National Assembly a draft information and communication technology sector law that sets out a framework for market liberalization. Improving performance in the electricity sector: To reduce total losses in the electricity sector, the Recipient s government has approved the terms of reference for a recovery and development plan establishing clear objectives for results to be attained by MA-MWE management and has initiated the procurement of the independent expert to prepare such plan by the publication of a call for expressions of interest Status Completed Completed Completed Completed Completed Completed Completed Completed Completed 9

20 DPO2 - Prior Actions Pillar A: Strengthening economic management Coordinating treasury and cash management: The Recipient s Directorate of Public Accounts and Treasury within its Ministry of Finance has become operational through: (i) the identification of a dedicated budget line in the Recipient s 2015 Budget Law; and (ii) the appointment of the remaining core staff as required by the Recipient s Decree no. No /PR dated February 29, 2012, through the Recipient s Arrete No /VP-MFEBICEP/CAB dated March 28, The Recipient s Ministry of Finance and Central Bank have signed a memorandum of understanding governing the functioning and administration of a Treasury Single Account at the Recipient s Central Bank, which memorandum of understanding, among other things, prohibits the opening and operating of new bank accounts unless prior authorization from the Recipient s vice-president responsible for finance has first been obtained. Strengthening wage bill management: The Recipient has strengthened wage bill management through: (i) the integration of civil service wages in the computerized wage management system; and (ii) the integration of biometric national ID numbers in the computerized wage management system. Improving budget comprehensiveness: The recipient has incorporated the public investment program in its 2015 budget law. Improving debt management: The Recipient has prepared and submitted to its National Assembly a debt management bill to strengthen the Recipient s debt management framework. Strengthening statistical systems: The Recipient, through its National Statistics Institute (L Institut National de la Statistique et des Etudes Economiques et Demographiques), has: (i) prepared a budgeted five year action plan that uses the SNA 1993 methodology for the production of national accounts; and (ii) has completed data collection for updating the Recipient s accounts. Pillar B: Improving transparency in economic management Supporting the fight against corruption: The Recipient has enacted Law No /AU amending the Anti-Corruption Law, dated December 26, 2013, in order to, inter alia, strengthen the judicial powers of the Anti-Corruption Commission (Commission nationale de prévention et de lutte contre la corruption). Pillar C: Improving competition and management in key infrastructure sectors Enhancing competition in the ICT sector: The Recipient has launched a competitive bidding process to award a second full-service license in the telecommunications sector. Improving performance in the electricity sector: The Recipient, through its Ministry in charge of Production, Environment, Energy, Industry and Craft, has adopted a recovery and development plan of the MA-MWE Company that includes a commercial recovery and performance framework. Status Completed Completed Completed Completed Completed Completed Completed Completed Completed 2.2 Major Factors Affecting Implementation: Adequacy of government s commitment The overall implementation of the DPO series was adequate with the Government committed to the reform program, though there were factors that negatively affected program implementation. 10

21 These negative factors were: (i) the impact of the elections on the fiscal position: an increase in spending occurred during this period; (ii) the new government changed policy focus to an expansionary fiscal policy instead of a focus on more efficacy in spending; (iii) the new government made extensive changes in management and technical personnel in the union and island governments including the closure of the anti-corruption commission, which is affecting capacity and continuity in the reform momentum; (iv) Comoros continue to present a very low capacity for implementation: (v) Comoros has a staff-monitored program (SMP) with the IMF but a disbursing program has not been possible partly because of the challenges listed above. Notwithstanding the mentioned negative factors, the contribution of the DPO series to the strengthening of economic management, improvement in transparency and improvement in competition and management in key infrastructure sectors was positive and satisfactory, except for two specific areas (debt management and the fight against corruption) where the intended outcome was partially achieved or not achieved. Specifically, in debt management, the debt management bill proposed to the National Assembly in October 2014 had not yet been adopted as of November However, annual debt reports on central government debt management have been regularly produced and annexed to the annual budget laws. On the fight against corruption, the number of cases investigated and completed by the anti-corruption commission and sent to the judiciary has not been achieved even though Comoros enacted in 2013 the Law No /AU amending the Anti-Corruption Law, to inter alia, strengthen the judicial powers of the Anti- Corruption Commission, enhance its independence and reinforce its authority. In September 2016, the new President decided to dissolve the Anti-Corruption Commission on grounds of lack of efficiency of the commission. Soundness of background analysis The DPO series was part of the Bank s strategic engagement with the Government s Program for which was based on the Poverty Reduction and Growth Strategy Paper (PRGSP), aimed at stabilizing the economy, promoting private sector growth and improving the delivery of social services. The government strategy under the PRSP was followed by the Sustainable Accelerated Growth and Development Strategy for (SCADD) that continued to support the same themes, focusing on the productive sectors of agriculture, fisheries, trade and infrastructure. The DPO series also: (i) supported the Government s Public Financial Management (PFM) Reform Strategy for the period which was organized around modernizing the regulatory framework; strengthening institutional capacity; rationalizing budget preparation; strengthening budget execution; and increasing transparency through improved internal and external controls; (ii) were aligned with the Government s policy for the energy sector that lays out plans for sector reform and recovery; (iii) supported the roadmap for the telecommunications sector reforms, including the adoption of market-based mechanisms and good governance; and (iv) are aligned with both strategic pillars of the Country Partnership Strategy for Comoros FY14-FY17, that is increasing public sector capacity, growth and employment. Added to the support given by the DPO to the country s program, a positive factor affecting implementation was the coordination with other WB technical assistance and investment projects, post HIPC reform momentum. 11

22 Relevance of the risks identified at appraisal The factors that negatively affected program implementation are linked to the overall risks identified under the DPO series, which although mitigated, affected the implementation of the reforms in some form or another. Political Risk The electoral cycle posed significant political risks to the DPO series and the implementation of Comoros broader reform program. The new administration that assumed office in May 2016, recognized that faster reforms and urgent action on the budget were needed and adopted a set of measures to improve revenue mobilization and reduce expenditures for the remainder of Measures included cancellation of contracts of recently hired government employees, but as mentioned earlier, the Government made extensive changes in management and technical personnel in the union and island governments, affecting the capacity and continuity in the reform. Opposition to reform risk Some of the reforms supported by the operations stimulated stakeholder opposition in the design and implementation stages. For instance, reform plans for the recovery of the electricity sector required stricter enforcement of payment of bills that resulted unpopular as they were not accompanied by an improvement in service provision. Macroeconomic risk Comoros macroeconomic and fiscal framework continues to be vulnerable to shocks that are characteristic of small island economies. Commodity price shocks could be readily translated into higher domestic prices given the extent to which consumption relies on imported goods, particularly food and fuel. Global or regional economic downturns could yield a shock to remittance flows and diminish employment opportunities abroad. Institutional capacity risk Weak institutional capacity affected the pace of implementation of some of the sector reforms supported by the DPO series. Capacity constraints are typical in the case of small, fragile states including the capacity to execute the budget. Institutions at the island level have particularly high capacity constraints. These factors affected some of the actions supported by the programmatic operations not allowing to be implemented as successfully as expected or in the agreed timeframe. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: Design The DPO series policy matrix presented the pillars, sub-components and results indicators clearly and these were well aligned with the PDO. Some indicators were revised during the preparation of the second operation, as described in Section 1.3, and the adjustments enhanced the M&E 12

23 framework of the series. The design of the indicators to monitor DPO progress was adequate. Overall, the indicators were well-selected, measurable, and clearly linked to the prior actions. The result indicators identified baseline and targets in line with the expected program outcomes. They were largely based on publicly-available data, however as the statistics system of the country is weak. Both the policy matrix and the corresponding results indicators were prepared jointly with the government counterparts, supporting the process of institutionalizing the monitoring and evaluation (M&E) arrangements in the public sector. Implementation The Bank conducted regular supervision in collaboration with the government to ensure continued implementation of the operations. The Bank s supervision had great impact in the implementation of DPO1 and DPO2 as the supervision was accompanied by technical assistance given to the Economic and Financial Reforms Unit (CREF), responsible for monitoring reforms, reporting progress and coordinating actions with all ministries and entities, including at the island level. The technical assistance was intended to strengthen the monitoring and evaluation capacity of the CREF who was expected to provide updates on progress of indicators, however this materialized only for a few indicators and not with the expected frequency given constraints in the coordination with the ministries and most of all with the Island entities. Utilization The DPO series promoted the use of the M&E arrangements. Regular monitoring and data collection undertaken as part of the DPO series facilitated discussions with the Government on the implementation of reforms and progress on the indicators. In particular, given that the statistics system of the country was weak, the DPO selected readily available indicators that the government already produced to facilitate monitoring and government decision making, Por instance, the systematic preparation and disclosure of information of fishing activities (agreements, licenses, revenues and its allocation) has contributed to improve the management of the fisheries resources and accountability. 2.4 Expected Next Phase/Follow-up Operation: Having set a foundation for economic governance reforms and a multi-sectoral approach to development policy reforms, the economic governance reform series was followed by a standalone DPO that seeks to further deepen the results. The follow-up DPO was designed as a standalone in response to a government request to maintain the momentum for reform between the end of the economic governance reform DPO series in mid-2015 and the expected inauguration of a new government by mid Although the follow-on DPO underwent a concept note review and has largely accomplished the implementation of its policy matrix, further progress has been delayed by the weakening of the macroeconomic framework after the 2016 elections. Dialogue is ongoing on the reforms areas supported by the economic governance DPO series through the follow-on DPO series, technical assistance and World Bank investment projects. The country strategy also provides for development operations to resume under a programmatic framework from 2018 onwards. 13

24 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Relevance of Objectives Rating: Substantial The program s development objectives to assist the Government of Comoros to strengthen economic management and improve its transparency; and improve competition and management in key infrastructure sectors, continue to be as relevant today as they were when the DPO series were designed. The key components of the DPO program were fully consistent with the Government s agenda and poverty reduction strategy (Accelerated Growth and Sustainable Development Strategy ); and with the pillars of the Country Partnership Strategy ( ). The relevance of the objectives is further highlighted by the fact that challenges in economic management remain, especially in fiscal policy and public finance management. There is need to further strengthen wage bill management, improve revenue collection, and improve transparency. In addition, Comoros continues to have difficulties in increasing access to electricity, and in advancing the development of its telecom sector a driver of dynamism in many developing countries. The 2016 IMF article IV report for Comoros, which includes a staff monitored program, has been supporting the government efforts to address many of the challenges that the economic governance DPO series was seeking to tackle. In effect, the new administration that took office in mid-year 2016, recognizing that accelerated reforms and urgent action on the budget were needed. adopted a set of measures to improve revenue mobilization and reduce expenditures for the remainder of 2016, including cancellation of contract of recently hired government employees, as well as measures to improve the supply of electricity. Relevance of Design Rating: High The design was appropriate and relevant. It supported the implementation of core reforms in Comoros CPS covering the period and in the Accelerated Growth and Sustainable Development Strategy (SCADD). The two main pillars of focus in the CPS, namely, increasing public sector capacity to deliver results by building the capacity to mobilize and effectively use public resources and strengthening the foundation for sustainable growth by investing resources to address constraints to growth and job creation, particularly energy and telecoms, are still at the center of the areas addressed by the DPO series. Similarly, the reforms supported by the Accelerated Growth and Sustainable Development Strategy (SCADD) aimed at addressing the productive sectors with a focus on agriculture, fisheries, trade and tourism, and searching to enable environment through improved infrastructure are also part of the reforms addressed in the DPO series. In retrospect, the design could have benefited from a more active inclusion of Island government authorities to promote faster implementation of reforms; and it would have also been good to address revenue management in the DPO. At the initial stage when DPO1 was being designed, Comoros still enjoyed revenue from the economic citizenship program. When this was suspended, the weakness of the revenue base became even more clear. The Bank started doing analytical work 14

25 in this area to build a base of knowledge for future DPOs. Therefore, the follow-on stand-alone DPO has a pillar on revenue. Relevance of Implementation Rating: High Implementation arrangements were and continue to be relevant. As indicated earlier, the Economic and Financial Reform Unit (CREF) was responsible for monitoring the reforms, reporting progress and coordinating actions with all ministries and entities, including at the Island level. Although the CREF has been instrumental in providing information, improvements could have been made to maintain the flow of information throughout the implementation period as reporting was sporadic and not always complete. 3.2 Achievement of Program Development Objectives Overall Rating: Moderately Satisfactory The overall Program Development Objective of strengthening economic management, improving transparency in economic management and improving competition and management in key infrastructure sectors, was overall achieved as evidenced by key results indicators. Although economic management in Comoros continued to be weak, substantial progress has been achieved in coordinating treasury and cash management; strengthening wage bill management; improving budget comprehensiveness; strengthening statistical system; enhancing transparency in the management of fisheries resources; enhancing competition in the ICT sector; and, improving performance in the electricity sector. Meanwhile, less satisfactory progress has been achieved in improving debt management and no progress was made in supporting the fight against corruption. The sustainability of these achievements is supported by operational plans, such as for the treasury and cash management; integrated management system, i.e., civil service wage management system; the actual adoption of new methodology for the national accounts; the development plan put in place for improving the performance of the electricity sector. The PDO of the DPO series was evaluated using ten results indicators. Out of ten indicators, eight were achieved (Indicators #1, #2, #3, #4, #6, #8, #9 and #10), while one indicator (#5) was partially achieved and one indicator (#7) was not met. The results indicators and their status are discussed in detail below. Objective 1: Strengthening economic management Rating: Moderately Satisfactory 15

26 Outcome Indicator 1: Cash management plans integrating the union and island treasuries are operational from a baseline where no integrated plans existed (2013) to a target where integrated plans have been developed and adopted within the budget laws (2016). Achieved At the time when the DPO series were designed Comoros had taken important legal and institutional steps towards improving public financial management. However, weak treasury management continued to be a persistent challenge for the effective management of public resources. The National Assembly had adopted the Public Financial Management Law in 2012 providing more clarity on the roles and responsibilities of the federal government and autonomous islands for the management of public finances. The authorities had also adopted a PFM reform plan towards strengthening the budget preparation process and improvements in revenue administration. However, significant challenges remained pertaining to all aspects of the PFM cycle. Key amongst these were Comoros fragmented four existing treasuries 4 operations that caused difficulties for the government to have a clear view of its cash position and to allocate scarce resources strategically as it executed the budget. Against the backdrop of not having cash management plans that integrated the Union and Island treasuries, the DPO series supported efforts to improve treasury management by effectively making operational the Directorate of Public Accounts and Treasury (DGCPT) that plays a key coordinating role in consolidating (union and island) cash plans and financial statements. To that end, a high priority was given to the preparation of a timely and accurate table of consolidated government financial operations (TOFE), as this table is crucial for budget preparation, execution, and monitoring, as well as for ensuring transparency in fiscal operations. Thus, the cash management plans are there, but only since In fact, the computerization of public finances is a recent reality through the Integrated Financial Management Information System (IFMIS) rollout with the accounting and budget software SIMBA 5 used since mid-2016 for implementation by the Union and Island Governments of automate budget execution, accounting, and reporting. Despite this progress, the full utilization of SIMBA is still hampered by the lack of a legal basis to enforce the use of the system for capturing all critical budget transactions. Furthermore, a fire that took place on March 4, 2017, in the Treasury building in Moroni interrupted the Union s access to the server for a few weeks, creating delays in the budget management and reporting. Notwithstanding these constraints, the Treasury has prepared (even manually) integrated cash balance statements that have been incorporated in the budget laws, contributing towards achieving the PDO of a stronger economic management. Outcome Indicator 2: The number of non-project central government bank accounts outside of the treasury single account framework reduced from a baseline of 64 accounts (2013) to a target of less than 10 accounts (2016). Achieved The DPO series supported the adoption of a memorandum of understanding between the Ministry of Finance and the Central Bank of Comoros governing the functioning and administration of a 4 The union treasury, and one for each of the three islands. 5 Installation and operationalization of the IFMIS IT solution (SIMBA) was completed in June

27 Treasury Single Account at the Central Bank in response to the tight cash position of government throughout the fiscal year, to the growing number of bank accounts operated by government spending agencies, and the delays in the depositing of funds collected by revenue agencies. The implementation of the TSA framework would also result in a consolidation of the government s banking operations and the rationalization of the number of bank accounts. Prior to the implementation of the TSA there were 64 government bank accounts 6. This number was expected to be reduced to less than 10 as of December, However, the number of central government bank accounts outside of the TSA framework has been reduced to zero accounts from the baseline value of 64 in The fact that the MOU signed between the Ministry of Finance and the Central Bank, among other things, prohibited the opening and operating of new bank accounts unless prior authorization from the vice-president responsible for finance had been obtained, played an important role towards the rationalization of accounts. Outcome Indicator 3. A computerized wage management system that integrates union and island civil service must be operational. Baseline: Separate systems operated for the union and islands (2013. Target: An integrated system that consolidates union and island civil service operational (2016). Achieved When the second operation of the DPO was designed Comoros civil service management modalities were fragmented, leading to a lack of coordination and weak control in the wage bill management. The union and islands operated separate civil service and wage management systems and they had autonomy over recruitment rights. These arrangements had resulted in fragmented management of the wage bill and provided incentives for hiring at the local level irrespective of the aggregate cost of salaries to the budget. That is why the operation supported the strengthening of wage bill management through the adoption of an integrated wage management system. With support from the operation the Government migrated from the fragmented to a centralized wage management system and a new computerized system allowed the integration of the union and the island civil services databases. The integrated personnel and payroll management system for the Union and Island Governments has been operational since January 2016 through the operationalization of the Government Human Resource Management Information System (GISE) 7. However, the gains in efficiency have not been fully obtained, yet. The deployment of the SIMBA/GISE interface has not been completely materialized and therefore deployment of GISE has not yet translated in total human resources data consolidation. As of March 2017, more than 95 percent of civil servants are paid through the automated payroll system. Outcome Indicator 4. Public budget that includes detailed information on investment and recurrent expenditures adopted. Baseline: No public budget with detailed information on both investment and recurrent expenditures (2013. Target: Public budget with detailed information on investment and recurrent expenditures (2016) Achieved 6 Arrêté #14-029/VP-MFEBICEI/CAB dated 11 March Government Human Resource Management Information System (Gestion Informatisée des Structures des Effectifs, GISE). 17

28 At the time when the DPO series was designed, Comoros had made progress in widening the scope of its budget documents. Previously, a key constraint to budget comprehensiveness and transparency had been the narrow classification framework. A new classification established in 2013 was implemented in The DPO sought to deepen budget transparency by expanding the coverage of the budget to include the Public Investment Program (PIP), which had been prepared by the National Commission for Planning, under an entirely parallel process to the budget cycle and hence had not been included in the budget law. The DPO supported the Planning Commission and the Budget Directorate to prepare the PIP together with the budget preparation calendar, and to present this information in the budget law. Thus, since 2015 the PIP has been appropriated by parliament and the budget, using the institutional classification framework presents a complete picture of domestically and externally funded investment program. The inclusion of the public investment plan has contributed to widening the scope of the budget. However, the low and decreasing execution ratio of the PIP is a major concern. The execution ratio of the PIP has been on a declining trajectory in recent years, decreasing from 47 percent in 2012 to around 40 percent in The low execution ratio not only signals weaknesses in budget credibility, but also causes the delay and even failure of ongoing projects. To increase the execution ratio, the authorities should aim to improve infrastructure, enhancing project management, and strengthening the communications with the donor countries. Outcome Indicator 5. Transparency and accountability of debt management has improved. Baseline: No regular debt reports produced and debt management framework incomplete (2013) Target: Annual debt reports produced and all new loans, guarantees and loan renegotiations conducted in line with debt management law (2016). Partially achieved The debt management reforms supported by this DPO series were expected to strengthen economic management through more transparent and strategic control of borrowing. Scrutiny of the debt position through regular reporting and an effective legal framework were considered critical for maintaining control of the country s liabilities. The reforms supported by this operation had started to yield results in this direction as access to regular debt information has been institutionalized in the budget. However, despite improvements in debt management reporting, the target remains short of full achievement. In fact, the annual reports on central government debt management are currently not produced by the Debt Directorate (DD). However, as indicated in the latest Debt Management Assessment 8, the Debt Directorate (DD) prepares each year a Debt Management Strategy (DMS) attached to the annual Budget law, which is published every year. The annual law also contains information on statistics of external debt service expenditures, expected new external debt disbursements, and monitoring of debt service payments arrears. 8 World Bank Debt Management Performance Assessment (DeMPA), August The DeMPA is a methodology for assessing public debt management performance through a comprehensive set of indicators spanning the full range of government debt management functions. 18

29 Furthermore, by law 9 the DD is responsible for producing the debt statistical bulletin. De facto, the latest annual debt statistical bulletin that DD produced was for fiscal year The bulletin was published in print and distributed to relevant officials, including Minister of Finance and Vicepresident for finance and economy. It included information on: evolution of debt stock by external creditors, types of creditors, currency composition, interest rate, annual debt service forecast and actual payments, as well as forecast of debt service for the upcoming three years period. Unfortunately, the bulletin is not available at the MOF website. In addition, DD produces quarterly information briefs, which include data on outstanding debt stock, debt service and accumulated external debt arrears, and are presented to management of the MOF and the BCC. Per the 2016 IMF Art IV the government has neither contracted nor guaranteed any other external loans apart from two concessional loans from the Export-Import Bank of India (US$33 million) for the construction of a heavy fuel oil electricity generation plan, and from China (US$32 million) to strengthen the telecommunications infrastructure. At the end of June 2016, total debt arrears were estimated at USD 4.5 million, so the IMF indicated the authorities that the incurrence of arrears on external debt service, even in small amounts, by a country, such as Comoros, that had recently received comprehensive debt relief would send a very bad signal to the international community. Hence, IMF explored with them possible steps to strengthen external debt management to avoid further arrears, including the establishment of a mechanism that would provide authority to the BCC to debit the government s account to facilitate debt service payments. Outcome Indicator 6: National Accounts prepared using the 1993 methodology and National Statistics Institute operational. Baseline: Draft national accounts for year 2007 using the 1993 methodology prepared (2013) Target: National accounts for year 2013 using the 1993 methodology adopted (2016). Achieved Comoros adopted a law to strengthen its institutional framework for statistics management in The law established the National Council of Statistics, changed the status of the National Directorate for Statistics from a directorate under the Planning Commission to an autonomous agency, the National Institute of Statistics and Economic Studies and Demographic (INSEED). Yet, despite these reforms and capacity building, outdated basic statistics and methodologies continued to hamper policy decision. This DPO supported the modernization of Comoros national accounts methodology as a key step towards improving basic statistics. In fact, until 2014 INSEED had been preparing national account statistics using the SNA 1968 methodology. The DPO operation supported INSEED in preparing updated national accounts based on SNA 1993, for the period , aiming to reinforce economic management by providing more accurate information for policy making. At end 2016, INSEED has completed the cleaning up of a GDP database for the using the SNA The National Accounts until 2015 have been validated and adopted by the Government only last September INSEED has also delivered the preliminary national accounts for 2016 and although the updated series based on the SNA 93 methodology have not yet been published, awaiting the green light from the Government, the full dataset was provided to the World Bank. 9 Decree No / PR of 29 February 2012, Art

30 Objective 2. Improving transparency in economic management Rating: Moderately Unsatisfactory Outcome Indicator 7. Number of cases completed by the anti-corruption commission and brought to court should increase from a baseline: 15 (2013) to a Target: 20 (2016). Not achieved Corruption is recognized as one of the main governance challenges facing Comoros. In 2014, Comoros ranked 142 out of 175 countries in the Transparency International corruption perceptions index, indicating the depth of the accountability and transparency deficit. In recognition of the need to tackle this situation, the government adopted in 2012 an anti-corruption strategy that included the issue of a decree that required asset and income declarations by high ranked public officials to increase transparency and avoid conflict of interests. The first DPO supported this effort by requiring the Anti-Corruption Commission to begin publishing a list of compliant and noncompliant public officials who have filed their asset declaration. But major challenges remained, particularly in terms of the limited capacity of the anti-corruption commission. Hence, the second DPO sought to enhance the country s capacity to combat corruption by supporting the strengthening of the legal and institutional framework. The government adopted a set of amendments to the anti-corruption legislation, empowering the Commission by giving its officers the legal powers to investigate perceived corruption cases, and to prepare and submit those cases to the judiciary, thus enhancing the independence of the Anti-Corruption Commission and reinforcing its authority. It was expected that these reforms would foster an environment of increased accountability. As of 2013 the anti-corruption commission had submitted 15 cases to the judiciary, and under the operation it was expected to increase the number of completed cases to 20 by However, three months after the new President took office (mid-year 2016) the Anti-Corruption Commission was dissolved in the grounds of lack of efficiency and efficacy. The government has not put in place an alternative credible system for pursuing the fight against corruption nor has it taken specific measures to combat corruption. Outcome Indicator 8. Information on access granted for fishing activities systematically disclosed, with revenue and its use documented. Baseline: Information not systematically available (2013). Target: Access to information on revenue and its use regularly documented and disclosed (2016) Achieved The first DPO supported transparency efforts in the fisheries sector, namely, the disclosure of information related to fishing agreements. In March 2014, the government signed and published a presidential decree 10 that mandated full systematic disclosure of fishing agreements, license information and budget revenues from this source. The disclosure of this information through government sites and local newspapers had contributed to improved transparency and accountability for the sector. Hence, the second DPO continued to support the systematic 10 Decree No of March

31 disclosure of information of fishing activities including revenue and its allocation as it would also contribute to improve the management of the fisheries resources where all sectors involved (stakeholders, fishing agreement signatories and neighboring coastal countries) would get the same information. The DGRH 11 support efforts to enhance transparency in the management of the fisheries resources through the systematic preparation of the information that is sent to the CREF 12 twice a year for its publication 13.This met the target of having the information available to the public through the CREF website and is updated at least once a year. Furthermore, the amount of revenues generated by access granted to fishing activities have been included in the budget law of 2015 and However, as of December 2016, and until October 2017, the information has not been published in newspapers due to the lack of financial resources. Objective 3. Improving competition and management in key infrastructure sectors Rating: Satisfactory Outcome Indicator 9. Increase in the number of Telecom operators with a service license and reduction in the monthly price per 1 GB of mobile data (3G) Baseline: 1 Telecom operator and KMF 10,000 price (2013. Target: At least 2 Telecom operators and KMF 7,500 price (2016) Achieved Since 2013, the Government of Comoros had been committed to the liberalization of the telecoms sector. To that end the Communications Law was approved by Parliament in March 2014 and was signed by the President on 25 December This law, among other issues removed Comores Telecom s exclusive privileges, effectively providing a level playing field for new competitive market entry. The reforms of the telecom sector have been supported by the Bank under the fourth phase of the Regional Communications Infrastructure Program (RCIP-4). The program aided with strengthening the legal framework for liberalization and with technical assistance to the process of licensing and selecting new service providers. The DPO series supported the effective opening of the telecoms sector through the granting of a full-service license to a new operator. Specifically, the expected result indicator was achieved as the competitive bidding process was launched in 2015 and Telma Comores (private company) was awarded a license in December 2015 and began operations in Although telecom was opened to the new operator the process was very complicated and prolonged. The price paid for the license was around US$16m and there were at least three other bidders. As expected Telma s price per 1GB per month is 5,000 KMF 14 while the Comores Telecom (national company) has a price of 5,250 KMF per month for 1GB. Telma s unit price is even lower if the purchase is higher (as low as 1,000 KMF per 1GB). 11 The Direction General de Resources Halieutiques (DGRH) 12 Information on fishing agreements updated until 2016 is available on the CREF website 13 Licenses information can be found in site: comores.org/pubs/protocoles/ 14 see 21

32 The introduction of competition to Comoros telecoms sector is expected to result in better connectivity for Comorian businesses and households as well as allow the access to more modern and affordable telephone and internet services, thus contributing towards achieving the PDO of an improving competition and management in a key infrastructure sector. Outcome Indicator 10. Increase in MA-MWE collection rates from a baseline of 55 percent (2013) to a target of 65 percent (2016) Achieved At the onset of the DPO series it was clear that inadequate commercial management, investment and maintenance were major drivers of poor electricity supply in Comoros, hence the electricity reforms under the DPO series complemented the Bank s Electricity Sector Recovery Project (ESRP) aimed at improving the commercial management and governance of the sector. Based on experience with such operations, it was fundamental to develop a performance and regulatory framework between the Government of Comoros and MA-MWE. Hence, the DPO series supported the preparation of a recovery and development plan for the MA-MWE in the first place and then the adoption of the plan by the Government of Comoros and MA-MWE. The framework would hold MA-MWE management and the senior managers accountable by setting reasonable and achievable targets for improving performance. The recovery process supported by this DPO series was expected to place the electricity sector on a path to improved performance that included an expected increase of the collection rates from a baseline of 55 percent in 2013 to 65 percent in 2016, a target that was fully achieved. In fact, the collection rate (as of end 2016) reached 79 percent and represents the total amount collected for electricity sales billed in 2016 (KMF) as a percentage of the total amount of electricity sales billed in 2016 (KMF). This rate concerns electricity sold to customers from both the low and medium voltage groups using traditional meters, which require a meter reader to manually record the information displayed on the meter and transmit it to the sales department for registration in the commercial management information system. 15 Parallel efforts are being made to improve the utility s recovery commercial performance through the deployment of a state-of-the-art management information system, prepaid meters as well as targeted communication campaigns and stakeholder engagement against electricity theft and meter fraud. MAMWE is improving slowly but, as mentioned earlier in this report, the new government is aware that unreliable and 15 The data used to estimate the collection rate have been extracted from the recuperations database of the sales department of the Water and Power Utility (MA-MWE. This database has been developed under the leadership of international senior managers hired as part of the ESRP project during the second half of The database is regularly up-dated and records the following information (from January 1, 2015 to October 2017): (i) monthly sales in kwh (based on billing date); (ii) monthly sales in KMF (based on billing date); (iii) receipts in KMF (knowing that each receipt is now associated with an invoice); and (iv) pre-paid meters sales/receipts (pre-paid meters is excluded from the indicator). The collection results are always reported to the billing period: Examples: 1) If a July 2015 bill is canceled in January 2017, the July 2015 billing rate is impacted (downward); 2) If a January 2017 bill is paid in August 2017, it is the January 2017 collection rate that is impacted (upward) 22

33 low quality supply of electricity represents a significant obstacle to economic growth, while the high cost of diesel-based generation puts a considerable strain on public finances by making the sector dependent on continuous provision of fuel subsidies. The government is therefore working with the World Bank and African Development Bank on a longer-term strategy to strengthen the technical, management, and commercial capacity of the entity in compliance with the PDO of improving management in this key infrastructure sector. 3.3 Justification of Overall Outcome Rating Rating: Moderately Satisfactory The rating of the achievement of development outcomes of DPO series is moderately satisfactory. The overall rating of moderately satisfactory reflects, conservatively, the moderately satisfactory rating of pillar 1, the moderately unsatisfactory rating of pillar 2 and the satisfactory rating of pillar 3. The overall assessment is on balance positive, both because the reform program was significant and relevant, eight of ten indicators were achieved while one was partially achieved. However, one of the supported measures has been reversed (the fight against corruption). The main reason why it is rated moderately satisfactory is because the elimination, in September 2016, of the Anti- Corruption Commission represents a risk to the sustainability of the program development objective promoting transparency given that, the fight against corruption and transparency, is a cornerstone of the DPO series. 3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The three pillars of the DPO series are expected to have a positive impact on poverty reduction and social development in the medium and long term. In effect, improving public financial management and transparency indirectly contributes to improved poverty and social outcomes as (i) an effectively executed budget allows the allocation of resources to development priorities; (ii) effective treasury and wage bill management support the system s ability to maximize the use of scarce resources; (iii) an improved governance framework, driven by transparency measures, supports openness and helps limit the leakage of funds. The third pillar of the DPO directed to improving competition and management of the ICT and electricity sectors is also expected to have a positive social impact by increasing the reliability of access to electricity services available in Comoros. This will particularly be the case for households, businesses, health facilities and schools in rural areas that still have low levels of supply and cannot afford to run individual generators. Finally, the reforms in the telecoms sector has already improved access to ICT services and to lower communication costs which are of social benefit in the Comoros context given the important role that connections with family members and remittances from abroad play in the economic welfare of households. Notwithstanding progress made under the DPO series regarding integration between the Union government and the islands, coordination remains to be improved. Meanwhile, problems with revenue collection and service delivery persist resulting in limited improvements in living 23

34 standards and poverty rates. Per the latest Poverty Assessment prepared by the World Bank 16 using the new household survey data from 2014, around four out of ten Comorians live below the national poverty line and nearly one fourth of the population is in a state of extreme poverty. In 2014, 42.4 percent of the population lived below the basic needs poverty line of KMF 25,341 per capita per month and about 23.5 percent of the population is in extreme poverty. However, using the international poverty line of US$1.9 per capita per day only two out of ten Comorians would be classified as poor, a rate that puts Comoros ahead of other Low Income (LIC) and Sub-Saharan African (SSA) countries by up to 30 percentage points. ES.3). However, compared to some of the richer Island Nations in the region, such as Mauritius or Seychelles, Comoros poverty rate is significantly higher. (b) Institutional Change/Strengthening The Bank s assistance to Comoros under the DPO series supported several reforms aimed at institutional strengthening across the pillars of the operation. In effect, the DPO reforms in debt management were also linked to the institutional strengthening of the debt management office that the Bank supported through targeted capacity building, including a program of technical trainings of a Comorian debt manager. The capacity of the Public Debt Directorate has been strengthened, including their role in managing regular debt reporting and supporting timely debt service payments. The 2016 Debt Management Performance Assessment (DeMPA) 17 noted that the Debt Directorate has made remarkable improvements since the last evaluation conducted in Furthermore, through the telecom and energy investment lending the DPO could help accelerate the reform agenda and institutional strengthening of the Electricity and the telecom institutions. Complementary advisory activities under the umbrella of DPO series have had a direct impact on institutional change. Most probably, one of the most significant underpinnings included the statistical strengthening reforms that are expected to reinforce economic management by providing more accurate information for policy making. Improved national accounts will provide critical information on the actual size and structure of the economy, and guide policy makers in designing economic reforms. The institutional strengthening of INSEED allowed the institution to regularly produce national accounts data based on an updated methodology (SNA 93) from 2015 onwards. Furthermore, the DPO supported institutional reform mainly through public financial management, making operational the Directorate of Public Accounts and Treasury (DGCPT) that plays a key coordinating role in consolidating (union and island) cash plans and strengthening the functioning of the Single Treasury Account. Finally, but not less important is the support given to wage bill management through the operationalization of an integrated system that consolidated union and island civil service. (c) Other Unintended Outcomes and Impacts No unintended negative effects have been identified by the team or the Government. 16 World Bank Comoros Poverty Assessment -- P April World Bank, Union of the Comoros: Debt Management Performance Assessment, August

35 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops There were no beneficiary survey and/or stakeholder workshop. 4. Assessment of Risk to Development Outcome Overall Rating: Substantial The risk of either policy reversals or not maintaining the outcomes in the areas supported by the DPO series was substantial. It is mostly associated with the country s potential political difficulties to implement reforms, the vulnerability to external shocks, high risk of debt distress and weak institutional capacity that could affect the pace of implementation of some of the sector reforms supported by the operation. In particular, the risks identified in the DPO relating to electoral cycle were well identified and have had an important effect on the results of the program in the areas of debt management (adoption of the debt management bill) and the anti-corruption reforms (disbanding of the anticorruption commission). These risks, which were well acknowledged, have also affected the PDO to the extent that the changes brought about by the new government in economic management, including looser fiscal policy, have weakened economic management after the DPO series concluded. Historically, difficult inter-islands relations over the use of public resources, within the context of weak governance, structural weaknesses in public financial management and high politicization, have been at the root of the country's fragility. This has been reflected in the impact of some of the reforms and the pace at which others were implemented. Currently, although the DPO series addressed reforms that were endorsed by the Union and Island governments, providing technical assistance to facilitate the consensus, it has not completely created sufficient trust among the parties despite improving transparency in the use of public resources. This is reflected in the fact that the TSA does not include the island own revenues, which fortunately do not amount to more than 5 or 6 percent of total revenues, due to lack of confidence that the Union government would not revert to the islands their own revenues. Furthermore, the country is highly vulnerable to external shocks (natural disasters, increases in international fuel and food prices, and slowdown in remittances), that could affect continuing implementing the reforms. As mentioned earlier in this ICR, Comoros macroeconomic and fiscal framework continues to be vulnerable to shocks that are characteristic of small island economies. Commodity price shocks could be translated into higher domestic prices given the extent to which consumption relies on imported goods, particularly food and fuel, and global or regional economic downturns could yield a shock to remittance flows and diminish employment opportunities abroad. Hence, government finances remain fragile, limiting the capacity of the authorities to respond to external shocks and maintain the country on a steady macroeconomic path. 5. Assessment of Bank and Borrower Performance 25

36 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Ratings: Satisfactory Bank performance during the preparation of the operation was satisfactory. The design of the operation was appropriate, timely and responded to the country s priorities. It built on lessons learned from previous DPOs in Comoros and the Bank s experience with DPOs in low income countries. The operations identification and appraisal drew from existing analytical work in areas such as treasury and cash management, budget comprehensiveness, or debt management. In the cash management area, the DPO benefited from the PEFA 18 report that highlighted the key weaknesses relating to treasury operations, including the fragmentation in treasury and cash management. In budget comprehensiveness, the PEFA report as well as the analysis of the Comoros public investment program 19 made by the WB identified several gaps relating to budget comprehensiveness and supported the recommendation to integrate all investment projects in the budget. With regards to improving debt management the DPO benefited from the DeMPA 20 that highlighted the need to strengthen the legal and strategic framework underpinning debt management, and this recommendation was taken-up in the operation s plan. Furthermore, the DPO series was underpinned by technical assistance and a frank policy dialogue. The work was well-coordinated within the Bank s multi-sectoral team. The results framework established a clear mapping from PDO to prior actions to results indicators. During the preparation of DPO2, the prior actions supported a broader reform scope relative to the triggers originally envisioned in DPO1. Moreover, in preparing for the DPO series, the Bank consulted and coordinated with major development partners and the sector reforms supported by the operation were discussed with stakeholders as part of the preparation of sector operations (i.e. ICT and electricity). The DPO was designed to leverage the TA and investment projects in the portfolio. This helped ensure (i) there was sufficient dialogue and consultations at the sectoral level, (ii) that there was analytical work done, and (iii) that there was support on the ground for monitoring and implementation. In areas, such as PFM, the World Bank Economic Governance Technical Assistance Grant supported the implementation of PFM reforms, with a focus on budget execution and wage bill management. The policy reforms on anti-corruption build on a dialogue stemming from a Governance and Anti-Corruption Technical Assistance, which supported the government in redefining the governance and anti-corruption action plan. However, the change of government, which involved a change in political party, widespread institutional and personnel changes, were key factors behind the closing of the anti-corruption commission. With regards to key infrastructure sectors, the reforms towards the liberalization of the telecoms sector were supported by the World Bank under the fourth phase of the Regional Communications Infrastructure Program (RCIP-4), that provided technical assistance to the process of licensing and selecting new service 18 Comoros Public Expenditure and Financial Accountability (PEFA) Report (2013) 19 Policy Note on the Comoros Public Investment Program (2013) 20 Debt Management Performance Assessment (DeMPA) (2011) 26

37 providers. Finally, the electricity component reflects the ongoing reform supported by the Electricity Sector Recovery Project Grant which helped the authorities in improving the commercial performance of MA-MWE. (b) Quality of Supervision Ratings: Satisfactory Bank performance in the supervision of the operation was satisfactory. The Bank conducted three supervision missions of the DPOs (May-June 2014; October-November 2014; and March 2015), The second supervision mission was combined with the identification mission of the second programmatic DPO. This helped assess the status of the outcome indicators and triggered the design of the new operation. The tentative timeline for the second economic reform DPO was like the first operation, about a year, with negotiations and board approval envisaged in March-April and disbursement in May Follow-up and implementation support for the program started in May 2014, one month after the approval of the first operation and continued to be on-going throughout the period of the operation. Additional guidance was provided by the World Bank team in key areas, for example closer Bank supervision in debt management including a DeMPA assessment for Comoros in In addition to this, numerous supervision missions and additional support was provided through the World Bank Governance, Telecoms and Electricity projects that supported areas linked to the reform program. (c) Justification of Rating for Overall Bank Performance Ratings: Satisfactory Given that the Bank performance for quality at entry and the quality of supervision is rated satisfactory, the overall Bank Performance is rated satisfactory. The unstable nature of Comoros s political situation and the fact that a new Government would come into power by mid-2016, six months before the closing of the second DPO posed challenges to get political support for the reform agenda. However, the fact that the series was anchored to Government s strategic reforms helped to ensure the positive results of the series. The Bank maintained high quality standards in the design and implementation of both DPOs, providing support through its analytical work and technical assistance 5.2 Borrower Performance (a) Government Performance Ratings: Moderately Satisfactory For this ICR, Government performance and implementing agency performance are considered the same. Therefore, the above rating should be viewed as an overall rating for the Borrower. The Government overall performance for this operation is rated moderately satisfactory. The Government showed commitment to reform and took full ownership of the program. The CREF played a consistent and effective role in coordinating dialogue and implementation, but when it came to monitoring and sustaining results its role was less effective as it monitored only 27

38 sporadically. In its role of harmonization, CREF coordinated with other Government ministries and agencies involved in the implementation of the DPO series, including BCC, SG-Finances, DGCPT, INSEED, DGRH, and MA-MWE. Together with CREF, these institutions collected the necessary data to assess implementation progress and reported to the Bank. During the collection of data, the documentation received for preparation of this ICR was mostly timely. The government made progress in complying with the integration of the cash management accounts, the reduction of central government bank accounts, strengthening the management of the wage bill and the statistical system and improving competition and management of the key sectors of telecommunications and electricity. Section 3.2 above explains in detail the actual achievements of the expected outcomes. It is important to note that despite the shortcomings in institutional capacity, the Government still managed to fully or partially achieve all indicators but one. The government was not successful in supporting the fight against corruption through the strengthening of the judicial powers of the Anti-Corruption Commission as established in indicator No.7. On the contrary, the government eliminated the commission and has not put in place a credible system for pursuing the fight against corruption. As indicated below, one of the lessons learned is that this indicator might have been too ambitious and the fact that it was revised in DPO2 could well indicate a shortcoming on the side of the Bank (b) Implementing Agency or Agencies Performance Not Applicable (c) Justification of Rating for Overall Borrower Performance Given that the Government performance is rated moderately satisfactory, and as the Government and Implementing Agency are indistinguishable, the overall Borrower Performance is rated moderately satisfactory 6. Lessons Learned Experience with the Economic Governance Reform DPOs validates lessons from previous operations but also generated new ones. 1. A key lesson learnt is that DPOs can help secure key reforms and complement traditional investment lending even in a fragile setting. Comoros remains a difficult implementation environment for reforms due to the limited institutional capacity, requiring simple project design focused on policy reforms in few relevant areas that are broadly supported by donors and with adequate technical assistance to support implementation. The narrow focus of the DPO was a positive design feature. By joining forces with other development partners in a systematic manner, particularly on PFM, wage management, statistics, energy and telecom sectors, the Government ensured adequate program implementation. In Comoros, small steady steps, and regular consultation, proved to be more feasible than the big bang approach. 28

39 2. Leveraging the existing Bank project and technical assistance activities is key to achieving results in low capacity fragile states. The implementation of the reforms was facilitated by targeted technical assistance provided by the Bank, i.e., through the Electricity Sector Recovery Project (ESRP) aimed at improving the commercial management and governance of the sector, in coordination with other donors (The AfDB provided support through a capacity building and technical assistance project and direct budget support); or the IMF ongoing program of technical assistance designed to improve the reliability of the national accounts and price statistics. 3. In settings, such as in Comoros, where power is shared amongst four governments, it is critical to seek consensus as much as possible prior to the implementation of reforms. This is even more crucial when it touches upon political economy issues such as the power sharing between the Island governments and the Union, or coordination between the Union and Island entities. Better understanding can also foster trust among the parties and help move the agenda forward in a more efficient manner. Ensuring that the Islands participate in relevant consultations so that the reforms that the government of the Union want to pursue are understood among all stakeholders is key. 4. Given the complicated, fragile and low capacity setting, a closer Bank supervision is needed to follow up with the Government regarding the steps towards achieving the PDO. For example, under this DPO, the government had information for the preparation and publishing of debt reports, but apparently, it was not totally clear to them that these meant self-standing comprehensive reports and not only including the information in the budget laws. 5. Strong analytical underpinnings and technical assistance can ensure an adequate program implementation. The DPO series was grounded in strong analytical groundwork, which, in turn, provided the rationale for the selection of policy reform areas. However, in formulating the results framework, a more satisfactory result could have perhaps been achieved by focusing on the objective of what needed to be achieved (fight against corruption) rather than a specific action for achieving it (e.g., an increase in the number of cases completed by the anti-corruption commission and transfer to the judiciary versus a requirement to strengthen the judiciary. This could have given the incoming administration some flexibility. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies Not yet available (b) Co-financiers Not Applicable (c) Other partners and stakeholders 29

40 Not Applicable 30

41 Prior Actions supported by DPO Coordinating treasury and cash management A dedicated budget line for the Directorate of Public Accounts and Treasury is clearly identified in the 2014 Budget and the following key staff is appointed in accordance with the Recipient s decree no /PR 29 February 2012 relating to DGCPT, including its General Manager), Coordinator, Managers of the three support services), Treasurer of the Union and Treasurer of each of the three Autonomous Islands The Recipient has included in its 2014 Budget Law four (4) previously off-budget accounts (comptes de régies) recorded in the accounts of the Treasury, and has issued a decision (arrêté) containing a complete list of accounts of the administrative entities of the Recipient (at the union and the Autonomous Islands levels) in the Recipient s central bank. 1.2 Strengthening wage bill management Annex 1: Economic Governance Reform Operations- Policy and Results Matrix Prior Actions Expected Results Indicators DPO2 supported by DPO2 (end 2016) Pillar A: Strengthening economic management The Recipient s Directorate of Public Accounts and Treasury within its Ministry of Finance has become operational through: (i) the identification of a dedicated budget line in the Recipient s 2015 Budget Law; and (ii) the appointment of the remaining core staff as required by the Recipient s Decree No /PR dated February 29, 2012, through the Recipient s Arrêté No /VP-MFEBICEP/CAB dated March 28, Cash management plans integrating the union and island treasuries are operational. Baseline: No integrated plans (2013) Target: Integrated plans developed and adopted with the budget laws (2016) The Recipient s Ministry of Finance and the Central 2.Number of non-project central Bank have signed a memorandum of government bank accounts outside of understanding governing the functioning and the single account framework reduced administration of a Treasury Single Account at the Recipient s Central Bank, which memorandum of Baseline:64 (2013) understanding, among other things, prohibits the opening and operating of new bank accounts Target: Less than 10 (2016) unless prior authorization from the Recipient s vice-president responsible for finance has first been obtained. The Recipient has strengthened wage bill management through: (i) the integration of civil service wages in the computerized wage management system; and (ii) the integration of biometric national ID numbers in the computerized wage management system. 3.A computerized wage management system that integrates union and island civil service operational. Baseline: Separate systems operated for the union and islands (2013) Target: An integrated system that consolidates union and island civil service operational (2016) Achieved Actual Outcome (as of end 2016) Cash management plans integrating the Union and Island Treasuries are operational and have been incorporated to the budget law starting in Achieved The number of central government bank accounts outside of the TSA framework has been reduced to zero accounts Achieved The integrated civil service wage management system for the Union and Island Governments is in place since January 2016 through the operationalization of the Government Human Resource Management Information System (GISE). More than 95 percent of civil servants are paid through the system.

42 Prior Actions supported by DPO Improving budget comprehensiveness The Recipient has included in its 2014 Budget Law: (i) overall envelopes per ministry; (ii) the state of execution of the 2013 budget until June 30, 2013 presented in the same format as the draft budget; and (iii) data on government revenues (own resources and external resources) in the main headings of the budget nomenclature, including data for Fiscal Year Improving debt management Prior Actions supported by DPO2 The recipient has integrated the public investment program in its 2015 budget law. Expected Results Indicators DPO2 (end 2016) 4.Public budget that includes detailed information on investment and recurrent expenditures adopted. Baseline: No public budget with detailed information on both investment and recurrent expenditures (2013) Target: Public budget with detailed information on investment and recurrent expenditures (2016) Achieved Actual Outcome (as of end 2016) The Public Investment Plan (PIP) is included in the budget law, starting with the 2015 budget law. The Recipient has included in its 2014 Budget Law a detailed debt report analyzing the debt stock as of October 31, 2013, The Recipient has prepared and submitted to its National Assembly a debt management bill to strengthen the Recipient s debt management framework. 5.Transparency and accountability of debt management has improved. Baseline: No regular debt reports produced and debt management framework incomplete (2013) Target: Annual debt reports produced and all new loans, guarantees and loan renegotiations conducted in line with debt management law (2016) Partially achieved Since the debt management bill was prepared and submitted to the National Assembly in 2014, no selfstanding debt reports have been published but debt information is produced each year and included in the budget law. 1.5 Strengthening statistical system The Recipient has signed (after Cabinet review) and published a presidential decree for the establishment of the National Council of Statistics. The Recipient, through its National Statistics Institute (L Institut National de la Statistique et des Etudes Economiques et Demographiques), has: (i) prepared a budgeted five-year action plan that uses the SNA 1993 methodology for the production of national accounts; and (ii) has completed data collection for updating accounts National Accounts prepared using the 1993 methodology and National Statistics Institute operational. Baseline: Draft national accounts for year 2007 using the 1993 methodology prepared (2013) Target: National accounts for year 2013 using the 1993 methodology adopted (2016) Achieved The National Statistics Institute (INSEED) is operational and has completed the GDP database for using the SNA 1993.

43 Prior Actions supported by DPO 1 Prior Actions Expected Results Indicators DPO2 supported by DPO2 (end 2016) Pillar B--- Improving transparency in economic management Actual Outcome (as of end 2016) 2.1 Supporting the fight against corruption The Anti-Corruption Commission (Commission nationale de prévention et de lutte contre la corruption) has published, on its website and/or in a national newspaper, a list of public officials who have filed their asset declaration, in accordance with the Recipient s Decree no /PR dated September 15, Enhancing transparency in the management of fisheries resources The Recipient has signed and published a presidential decree to systematize disclosure of fishing access rights to national waters attributed and related revenues as well as their allocation. The Recipient has enacted Law No /AU amending the Anti-Corruption Law, dated December 26, 2013 in order to inter alia, strengthen the judicial powers of the Anti-Corruption Commission (Commission nationale de prévention et de lutte contre la corruption). 7.Number of cases completed by the anti-corruption commission and brought to court. Baseline:15 (2013) Target: 20 (2016) 8.Information on access granted for fishing activities systematically disclosed, with revenue and its use documented. Baseline: Information not systematically available (2013) Target: Access to information on revenue and its use regularly documented and disclosed (2016) Pillar C--- Improving competition and management in key infrastructure sectors Not Achieved The anti-corruption commission has been dissolved by the President in of the Union of Comoros in September 2016 Achieved Information on fishing activities is systematically prepared and disclosed through the Economic and Financial Reform Unit (CREF) Furthermore, the amount of revenues generated by access granted to fishing activities have been included in the budget law of 2015 and Enhancing competition in the ICT sector The Recipient s government has prepared and submitted to the National Assembly a draft information and communication technology sector law that sets out a framework for market liberalization. The Recipient has launched a competitive bidding process for a second full-service license in the telecommunications sector. 9.Increase in the number of Telecom operators with a service license and reduction in the monthly price per 1 GB of mobile data (3G) Baseline: 1 Telecom operator and KMF 10,000 price (2013) Target: At least 2 Telecom operators and KMF 7,500 price (2016) Achieved There are two telecom operators: Comores Telecom (national) and Telma (private).telma s price per 1GB per month is 5000 KMF while the Comores Telecom price is 5250 KMF per month for 1GB 33

44 Prior Actions supported by DPO Improving performance in the electricity sector Prior Actions supported by DPO2 Expected Results Indicators DPO2 (end 2016) Actual Outcome (as of end 2016) To reduce total losses in the electricity sector, the Recipient s government has approved the terms of reference for a recovery and development plan establishing clear objectives for results to be attained by MA-MWE management and has initiated the procurement of the independent expert to prepare such plan by the publication of a call for expressions of interest. The Recipient, through its Ministry in charge of Production, Environment, Energy, Industry and Craft, has adopted a recovery and development plan of the MA-MWE Company that includes a commercial recovery and performance framework. 10.Increase in MA-MWE collection rates Baseline: 55 percent (2013) Target: 65 percent (2016) Achieved The collection rate (as of end 2016) reached 79 percent and represents the total amount collected for electricity sales billed in

45 Annex 2 Bank Lending and Implementation Support/Supervision Processes (a) Task Team members P KM First Economic Governance Reform Operation Names Title Unit 35 Responsibility/ Speciality Rafael Muños Moreno Program Leader LCC Task Team Leader Noro Aina Andriamihaja Senior Financial Sector Specialist GFM01 Anne-Lucie Lefebvre Senior Public Sector Specialist GG017 Hajarivony Andriamarofara Consultant GGO13 Xavier Vincent Lead Fisheries Specialist GENDR Dirk Bronselaer Senior Procurement Specialist AFTPE Tim Kelly Lead ICT Policy Specialist GTI11 Mustafa Zakir Hussain Operations Adviser OPSIL Helene Bertaud Lead Counsel LEGES Faniry Razafimanantsoa Economist GMF13 Hugues Agossou Senior Financial Management Specialist GGO31 Joseph Byamugisha Financial Management Specialista AFTFM Ralph Van Doorn Senior Counrty Economist GMF06 Stephan Eggli Operations Officer OPSOR Shahrzad Mobasher Fard Consultant GMF05 Said Ali Antoissi Operations Officer AFMKM Jean Gaspard Ayi Ntoutomane Consultant AFTP1 P KM Second Economic Governance Reform Operation Names Title Unit Responsibility/ Specialty Shireen Mahdi Senior Economist GMF13 Task Team Leader Wael Mansour Senior Economist GMF08 Said Ali Antoissi Operations Officer AFMKM Anne-Lucie Lefebvre Senior Public Sector Specialist GG017 Hajarivony Andriamarofara Consultant GGO13 Xavier Vincent Lead Fisheries Specialist GENDR Tim Kelly Lead ICT Policy Specialist GTI11 Mustafa Zakir Hussain Operations Adviser OPSIL Ewa Katarzyna Klimowicz Consultant GEE07 Siobhan McInerney-Lankford Senior Counsel LEGAM Ruxandra Costache Senior Counsel LEGLE Aissatou Diallo Senior Finance Officer WFALN John Y.Ngwafon Senior Economist/ Statistician DECDG Hugues Agossou Senior Financial Management Specialist GGO31 Jean Gaspard Ayi Ntoutomane Consultant AFTP1 Madeleine Chung-Kong Senior Program Assistant GMFDR Rondro Malanto Rajaobelison Program Assistant AFMMG

46 (b) Staff Time and Cost P KM First Economic Governance Reform Operation Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No. of staff weeks travel and consultant costs) Lending , Supervision 0 1, P KM Second Economic Governance Reform Operation Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No. of staff weeks travel and consultant costs) Lending , Supervision

47 Annex 3. Borrower's Comments 37

48 Annex 4. Comments of Cofinanciers and Other Partners/Stakeholders N/A 38

49 Annex 5. List of Supporting Documents World Bank, Program Document for Economic Governance Reform Operation, Report No KM of March 27, 2014 World Bank, Program Document for the Second Economic Governance Reform Grant, Report No KM of May 5, 2015 World Bank Policy Note on the Comoros Public Investment Program (2013) World Bank Electricity Sector Recovery Project, Report RES25200 of September 2013 World Bank Comoros Public Expenditure and Financial Accountability (PEFA) Report (2013) World Bank, Comoros Policy Notes Accelerating Economic Development in the Union of Comoros, Report No: KM of February World Bank Country Partnership Strategy for Comoros Fy , Report No KM of April 16, 2014 World Bank Debt Management Performance Assessment (DeMPA), August World Bank Comoros Public Expenditure and Financial Accountability (PEFA) Report (2016) World Bank ICR Economic Governance Technical Assistance Project, Report No. ICR of June 20, 2017 World Bank Comoros Poverty Assessment of April 2017 International Monetary Fund, 2016 Art IV Consultation, IMF Country Report No. 16/393, December 2016 World Bank Aide-Memoirs and Back-to-Office Reports from June 2014 to March

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