Document of The World Bank FOR OFFICIAL USE ONLY Report No. P 7541 PVC REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED ECONOMIC RECOVERY CREDIT OF SDR 160.2 MILLION (US$200 MILLION EQUIVALENT) TO THE REPUBLIC OF COTE D'IVOIRE May 14, 2002 AFTP4 and AFTR2 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (as of April 2002) Currency Unit = CFA franc (CFAF) US$1.00 = CFAF 717.52 FISCAL YEAR January 1-December 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank ARCC Autorite de Regulation du Secteur Cafe/Cacao BCEAO Banque Centrale des Etats d 'Afrique de l 'Ouest BCC Bourse du Cafe et du Cacao CAA Caisse Autonome d'Amortissement CAS Country Assistance Strategy CFAF CFA Franc CIDT Compagnie Ivoirienne de Developpement des Textiles CIF Cost Insurance Freight COGES Community Management Committees Coistab Caisse de Stabilisation ESAF Enhanced Structural Adjustment Facility EU European Union FDPCC Fonds de Developpement des Activites des Producteurs de Cafe et de Cacao FRC Fonds de Regulation et de Contr6le GDP Gross Domestic Product HIPC Heavily Indebted Poor Countries IDA International Development Agency IMF International Monetary Fund I-PRSP Interim Poverty Reduction Strategy Paper LDP Letter of Development Policy MLS Minist&e charge de la Lutte contre le SIDA MOH Ministry of Public Health MTEF Medium-Term Expenditure Framework NGO Non-Governmental Organization PER Public Expenditure Review PIMS Poverty Impact Monitoring System PNDEF Plan National de Developpement du Secteur Education/Formation PNDS Plan National de Diveloppement Sanitaire PNLP Plan National de Lutte contre la Pauvrete PRGF Poverty Reduction Growth Facility RESEN Rapport d'Etat sur le systeme EducatifNational SIGFIP Financial Management System SIR National Refinery Company SMP Staff Monitored Program STD Sexually Transmitted Disease Vice President: Callisto Madavo Country Director: Mamadou Dia Sector Managers: Emmanuel Akpa Joseph Baah-Dwomoh FOR OFFICIAL USE ONLY REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED ECONOMIC RECOVERY CREDIT TO THE REPUBLIC OF COTE D'IVOIRE TABLE OF CONTENTS Page No. CREDIT AND PROGRAM SUMMARY 1. INTRODUCTION .......................................................................I II. BACKGROUND ......................................................................1I Ill. RECENT ECONOMIC POLICIES AND PERFORMANCE ....................................................................... 2 IV. POVERTY STATUS AND THE THRUST OF THE RECOVERY PROGRAM .....................................................3 V. MEDIUM-TERM PROSPECTS AND FINANCING REQUIREMENTS ................................................................S A. M EDIU M-TERM O UTLOOF; .................................................................................. 5 B. FINANCING REQUIREMENTS ...................................................................................6 VI. GOVERNMENT'S POVERTY REDUCTION STRATEGY ....................................................................... 7 VIl. IDA'S INTERIM ASSISTANCE STRATEGY. 7 VIII. THE ECONOMIC RECOVERY PROGRAM, 2002-03 ......................................................................8 A. CREATING THE CONDITIONS FOR RENEWED BROAD-BASED GROWTH ...........................................................................8 B. EXPANDING ACCESS TO AND IMPROVING DELIVERY OF BASIC PUBLIC SERVICES (EDUCATION AND HEALTH) ........... 12 C. IMPROVING PUBLIC EXPENDITURE MANAGEMENT .................................................................................. 1 6 IX. FEATURES OF THE PROPOSED ECONOMIC RECOVERY CREDIT ............................................................. 19 A. RATIONALE .................................................................................. 19 B. REFORM ACTIONS TAKEN THROUGH JUNE 2002 .................................................................................. 19 C. CONDITIONS OF CREDIT EFFECTIVENESS .................................................................................. 20 D. AMOUNT AND TRANCHING .................................................................................. 20 E. CONDITIONS OF SECOND AND THIRD TRANCHES .................................................................................. 20 F. IMPLEMENTATION. MONITORING, EVALUATION AND SAFEGUARDS ............................................................................ 22 Fidtuciary Safeg.ards ................................................................................... 23 Donor Coordination .................................................................................. 24 X. COUNTRY OWNERSHIP, BENEFITS AND RISKS ...................................................................... 25 Xi. RECOMMENDATION ...................................................................... 26 BOXES Box 1: Cote d'Ivoire - Country Profile Summary ........................................................................ 4 Box 2: Cote d'Ivoire: Key Macroeconomic Indicators, 2000-03 ................................................................ 5 Box 3: C6te d'Ivoire Government Financing Operations, 2001-04 ........................................................... 6 Box 4: PRSP Objectives ........................................................................ 7 ANNEXES Annex 1 Supplementary Credit Data Sheet Annex 2 Letter of Development Policy Annex 3 Matrix of Policy Measures Annex 4 Synergy between the ERC and the project portfolio Annex 5 Cote d'lvoire At-a-Glance Annex 6 Key Economic Indicators Annex 7 Social Development Indicators Annex 8 Status of Bank Group Operations This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY THE REPUBLIC OF COTE D'IVOIRE ECONOMIC RECOVERY CREDIT CREDIT AND PROGRAM SUMMARY Borrower The Republic of Cote d'Ivoire Amount SDR 160.2 million (US$200 million equivalent) Terms Standard IDA terms (40-year maturity and 10-year grace period) Implementing Agency Ministry of Economy and Finance Program Objectives The government's Economic Recovery Program (ERP) supported by the Credit aims at: (i) creating the conditions for renewed broad-based growth driven by the rural economy and a private sector that is more confident about the future; (ii) improving public sector delivery with participation of local communities; and (iii) improving efficiency and accountability in public resource management. Credit Description The ERC is a quick-disbursing credit of three tranches. Its proceeds will help the government: (i) meet the costs of the economic recovery program within a stable macroeconomic environment; and (ii) increase resource allocation to the priority poverty-sensitive sectors of primary education and primary health (including the fight against HIV/AIDS). Benefits Successful implementation of the ERP supported by the ERC should: (i) increase incomes and employment opportunities in the rural economy and create the conditions for strengthened private sector activity; (ii) expand access to and improve the quality of primary education and health services, while strengthening local community (COGES) participation in the delivery of such services; and (iii) improve budget formulation, execution and monitoring and reporting, while strengthening accountability. Risks The program faces three risks: (i) new external shocks may create financing difficulties; (ii) renewed social unrest could interrupt the reforms; and (iii) capacity limitations may delay some reforms. (i) The possibility of new external shocks is the most serious risk. Conservative estimates of inflows have built some safety margins into the macroeconomic framework. The recent upturn in cocoa prices, in particular, increases the flexibility for dealing with new shocks. (ii) The probability of the national reconciliation process stalling has diminished somewhat following the successful National Reconciliation Forum of October 2001. The broad participation of all segments of the population in the PRSP process also furnishes an outlet for expressing any discontent, propels the reconciliation forward, and builds consensus around key elements of the reform program. (iii) The technical capacity of the government may be tested by the volume of tasks to accomplish to implement the reforms. Care has been taken in program design to limit its complexity and technical support is being coordinated from partners to further mitigate this risk. Disbursements The Credit will be disbursed in three tranches. The first tranche of SDR 80.1 million (US$100 million equivalent) will be disbursed upon credit effectiveness. This front-loading is justified by the strength of the program (upfront measures to consolidate the liberalization of the cocoa/coffee markets; allocation of more budgetary resources to primary health and education, to be used by local community management groups where the poverty impact would be greatest, and targeting more of these services to the most disadvantaged; and reinforcement of accountability through the presentation of audited budgets for the years 1999 and 2000 to the Parliament). It also helps to facilitate the orderly execution of the public expenditure program. The second and third tranches of US$60 million equivalent and US$40 million equivalent, respectively, will be released upon satisfactory implementation of the program as a whole and the fulfillment of specific conditions. Financing Plan 100 percent IDA financing, with parallel financing from the European Union, African Development Bank, the IMF, France, and other bilateral partners of Cote d'Ivoire. Poverty Focus The ERC-supported program is expected to contribute to a reduction of income poverty in rural areas, as higher pass-through of world market prices to producers of cocoa and coffee happens in a more competitive environment; the producers representatives in ARCC and BCC become more accountable (and more efficient as a result), and reduce the level of non-fiscal levies collected from the farners for their operational budget and the reserve fund. The program is also expected to improve human development outcomes among the poor by expanding access to and improving the quality of basic education and health services, as a result of higher budgetary resources going to such services; greater community management of the services; some targeting of free school supplies and subsidies for essential drugs to the very poor; and greater general availability and affordability of basic inputs (essential prices and school textbooks and supplies). Environment Rating Category C Project ID Number CI-PE-P071375 REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED ECONOMIC RECOVERY CREDIT TO THE REPUBLIC OF COTE D'IVOIRE I. INTRODUCTION 1. I submit for your approval the following report and recommendation on a proposed Economic Recovery Credit (ERC) to the Republic of Cote d'Ivoire for SDR 160.2 million, the equivalent of US$200 million. The ERC would provide assistance to C6te d'Ivoire during the country's recovery from the turmoil that followed the military coup in December 1999. Coming after three years of sharp economic decline, the turmoil resulted in a significant deterioration of economic and social conditions of the poor in particular. As part of the preparation of an Interim Poverty Reduction Strategy Paper (I-PRSP), the Ivorian authorities have prepared an Economic Recovery Program (ERP) with the objective of recovering the lost ground and creating the basis for future progress. 2. The ERP, for which they are seeking support from development partners including IDA, will be implemented during 2002-03, and will be the precursor of programs that the authorities expect to launch following the completion of their full PRSP. The proposed ERC would be the main instrument of IDA's support to the ERP. It would: (i) provide quick disbursing financial assistance to help stabilize the public finances; and (ii) support a set of priority reforms to promote rural productivity and competitiveness, improve service delivery, and strengthen public resource management and accountability. II. BACKGROUND 3. Once hailed as one of Africa's few stable and successful countries, Cote d'Ivoire witnessed unprecedented instability during 1999 and 2000. In December 1999, a military coup ousted President Konan Bedie and was followed by a "national salvation government" led by the military junta of General Guei until its own ouster in October 2000. Although the December 1999 coup was bloodless and greeted with relief by the population and political parties, the transition period up to the Presidential election of October 2000, from which some opposition candidates were excluded, was marked by increasing violence and human rights abuses. Political tensions have since eased. Peaceful municipal elections were held in March 2001 and the long awaited "national reconciliation forum" was launched in October 2001 to mend the country's social fabric and consolidate social peace. This was followed by a meeting in January 2002 of the four major party leaders who agreed to continue the reconciliation process and adopted a 14-point resolution for that purpose, along with an implementation plan. Cote d'Ivoire 2 4. The Ivorian authorities are aware that return of political stability and economic growth will depend on continued democratic reforms and the implementation of sound economic policies, as well as the resumption of external aid. After the municipal elections and the launching of official investigations into the human rights violations which occurred at the end of 2000, the European Parliament agreed in June 2001 that the conditions were met for a gradual resumption of its dialogue with the new government. The European Union (EU) has decided to fully resume its aid program. In August 2001, the IMF approved a six-month Staff Monitored Program (SMP) for the Cote d'Ivoire. Successful implementation of the SMP paved the way for the preparation of a program to be supported by the IMF's Poverty Reduction and Growth Facility (PRGF), which was approved by the IMF's Board in March 2002. The government has launched the preparation of a Poverty Reduction Strategy Program using a process which allows for the participation of all segments of the Ivorian society. An Interim PRSP (I-PRSP) was completed in February 2002, and the full PRSP is scheduled to be completed in a year. III. RECENT ECONOMIC POLICIES AND PERFORMANCE 5. During the late 1980s and early 1990s, the Ivorian economy suffered from economic decline, weak public finance and increasing impoverishment of the population. The devaluation of the CFA Franc in 1994 started a reversal of that trend. Economic growth resumed in 1994, accelerating to 6.5 percent p.a. on average during the 1995-97 period. In 1997, the government adopted a National Poverty Reduction Plan (Plan National de Lutte contre la Pauvrete-PNLP), focused on: (i) spurring wide-spread economic growth through the continuation of the liberalization of the economy and the promotion of private sector development; (ii) improving basic infrastructure (in particular roads and water supply); (iii) improving social service delivery; and (iv) reforming the agricultural sector policies to boost productivity, competitiveness and income. The incidence of poverty declined globally from 37 percent in 1994 to 33.6 percent in 1998 and the government appeared on track towards significant progress in its poverty alleviation objectives. 6. Although the economy responded well to the devaluation and macroeconomic stabilization policies, implementation of structural reforms and pro-poor policies fell short of expectations. Economic growth decelerated sharply in 1998 and real GDP fell by 1.5 percent in 1999, due to growing political instability, a deterioration in the country's terms of trade, deep cuts in the public investment program, and weakening private investor confidence. Public expenditures in favor of priority sectors dwindled and structural reforms stalled when economic growth faltered, external assistance dried up and political and social unrest escalated. In response to slippages in macroeconomic management, governance issues and the stalling of structural reforms, the IMF suspended its Enhanced Structural Adjustment Facility (ESAF) in early 1999. The situation deteriorated further in 2000 with real GDP contracting by 2.5 percent. The government failed to meet its debt service obligations. External and domestic arrears reached 14 percent of GDP in 2000. Despite some signs of recovery in 2001, particularly in manufacturing and services, real GDP declined further by 1 percent. 7. The adoption of the SMP marked a turnaround. The program included important macroeconomic stabilization measures and critical structural reforms in the coffee/cocoa, energy, Economic Recovery Credit 3 electricity and financial sectors, defined with the help of Bank staff. Performance under the SMP was satisfactory. All quantitative macroeconomic benchmarks were met, and substantial progress was also achieved on structural reforrns. 8. In the cocoa sector, the new Caisse de Stabilisation (Caistab) was liquidated in December 2001, after the new institutions in charge of managing the sector in a competitive environment were established; and the government launched a strengthened program to recover Caistab's claims on defaulting exporters. In the electricity sector, the government took measures to eliminate a CFAF 50 billion sector deficit (through a tariff increase and cost-reducing measures shared by the government and energy suppliers). Agreement was reached on a strategy to liberalize the energy sector, and reduce the CFAF 42 billion deficit of the national refinery company (SIR) and privatize it. In the financial sector, the Savings and Postal Agency (CECP) was split into two separate agencies and agreement was reached on the restructuring of the Caisse Autonome d'Amortissement (CAA). Finally, the government succeeded in preventing an increase in domestic and external arrears. The government repaid its arrears to IDA on January 30, 2002, leading to the full resumption of disbursements under the on-going portfolio. 9. This satisfactory performance by C6te d'Ivoire significantly improved its prospects for a return to sustained economic growth. It also paved the way for the preparation of a program to be supported by the IMF under its PRGF, which was approved by the IMF Board in March 2002. This program which covers the period 2002-04 focuses on: (i) restoring macroeconomic stability; (ii) improving public finance management; and (iii) normalizing relations with creditors by eliminating arrears on domestic and external debt. It will complement the proposed ERC, in supporting key structural measures with macroeconomic relevance in the cocoa, electricity and financial sectors, ensuring a satisfactory level of verified spending in the health and education sectors and supporting measures aimed at strengthening public and corporate governance. IV. POVERTY STATUS AND THE THRUST OF THE RECOVERY PROGRAM 10. Household surveys conducted in 1985, 1995, and 1998 show that poverty is most prevalent in rural areas. Over half of the rural population live below the poverty line and about three quarters of all poor are rural. Of the 4 million active rural population, 61 percent are wage employees and sharecroppers who earn less than a third of what cocoa farmers eam. School enrollment rates amongst children of this group are frequently as low as 20 percent. The surveys highlight the very negative impact of the economic recession which prevailed through most of the 1980s and early 1990s (poverty rose from 10 percent in 1985 to 37 percent in 1995 before falling slightly to 33.6 percent in 1998), as well as the high and growing disparities in income (in 1998 the income of the 10 percent richest households was 13 times that of the 10 percent poorest). C6te d'Ivoire 4 Box 1: Cote d'lvoire - Country Profile Summary C6te d'lvoire has a population profile with an estimated 43 percent of the population C8te Burldna being less than 15 years old. The d'Ivoire Ghana Nigeria Faso population of 17 million is still growing Human Development Index 0.42 0.56 0.44 0.31 rapidly (3.3 percent per year) and is rapidly Real GDP/head (US$ inPPP) 1,598 1,735 795 870 becoming urbanized (46 percent of total Life Expectancy (years) 47 61 51 45 population), with Abidjan. alone (3.5 Adult Literacy (%) 45 69 61 . 23 million) accounting for about one fifth of Population without access to the country's total population. Population Safe water .58 35 51 58 density is moderate at 45 inhabitants/sq km Health services 40. 75 33' 30 (81 in Ghana), although it can reach more Sanitation 61 68 59M ;63 than 100/sq km in parts of the more fertile Combined primary secondary/ 41 43 43i 22 Southern region where increasing land tertiary school gross pressure has resulted in rapidly escalating enrollment rate(%/0) , clashes over land access. All indicators of social welfare are low, with poor access to health care, high infant mortality rates, widespread ghildren mnalnutrition, low enrollment and literacy rates and an average life expectancy of 47 years (and expected to decline further because of the impact of the HIV/AIDS pandemic). They compare poorly with those in neighboring countries. Source: SIMA and National Sources 11. According to the 1998 survey, the highest proportion of poor rural households was found in the savannah zone (55 percent). In the forest zone, poverty levels varied between 25 percent and 47 percent. Poverty was most acute among food crop farmers (58 percent) and agricultural laborers/sharecroppers, but poverty was also high among export crop producers (43 percent). The dramatic fall in the price of Cote d'Ivoire's main export crops in 2000-01 (40 percent for cocoa, more than 50 percent for coffee and 25 percent for cotton) has had a major impact on agricultural incomes and rural poverty, to the extent that cocoa and coffee provide the bulk of cash income in the forest region, and cotton in the savannah region. Finally, qualitative assessments showed that Ivorians place great importance on economic as well as non-economic factors in evaluating their sense of well-being. Hence, in addition to access to health and education services, the precariousness of income sources, exclusion from social networks and lack of empowerment were all identified as critical elements of poverty. The 1995 survey concluded that, in addition to sharecroppers, women and people living with AIDS felt particularly vulnerable and marginalized. 12. In view of the poverty characteristics, the pillars of the ERP are well chosen to help recover lost ground and prepare the basis for future progress on poverty reduction. A more competitive and resilient rural economy would raise performance overall and also procure for the farmers a growing share of the value of their products. Growing private sector confidence in the economy could help the Cote d'Ivoire regain the private investment levels of the pre-decline years and be the basis of new secondary and tertiary sector jobs and incomes in the urban areas. These in turn would strengthen households' capacities to pay for the needed education and health services. The policy and institutional changes being put in place by the ERP should expand availability of these services; improve their relevance with community action; and also improve the access of those who are particularly disadvantaged. Economic Recovery Credit 5 V. MEDIUM-TERM PROSPECTS AND FINANCING REQUIREMENTS A. Medium-Term Outlook 13. The government's objective is to achieve an Box 2 CoteAd'Ivoire: Key Macroeconomic Indicetors,2900-03 average real GDP growth of 2000, 2001 2002 2003 4 percent p.a. over the 2002- (Proj.) (ProJ.) 2005 period, with the growth GDP Growth -2.3 -0.9 3.0 4.5 percet in Gross Investment/GDP (%/) 10.6 9.9 13.5 14.6 rate rising from 3 percent in Gross National Savings/GDP(%) 7.7 7.4 11.8 13.4 2002 to 5 percent in 2004. CPI Inflation, period avg., (%) 2.5 4.4 3.0 3.0 This is expected to decrease Overall Fiscal DeficitlGDP (%) (incl. grants) -1.3 1.2 -0.5 0.2 exp h eadcunt poved ty index ICurrent Account Gap/GDP (%) (incl. grants) -2.9 -2.5 -1.7 -1.2 the headcount poverty index- - - from 33.6 percent in 1998 to 30 percent in 2005. The recovery in 2002 will be helped by the resumption of external assistance and externally funded public investments. The rural economy is expected to contribute to this turnaround, with agriculture going from a decline of nearly 6 percent in 2001 to an increase of 2 percent and to above 3 percent p.a. over the medium term. This outlook is expected to be supported by a gross investment rate averaging some 13 percent of GDP p.a. over the period. Financing for this is expected to come partially from domestic savings projected to average some 12 percent of GDP p.a. and thus permit higher investment levels beyond the 2002-04 recovery period. Activities in the manufacturing and service sectors are expected to pick up in 2003, when both consumer and government spending accelerate, private investors' confidence returns, trade and transport activities grow again as C6te d'Ivoire slowly regains its position as a regional transit hub, and new oil fields come into production. 14. With improved resource mobilization (revenues rising from 16.6 percent of GDP in 2001 to some 17.8 percent during 2002-04) and expected fiscal discipline, the budget deficit declines from -1.1 percent of GDP in 2001 to less than -0.1 percent during the period 2002-04, despite the increased resource allocation to priority sectors and basic public infrastructure. This level of fiscal deficit is financed by the expected program aid and debt relief, at the same time as domestic bank debt is gradually retired. With the rising output and prudent financial policies, the inflation rate falls from some 4 percent in 2001 to about 2 percent during 2002-04, making it possible to protect the income gains from the recovery. 15. External sector policies for the medium term emphasize diversification of exports and reduction of the debt burden to sustainable levels in the context of the HIPC Initiative. Using end-2000 data and the macroeconomic assumptions of the PRGF-supported program, the Debt Sustainability Analysis carried out for the Preliminary Document of the enhanced HIPC Initiative showed that, after full application of traditional debt-relief mechanisms, Cote d'Ivoire's external debt would be unsustainable in terms of the NPV of debt-to-revenue ratio, at 397 percent. The NPV of debt-to-exports ratio would be 145 percent. On the basis of the end-2000 data, the Cote d'Ivoire would thus qualify for relief under the fiscal/openness window. Assuming a Decision Point in September 2002, after relief under the enhanced initiative, the NPV of debt-to-revenue ratio would fall from 180 percent in 2002 to 166 percent at the Completion Point in 2004; and fall further to 55 percent in 2020. In 2002, the debt service-to- revenue ratio would decline from 33 percent after traditional mechanisms to 21 percent under the Cote d'Ivoire 6 enhanced HIPC Initiative. At the Completion Point, the debt service-to-revenue ration would be 20 percent, and it would fall to about 5 percent in 2020. Under an alternative scenario, where the projected real GDP growth rate is reduced by 2 percent (from an average of 5.7 percent in the base case), the debt level would still be sustainable as long as the ensuing financing gap is filled by new concessional borrowing. 16. Under the base case projections, it is projected that the external current account deficit would decline from 2.5 percent of GDP in 2001 (in the presence of arrears) to an average of 1.5 percent of GDP over the period 2002-04 (with HIPC debt relief in play, including the resolution of arrears). This gap is expected to be covered by disbursements under the project portfolio, and program aid as indicated below. B. Financing Requirements 17. Government financial operations over the 2002-04 period are projected to result in overall deficits (on a cash basis but excluding HIPC transactions) averaging CFAF 113 billion or less than 1.5 percent of GDP. The gap widens when external debt due is taken into account. Debt relief then intervenes as part of the financing. 18. For the year 2002, the total financing requirements are estimated .Box63: Cote,d'lvoire Goverume,tFinancial Qpera,Oons,-2001-04 at CFAF 1440 billion (US$ 2,060 (in billions CFA"' 2001 202 2003 --2004 million), or 18 percent of GDP. ; Po r E2 0 Debt relief from the Paris and Overa balance 93 -41 1.3 11F London Clubs is expected to armount Changeindomestic arars - 24 . -8; . -119 I I 18 Overll bilance (CaSh -ass)9 -128: -106 ~,-107- to CFAF 984 billion, leaving a residual financing gap of CFAF 456 Financing -69 -931' -10 -i4 Domesticfti~ncing ~ -99 -95. -03 -14 billion (US$ 626 million)'. This gap External financing-,, ,- 30 - --1217, ^"-207>- -ii4 is after an assumed repayment of Financing Gap ' 1440' 16 395 some CFAF 95 billion in domestic Finanicing' theGap 1440 416- 395 arrears. It would be financed by the DebtRelief 984 IMP :~~~~~~ ~~~~~~~10865 65 IMF (CFAF 108 billion or US$148 I bA , 18 3 million), IDA through the proposed Al:B 42- ERC (CFAF 118 billion or US$162 Eu 39' France 120zi million), the African Development :Other Bilateral 29' Bank (CFAF 42 billion or US$58 million), the European Union (CFAF 39 billion or US$53 million), France (CFAF 120 billion or US$164 million), and other bilateral donors (CFAF 29 billion or US$40 million). 1 It is expected Cote d'Ivoire will become eligible for debt relief under the enhanced HIPC initiative with a decision point around October-2002. Economic Recovery Credit 7 VI. GOVERNMENT'S POVERTY REDUCTION STRATEGY 19. Early in 2001, the new government launched a national debate on the main lines of a priority medium-term program (la Refondation) to address the main aspirations of all segments of the population. In May 2001, a national workshop -- attended by representatives from government, academia, civil society, the private sector and development partners -- was organized to launch the preparation of a PRSP. The workshop concluded that the major constraints to growth and equitable development in C6te d'Ivoire, to be urgently addressed under the PRSP, were: (i) faulty policies, excessive public intervention, a cumbersome regulatory environment and poor governance, including the incapability of the judicial system to fairly administer the laws and protect individual rights and properties; (ii) an ineffective and overly centralized public sector, with an excessive public intervention, public expenditure allocations and poor management and control of public finances; and (iii) the exclusion of the poor and vulnerable groups, in particular in rural areas, from income opportunities and decision-making processes. A Working Group -- including representatives from the public and private sectors and from civil society -- was established under the leadership of the Prime Minister to prepare an I- PRSP, in early 2002, with a full PRSP to follow in 2003. 20. The I-PRSP presented to the Boards of the Bank and Fund provides strong evidence of the government's commitment to poverty alleviation and an adequate macroeconomic framework for the period under consideration. It describes the detailed participatory process that will lead to the design of the full PRSP and outlines the thrust of the government's poverty alleviation strategy. Set in the longer-term framework of "C6te d'Ivoire 2025", the I- PRSP/PRSP has the following objectives: Box 4: PRSP Objectives The main poverty reduction objective is to reduce the poverty rate in the medium term from 33.6 percent in 1998 to 30 percent in 2005. In particular, the aim is to: (I) Achieve an economic growth rate of 3 percent in 2002 and of over 4 percent on average for.the 2003-2005 period, create jobs, and increase the income of the population; (ii) Ensure equitable access to basic social services and to decent living conditions; and (iii) Reduce regional and local inequalities and disparities. These objectives are to be pursued through the following strategic priorities: I. Promotion of the private sector as a growth engine and support for rural development to create.income and jobs; 2. Improving equitable access to and the quality of basic social services;: 3. Decentralization as a means for the people to participate in the development process, and reduction of regional disparities; and 4. Promotion of good governance and capacity building to allow for better resource allocation and use. VII. IDA'S INTERIM ASSISTANCE STRATEGY 21. IDA's re-engagement strategy focuses on private sector-led growth, improved public sector management and improved service delivery. The proposed IDA assistance during the re- engagement period is outlined in the accompanying Interim Country Assistance Strategy (I- CAS). The I-CAS includes three main components: Cote d'Ivoire 8 (i) providing critically needed quick disbursing support through the proposed ERC and a following adjustment credit in 2003, to ensure that the required external financing is available and that essential public services are adequately funded; (ii) supporting national programs in health, education, transport, urban and rural development through the on-going portfolio, which is being restructured to focus on local community development, decentralized service delivery, and capacity building at all levels; and (iii) supporting the government's national HIV/AIDS program through a multi- sectoral HIV/AIDS project. 22. Improved service delivery will be at the core of IDA's assistance strategy. It will be built on establishing a strong synergy between on-going sectoral programs and targeted external financing support under the proposed ERC (and future quick-disbursing credits that may support the country's medium-term poverty reduction strategy). The ERC will support inter-sectoral and cross-cutting issues (such as public sector management), while intra-sectoral priorities and efficiency issues will be dealt with under the specific sectoral programs (Rural Community Support Program, National Agricultural Services Program, National Integrated Health Program, National Education and Training Support Program and Transport Sector Adjustmnent Program). The focus of this re-engagement strategy is fully in line with the country's immediate recovery/reconstruction needs and longer-term development needs as reflected in the I-PRSP. VIII. THE ECONOMIC RECOVERY PROGRAM, 2002-03 23. As set forth in detail in the Ivorian authorities' Letter of Development Policy (Annex 2), and summarized in the Policy Reforms Matrix (Annex 3), the basic aim of the Economic Recovery Program (ERP) is to recover the ground lost owing to the combined effects of the economic decline during 1998-2001 and the socio-political turmoil of 1999-2000, and set the stage for future progress. The specific objectives are to: (i) create the conditions for renewed broad-based growth, in particular in the rural and private sector development; (ii) improve the delivery of public services to the poor, using and building local capacity to manage these services; and (iii) improve efficiency and accountability in management of budgetary resources. The ERP represents an articulation of the authorities' program as it has evolved since the SMP and as stated for PRGF support. A. Creating the Conditions for Renewed Broad-based Growth 24. Renewed broad-based growth will be pursued through reforms in two areas: (i) stimulation of agriculture sector growth; and (ii) promotion of private sector development. Amriculture Sector 25. In the agriculture sector, the authorities' medium-term policy goals are to promote the role of market forces in the productive chain of the main crops so as to raise the share of value added that accrues to producers; improve market access through the provision of better Economic Recovery Credit 9 infrastructure, and communication and information systems; enhance access by producers to appropriate adapted technologies; and generally encourage diversification and derivation of higher value from products. To achieve these, the government plans to: (i) promote effective competition at all levels of the cocoa/coffee value chain; and (ii) foster a more competitive cotton sector. 26. Ensuring Effective Competition in the Coffee/Cocoa Chain. As part of ongoing reforms, a new institutional framework has been put in place for the coffee and cocoa sectors. It comprises: (i) the Autorite de Regulation du Secteur Cafe- Cacao - ARCC, is responsible for implementing the legal and regulatory framework to guarantee competition at all levels; (ii) the Bourse du Cafe et du Cacao - BCC, is in charge of the trading of coffee and cocoa, including a mechanism to allow producers to manage their price risk; (iii) the Fonds de Regulation et de Controle - FRC, has the responsibility for the financial management of export operations; and (iv) the Fonds de Developpement et de la Production de Cafe et de Cacao - FDPCC, is in charge of financing producer-sponsored development programs using resources contributed by the producers. The next steps are to ensure that these institutions function to enable the sectors to become more competitive and efficient. 27. To achieve these, the authorities intend to ensure that: (i) the new regulatory framework functions in a way that avoids concentration of market power; (ii) there is true representativeness, and therefore the legitimacy, in the governance bodies of the recently- established institutions and that their operations are transparent and efficient; (iii) there is an export mechanism which would optimize export receipts while allowing producers to manage price risk; and (iv) the currently high level of taxes and levies is reduced. 28. Regulatory Framework. The government would like to avoid the concentration of market power in a few hands and also promote small- and medium-scale national exporters. To guard against concentration and while waiting to work out the definitive regulatory framework, the ARCC put in place for the 2001-02 crop year, an interim measure restricting an individual exporter's share to no more than 10 percent of the expected total output. The government will undertake a study of the appropriate regulatory measures to put in place to avoid the emergence of concentration without recourse to quantitative restrictions. This regulatory framework will be introduced before the marketing of the output of the 2002-03 crop year. 29. The government is also aware that many distortions and rigidities exist in other areas of the productive chain, that hurt efficiency and impose costs on producers. It is also desirous of finding the best ways to help producers: (i) increase productivity via access to appropriate adapted technologies; and (ii) diversify output and derive higher value from their output. In order to find ways forward on these concerns, a second study will be undertaken in 2002 to review the role that the regulatory framework might play in achieving greater efficiency in the various activities of the value chain: primary purchase, bagging, transit and phytosanitary treatment, and processing. 30. Representativeness, Efficiency, and Accountability of the New Institutions (BCC, FRC, FDPCC). The authorities plan to ensure that: (i) the weight of various partners in the governing structures and the modality of the operation of the latter allow full participation in decision Cote d'Ivoire 10 making; and (ii) the representatives fully represent their bases. With the mandate of the producers' representatives on the first Board of the Administration of the BCC having expired on December 31, 2001, the government intends to ensure open and fair election of the new delegates before June 30, 2002. The government will also ensure that the ARCC, the BCC, and the FRC have clear internal policies and operational procedures that are known to all; prepare annual programs and budgets that are adopted by their governing bodies; and have satisfactory management systems. New operational policies and internal procedures will be adopted by June 2002. 31. Export Mechanism and Market Risk Management. During the 2001-02 season, the marketing of cocoa took place in a transitional mechanism allowing actual farm-gate prices to be freely determined by the market above a minimum farm-gate price announced by the BCC and based on world market prices. This system has worked well and allowed producers to benefit from the recent price increase on the international market. The BCC will decide a new system for the 2002-03 crop year. 32. The new system to be put in place by end-July 2002 will be based on the recommendations of a study to be undertaken shortly. Before its entry into effect, the government will ensure that the new system has been discussed by the general Assembly of the BCC/FRC and that it receives the support of the main participants in the sector. The government will also eliminate all administrative allocative systems, including quotas or other quantitative or financial restrictions. The system will be in place before the start of the marketing of the 2002- 03 crop. 33. Taxation and other Levies. Currently, taxes and levies on cocoa total CFAF 300/kg, or some 30 percent of the CIF price. The government's share, in the form of the DUS and the registration tax amount to CFAF 197/kg, or some 20 percent of the CIF price or the maximum tax level set by government. In addition, an amount of CFAF 9.2/kg is collected for the operation of the new institutions (ARCC, BCC, and FRC); an additional CFAF 60/kg goes towards a prudential reserve fund; and an extra CFAF 35/kg is collected on behalf of the producers to fund the FDPCC. 34. In the short term, government will ensure that the level of para-fiscal levies are justified by the clearly-identified activities. The levies going to the ARCC, BCC, and FRC will be justified on the basis of their work programs and budgets as approved by their governing bodies; the prudential reserve fund will be capped and its management rules clearly defined; and the levies for the FDPCC will be justified on the basis of activities requested by a majority of producers. These levies currently amount to 10 percent of the CIF price. While it does not have a direct say in the setting of these levies, the government thinks that the level is rather high, and has signaled to the farmers' representatives the need to find ways to reduce them on the basis of a rigorous review of the activities financed. As a start towards this objective, an audit of the budget, operations and financial statements of the ARCC, BCC, and FRC for the period year 2001 through March 2002 will be audited; and clear operational guidelines, program and budget will be prepared on the basis of the audit results for the adoption of their governing bodies by the start of the 2002/2003 crop year. In the medium term, the government plans to work towards a reduction of these levies on the coffee/cocoa sectors and the establishment of a tax-cum- Economic Recovery Credit 11 incentive system that would be more favorable to the development of these sectors. In the meantime, based on the findings of the audit, new - and, hopefully, lower -- levels of the para- fiscal levies will be set for the 2002/2003 crop year, based on the findings of the audit. 35. Cotton Sector. The government has renewed its commitment to liberalize the cotton sector. To this effect, the government organized in January 2002, with all concerned parties, national workshops on cotton (les ateliers nationaux du coton) to discuss a strategy to introduce competition at all levels within a two-year period. The workshop recommendations were to: (i) introduce competition at all levels of the sector, within a legal and regulatory framework permitting entry and competition at all levels; and (ii) privatize CIDT-Nouvelle within the context of a sector open to competition. Private Sector DeveloDment 36. The crisis experienced by the Cote d'Ivoire since the year 2000 has diminished the attractiveness of the environment to investors. The recovery of the economy requires the restoration of investor confidence and of good relations between the government, investors and workers. In view of this, the government's strategy towards the private sector focuses on pursuing the divestiture program; improving security of people and properties and of the legal, judicial and regulatory environment of enterprises; improving access to markets and services; reinvigorating the financial sector; and reducing factor costs. Specifically, under the ERP, the government plans to relaunch the privatization process; pursue the rehabilitation of the financial sector; and re-establish confidence with the private sector. 37. Relaunch of the Privatization Process. The government plans to take actions to relaunch the privatization process as a way to promote the growth of the private sector as a source of employment and income generation. To do so, the government will adopt a Letter of Privatization Policy in which it will set out its vision, the institutional framework, and its intentions regarding the portfolio of enterprises remaining to be privatized. 38. Pursuit of Rehabilitation of the Financial Sector. The government will finalize the restructuring plan for the Caisse Autonome d'Amortissement (CAA) by the end of June 2002. Among other things, this plan will provide for the reimbursement of the governnent's debt to the CAA; the restructuring proper of the CAA, and subsequent reduction of the government's involvement to 20 percent or less of the outstanding shares, by end-2003. As part of the progress on this path, the government expects by the mid-2003 to identify a qualified technical partner for the CAA; and privatize (offer for sale to willing buyers) at least 51 percent of the outstanding shares. This process has been confirmed by the government in its Letter of Development Policy for the ERC as well as in the Privatization Policy Letter. 39. Re-establishment of Confidence with the Private Sector. The government will examine the enterprise inspection visits carried out by the tax services with a view to improving their efficiency. The government will also commence a dialogue with the private sector to revise the "Fiscal Procedures Manual" (Livre de Proce'dure Fiscales) and re-examine the emergency modifications contained in the "Fiscal Annex" for the budget years 2000 and 2001. Cote d'Ivoire 12 13. Expanding Access to and Improving Delivery of Basic Public Services (Education and Health) 40. Education. Despite years of relatively high public spending on education (more than 30 percent of total public expenditures on average), Cote d'Ivoire's performance in the sector has been poor. Overcrowded classes and a low quality of teaching result in low completion and pass rates. The government's 1997 National Education and Training Development Plan, 1998-2010 - Plan national de Developpement du Secteur Education/Formation (PNDEF) - aimed at: (i) increasing the net enrollment rate from 51 percent to 55 percent in 2000; (ii) improving education quality at all levels; and (iii) making education and training more responsive to the socio-economic needs of the country. The plan called for an increase in the share of education in public expenditure from 32 percent (excluding external financing) in 1996 to 39 percent by year 2000, with about 45 percent of the education budget allocated to primary education. 41. Implementation of the plan has been spotty. Budgetary allocations were in line with the plan but serious internal efficiency problems considerably lowered impact on the ground. Efforts were made by the government to respond to the need for additional teachers and textbooks but the overall availability of textbooks and other inputs at the school level remained very low. Results in the area of school construction and rehabilitation were also limited. Overall, sector outcomes lagged behind expectations. Primary net enrollment rate increased only slightly from 5i percent in 1996/97 to 52 percent in 1999/2000 - higher for boys than girls and higher in urban than rural areas. Achieving significant progress, let alone universal primary enrollment, will require significant efforts to lower schooling costs for households and to target resources to attract out-of-school children, i.e. the poorest and girls. 42. The new government has embarked on the preparation of a sector-wide strategy, encompassing all levels and all types of education (from pre-school to university and from general education to informal literacy and to vocational training). To do so, it has initiated a comprehensive diagnostic of the entire education sector (to be summarized in an Education Sector Country Status Report -- Rapport d'etat sur le systeme educatif national - RESEN) which will support the design of a new national integrated policy and strategic framework for the education sector before the end of 2002. This policy and strategic framework will be incorporated in the PRSP. In the interim, the government has already finalized a new medium- term strategic framework for primary education, adult functional literacy, and out-of-school children. Even though it is still provisional (since the outcomes of the RESEN are not yet available), it lays out the fundamental directions for the future. 43. The framework gives priority to rural and under-served areas, and targets women and the rural poor. It seeks to develop basic education at low recurrent cost and to take advantage of the decentralization process to transfer more decision making at the local levels. Its main objectives for 2015 include: (i) increasing the national primary school gross enrollment ratio to 80 percent, with a particular focus on rural children and girls; (ii) increasing the adult literacy rate to 70 percent for men and 50 percent for women, through the combination of expanded access to primary education and the provision of adult literacy programs delivered by NGOs and other local organizations, targeting rural women in particular; and (iii) strengthening professional/vocational training programs, in particular by providing alternative, community- based training opportunities for out-of-school children aged 9-15. The strategy of the Economic Recovery Credit 13 government in this area is built on four principles: (i) free schooling (to be implemented gradually with a priority given to primary schools and ruralJpoor areas); (ii) improving access by creating 1,000 new schools/year and recruiting new teachers and improving the latters' skills to meet priority needs at all levels; (iii) the generalization of the distribution of textbooks on a lease basis to primary and secondary schools; and (iv) the establishment of a closer relation between schools and communities, in particular by strengthening the power and capacity of school management committees (COGES). 44. Under the ERP, the authorities intend to: * maintain education's budget share to at least 3.8 percent of GDP into the medium term; * undertake a comprehensive diagnostic and Public Expenditure Review (PER) for the entire sector (with an emphasis on 'credits delegues') and prepare a Medium-Term Expenditure Framework (MTEF); * decrease the cost of text books by opening up editing and supply to competition; * lower the cost of education to poor families by providing textbooks free of charge, on a loan basis (for all primary grades) as well as individual "school kits" (pens and pencils, note books) to primary school children nationwide (for the four first grades); * ensure sufficient allocations in the budget to cover basic maintenance and operating costs of primary and secondary schools, and transferring these allocations directly from the "Direction des Affaires Financieres" of the central Ministry of Education to schools' committees (COGES2); ensure transparency and accountability in the latter's use of funds through period inspections and audits (both internal and external). Only primary schools (3000, representing 40 percent of all primary schools) will be targeted in 2002; secondary schools will follow in 2003; * expand at a rate of at least 4 percent p.a. and ensure the sustainability of the "school meals program" (also supported by the World Food Program) to promote enrollment of children (especially girls) from poor households and improve their nutritional status and their academic performance; and * include reproductive health in the curriculum and establishment and funding of volunteer HIV/AIDS committees in all schools. 45. Health. Although its GNP per capita is one of the highest in the sub-region, its health indicators are among the lowest in West Africa. In 1996, the government launched an ambitious National Health Development Plan (Plan National de Developpement Sanitaire - PNDS). The Plan proposed to focus health efforts on an essential package of services to fight the most prevalent diseases and called for targeting health services to poor regions and rural areas. Specifically, it aimed at reducing infant mortality from 90 to 50 deaths/1000 births, extend vaccination from 50 percent to 90 percent of the population and increase life expectancy to 60 years by 2005. To do so, the plan called for improving the access, quality and affordability of health services by opening new health centers and maternities, the recruitment of new health 2 COGES exist in 68% of all primary schools and 100% of secondary schools Cote d'Ivoire 14 personnel and promoting cheaper generic drugs. The plan envisaged an increase in the share of health in total public expenditures in the sector from 7.1 percent in 1996 to 10.8 percent in 2000, while the share of primary health care would increase from 33 percent to 39 percent of total public expenditures on health. A review of the implementation of the PNDS in early August 2001 acknowledged that although some progress had been made in improving the geographical coverage of health facilities and in the promotion of generic drugs, implementation fell well short of its targets. In particular, the 2000 vaccination coverage was only around 60 percent against a Plan target of 90 percent. 46. The I-PRSP endorses the existing policy and strategic framework embodied in the PNDS. However, there is a clear gap between policy (which emphasizes primary health care and favors underserved areas and vulnerable populations) on the one hand, and actual practice (which favors hospitals and urban elite) on the other. During the 2002-2005 period, the government's strategy would be based on the principles below: (i) aligning budgetary allocations and priority actions more explicitly with the government's priority (addressing health needs of the poorest and vulnerable groups); (ii) improving the access to basic health services (number of facilities; improvements in the drug procurement and distribution system; focus on underserved regions; and "best buys" in public health interventions); (iii) improving sector internal efficiency (restructuring/de-concentration of the Ministry of Health); improving policy formulation, planning, budget management and human resources management; making health services more client-oriented; devolving of more responsibilities to community management committees (COGES); (iv) improving equity in the health sector (intensifying efforts to target under-served areas and the specific needs of vulnerable groups and making basic health care affordable by the poor); and (v) ensuring the technical adequacy and proactivity of the health sector in the fight against HIV/AIDS. 47. Accordingly, under the ERP, the authorities intend to: * carry out a mid term review of the National Health Strategy; update the health sector strategy and prepare a Medium-Term Expenditure Framework (MTEF); * implement a public expenditure review of the health sector which will also be integrated in the PER to be carried out for other sectors; * improve the management, allocation and effectiveness of human resources for health, through a decentralization of recruitment and management, improved career development, and technical training; * align the Ministry Of Public Health's organization, resources, and management systems with the government's decentralization policy (including updating/fine- tuning of district and regional health plans that would align them with the MTEF and locally set targets for each key performance indicator); * develop capacities at each level of the health system in strategic sector management and in management of resources to enable them to assume their new expanded roles and responsibilities under a decentralized framework; * strengthen the health management information system, most notably the consolidation of key indicators for each level of the health system, to be used as a basis to set Economic Recovery Credit 15 targets, monitor and evaluate their performance, and use to improve their efficiency and impact; * study ways to endow the drug purchasing agency with autonomy progressively; and * raise the proportion of generic drugs as a proportion of the total purchased from 42 percent, with a view to attaining 75 percent by 2003. 48. HIV/AIDS. Cote d'Ivoire's economic, social and cultural development is threatened by the rising scourge of HIV/AIDS. National consciousness of the HIV/AIDS tragedy has risen only slowly and the government has pursued an ineffective medical strategy. The virus has spread rapidly and the number of AIDS patients and AIDS-related deaths have risen at alarming rates. The intensity of the urban-rural linkages within the country and central importance of C6te d'Ivoire in the economic and trade activities of the sub-region facilitates the penetration of the disease in rural areas and neighboring countries. Current HIV prevalence rates are estimated at between 12 percent and 15 percent of the adult population, and the virus has penetrated all segments of the adult population (most AIDS patients are young adults 20 - 40 years of age). AIDS related deaths are now the leading cause of adult mortality. 49. Counseling for HIV/AIDS patients has been limited and the patients and their families are often left to suffer without proper care and support. The epidemic is affecting all sectors of social and economic life. Hospitals have become overcrowded by AIDS patients at a time when the country lacks adequately qualified and experienced health staff, basic equipment and medical supplies for providing minimum health to the population. The education sector is losing trained teachers at an alarming rate (one a day), and absenteeism among HIV infected teachers and students is having a deep negative effect on the already low productivity of the education system. There are also more than 600,000 children orphaned by the disease, who suffer from an economic, social and cultural deprivation of enormous magnitude. 50. Until recently, Cote d'Ivoire had a medical-centered strategy based on three components: (i) prevention through the distribution of condoms; (ii) ensuring the safety of the national blood bank; and (iii) the treatment of a limited number of HIV infected and AIDS patients using subsidized anti-retroviral drugs (ART) funded under the national solidarity fund. Recognizing the inadequacy of such a limited response, the present government made combating HIV/AIDS through a multi-sector approach one of its top development priorities. A new Ministry responsible for HIV/AIDS (Ministere charge de la Lutte contre le SIDA - MLS) has been established within the Prime Minister's Office to coordinate the national multi-sector program and lead the national campaign against this pandemic. The MLS will coordinate the preparation of the multi-sector response program which will be supported both by on-going operations and the proposed IDA Credit for AIDS Prevention. 51. Many of the following will be implemented under the ERP: * set up and train all central ministries, regional, municipal and district health committees and focal points as well as promising community and village-based HIV/AIDS initiatives, preparatory to the launching of a comprehensive program through the proposed IDA Credit for AIDS Prevention; C6te d 'Ivoire 16 * support and expand training, care and support to PLWHA and fund their cooperative economic income generation initiatives aimed at improving their nutrition and welfare. Expand multimedia information/sensitization campaigns, critical for changing the high risk behavior that exposes individuals, especially young adults to HIV/AIDS and STDs; * set up and monitor on a pilot basis voluntary counseling and testing schemes in secondary municipal areas; * test methodology for meeting the needs of HIV/AIDS orphans through community support systems and prepare a program for scaling up this effort nationwide; * test and initiate on a pilot basis HIV/AIDS training programs for sector personnel (Agriculture, Transport, Education, Tourism, Health etc.); and * test funding mechanisms (accounting systems and controls) for local community- based initiatives for combating HIV/AIDS in key cities and regions to refine management tools for the future multi-sector project. The expected results of the IDA project would be the establishment of an effective accounting and control system to channel resources into the multi-sector anti-AIDS program. As such, it would link up with the reforms discussed below in the budgetary management system. C. Improving Public Expenditure Management 52. The government attaches high importance to continuing improvement in the management of its finances as the means to getting maximum benefit from the use of its resources as well as a central element in improving its delivery of essential services to the population. The discovery in 1998 of the inappropriate application of part of the program aid accorded by the EU to the health sector raised awareness about serious deficiencies in the public resource management system. A review of the framework and efficiency of public finance management in 1998/99 confirmed that the existing laws are exhaustive but that there is more to do to improve the efficiency and transparency of their application to manage the finances. On this basis, a reform program was prepared which deals with reforms in: (i) budget formulation, to align it with priorities; (ii) budget execution, including procurement, for efficiency and transparency; and (iii) internal controls and audits to increase probity. Some of the necessary measures have been implemented with the adoption of a new budgetary nomenclature and a new accounting system; an integrated computer system for managing expenditures (SIGFIP); and the preparation of a new Procurement Code. The program has been under implementation since 2000. The reforms will be reinforced under the ERP. (i) Budget Formulation. Under the ERP, the government intends to use regular reviews of its public expenditure management to ensure that resources are being allocated and used in line with its priorities. Furthermore, work will be undertaken on medium term planning and execution of the budget, with a view to developing a Medium-Term Expenditure Framework (MTEF). A new unit (Cellule de Revue des Depenses Publiques) for Public Expenditure Studies is being created for that purpose. This Unit will carry out a first comprehensive PER in 2002, Economic Recovery Credit 17 with particular attention to the social sectors. It will also develop a medium-term work program, which it will pursue with the support of IDA, the EU and other partners. (ii) Financial Accountability. The program for public expenditure reform was developed in response to the problem of misapplication of resources that was noted in 1998 during the audit of the health sector programs supported by the EU. The program was prepared on the basis of the results of diagnostic review of procedures conducted with the support of the EU. The program constitute an adequate vehicle for strengthening accountability over the medium term. However, after the first annual PER, the authorities plan to take stock of the performance in this area by preparing a country financial assessment (2003-04). (iii) Budget execution and public procurement. In 1999, the government introduced an integrated public financial management system (SIGFIP) and launched a review of procurement procedures. While the SIGFIP operates satisfactorily, it showed initially a tendency to slow down the processing of operations. This slowed down the implementation of development projects, including IDA-supported ones. Corrective measures have been adopted recently making the SIGFIP more flexible, and a special commission has been set up to monitor its performance. 53. Under the ERP, two further modifications are planned, to help accelerate the pace of disbursements for project implementation: (i) institution of advances for four months expenses for each operation; and (ii) the assignment of the duties of "regisseur" on the project financial managers and accountants, to allow for efficient use of the advances. The funds available under the system of advances will be used for all eligible project expenditures, including operating expenses. Where IDA projects/programs are concerned, each advance system (regie d'avance) will receive resources from both the Special Account and the national counterpart account, respectively. The resources will go into two separate accounts, as provided for by the Credit Agreements. The integrity and performance of these arrangements will be continually monitored through frequent ex-post verifications/controls. A technical audit of the expenditure processes will be carried out at the end of 2002. (iv) Procurement Reform. The reform of procurement deals with all the principal components of procurement: (i) an established legal framework, including the law and institutions, with clear responsibilities in regulation, policy, audits and recourse; and distinct from the public entities actually handling procurement; (ii) a set of modern procurement procedures, including the directives (Code), sample bidding documents, transparent and efficient procedures for evaluating and adjudicating bids, and efficient management of contracts; (iii) sufficient institutional capacity, including competent personnel; (iv) the existence of an independent control system, including regular audits and application of sanctions, a judicial system of recourse, an environment distinguishing the role of oversight of procurement from that of procurement itself; and (v) measures against corruption incorporated in the law on procurement, along with the applicable sanctions. 54. The partial results of the procurement reform were examined in a seminar in Yamoussoukro in May 2001. The recommendations of this seminar were to be used to update the Code. The remaining challenges in the institutional and legal reform are: (i) the composition and the terms of reference of the second commission of arbitrage and reconciliation; (ii) the C6te d'Ivoire 18 choice of an independent entity for external audits; and (iii) the inclusion of provision for penal sanctions and their application in cases of corruption in procurement. 55. The Code will be submitted to the Council of Ministers by June 2002 for their adoption and authorization of further work on the reform, by deepening the analysis of the institutional framework and proposing arrangements for training and capacity building, as well as a master plan on computerization of the system. Application of the Code will require the approval and entry into operation of all the institutional aspects (creation of entities responsible for procurement at central and decentralized levels, creation of new commissions). An international consulting company has been recruited to work on these aspects. Their recommendations will be adopted by the government via application decrees. Thereafter, the Code will be resubmitted for final adoption by the Council of Ministers in September 2002, along with application decrees. In 2003, the Bank will collaborate with the authorities on an analytic review of the implementation of the reforms as regards: (i) adequate staff in all the procurement entities to fulfill their new responsibilities; (ii) capacity building and training at a sufficiently rapid pace to permit these entities, particularly the new ones at both the central and decentralized levels to perform their duties; and (iii) adequate supply of the modern tools needed for their work. The authorities intend to undertake a thorough review of performance of the Code (CPAR), once enough time has elapsed and some experience has been accumulated in implementing it. (v) Governance: Internal Controls, Auditing and External Oversight. Reforms will be carried out to increase the transparency and accountability of the budget process: (a) strengthening the Financial Control Directorate (Direction du contr6le financier) and the General Inspection of the Ministry of Economy and Finance (Inspection Generale des Finances); and (b) restructuring the existing National Accounts Chamber (Chambre des Comptes), responsible for the a posteriori control of all the organizations that receive funds from the State, into a fully autonomous Cour des Comptes. Finally, the government will prepare two major pieces of legislation to be the core of its anti-corruption program: a Fiscal Responsibility Act and an Anti- Corruption Practices Act. (vi) Increasing Stakeholders' Participation. The government has decided to use decentralization as the main instrument to improved service delivery. Communalization will lead to the creation of 580 communes compared with an original 370. Beneficiaries participation in policy/program design, implementation and monitoring will be systematically sought through inter-alia: (a) the empowerment of stakeholders in the education and the health sectors, by transferring directly to the local (schools and health centers) management committees (COGES), and making them accountable for funds for the operation and maintenance of basic infrastructure; (b) making agricultural services demand-driven and (partly) financed by beneficiaries through contractual arrangements; and (c) restructuring and deconcentrating ministries and transferring some of their responsibilities to the newly created communes. Economic Recovery Credit 19 IX. FEATURES OF THE PROPOSED ECONOMIC RECOVERY CREDIT A. Rationale 56. The ERP aims to create the conditions that would permit a return to strong and sustained high growth and the development of human resources able to participate in and contribute to such growth. It also aims to alleviate poverty amongst the poorest segment who are the rural workers and sharecroppers in export agriculture and the near subsistence food crop farmers and who constitute the labor force needed for growth. The proposed ERC would support these goals by making available quick-disbursing financing to help preserve a stable financial environment during the implementation of the ERP, and also enable the government to allocate higher levels of resources to the priority sectors of primary education and health, working through mechanisms that build local capacity to take responsibility for and manage these critical services. B. Reform Actions Taken Through June 2002 General (i) Submission to IDA of a final Letter of Development Policy. Creatin! the Conditions for Renewed, Broad-based Growth (i) Adoption by the Council of Ministers of a Statement of Privatization Policy, satisfactory to IDA, outlining the process of reorganizing and privatizing the CAA and the privatization strategy of the CIDT-Nouvelle; (ii) Inauguration of a new partnership with the private sector via launching of collaborative work on revision of the Fiscal Procedures Manual; (iii) Launching of an audit of the activities, procedures and financial statements of ARCC, BCC, and FDPCC up to March 2002; and (iv) Launching of a study of the regulatory framework to ensure real competition at all stages of the cocoa production chain ffifiere), and avoid emergence of dominant positions; as well as to define the marketing mechanism to be put in place before July 2002 for the 2002-03 harvest; Expanding Access to and Improving Delivery of Basic Public Services (Health and Education) (v) Increasing the allocation for primary schools within the approved 2002 budget of the Ministry of National Education by CFAF 6.8 billion (2.8 percent of the current budget of the ministry), distributed as follows: CFAF 2.5 billion for textbooks; CFAF 2.2 billion for school kits; CFAF 1.8 billion for COGES; and CFAF 0.3 billion for canteens; (vi) Allocation within the approved 2002 budget of the Ministry of Health of CFAF 680 million (1.25 percent of the total) to subsidize the purchase of essential drugs by the C6te d'Ivoire 20 poorest and most vulnerable people in the health districts of Tiassale, Grand-Lahou, Guiglo and Duekoue; and agreement with government on the principles of managing these funds by the COGES for the benefit of the intended beneficiaries; (vii) Publication of legal texts (decree and arrete7) reorganizing the COGES in the education sector, enabling them to manage budgetary resources transferred to them or directly collected by them, with a reinforced role and responsibility for parents; and the adoption of a guiding manual of procedures; (viii) Agreement on the list of COGES participating in the program of decentralized management in the health and education sectors; and Improving Public Expenditure Management (ix) Agreement with the World Bank and the EU on a concept paper for the 2002 PER; and (x) Transmission to the National Assembly of the audits (Lois de Reglement) of the 1999 and 2000 budgets, including the reports by the Chambre des Comptes. C. Conditions of Credit Effectiveness (i) Ratification of the Credit Agreement and transmission to IDA of the Legal Opinion. D. Amount and Tranching 57. The amount of the proposed ERC is US$200 million equivalent. The proposed ERC would be disbursed in three tranches, subject to both general and any specific conditions being met. The first tranche of US$100 million would be disbursed upon credit effectiveness. E. Conditions of Second and Third Tranches 58. The second and third tranches of US$60 million and US$40 million, respectively, could be disbursed over the following twelve months, provided that: (i) there is satisfactory progress on the implementation of the program described in the LDP; (ii) the macroeconomic framework remains sound (as indicated by the PRGF-supported program remaining on track); and (iii) the following specific conditions are met. Creating Conditions for Renewed, Broad-based Growth (i) Adoption of a new regulatory framework for cocoa and coffee marketing based on competition and excluding any administrative allocations or quotas, unless as otherwise agreed with the Association; (Second Tranche) (ii) Implementation by BCC/FRC of a competitive marketing strategy for the 2002/2003 cocoa and coffee crops and excluding any administrative allocations or quotas, unless as otherwise agreed with the Association; (Second Tranche) Economic Recovery Credit 21 (iii) Implementation by ARCC, BCC, and FDPCC of the agreed recommendations of the audit of the activities, procedures and financial statements; adoption by them of levels of non-tax levies for cocoa and coffee in the 2002/2003 crop year; and approval by them of the annual programs and budgets for the crop year 2002/2003; (Second Tranche) (iv) The adoption by the government of an institutional and regulatory framework to ensure competition at all levels of the cotton chain; (Third Tranche) (v) Privatization (bringing to point of sale) of the "CIDT-Nouvelle"; (Third Tranche) (vi) The selection of a qualified technical partner for the CAA; and privatization (offer for sale to willing partners) of at least 51 percent of the government's shares in the CAA; (Third Tranche) and (vii) Adoption and publication of the revised Fiscal Procedures Manual (Third Tranche). Expanding Access to and Improvin2 Delivery of Basic Public Services (Education and Health) (viii) The signing of agreements between the Ministries of Education and of Health, on the one hand, and the selected education and health sector COGES, on the other; the opening of bank accounts in appropriate institutions by the COGES; and the deposit of at least 60 percent of the budget allocations for the activities of the COGES in those accounts; (Second Tranche) (ix) The opening to competition of text book publishing and editing for primary education; and the supply to the IEPs in 43 selected school districts of their stock of free textbooks; (Second Tranche) and (x) Completion of a study of the system for procuring and distributing essential drugs for the public sector; the adoption of an action plan based on the study for improving the procurement of essential drugs for the public sector; and provision of evidence, satisfactory to IDA, of the procurement of drugs in line with the action plan (Third Tranche). Improving Public Expenditure Management (xi) Transmission to the National Assembly of the draft new laws on Public Procurement and on the establishment of the Cour des Comptes (Lois de Reglement); (Second Tranche) and (xii) Transmission to the National Assembly of the draft audit (Lois de Reglement) of the 2001 budget, including the report by the Cour/chambre des Comptes (Third Tranche). C6te dI'voire 22 F. Implementation, Monitoring, Evaluation and Safeguards 59. Implementation Arrangements. An Inter-Ministerial Committee, chaired by the Prime Minister/Minister of Economy and Finance and including the representatives of the priority sectors, will oversee and guide the implementation of the program. The program's day-to-day supervision will be the responsibility of a Technical Unit established within the Prime Minister's Office/Ministry of Economy and Finance. The implementation of individual components will be the responsibility of the relevant line ministries (Ministries of Agriculture, Education, Health, Public Works) and other agencies. 60. Reporting and Auditing. The Technical Unit will be responsible for preparing regular progress reports for the Inter-Ministerial Committee and IDA. IDA's support to implementation will be provided through the Country Office, which will be strengthened in early FY03 with the recruitment of a local economist and the posting of an internally recruited senior macroeconomist. This support will be closely coordinated with the IMF and other donors providing support to the government's I-PRSP. The General Financial Inspection Directorate of the Ministry of Economy and Finance will carry out the audits of the 2002 and 2003 public expenditure programs of the Ministries of Agriculture, Health, Education and Public Works. The National Account Chamber (Chambre des Comptes) of the Supreme Court (to be replaced by an independent Cour des Comptes), will be responsible for the a posteriori control of the implementation of the budget and the audit of all the organizations that receives funds from the State. IDA reserves the right to seek an audit of the Credit deposit account. 61. Disbursements. The borrower will be the Government of the Republic of C6te d'Ivoire. Disbursements will follow IDA's simplified disbursement procedures for adjustment operations. Upon effectiveness, IDA will deposit the amount of the first tranche in a deposit account opened in Euro (or US Dollar) with BCEAO. Subsequent disbursements will be made through this account. Proceeds of the Credit will not be used to finance goods or services on the standard negative list. 62. Environmental Aspects. The ERC is a structural adjustment operation and the requirements of Operational Directive (OD) 8.60 apply. It is estimated that none of its components would have a significant negative environment impact. The government is already implementing satisfactory road maintenance mitigation measures (under the IDA-financed Transport Sector Program). The liberalization of the cocoa/coffee and cotton sectors, and improved farmers access to services and technologies, will improve the financial profitability of growing these crops and may therefore involve potential environmental risks. However, the government has already adopted reforms that would discourage agricultural/cocoa encroachment in natural forests and a comprehensive set of appropriate technologies - micro-spraying, integrated pest management (IPM), soil conservation measures -- are already promoted, and would be strengthened, through the IDA-financed National Agricultural Services Program. The overall PRSP impact assessment system will include a specific comprehensive environment impact assessment component. The latter will be developed within the context of the PRSP preparation and will be fully operational before the-end of 2002. 63. Gender Dimensions. The Poverty Assessment (1996) found important disparities in living standards between men and women as reflected, for example, in their respective access to Economic Recovery Credit 23 health and education services. Female workers are concentrated in low productivity food production and processing, informal trade and domestic activities. Four factors combine to marginalize poor Ivorian women: (i) inadequate control by women over their time and labor; (ii) limited access to productive resources; (iii) insufficient human capital accumulation; and (iv) lack of voice in public policy decisions. Low productivity among women has limited their economic contribution and thus diminished potential GNP. Meanwhile, UNAIDS data indicate that HIV prevalence is almost twice as high among females aged 15-24 (9.3 percent), compared with males of the same age (5.3 percent), reflecting marked gender and age differences in risk and vulnerability to HIV/AIDS. There are also key gender differences in responsibilities for care and coping, i.e., for AIDS orphans. 64. Monitoring of Implementation and Impact Assessment. The impact of the implementation of the country's poverty reduction strategy will be assessed through a comprehensive system of key human and economic development indicators specific to each of the major policy domains. The development of such a full poverty impact monitoring system (PIMS) has started with the preparation of the I-PRSP and it is expected that it will be fully operational by the end of 2002. However, specific indicators have been developed to monitor the implementation of key reforms agreed upon under the ERC. Because of the latter's short time span, these indicators are essentially process and output indicators. Fiduciary Safeguards 65. The measures being implemented by the government to strengthen financial management are considered adequate to ensure that fiduciary standards are met with regard to the use of IDA resources provided under the ERC. The same applies to the use of the budgetary savings expected from debt relief under the enhanced HIPC Initiative. The measures include the following: (i) a value-for-money audit of government recurrent and capital expenditures, which will establish compliance with existing regulations and procedures, and assess the comparative cost of public services with the prices in the private sector; (ii) strengthened financial management at the decentralized level; and (iii) a new procurement code which will ensure transparency in procurement down to the decentralized level. These will be bolstered with reinforcement of the inspection and financial control system, with a view to achieving accountability and transparency in the use of public resources. The reinforcement will cover the a priori and a posteriori control agencies in the Ministry of Economy and Finance as much as the supreme audit institution, the Chamber of Accounts of the Supreme Court. 66. Country Financial Accountability. For the last three years, the government has been implementing a comprehensive program of improving the planning, implementation, follow-up and control of public expenditures, with support primarily from the EU. The reforms are also designed to directly support the decentralization and de-concentration of the government's administration and service delivery to the local level. The reforms cover budgetary management, public procurement, financial management, the control and sanctions system, and relations between the central and local governments. 67. Currently, budgetary preparation is considered satisfactory. Data is accurate and available in a timely fashion. To further improve resource allocation, budget formulation will be C6te d'Ivoire 24 strengthened with a link to analysis done in PERs. A new Unit, the 'Cellule de Revue de D4penses Publiques" has been established and given responsibility for the PERs. The Unit will bring together a core group made of representatives of the Ministry of Economy and Finance and the Ministry of Plan, and execute a medium-term work program to guide reforms. It will undertake the first PER in 2002. Part of this work, which will extend into 2003, will cover the establishment of a system to track poverty-related expenditures (including those to be financed out of HIPC-derived savings), and a value-for-money audit. 68. Budget execution is also being improved. The integrated financial management system (SIGFIP) is being regularly adjusted to permit effective budget management including at the decentralized level. The "Directions Administratifs et Financiers (DAF)" which do the programming of the budget and support its implementation in each ministry, will be reinforced. Proposals are now being reviewed in the government (with support from the IMF) to place the DAF under the sole control of the Minister of Economy and Finance. This change would enforce the SIGFIP system, ensuring that no commitment to spend can be undertaken outside the system and that extra-budgetary expenditures are not permitted. 69. The Financial Control Directorate (Contr6le Financiere) and the Budget Control Office (Controle Budgetaire) are being reinforced with additional personnel and material means. They will publish regular bulletins to promote transparency. The General Inspectorate of Finances (IGF) is conducting a training program for new staff. The Chambre des Comptes received, in January 2002, the Lois de Reglement for the years 1999 - 2000. The Chambre plans to issue its report for these years to the Assembly by mid-2002. Following the PER planned for 2002, a CFAA will be prepared (2003). 70. Country Procurement Assessment. A new Public Procurement Code has been finalized in 2002, in consultation with the Bank. Among other things, it will permit decentralization of procurement to the local level and is designed to simplify procedures, avoid systematic exemptions from competitive bids and introduce full transparency in the bidding and award process. It provides for an arbitrage commission at the central and regional levels to allow for appeals against awards as well as a consultative commission at the Ministerial level to deal with direct procurement and eligibility of bidders. The Director of Public Procurement will be given the material means and authority to carry out his fimctions. The new Code will enter into implementation later in 2002. The Bank is lending assistance to prepare the basis. The authorities plan to undertake a review once the Code has been under implementation for a while. For this reason, a CPAR is planned tentatively for 2004. Donor Coordination 71. IDA continues to work closely with all of Cote d'Ivoire's development partners to support the country's programs. The medium-term PRSP will provide the overall framework for donor support, including IDA's and IMF's. The ERC operation is designed specifically to complement efforts supported by the IMF under the PRGF and by other donors. The PRGF will focus on a stabilization program, as well as on key structural measures identified in the I-PRSP which directly affect the macroeconomic program, in particular in the energy and the financial sectors. The reforms supported by the ERC would be coordinated with those supported by other Economic Recovery Credit 25 donors to ensure coherence, and avoid gaps and/or duplication. In the area of poverty reduction measures, the EU is expected to be a close partner. X. COUNTRY OWNERSHIP, BENEFITS AND RISKS 72. National ownership of and commitment to the ERC are high. The operation has been prepared in close collaboration with the government and will support critical reforms/activaties clearly identified during the highly participatory preparation of the country's I-PRSP. The ERC would provide vital financial support necessary for restoring macroeconomic stability and creating the conditions for accelerated growth. It would also specifically address poverty reduction by targeting structural reforms and public expenditures in key sectors, and by actually channeling public funds to activities directly benefiting the poor, particularly in rural areas. The following main risks have been identified: (i) the national reconciliation process may stall or be reversed, which may lead to renewed social unrest and a disruption of economic activities. The Nationai Reconciliation Forum (October 2001) was an important test for assessing the strength of the on-going social and political mending process. The on-going preparation of the full PRSP also provides a national forum to discuss priorities and possible arbitrage between conflicting objectives and interests. By providing support for increased access to opportunities and services to disenfranchiseE groups, the ERC would be instrumental in diffusing the tensions that will continue in the medium-term during the transition to sustained and broad-based growth. The measures aimed at benefiting the poor will also reduce social distress and discontent. (ii) the government may lack the institutional capacity to sustain the stabilization and structural reforms which underlie the recovery effort. This would render iargely ineffective any additional external financial resources, including through the ERC, and curtail any further assistance from IDA. This risk will be mitigated by ensuring that the recovery program is fully funded, the ERC supports the analysis and improvement of the country's public financial accountability arrangements, and on- going operations and Economic Sector Work (ESW), in particular those funded by IDA, and provide complementary concrete implementation support to the government's economic recovery program. (iii) new external shocks in the form of export price declines, loss of government revenues and lack of external concessional financing could interrupt the recovery and the poverty alleviation programs. The evident commitment of major donors including the Bank to assist Cote d'Ivoire during the transition phase and thereafter partly alleviates these risks. C6te d'Ivoire 26 XI. RECOMMENDATION 73. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve it. James D. Wolfensohn President by Shengman Zhang Washington, D.C. May 14, 2002 Annex 1 C6te d'Ivoire: Economic Recovery Credit Page I of I ECONOMIC RECOVERY CREDIT SUPPLEMENTARY CREDIT DATA SHEET Timetable of Key Project Processing Events Time taken to prepare the project Identification January 2002 ROC Meeting March 7, 2002 Appraisal March 12-21, 2002 Negotiations April 22, 2002 Board Presentation June 4, 2002 Effectiveness Date End-June, 2002 Closing Date December 2003 Task Team Members Emmanuel Akpa Team Leader, AFTP4 J. Paul Chausse co Team Leader, AFTRS Richard Westebbe Consultant, AFTP3 Gaston Gohou Consultant, AFTP4 Denise Vaillancourt Sr. Health Specialist, AFTH2 Gerald Meyerman PSD Specialist, PSASP Rachidi Radji Sr. Education Specialist, AFTH2 Steve Wan Language Program Assistant, AFTP4 C. Morin/T. Mpoy Kamulayi Lawyer, LEGAF Renee Desclaux Disbursement Officer, LOAGI This report is based on the findings of the World Bank mission which visited the Republic of Cote d'Ivoire in March 2002 to assist the Government in the appraisal of the Economic Reform Credit. Mission members included: Messrs./Mmes E. Akpa (Team Leader/Sector Manager); T. Ahlers (Director, AFRVP), J. P. Chausse, R. Westebbe, G. Gohou, D. Vaillancourt, G. Meyerman, R. Radji, and S. Wan. Annex 2 C6te dI'voire: Economic Recovery Credit Page 1 of 12 Unofficial Translation ECONOMIC RECOVERY CREDIT LETTER OF DEVELOPMENT POLICY MINISTRY OF ECONOMY AND FINANCE REPUBLIC OF COTE D'IVOIRE NO. 1389/MEF/CAB-l/Mbv Union-Discipline-Work [seal] Minister of Economy and Finance Abidjan, May 14, 2002 Mr. James D. Wolfensohn President World Bank Washington, DC 20433 Dear Mr. Wolfensohn, Since 1994, the government has implemented programs of macroeconomic and structural reform, with a view to achieving strong and balanced economic growth and establishing financial viability over the medium term. These programs have been supported by the International Monetary Fund with the Poverty Reduction and Growth Facility, initially during the period 1994-97, then during the period 1998-2001, excluding the suspension in 1999. Simultaneously with the approval of the second agreement, Cote d'Ivoire was declared eligible for relief on its external debt in the context of Highly Indebted Poor Countries Initiative (HIPC), with the completion point set for March 2001. Within the framework of these arrangements, the government achieved significant progress in reducing macroeconomic disequilibria, liberalizing the economy and creating the basis for sustained growth. However, from 1999 onwards, the country became confronted with serious problems of budgetary management and governance, which became exacerbated by an unparalleled socio-political crisis. Confronted with these difficulties, Cote d'Ivoire could not attain the objectives of the tree-year adjustment program supported by the PRGF approved on March 18, 1998. The public finances remained fragile, with severe cash flow pressures illustrated by the accumulation of internal and external payment arrears as well as by a high level of unauthorized but committed expenditures (DENO). Private investment, which was until then the basis of growth, strongly declined, as a result of the deterioration of the economic and the socio-political environment. From 1999 on, per capita income fell in a context of strong population growth, social indicators deteriorated, and poverty indicators remained at a high level, particularly in rural areas. It is in this difficult context that the Government of the second Republic started in June 2001, rehabilitation of financial management to improve the public finances, curb problems of governance and accelerate structural reforms. The government implemented an interim reform program covering the period July-December 2001, which enabled it to create the necessary Annex 2 C6te dIvoire: Economic Recovery Credit Page 2 of 12 conditions for the preparation of a more ambitious program supported by the PRGF. The main macroeconomic objectives for the period 2002-04 are: (a) an average real GDP growth rate of 4 percent; (b) reduction in inflation to less than 3 percent; and (c) reduction of the external current account deficit (including official transfers) to 1 percent of GDP by 2004. In parallel, an Interim Poverty Reduction Strategy Paper (I-PRSP) was approved and adopted by the Board of the World Bank, permitting the choice of September 2002 as the Decision Point for the enhanced HIPC Initiative. In fact, the government has made the fight against poverty a priority of its development program. The principal objectives of its poverty reduction: (a) the reduction of the poverty threshold from 33.6 percent in 1998 to 30 percent in 2005; (b) increase in the gross enrollment rate from 74 percent in 2000 to 77 percent in 2004; (c) improve access by the population to primary health care; and (d) intensification of the fight against HIV/AIDS. The government's desire to fight against poverty and assure sustained growth requires the deepening of structural reforms to be implemented in close collaboration with the World Bank and other development partners. The government plans to rely on: (i) a significant improvement of the quality of public expenditures in the social sectors so as to expand access to public services and improve their quality; (ii) the finalization of reforms of the agricultural crop chains; (iii) pursuit of the withdrawal of the State from the productive and commercial sector; (iv) improvement of the regulatory and operational environment of enterprises; (v) improvement of public expenditure management; and (vi) decentralization. The present Letter of Development Policy describes the strategies, actions and priority actions for which the government would like to receive the support of the World Bank in the context of the implementation of its program of growth and poverty reduction. The program consists of three components: (i) creation of strong, broad-based growth; (ii) improvement of access by the population to basic public services: education and health; and (iii) improvement of public finance management. We reaffirm our commitment to reinforce and increase the means necessary to the fight against poverty, and to take all measures which will enable us to arrive at the completion point of the HIPC. We are convinced that the policies outlined in our program will make it possible to carry out these objectives and to this end, we pledge to take all the supplementary measures which would be necessary. Sincerely yours, The Minister, Bohoun Bouabre Annex 2 C6te d'Ivoire: Economic Recovery Credit Page 3 of 12 ECONOMIC RECOVERY CREDIT LETTER OF DEVELOPMENT POLICY I. INTRODUCTION 1. Since 1994, the government has implemented programs of macroeconomic and structural reform, with a view to achieving strong and balanced economic growth and establishing financial viability over the medium term. These programs have been supported by -the International Monetary Fund with the Poverty Reduction and Growth Facility, initially during the period 1994-97, then during the period 1998-2001, excluding the suspension in 1999. Simultaneously with the approval of the second agreement, Cote d'Ivoire was declared eligible for relief on its external debt in the context of Highly Indebted Poor Countries Initiative (HIPC), with the completion point set for March 2001. Within the framework of these arrangements, the government achieved significant progress in reducing macroeconomic disequilibria, liberalizing the economy and creating the basis for sustained growth. However, from 1999 onwards, the country became confronted with serious problems of budgetary management and governance, which became exacerbated by an unparalleled socio-political crisis. 2. Confronted with these difficulties, Cote d'Ivoire could not attain the objectives of the tree-year adjustment program supported by the PRGF approved on March 18, 1998. The public finances remained fragile, with severe cash flow pressures illustrated by the accumulation of internal and external payment arrears as well as by a high level of unauthorized but committed expenditures (DENO). Private investment, which was until then the basis of growth, strongly declined, as a result of the deterioration of the economic and the socio-political environment. From 1999 on, per capita income fell in a context of strong population growth, social indicators deteriorated, and poverty indicators remained at a high level, particularly in rural areas. 3. It is in this difficult context that the Government of the second Republic started in June 2001, rehabilitation of financial management to improve the public finances, curb problems of governance and accelerate structural reforms. The government implemented an interim reform program covering the period July-December 2001, which enabled it to create the necessary conditions for the preparation of a more ambitious program supported by the PRGF. The main macroeconomic objectives for the period 2002-04 are: (a) an average real GDP growth rate of 4 percent; (b) reduction in inflation to less than 3 percent; and (c) reduction of the external current account deficit (including official transfers) to 1 percent of GDP by 2004. 4. In parallel, an Interim Poverty Reduction Strategy Paper (I-PRSP) was approved and adopted by the Board of the World Bank, permitting the choice of September 2002 as the Decision Point for the enhanced HIPC Initiative. In fact, the government has made the fight against poverty a priority of its development program. The principal objectives of its poverty reduction: (a) the reduction of the poverty threshold from 33.6 percent in 1998 to 30 percent in 2005; (b) increase in the gross enrollment rate from 74 percent in 2000 to 77 percent in 2004; (c) improve access by the population to primary health care; and (d) intensification of the fight against HIV/AIDS. Annex 2 C6te d'Ivoire. Economic Recovery Credit Page 4 of 12 5. The government's desire to fight against poverty and assure sustained growth requires the deepening of structural reforms to be implemented in close collaboration with the World Bank and other development partners. The government plans to rely on: (i) a significant improvement of the quality of public expenditures in the social sectors so as to expand access to public services and improve their quality; (ii) the finalization of reforms of the agricultural crop chains; (iii) pursuit of the withdrawal of the State from the productive and commercial sector; (iv) improvement of the regulatory and operational environment of enterprises; (v) improvement of public expenditure management; and (vi) decentralization. 6. The present Letter of Development Policy describes the strategies, actions and priority actions for which the government would like to receive the support of the World Bank in the context of the implementation of its program of growth and poverty reduction. The program consists of three components: (i) creation of strong, broad-based growth; (ii) improvement of access by the population to basic public services: education and health; and (iii) improvement of public finance management. A. Strong and Broad-based Growth 7. The economic reform program undertaken by the government is expected to permit the Ivorian economy to return to a path of real growth averaging 4 percent over the period 2002-04. 8. This growth will be based on the following essential levers: (i) improvement of the public finances and the search for enhanced competitiveness of the economy; (ii) promotion and development of the private sector and the development of sectors like agriculture, infrastructure, industry and tourism; (iii) modernization and professionalization of agriculture, notably food crop agriculture and non-traditional crops; (iv) upgrading of the distribution channels for products and the development of their processing. 9. This component of development policy will emphasize competitiveness and growth of the agriculture sector and development of the private sector. a. Competitiveness and Growth of the Agriculture Sector 10. In agriculture, the government's policy will be anchored on: (i) promotion of competition and efficiency in the chain of the major crops, so as to increase the share of value added accruing to producers; (ii) improvement of access by producers to markets, especially export markets; (iii) increase in agricultural productivity; and (iv) diversification and derivation of higher value from products, especially by their transformation into higher value-added products. 11. The government will consolidate the liberalization of the coffee/cocoa chain. A new institutional and regulatory framework has been instituted consisting of: (i) the Autorite de Regulation du Cafe et du Cacao (ARCC), which is in charge of implementing the legal and regulatory framework of the sector in a way that guarantees effective competition at all levels; Annex 2 C6te d'Ivoire: Economic Recovery Credit Page 5 of 12 (ii) the Bourse du Cafe et du Cacao (BCC), in charge of coordinating the marketing of coffee and cocoa and implementing, along with the FRC, a mechanism for better management of market risk; (iii) the Fonds de Regulation et de Contr6le (FRC), which has the responsibility for managing the financial management of the marketing operations; and (iv) the Fonds de DIveloppement de la Production de Cafe et de Cacao (FDPCC), responsible for the financing of the sector's development programs that are conceived by the producers themselves, using the levies on the crops, as freely agreed by them. 12. To finalize the operationalization of the institutional framework, the government will ensure: * the maintenance of effective competition at all levels of the chain and the promotion of national exporting small- and medium-scale enterprises, with particular attention to avoiding the emergence of dominant positions; * the representativity/legitimity of the governing organs of the new institutions as well as the transparency and efficiency of their activities; * the efficiency of the mechanism for marketing and management of market risk as well as its compatibility with true competition among operators in the crop chain; * the compatibility of the nature and level of direct taxes and other levies on the crop chain with the goal of economic growth and poverty reduction in the rural areas. 13. While waiting to define the definitive regulatory framework for the entire crop chain, the ARCC instituted for the 2001-02 crop year a transitory system based on ceilings on purchases. The government has launched a study of the framework to put in place that would provide a satisfactory response to all the concerns in this area. This framework will be put in place before the marketing of the output of the 2000-03 crop year. It will exclude the use of administrative allocations or quotas, except as may be agreed with IDA. 14. In the context of its strategy of raising the value added created and distributed in the sector, the government will launch a detailed review of other activities in the crop chain: transformation, field purchase, bagging, transit and phytosanitary treatment. In particular, the government will launch: (a) a study of the value added created by local transformation as a basis for the development of this activity; and (ii) a study of the strategy to promote quality, including methods of conditioning of the product for exportation. 15. To raise representativity and efficiency of the new institutions, the government will see to it that: (i) the operating modality of the governing organs of the BCC and the FRC permit the various actors of the industry group to participate in decision making; and (ii) the elections are organized with transparency before 30 September 2002, towards the renewal of the mandate of the producer's representatives on the Board of the BCC. As to the ARCC, BCC and FRC, the government will ensure that they: (i) acquire clear internal operational policies and procedures which are known to all; (ii) prepare programs of activities and annual operating budgets to be approved by their governing bodies; and (iii) acquire satisfactory management systems. To this end, an audit will be conducted on the activities of the management of the ARCC, BCC and FPDCC through 31 March 2002. Annex 2 C6te d'Ivoire: Economic Recovery Credit Page 6 of 12 16. In the 2001-02 crop year, the marketing of cocoa took place within a transitory system where previously fixed prices were replaced by freely determined prices above a minimum based on international prices. This system has worked satisfactorily and permitted producers to benefit from the recent strong increase in the international market price for cocoa. 17. The BCC will now decide a new marketing system for the 2002-03 crop year. This cocoa marketing mechanism will be based on the recommendations of a study being undertaken with the assistance of the World Bank, and will be introduced before July 2002. The government will ensure that the new system: (i) receives the adherence of all the actors in the chain; (ii) eliminates all direct intervention by the State and all direct or implicit financial involvement in the marketing; (iii) allows the pass-through of the international market price to producers; and (iv) eliminates all use of a system of administrative allocation or quotas, except those justified by the study. 18. With the fiscal levies maintained within the limit of 20 percent, the government will ensure that the total of taxes and other levies do not exceed 30 percent of the c.i.f. price. 19. As to the other levies, the government will ensure that their use will be on the basis of clearly defined activities: (i) the levies of the ARCC, the BCC, the FRC, and the FDPCC will be justified on the basis of work programs and annual budgets approved by their governing bodies; and (ii) the rules for managing the prudential reserve of the BCC/FRC will be clearly defined. The government's goal is to optimize the efficiency of the tax-cum-incentive system on the development of the crop. To this end, the government will undertake a general review of the current system before the end of the year 2002 with a view to identifying scope for reducing their levels. New levels of the non-tax levies will be adopted for the 2002/03 crop year, as will the annual programs and budgets of the ARCC, BCC, and FDPCC. 20. As to the cotton sector, the government is determined to complete the liberalization of the chain. To this end, it organized with the industry group (interprofession) in January 2002, a national seminar bringing together all the actors in the chain. The seminar recommended a program of measures which the government intends to implement with a view to: (i) complete the privatization of the CIDT at the end of 2002; and (ii) put in place before end-2002, an institutional framework guaranteeing fair competition at all stages of the chain. b. Private Sector Development 21. The crisis which has hit Cote d'Ivoire since 2000 has created an unfavorable environment for private investment, national as well as international. The renewal of strong economic growth depends on the dialogue between the government, business people and workers. The government's strategy for the development of the private sector will be anchored on: (i) pursuit of the withdrawal of the State from productive goods, and of the legal, judicial and regulatory environment for businesses and productive sectors; (iii) improvement in access to markets and services; (iv) invigoration of the financial sector; and (v) reduction in factor costs. Specifically, the government will undertake the following priority measures: reinvigorate the privatization process, with a view to promoting private sector growth as source of employment creation and income generation. The government will adopt a Annex 2 C6te d'Ivoire: Economic Recovery Credit Page 7 of 12 Declaration of Privatization Policy which will state its vision and the institutional framework in which the privatizations will be carried out; * finalize the restructuring plan of the Caisse Autonome d'Amortissement (CAA) by end- June 2002 at the latest. This plan will contain, among other things, the plan for reimbursing the debt of the government to the CAA, and the approach to restructuring of the CAA so as to reduce the State's share progressively to a maximum of 20 percent by the end of the year 2003 at the latest. This process will be confirmed by the government in its Declaration of Privatization Policy; * reinforce the framework for consultation between the public and private sectors by intensifying interaction and developing collaborative approaches to problem solving as the basis for creating durable mutual confidence. Along the same lines, the government will review the assessments conducted by its various tax services on private enterprises, with a view to improving their coordination and efficiency. To this end, the government has launched collaborative work on the revision of the Fiscal Procedures Manual. The government will adopt and diffuse widely the contents of the revised manual by September 2003. B. Improving Access by the Population to Basic Social Services: Education and Health a. Education 22. During the period 2002-05, the government's objectives are to: (i) raise the gross school enrollment rate from 74 percent to 80 percent; (ii) assure access to the school system for all, in particular girls and children in rural areas; (iii) improve the quality and relevance of teaching; (iv) reinforce the structures for vocational training, especially for the youth; and (v) pursue the reduction of illiteracy. 23. The strategy of the government for attaining these objectives rely on: (i) progressive generalization of fee-free education, from kindergarten through the first three years of primary school, with a particular emphasis on disadvantaged areas; (ii) increase in class space available by the construction of 800 classes a year, the elimination of the teacher deficit at all levels and the reinforcement of their abilities through in- service training; (iii) rehabilitation of technical and vocational training; and (iv) reinforcement of literacy programs. 24. In line with this, the government will implement the following measures: * maintenance of the share of the education sector in public expenditures (excluding external financing) at at least 3.8 percent of GDP, and that of primary education at 50 percent of the sector's allocation; * preparation of a public expenditure framework (PER) for this sector (see para. 29); * revision of the texts (decrees and application arr&es) relating to the organization and operation of the COGES, specifying the role to be devolved on to parents' associations in the management of the schools; Annex 2 C6te d'Ivoire: Economic Recovery Credit Page 8 of 12 * Increase the allocation to primary education within the education budget of 2002 by CFAF 6.8 billion, of which CFAF 1.8 billion for the COGES; at least 60 percent of the amount allocated to the COGES will be deposited in their bank account by September 2002; * total opening to competition of the market for the publication of textbooks at primary and pre-primary levels for the 2003-04 school year. For the 2002-03 school year, a transitory procedure which takes account of legal and time constraints, will be agreed with the World Bank. * reduction in the cost of schooling at the primary school level, by making textbooks free through a system of loaning out books, distributing "school kits" (at CP1 and CP2), and extension of the program of school canteens, with priority given as from the 2002-03 school year to the 43 most disadvantaged districts whose IEPs will receive their stocks of free textbooks by September 2002; * introduction of nutrition and reproductive health into the school programs and financing committees for the fight against AIDS in all the schools. 25. The government will also implement the reforms necessary for improving the management and efficiency of the sector, and reinforce the State-private sector-civil society partnership as well as the role of the COGES in the management of school infrastructures. The government has undertaken an in-depth review of the Programme National pour le Developpement de l'Education et la Formation (PNDEF) to make it coherent with this strategy. A report on the state of the national educational system (RESEN) will be finalized before end- 2002. The conclusions of this report will serve both to update the PNDEF and finalize the PRSP. b. Health 26. The principal objectives of the government for the period 2002-05 are to reduce mortality and morbidity linked with the major health problems (in particular maternal and infant mortality) by 15 percent by 2015 and to reinvigorate family planning. For this, the government intends to implement the following strategy: (i) improve the coverage and quality of health services, especially for vulnerable and rural areas; (ii) raise the vaccination rate to 80 percent by 2005; (iii) reduce the cost of health care to the population by the use of generic drugs and establishment of greater health insurance; (iv) raise the efficiency of he health system by restructuring the Ministry of Health, improvement in the management of human and financial resources, and reinforcement of the partnership with the private sector and civil society; and (v) raise the efficiency of the actions fighting against AIDS and the proactivity of those involved in the fight against this pandemic. The strategy will be implemented along the following lines: * ensure coherence between the strategy and public expenditures allotted to it. To do so, the government will undertake PER in the sector (see para. 29); * improve the availability and accessibility to the population of generic drugs, by the increase in the rate of their use through: (i) promotion of the utilization of generic drugs by sensitization campaigns, sensitizing training of doctors, nurses and pharmacists; (ii) detailed analysis of the possibilities among the products currently bought by the Pharmacie de la Sante Publique (PSP), to increase the proportion of generic medicines, and the sale by the PSP to private vendors; (iii) reinforcement of the quality control Annex 2 C6te d'Ivoire: Economic Recovery Credit Page 9 of 12 system for generic drugs; and (iv) improvement in the efficiency of the purchase system of financing and distribution of drugs meant for the public sector, to ensure pertinence in the choice of drugs, reduce their cost and avoid shortages. To this end, a study on procurement and distribution will be launched to aid the preparation of an action plan to be agreed with development partners. Future orders will be in line with the agreed action plan; * improvement in the quality of basic health services as well as their placement close to the population through a new partnership between the health institutions and the communities in the context of decentralization. A pilot performance-based system will be tested in four districts in the context of the Programme de D6veloppement des Services de Sante Integres (PDSSI) in order to prepare the definition and implementation of the new role and responsibility as well as the operational relations between (i) the Conseils Generaux and the health districts and (ii) the COGES and local health centers. * raise the rate of utilization of health services, especially: (i) by reducing the cost of essential drugs; and (ii) by placing health centers close to the poorest and most vulnerable segments of the population. To start this initiative, the price of drugs will be subsidized, thanks to a budgetary re-allocation of CFAF 680 million to the health centers in four districts of the pilot areas of the PDSSI (Tiassale, Grand-Latou, Guiglo, and Duekoue). For these four health districts: o the funds will be managed through a system of advances established within the PDSSI framework; and with the involvement of the concerned COGES; o for higher efficiency, the managers of COGES will be trained in community and financial management; o a procedural manual will be prepared, stating the modalities of control. C. Improvine Public Expenditure Manazement 27. The budgetary procedure starts with the macroeconomic framework. This framework, which proposes the total amount of the budget for the year in prospect, is reviewed by the Council of Ministers. After the adoption of the framework, a letter on it is sent to different ministries. This letter indicates the envelops of operational and investment expenditure allocated to each ministry. With the transmission of the budget proposals by ministry, the budget conferences are organized, leading to the adoption of the budget law by the Council of Ministers for the year in prospect. The draft law is transmitted to the National Assembly, together with the conformity certificate on the next budget under execution. The drafts of the budget law and the Lois de Reglement are discussed and adopted by the National Assembly. The debates in plenary are retransmitted by the National Television and the media. The budget law is then voted and promulgated in the government gazette (Journal Officiel) and the budgetary documents are distributed to the entities in the Administration, to operators in the economy (economic agents) and to the labor unions. 28. The government considers improvement in public expenditure management a central element on its strategy of improved service delivery. This improvement will cover the programming-budgeting, accountability in public resource use, execution of public expenditure Annex 2 C6te d'Ivoire: Economic Recovery Credit Page 10 of 12 programs, procurement, and the improvement of internal and external controls in the context of good governance. 29. In programming and budgeting, the government intends to use PERs and the preparation of an MTEF to ensure better coherence between its poverty reduction priorities and budgetary allocations. To do so, the government has created a Cellule de Revue des Depenses Publiques (CRDP) in the Ministry of Economy and Finance. The work program of the CRDP in 2002 will focus on review of expenditures in 2001, with particular attention to the education and health sectors. A Concept Note has been prepared for this purpose. The Unit will then define a medium-term program which it will follow with the support of the World Bank, the European Union and other development partners. 30. In 1999, the Government introduced a System Integre de Gestion des Finances Publiques (SIGFIP) and launched a review of the Procurement Code. While it functioned well generally, the SIGFIP tended in its initial form to be excessively centralized and limiting, especially with regard to the execution of programs involving decentralization. Corrective measures were recently introduced to make the SIGFIP more flexible and compatible with the policy of deconcentration and decentralization of the State, and the Government has established a special commission for monitoring the efficiency of the system. To improve the utilization of financial resources and raise the disbursement of extemal financing, a modification will be made to the SIGFIP to allow the use of a system of advances to permit more rapid implementation of projects. To ensure that the modification is managed properly, measures will be taken regarding more frequent ex-post controls/assessments. In addition, a technical audit of the expenditure chain will be carried out before end-2002 and a complete review of the reliability of the public resource management system (CFAA) will be carried out in 2003 in collaboration with development partners. 31. Regarding public procurement, the reform is based on the principal components: (i) an established legal framework for procurement; (ii) a set of transparent modem procurement procedures; (iii) sufficient institutional capacity; (iv) the existence of a system of independent controls; and (v) anti-corruption measures. 32. The partial results of the procurement system reform were examined in a seminar organized during 10-11 May, 2001 in Yamoussoukro. All recommendations of a regulatory and legal nature aimed at promoting and reinforcing transparency, equity, efficiency and the responsibilization of various actors will be incorporated in a revised version of the draft New Code. 33. The remaining challenges in the institutional and legal reform domain are: (a) composition and preparation of terms of reference for the Arbitrage and Conciliation Commission, in order to ensure that there is no risk of conflict of interest and that the private sector and civil society see it as an efficient mechanism for protecting the rights of all; (ii) the choice of an independent entity for conducting efficient external audits; and (iii) the inclusion and application of penal sanctions in the Code for fraudulent practices and corruption during procurement. Annex 2 C6te d'Ivoire: Economic Recovery Credit Page 11 of 12 34. The draft Code will be presented to the Council of Ministers at end-June 2002 for adoption and authorization of the pursuit of the reforms, which will deepen the analysis of the institutional arrangement and propose an operational structure for training and capacity building, as well as a master plan on computerization of the system. An international firm has been recruited by the Government to finalize the institutional aspects, and their recommendations will be examined for adoption. The final draft Code will be adopted by the Government latest in September 2002 and will be transmitted to the National Assembly for adoption. 35. In 2003, the government will launch an analytical review of the system, in collaboration with the World Bank to evaluate the implementation of the reform. It will cover: (i) the posting of adequate staff in all the entities in charge of procurement at the central as well as decentralized levels; )ii) capacity building and training to allow these entities to face up to their new responsibilities; and (iii) the provision of modern tools to these entities. 36. In the framework of good governance, measures have been taken to reinforce probity in public expenditure management by improving internal and external controls: (i) reinforcement of the Direction General du Budget du Ministere de l'Economie et des Finances, the Direction du Contr6le Budgetaire; and (ii) restructuring of the current Chambre des Comptes de la Cour Supreme, which is in charge of the control of all the services which receive public funds, into a Cour des Comptes Autonome. It will have the supreme authority of public finance control, and its jurisdiction will extend not only to public accountants but those who commit funds as well, including locally elected officials; and (iii) reinforcement of the Inspection Generale des Finances and implementation of technical and financial audits in other ministries (health, education, infrastructure). 37. The government will submit prior to September 2002, the draft Lois des Reglements 1999 and 2000 including the report by the Chambre des Comptes to the National Assembly. It will submit to the National Assembly, latest by December 2002, the draft Lois des Reglements 2001 along with the report of the Chambre des Comptes. A draft law on the creation of an autonomous Cour des Comptes will be submitted to the National Assembly for adoption. 38. In order to keep the general public informed, the government will ensure wide dissemination of the measures and economic results through the media. The coverage of parliamentary debates and the publication of informative articles in the written press will be systematized. 39. Decentralization and participation by the population are at the center of the strategy for the fight against poverty. This policy will permit the operation of 56 departments and 2 districts and raise the number of communes from the present 370 to 580 with three objectives: (i) put the administration close to the people; (ii) reinforce popular participation in the management of public affairs; and (iii) improve efficiency of the central administration. A national seminar (December 2001) has permitted the definition of the division of the areas of competence between the central administration, its deconcentrated organs and local government, in line with the principle of subsidiarity. A draft law on the transfer of competences is under preparation. During the period 2002-2005, the Government intends to launch pilot operations that would Annex 2 C6te d'Ivoire: Economic Recovery Credit Page 12 of 12 permit the testing of the practical implementation of the principles of deconcentration/decentralization in the health and education sectors. 40. The Ministry of Health has initiated the preparation of a plan aimed at restructuring/ decentralizing its services; improving its programming capacities and implementation at all levels, and introducing personnel management performance-based mechanisms to ensure that its services respond well to the needs of beneficiaries. It also aims at defining and implementing a monitoring evaluation system on the efficiency of the national health system. This plan will be finalized before end-2002, and then be implemented from 2003 onwards, initially as a pilot, before being extended to other ministries. 41. To raise the responsibilization of communities/beneficiaries in the definition of policies and the management of basic services, a pilot program has been prepared in the education and health structures at the local level. This responsibilization will rely on the COGES which will be given budgetary resources directly for managing services and maintaining facilities. The government has already launched the preparation of accompanying measures which are indispensable for operationalizing the program: (i) revision of the statutes of the COGES; (ii) the establishment of a protocol-agreement of partnership between the State and the COGES; and (iii) the definition of a mechanism for budgetary transfers and the institution of a monitoring and audit system for the operations of the COGES. At the end of the first year of operation of the selected COGES in the health and education sectors, an evaluation will be carried out. D. Institutional Arrangements for Program Management 42. In order to manage the government's economic and financial program efficiently, a Steering Committee has been put in place. It is presided by the Prime Minister and includes the Minister of Economy and Finance and the Minister of the Civil Service. The Steering Committee has a Technical Secretariat which has on-going responsibility for the program monitoring and evaluating the implementation of the reforms, measures and actions adopted by the government and agreed with the development partners. 43. In the framework of the Economic Recovery Program, the Steering Committee will oversee the appropriate management and implementation of the measures decided. An implementation report will be prepared for each tranche. The impact of these measures will be monitored with the aid of indicators which will be defined as part of the monitoring-evaluation arrangements to be put in place with the PRSP. MINISTERE DE L'ECONOMIE REPUBLIQUE DE COTE D'IVOIRE ET DES FINANCES 4 w>b NO 1 3 8 9 /MEF/CAB-1/Mbv -4 Monsieur James WOLFENSOHN PrEsident de b Banque Mondiale WASHINGTON Monsieur le President, Depuls 1994, le Gouvemernment a mis en ceuvre des programmes de reformes macro6conomlques et structurelles destinEes A rEallser une crolssance economique fbrte et Oqulllbrfe, et A retabllr la vIabilltE flnancl6re A moyen terne. Ces programmes ont bEn6f1cI de I'appui du Fonds Montalre Internadonal dans le cadre de la Facilitt de Reduction pour la Pauvretd et la Crolssance (FRPC), d'abord au cours de la pdriode 19941997, puls pendant la pErlode 1998-2001 avant 1a suspension Intervenue en 1999. Conjolnternent a l'approbatbon du second accord au titre de la FRPC, la C6te d'Ivolre a etW dclardc-41gibb-au btn6ftce de l'allIpment do s3 dette extErl.ure dans la cadre de l'Initlatlve en raveur des Pays Pauvres Tres Endettks (PPTE) avec le point d'achtvcmcnt fixb au mob de mars 2001. Dans le cadre de co accords, Is Gouvernement a reallse des progr*s slgnlflcatlfs en matiere de reduction des d6sequilibres macroEconomlques, de llbEralisatlon de l'economie et de creation des bases d'une croissance durable. Toutefols, a partir de 1999, le pays a ete confronte a de graves problemes de gestlon budgEtaire et de gouvernance qul ont ete exacerbes par une crise soclo-polltique sans precedent Confrontee A c;;s difficultds, la Cte -d'lvolre n'a-pa pu r4l0sor lot objectifk du programme triennal d'alustement appuye par la FRPC approuve le 18 mars 1998. Les finances publiques sont restees fagiles, avec de graves tensions de tresorerle lllustrees par I'accumulatlon des arrleres de palements tnterieurs et extErleurs ainsi que par un niveau elevE de depenses engages et non ordonnancees (DENO). Les lnvestissements prives, jusque 13 porteurs de la croissance, ont fortement bakse, suite a la degradation de l'environnement economique et soclo - polkique. De meme, le revenu par habitant a fl6chi A parilr de 1999 dans un contexte de fort taux demographlque, les Indicateurs soclaux se sont degradEs et I'Incidence de la pauvrete, particulirement dans le.s noxfl rurales, est restee b un niveau eleve. C'est dans cc contexte diMcile que le gouvernement de la deuxleme Rdpubllque a amorce en juin 2001, un assainissement de la gesdon flnancldre de I'ttat pour ameliorer [es finances publiques, remddler aux probitmes de gouuernance et41rc41&u'.res afannpL structurelles. Aussi, le gouvernement a-t-Il mis en ceuvre un programme Interlmalre de r6formes couvrant la periode julllet-decembre 2001, qui lul a permis de creer les conditions n6cessaires A I'elaboratlon d'un programme plus ambideux qul b4n6flcle de Vappul de la FacilIte pour la Reductlon de la Pauvrete et pour la Crotssance (FRPC) qul a ete approuve le 27 mars 2002 par le Consell d'Administration du FMI. Les principaux objectifs macroeconomlques pour la piriode 2002-04 retenus darns ce programme, sont: (a) un taux de croissance reel du PIB superteur A 4% en mayenne sur la perlode; (b) une reduction de r'innlatlon b moins de 3% ; et (c) une r4ductlon du deficit du compte courant exthrleur (y comprk les transferts officiels) A 1% du PIB 3 B'horizon 2004. Parallelement, un Document IntErlmalre de Strat6gie de la Reduction de la Pauvrete (DSRP-I) a WtF 4labore par le Gouvernement et approuvE par le Consell d'Administratlon de la Banque Mondlale permettant de fixer a septembre 2002 le point de dEcilson pour l'Bnttiative PPTE renforc6e. En effet, le Gouvernement a fait de la lutte contra 12 pativretr iine prinrtiw dft mn nroiramme de ddveloooemenL Les orinc(Daux objecdtf de sa sEratfgBe de r4duction de la pauvret# sont: (a) la reduction du seull de pauvrete de 33,6% en 1998 A 30% en 2005; (b) I'accroissement du taux brut de scolarbatton de 74% en 2000 A 77%h en 2004; (c) amilioration de B'accessiblkt des populations aux soins de santE primralre et I1ntenslflcation de la hutte contre le VIH/SIDA. La volonit du Gouvernoment de lutter contre ta pauvreO et dXmucec imtnecrnumsn soutenue requitewl'dppruosndimmem des refornmes structureBles-qui scront mises en ceuvre en Etrolte collaboratlon avec la Banque Mondiale et d'autres partenalres au d6veloppement. Le Gouvernement entend s'appuyer prindcpalement sur: (I) une amelioration signiflcatlve de la qualit des depenses publiques dans les secteurs soclaux afln c'%larvir l'acces aux services oublics et d'en accroltre Blefficacite; (II) B'achdvement des reformes des fllleres agricoles; (ill) la poursulte du desengagement de 'EaT du secteur productif et commercial; (Iv) I'am6lioratlon de I'environnement reglementaire et opEratlonnel des entreprises; (v) I'amelloratlon de la gestlon des depenses publiques; et (vi) la dEcentralisation. La presente leure de politique de d6veloppement a pour oblet de decrire les strategles, les actions et les mesures prioritaires que le Gouvernement souhaite voir appuyer par la Banque Mondiale dans le cadre de la mIse en oeuvre de son programme de crossance Economique et de reduction de la pauvrewE. Celle-cl s'arlfcule autour de trois volets: * Ba realksationi d'une croisance forte et partagee; * I'amElloratlon de l'acces des populations aux services sociaux de base: ducation et sante; * I'amelioration de la gesdton des depenses publiques. Nous reaffirmons notre volontc de renforcer et d'accroltre les moyens nEcessalres A la lutte contre la pauvretk, et de prendre toutes les mesures qui nous permettront de parvenlr au point d'achevement dans le cadre de l'initladve en raveur des Pays Pauvres Tr&s Endett.s (PPTE). Nous sommes convaincus tiue Iks politbues exposees dans notre Programme permettront de rtallser ces obiecUfs, et nous nous engageons a prendre toutes les mesures supplEmentaires qui pourralent s'averer n6cessalres A cet effet. le vous prle d'agreer, Monsleur le Pr6sldent, I'expression de ma haute consideration. LETTRE DE POLITIQUE DE DEVELOPPEMENT I. INTRODUCTION 1. Depuis 1994, le Gouvemement a mis en ceuvre des programmes de reformes macroeconomiques et structurelles destinees A realiser une croissance economique forte et equilibree, et A retablir la viabilite financiere A moyen terme. Ces programmes ont beneficie de I'appui du Fonds Monetaire International dans le cadre de la Facilite de Reduction pour la Pauvrete et la Croissance (FRPC), d'abord au cours de la periode 1994-1997, puis pendant la periode 1998-2001 avant la suspension intervenue en 1999. Conjointement A I'approbation du second accord au titre de la FRPC, la C6te d'Ivoire a e declaree 6ligible au benefice de l'allegement de sa dette exterieure dans le cadre de l'Initiative en faveur des Pays Pauvres Tres Endettes (PPTE) avec le point d'achevement fixe au mois de mars 2001. Dans le cadre de ces accords, le Gouvernement a realise des progres significatifs en matiere de reduction des desequilibres macroeconomiques, de liberalisation de l'economie et de creation des bases d'une croissance durable. Toutefois, A partir de 1999, le pays a ete confronte A de graves problemes de gestion budgetaire et de gouvernance qui ont ete exacerbes par une crise socio-politique sans precedent. 2. Confrontee A ces difficultes, la CMte d'Ivoire n'a pas pu realiser les objectifs du programme triennal d'ajustement appuye par la FRPC approuve le 18 mars 1998. Les finances publiques sont restees fragiles, avec de graves tensions de tresorerie illustrees par l'accumulation des arrieres de paiements interieurs et ext6rieurs ainsi que par un niveau eleve de depenses engagees et non ordonnancees (DENO). Les investissements prives, jusque lA porteurs de la croissance, ont fortement baisse, suite A la degradation de 1'environnement economique et socio - politique. De meme, le revenu par habitant a flechi A partir de 1999 dans un contexte de fort taux demographique, les indicateurs sociaux se sont degrades et l'incidence de la pauvrete, particulierement dans les zones rurales, est restee A un niveau eleve. 3. C'est dans ce contexte difficile que le gouvernement de la deuxieme Republique a amorce en juin 2001, un assainissement de la gestion financiere de I'Etat pour ameliorer les finances publiques, remedier aux problemes de gouvernance et accelerer les reformes structurelles. Aussi, le gouvernement a-t-il mis en oeuvre un programme interimaire de reformes couvrant la periode juillet-decembre 2001, qui lui a permis de creer les conditions necessaires A I' eaboration d'un programme plus ambitieux qui beneficie de I'appui de la Facilite pour la Reduction de la Pauvrete et pour la Croissance (FRPC) qui a ete approuv6 le 27 mars 2002 par le Conseil d'Administration du FMI. Les principaux objectifs macroeconomiques pour la periode 2002-04 retenus dans ce programme, sont: (a) un taux de croissance reel du PIB superieur A 4% en moyenne sur la periode ; (b) une reduction de l'inflation A moins de 3% ; et (c) une reduction du deficit du compte courant exterieur (y compris les transferts officiels) A 1% du PIB A l'horizon 2004. 4. Parallelement, un Document Interimaire de Strategie de la Reduction de la Pauvrete (DSRP-I) a ete elabore par le Gouvernement et approuv6 par le Conseil d'Administration de la Banque Mondiale permettant de fixer A septembre 2002 le point de decision pour l'Initiative PPTE renforcee. En effet, le Gouvemement a fait de la lutte contre la pauvrete une priorite de son programme de developpement. Les principaux objectifs de sa strategie de reduction de la pauvrete sont: (a) la reduction du seuil de pauvrete de 33,6% en 1998 a 30% en 2005 ; (b) l'accroissement du taux brut de scolarisation de 74% en 2000 a 77% en 2004 ; (c) amelioration de l'accessibilite des populations aux soins de sant6 primaire et l'intensification de la lutte contre le VIH/SIDA. 5. La volonte du Gouvernement de lutter contre la pauvrete et d'assurer une croissance soutenue requiert l'approfondissement des reformes structurelles qui seront mises en cvuvre en etroite collaboration avec la Banque Mondiale et d'autres partenaires au developpement. Le Gouvernement entend s'appuyer principalement sur: (i) une amelioration significative de la qualit6 des depenses publiques dans les secteurs sociaux afin d'elargir l'acces aux services publics et d'en accroitre l'efficacite ; (ii) l'achevement des reformes des filieres agricoles ; (iii) la poursuite du desengagement de l'Etat du secteur productif et commercial ; (iv) l'amelioration de l'environnement reglementaire et operationnel des entreprises ; (v) l'amelioration de la gestion des depenses publiques ; et (vi) la decentralisation. 6. La presente lettre de politique de developpement a pour objet de decrire les strategies, les actions et les mesures prioritaires que le Gouvemement souhaite voir appuyer par la Banque Mondiale dans le cadre de la mise en couvre de son programme de croissance economique et de reduction de la pauvrete. Celle-ci s'articule autour de trois volets: (i) la realisation d'une croissance forte et partagee; (ii) l'amelioration de l'acces des populations aux services sociaux de base: education et sante; (iii) l'amelioration de la gestion des depenses publiques. A << Croissance forte et partagee > 7. Les programmes economique et d'assainissement engages par le Gouvernement permettront a I' economie ivoirienne de retrouver un sentier de croissance reelle de 4% en moyenne sur la periode 2002-2004. 8. Cette croissance aura pour leviers essentiels : (i) I'assainissement des finances publiques et la recherche d'une plus grande competitivite de l'economie ; (ii) la promotion et le developpement du secteur prive, et le developpement de secteurs tels que l'agriculture, les infrastructures, l'industrie et le tourisme ; (iii) la modernisation et la professionnalisation de I'agriculture, notamment de l'agriculture vivriere et des productions non traditionnelles ; (iv) l'amelioration de 1'efficacite des circuits de distribution et de commercialisation des produits agricoles, et le developpement de la transformation de ces productions. 9. Cette composante de la politique de developpement mettra l'accent sur la competitivite et la croissance du secteur agricole et le developpement du secteur priv6. a. Competitivite et croissance du secteur agricole. 10. Dans l'agriculture, la politique du gouvernement sera axee sur: (i) I'accroissement de la competitivite du secteur et de la part de la valeur ajoutee revenant aux producteurs; (ii) I'amelioration de l'acces des producteurs au marche, notamment a l'exportation; (iii) I'accroissement de la qualite de la production agricole ; (iv) la diversification et une meilleure valorisation des productions notamment par leur transformation en produits de plus grande valeur ajoutee. 11. Le Gouvernement consolidera le processus de liberalisation de la filiere cafe/cacao. Un nouveau cadre institutionnel et reglementaire de la filiere a ete mis en place et est constitue de: (i) I'Autorite de Regulation du Cafe et du Cacao (ARCC), chargee de la mise en cruvre du cadre legal et reglementaire du secteur garantissant une concurrence effective a tous les niveaux; (ii) la Bourse du Cafe et du Cacao (BCC), chargee de coordonner la commercialisation du cafe et du cacao et de mettre en ceuvre, avec le FRC, un mecanisme permettant une meilleure gestion des risques de marche; (iii) le Fonds de Regulation et de Contr6le (FRC) charge de la gestion financiere des operations de commercialisation ; et (iv) le Fonds de Developpement de la Production de Cafe et de Cacao (FDPCC), responsable du financement de programmes de developpement du secteur a l'initiative des producteurs eux-memes, a partir de prelevements librement consentis sur la filiere. 12. Pour achever l'operationalisation de ce cadre institutionnel, le Gouvemement s'attachera a assurer: * l'instauration d'une concurrence effective a tous les niveaux de la filiere et la promotion des petites et moyennes entreprises exportatrices nationales avec un accent particulier sur la non constitution de position dominante. * la representativite/legitimite des organes de gouvernance des nouvelles institutions ainsi que la transparence et l'efficacite de leurs activites; * 1'efficacite du mecanisme de conimercialisation et de gestion des risques et sa compatibilite avec une concurrence veritable entre les operateurs de lafiliere; * la compatibilite de la nature et du niveau de la taxation directe et des autres prelevements sur la filiere avec l'objectif de croissance economique et de reduction de la pauvrete en zone rurale. 13. En attendant de definir le cadre reglementaire definitif pour l'ensemble de la filiere, I'ARCC a mis en place pour la campagne 2001-2002 un systeme transitoire base sur des plafonds d 'achat. Le Gouvemement a lance une etude pour la mise en place du cadre reglementaire permettant a la fois d'assurer une concurrence saine et loyale dans la filiere, empecher la constitution de positions dominantes et de promouvoir l'emergence de petites et moyennes entreprises efficaces. Ce cadre reglementaire, qui exclura toute allocation administrative ou quota la base de l'etude, sera mis en place avant la commercialisation de la production de la prochaine campagne 2002-2003. 14. Dans le cadre de sa strategie de promotion de la valeur ajoutee creee et distribuee dans le secteur, le Gouvernement lancera aussi une revue detaillee des autres activites de la filiere: transformation, achat en brousse, sacherie, transit et traitements phytosanitaires. En particulier, le Gouvernement lancera (i) une etude detaillee de la valeur ajoutee engendree par la transformation locale pour asseoir une strategie de developpement de cette activite; et (ii) une etude de la strategie de promotion de la qualite, y compris les methodes de conditionnement et d'emballage du produit a l'exportation. 15. Pour une meilleure representativite et une efficacite des nouvelles institutions, le gouvernement veillera a ce que: (i) le mode de fonctionnement des organes de gouvernance de la BCC, du FDPCC et du FRC permette aux differents acteurs de l'interprofession de participer a la prise de ddcision ; et (ii) le renouvellement des delegues des producteurs au Conseil d'Administration de la BCC se fasse avant le 30 septembre 2002 sur la base d'elections transparentes. Le gouvernement veillera egalement A ce que I'ARCC, la BCC et le FRC: (i) disposent de politiques operationnelles et de procedures internes claires et connues de tous; (ii) preparent des programmes d'activites et des budgets de fonctionnement annuels detailles, pour approbation par leurs organes de gouvemance; et (iii) soient dotes de systemes de gestion satisfaisants. A cette fin, un audit des activites et de la gestion au 31 mars 2002 de l'ARCC, la BCC et la FDPCC sera realise. 16. Au cours de la campagne 2001-2002, la commercialisation du cacao s'est faite dans le cadre d'un systeme transitoire oui les prix etaient libres A tous les niveaux de la filiere au dessus d'un prix minimum (annonce par la BCC en debut de campagne) base sur le prix international. Ce systeme a fonctionne de fa,on satisfaisante et permis aux producteurs de profiter de la recente forte hausse du prix du cacao sur le marche international. 17. La BCC compte maintenant decider du systeme de mise A marche pour la prochaine saison (2002-2003). Ce mecanisme de commercialisation du cacao sera mis en place avant la fin du mois de juillet 2002 sur la base des recommandations d'une etude qui sera entreprise avec le concours de la Banque mondiale. Le gouvemement veillera A ce que ce systeme: (i) re9oive I'adhesion des acteurs de la filiere ; (ii) elimine toute intervention directe de l'Etat et tout engagement financier direct ou implicite dans la commercialisation ; et (iii) permette que les prix du marche international soient repercutes au niveau des producteurs ; (iv) exclue tout recours A un systeme d'allocations administratives ou quotas autres que ceux qui pourraient s'averer justifies sur la base de l'etude. 18. Outre les prelevements fiscaux qui restent maintenus dans la limite de 20%, le Gouvernement veillera A ce que l'ensemble des taxes et autres prelevements sur la filiere ne depassent pas 30% du prix CAF. 19. Concernant les autres prelevements, le Gouvernement s'assurera que leur utilisation se fera sur la base d'activites clairement identifiees: (i) les prelevements de l'ARCC, de la BCC, du FRC et du FDPCC seront justifies sur la base de programmes de travail et de budgets annuels approuves par leurs organes de gouvernance ; (ii) les regles de gestion de la reserve prudentielle de la BCC/FRC seront clairement definies. L'objectif du Gouvernement etant d'optimiser l'efficacite du systeme de taxes/incitations sur le developpement de la filiere, il entreprendra une revue exhaustive du systeme actuel, qui sera completee avant la fin de l'annee 2002. b. Developpement du secteur prive 20. Pour ce qui concerne le secteur coton, le Gouvernement est determine A parachever la liberalisation de la filiere. A cette fin, il a organise avec l'interprofession, en janvier 2002, un seminaire national reunissant tous les acteurs de la filiere qui a recommande un programme de mesures, que le Gouvernement entend mettre en ceuvre, visant A: (i) achever la privatisation de la CIDT A la fin de 2002 ; et (ii) mettre en place avant la fin de 2002 un cadre institutionnel garantissant une concurrence saine et loyale A tous les stades de la filiere. 21. La crise qui a secoue la Cote d'Ivoire depuis 2000 a cree un environnement defavorable aux investissements prives, tant nationaux qu'internationaux. La reprise d'une croissance economique forte depend de la restauration de la confiance des investisseurs et de la reprise d'un dialogue constructif entre le Gouvemement, les operateurs et les acteurs du monde du travail. La strategie du Gouvemement en matiere de developpement du secteur prive sera centree sur: (i) la poursuite du desengagement de l'Etat ; (ii) l'amelioration de la securite des biens et des personnes, et de l'environnement legal, judiciaire et reglementaire des entreprises et des secteurs productifs; (iii) I'amelioration de l'acces au marche et aux services ; (iv) la dynamisation du secteur financier ; et (v) la diminution du cofit des facteurs. Specifiquement, le gouvernement entreprendra les mesures prioritaires suivantes: * redynamiser le processus de privatisation afin de promouvoir la croissance du secteur priv6, source de creation d'emploi et de revenus. Le gouvemement adoptera une lettre de politique de privatisation qui precisera sa vision et le cadre institutionnel dans lequel les privatisations seront menees. * Elaborer un plan de restructuration de la Caisse Autonome d'Amortissement (CAA) au plus tard A la fin juin 2002. Ce plan definira notamment le schema et les modalites d'ouverture du capital aux partenaires prives. A ce sujet, une premiere consultation sera lancee d'ici au 31 decembre 2002 en vue de selectionner une liste restreinte d'investisseurs potentiels credibles pouvant jouer le role d'actionnaire de reference. Une deuxieme consultation sera lancee en mars 2003 sur la base de la liste restreinte pour selectionner l'actionnaire de reference et pour reduire la participation de l'Etat dans cette institution A un niveau minoritaire d'ici au 30 juin 2003, et A moins de 20%, d'ici au 31 d6cembre 2003. Ce processus sera confirme par le Gouvernement dans sa << Lettre de Politique de Privatisation >>. * Enfin, renforcer le cadre de concertation secteur public-secteur prive en intensifiant les echanges et en developpant des approches de solutions concertees afin de creer les bases d'une confiance reciproque durable. Dans cet ordre d'idees, le Gouvemement va entreprendre une revue des controles des divers services et regies de l'Etat dans les entreprises privees, pour en ameliorer la coordination et l'efficacite. Le Gouvernement entamera un dialogue avec le secteur prive dont les resultats serviront A la revision du << Livre de Procedures Fiscales >>. Le gouvernement s'engagera a assurer une large diffusion de 1'ensemble des dispositions de ce << Livre >> B o I'amelioration de l'acces des populations aux services sociaux de base: education et sante> a. Education 22. Au cours de la periode 2002-2005, le gouvernement s'est donne les objectifs suivants: (i) accroiltre le taux brut de scolarisation de 74% A 80% ; (ii) assurer l'acces de tous, en particulier des filles et des enfants en zone rurale, au systeme scolaire; (iii) ameliorer la qualite et la pertinence de l'enseignement ; (iv) renforcer le dispositif de formation et d'insertion professionnelles, en particulier au profit des jeunes ; et (v) poursuivre la reduction du taux d'analphabetisme. 23. La strategie du gouvemement pour atteindre ces objectifs s'appuiera sur: (i) la generalisation progressive de la gratuite de l'enseignement, de la matemelle A la classe de troisieme, avec un accent particulier sur les zones les plus defavorisees; (ii) I'augmentation de la capacite d'accueil par la construction de 800 classes par an, la resorption du deficit d'enseignants A tous les niveaux et le renforcement de leurs competences par la formation continue; (iii) la rehabilitation de l'enseignement technique et professionnel ; et (iv) le renforcement des programmes d'alphabetisation. 24. A cet effet, le gouvernement s'attellera a mettre en aeuvre les mesures suivantes: * Le maintien de la part du secteur de l'education dans les depenses publiques (hors financement exterieur) a au moins 3,8% et en donnant une priorite au niveau primaire de l'education dans les allocations globales du secteur; * La realisation d'une revue des depenses publiques dans ce secteur (voir § 29); * La revision des textes (decrets et arretes d'application) relatifs a l'organisation et au fonctionnement des COGES precisant le r6le qui sera devolu aux associations de parents d'eleves dans la gestion des etablissements scolaires; * L'ouverture totale A la concurrence, du marche de l'edition des manuels scolaires du primaire et du pre-scolaire pour la rentree scolaire 2003-04. Pour la rentree 2002-03, une procedure transitoire tenantcompte des contraintes legales et des delais de production et de distribution sera convenue avec la Banque Mondiale. * La reduction des frais scolaires au niveau de l'ecole primaire, par la gratuite des manuels A travers un systeme de pret-location, la distribution de << kits scolaires >> (du CP1 au CE2) et l'extension du programme de cantines scolaires, en accordant des la prochaine rentree scolaire 2002 - 2003 la priorite aux (43) sous-prefectures les plus defavorisees; * L'introduction dans les programmes scolaires des notions de nutrition et de sante reproductive et le financement de comites de lutte contre le SIDA au niveau de toutes les ecoles. 25. Le gouvernement mettra egalement en ceuvre les reformes necessaires pour ameliorer la gestion et l'efficacite du secteur, et renforcera par ailleurs le partenariat Etat - secteur prive - societe civile ainsi que le r6le des Comites de Gestion (COGES) dans la gestion des infrastructures scolaires. II a entrepris la revue en profondeur du Programme National pour le Developpement de l'Education et la Formation (PNDEF) pour le mettre en coherence avec cette strategie. Un << Rapport sur l'etat du systeme educatif national (RESEN) >> sera acheve avant la fin 2002. Les conclusions de ce rapport serviront A la fois A sous-tendre l'actualisation du PNDEF et la finalisation du DSRP. b. Sante 26. Les objectifs principaux du gouvemement pour la periode 2002-2005 sont de reduire la mortalite et la morbidite liees aux grands problemes de sante (en particulier la mortalite maternelle et infantile) de 15% d'ici 2005 et de redynamiser la politique de planning familial. Pour cela, le gouvemement entend mettre en ceuvre la strategie suivante: (i) ameliorer la couverture et la qualite des soins de sante, notamment en matiere de sante primaire, avec un accent particulier sur les groupes vulnerables et les zones rurales ; (ii) augmenter le taux de vaccination A 80% d'ici 2005 ; (iii) reduire les frais de sante pour les populations grAce A l'utilisation des medicaments generiques et A l'instauration de l'assurance maladie universelle; (iv) accroitre l'efficacite du systeme de sante grace A la restructuration du Ministere de la Sante, a l'amelioration de la gestion des ressources humaines et financieres, et au renforcement du partenariat avec le secteur prive et la societe civile ; et (v) accroitre l'efficacite du dispositif de lutte contre le SIDA et la pro-activite des acteurs intervenant dans la lutte contre la pandemie. La mise en ceuvre de la strategie s'appuiera sur les axes operationnels suivants: * assurer la coherence entre la strat6gie de developpement du secteur et les depenses budgetaires en sa faveur. Pour ce faire, le Gouvemement mettra en ceuvre une revue des depenses publiques dans le secteur (voir § 29). * ameliorer la disponibilite et l'accessibilite des medicaments generiques (MEG) aux populations par l'accroissement du taux d'utilisation, grace A: (i) la promotion de l'utilisation des MEG par des campagnes de sensibilisation des utilisateurs et la formation/sensibilisation des medecins, des infirmiers et des pharmaciens ; (ii) l'analyse detaillee de la possibilite, parmi les specialites actuellement achetees par la Pharmacie de la Sante Publique (PSP), d'augmenter la proportion des medicaments generiques, et de la vente par la PSP des MEG aux distributeurs prives ; (iii) le renforcement du systeme de controle de qualite des medicaments g6neriques, en particulier au niveau du laboratoire national d'analyse ; et (iv) I'amelioration de l'efficacite du systeme d'achat, de financement et de distribution par la PSP des medicaments destines au secteur public, pour assurer la pertinence dans le choix des medicaments, diminuer leur cofit et eviter les ruptures de stock. A cet effet, une etude sur l'approvisionnement et la distribution sera lancee pour determiner un plan d'actions qui sera convenu avec les partenaires au d6veloppement. Toutes les commandes suivantes vont refleter le plan d'actions convenu; * amelioration de la qualite des services de sante de base ainsi que leur rapprochement de la population A travers un nouveau partenariat entre les structures de sante et les communautes dans le cadre de la decentralisation. Une experience pilote de gestion bas6e sur la performance sera conduite dans quatre (4) districts dans le cadre du Programme de Developpement des Services de Sante Int6gres (PDSSI) afin de preparer la definition et la mise en oeuvre des nouveaux r6le et responsabilite ainsi que les relations fonctionnelles entre (i) les Conseils Gn&raux et les districts sanitaires au niveau departemental et (ii) les COGES et les formations sanitaires au niveau peripherique; * augmenter le taux d'utilisation des services de sante notamment (i)en reduisant le couit des medicaments essentiels,(ii) en rapprochant les centres de sante des populations les plus pauvres et les plus vulnerables. Pour demarrer cette initiative, le prix des medicaments sera subventionne grace A une re-allocation budgetaire de 680 millions de FCFA mise A la disposition des formations sanitaires dans 4 district sanitaires (departements) de la zone pilote du PDSSI (Tiassale, Grand-Lahou, Guiglo et Duekoue). Pour ces 4 districts sanitaires: o les fonds seront geres A travers des regies d'avances mises en place dans le cadre du PDSSI; et elle impliquera les COGES concernes; o pour une plus grande efficacite, les responsables des COGES seront formes en gestion communautaire et financiere; o un manuel de procedure sera elabore et precisera egalement les modalites de controle. C. < Amelioration de la gestion des depenses publiqueso> 27. La procedure budg6taire debute avec l'elaboration du cadrage budgetaire qui s'inspire du cadrage macroeconomique. Ce cadrage budgetaire qui fixe provisoirement le montant global du budget pour l'annee A venir, fait l'objet d'une adoption par le Conseil des Ministres. Apres l'adoption du cadrage budgetaire, une lettre de cadrage du Premier Ministre est adressee aux differents ministeres. Cette lettre indique les enveloppes de depenses ordinaires et d'investissement allouees a chaque ministere. Avec la transmission des propositions de budget par ministere, les conferences budgetaires sont organisees qui aboutissent A l'adoption par le Conseil des Ministres du projet de loi des finances pour l'annee A venir. Ce projet de loi, avec le certificat de conformite de la Chambre des Comptes sur l'execution de l'exercice en cours, sont transmis A l'Assemblee Nationale. Les projets de loi de finances et de reglement sont discutes et adoptes par l'Assemblee nationale. Les debats en pleniere sont retransmis par la T6levision Nationale et les media. La loi de finances ainsi vote est promulgue dans le Journal Officiel et les documents budgetaires sont distribues aux structures de l'Administration publique, aux operateurs economiques et aux federations de syndicats. 28. Le Gouvernement a fait de l'amelioration de la gestion des finances publiques un element central de sa strategie pour accroltre l'efficacite et l'impact des services publics. Cette amelioration portera notamment sur la programmation-budgetisation, la capacite de rendre compte de l'utilisation des ressources publiques, l'execution des programmes de depenses publiques, les procedures de passation des marches publics, et l'amelioration des contr6les intemes et extemes dans le cadre de la bonne gouvemance. 29. En matiere de programmation et de budgetisation, le Gouvernement entend utiliser les Revues de Depenses Publiques (RDP) et la preparation de Cadres deDepenses Publiques a Moyen Terme (CDPMT), pour assurer une meilleure coherence entre ses priorites en matiere de lutte contre la pauvrete et les allocations budgetaires. Pour ce faire, le Gouvernement a cree une Cellule de Revue des Depenses Publiques (CRDP) au sein du Ministere de l'Economie et des Finances. Le programme de travail de la CRDP en 2002 sera centre sur la revue des depenses publiques de [2001], avec un accent particulier dans les secteurs Sante et Education. Une note conceptuelle sera elaboree A cet effet. La cellule definira ensuite un programme de travail a moyen terme qu'elle suivra avec l'appui de la Banque Mondiale, de l'Union Europeenne et des autres partenaires au d6veloppement. 30. En 1999, le Gouvemement a introduit un Systeme Integre de Gestion des Finances Publiques (SIGFIP) et lance une revue du Code des marches publics. Le SIGFIP, bien qu'ayant fonctionne de facon globalement satisfaisante, s'est cependant montre dans sa forme initiale excessivement centralise et contraignant, en particulier pour l'execution des programmes A application decentralisee. Des mesures correctives ont et recernment introduites pour rendre le SIGFIP plus flexible et compatible avec la politique de deconcentration et de decentralisation de l'Etat, et le Gouvernement a mis en place une Commission speciale pour assurer le suivi detaille de l'efficacite du systeme. Pour am6liorer l'utilisation des ressources fmancieres et accroitre la capacite de decaissement des financements exterieurs, un amenagement du SIGFIP sera opere visant la mise en place de regies d'avance pour permettre une execution plus rapide des operations des projets. Pour s'assurer d'une bonne maitrise de cet amenagement, des mesures d'accompagnement seront mises en ceuvre et porteront essentiellement sur une plus grande frequence des contr6les a posteriori. En outre, un audit technique du circuit de la depense publique sera r6alise avant la fin de l'annee 2002 et une etude approfondie de la fiabilite du systeme de gestion des ressources publiques (CFAA) sera effectuee en 2003 en collaboration avec les partenaires au developpement. 31. Pour ce qui est des Procedures de Passation des Marches Publics, leur reforme repose sur les principales composantes d'un systeme de passation des marches publics, A savoir: (i) Un cadre legal etabli pour la passation des marches publics, (ii) Une pratique transparente de procedures modernis6es de passation des marches; (iii) Une capacite institutionnelle suffisante; (iv) L'existence d'un systeme independant de contr6le ; (v) Des mesures contre la corruption liees A la passation des marches. 32. Les resultats partiels de la reforme du systeme des marches publics ont ete examin6s au cours d'un seminaire de restitution, organise les 10 et 11 mai 2001 A Yamoussoukro. Toutes les recommandations A portee reglementaire et juridique visant A promouvoir et A renforcer la transparence, l'equite, l'efficacite des procedures et la responsabilisation des acteurs, seront prises en compte dans une version amendee du projet de code des marches publics. 33. Les defis qui restent encore A relever dans le domaine de la reforme institutionnelle et legale sont: (i) la composition et les termes de reference de la commission d'arbitrage et de conciliation, en vue de s'assurer qu'il n'y pas de risque de conflit d'interet et qu'il soit percu par le secteur prive et la societe civile comme un mecanisme efficace pour proteger les droits de tous; (ii) le choix d'une entite independante pour mener des audits externes efficaces et (iii) l'inclusion et l'application de sanctions penales dans le Code pour pratiques frauduleuses et corruption liees A la passation des marches. 34. Le projet de Code sera soumis pour adoption au Conseil des Ministres au plus tard fin juin 2002 afin d'autoriser la poursuite des travaux de la reforme visant A approfondir I'analyse du schema institutionnel et A proposer un dispositif operationnel de formation et de renforcement des capacites, ainsi qu'un schema directeur d'informatisation du systeme. Un cabinet international a ete recrute par le Gouvernement pour fmaliser les aspects institutionnels et leurs recommandations et conclusions seront examinees pour adoption. La version finale du Code sera adoptee par le Gouvernement au plus tard en Septembre 2002 et transmise A l'Assembl6e Nationale pour adoption. 35. Le Gouvernement lancera en 2003 une revue analytique du systeme en collaboration avec la Banque pour evaluer la mise en oeuvre de cette reforme. Elle portera sur: (i) la mise A disposition d'un personnel adequat dans toutes les entites chargees de la passation des marches aussi bien aux niveaux central que decentralise ; (ii) le renforcement des capacites et la formation pour permettre a ces entites de faire face A leurs nouvelles responsabilites ; et (iii) la fourniture d'outils modernes A ces entites. 36. Dans le cadre de la bonne gouvernance et plus specifiquement de l'amelioration des controles internes et extemes, des mesures ont ete prises pour renforcer le suivi et le controle des depenses publiques: (i) renforcement de la Direction Generale du Budget du Ministere de l'Economie et des Finances, avec le regroupement de la Direction du Controle Financier et la Direction du Contr6le Budgetaire ; et (ii) restructuration de l'actuelle Chambre des Comptes de la Cour Supreme, qui a la charge du controle de tous les services qui recoivent de fonds publics, en une Cour des Comptes Autonome. Elle sera la juridiction supreme de contr6le des finances publiques, dont la juridiction s'etendra non seulement aux comptables publics mais aussi aux ordonnateurs, y compris les elus locaux ; et (iii) renforcement de l'Inspection Generale des Finances et mise en couvre d'audits techniques et financiers des departements ministeriels (sante, education, infrastructures). 37. Par ailleurs, le Gouvernement soumettra avant septembre 2002 les projets de loi de reglements 1999 et 2000 incluant le rapport de la Chambre des Comptes, A l'Assembl6e Nationale. II soumettra A l'Assemblee Nationale, au plus tard en decembre 2002, le projet de loi de reglements 2001 accompagne du rapport de la Chambre des Comptes. Par ailleurs, un projet de loi portant creation de la Cour des Comptes sera transmis A l'Assemblee Nationale au plus tard en Septembre 2002 pour adoption. 38. En vue de l'information du grand public, le Gouvernement s'assurera d'une large diffusion des mesures et des resultats economiques A travers les media. La couverture des debats parlementaires et la publication d'articles informatifs dans la presse ecrite seront systematisees. 39. La decentralisation et la participation des populations sont au centre de la strategie de lutte contre la pauvrete. Cette politique permettra la creation de 56 departements et de 2 districts et portera le nombre de communes A 580 contre 370 actuellement, avec trois objectifs principaux: (i) rapprocher l'administration du citoyen ; (ii) renforcer la participation des populations a la gestion de leurs propres affaires et (iii) ameliorer l'efficience des administrations centrales. Un seminaire national (Decembre 2001) a permis de definir le partage des champs de competence entre l'administration centrale, ses organes deconcentres et les collectivites territoriales, selon le principe de subsidiarite, et un projet de loi sur les transferts de competence est en preparation. Pendant la periode 2002-2005 le Gouvernement entend lancer des operations pilote permettant de tester la mise en oeuvre pratique des grands principes de deconcentration/decentralisation dans les secteurs de la sante et de l'education. 40. Le Ministere de la Sante a initie la preparation d'un plan visant a la restructuration/deconcentration de ses services, l'amelioration des capacites de programmation, et d'execution A tous les niveaux, l'introduction de mecanismes de gestion du personnel base sur la performance, pour s'assurer que ses services repondent mieux aux besoins des beneficiaires et la definition ainsi que la mise en ceuvre d'un systeme de suivi-evaluation de 1'efficacite du systeme sanitaire national. Ce plan sera finalise avant la fin de l'ann6e 2002 pour une mise en ccuvre des 2003, comme programme pilote avant son extension aux autres ministeres. 41. Pour accroitre la responsabilisation des communautes/beneficiaires dans la definition de ses politiques et la mise en ceuvre des services de base, un programme pilote a ete prepare dans les secteurs de l'education et de la sante pour la gestion des structures de base. Cette responsabilisation s'appuiera sur les Comites de gestion communautaires (COGES, voir ci- dessus) qui se verront allouer directement les ressources budgetaires necessaires A la gestion des services et A l'entretien des infrastructures au niveau du terrain. Le gouvernement a dejA lance la preparation des mesures d'accompagnement indispensables pour op6rationnaliser ce programme: (i) revision des statuts des COGES ; (ii) etablissement d'un protocole-type d'accord de partenariat entre l'Etat et les COGES ; (iii) definition d'un mecanisme de transfert budgetaire et mise en place d'un systeme de suivi et d'audit des operations des COGES. A la fin de la premiere annee de fonctionnement des COGES selectionnes dans les secteurs sante et education, une evaluation sera faite. D. < Dispositif institutionnel pour la gestion du Programme > 42. Pour une gestion efficace du programme economique et financier du Gouvemement, un Comite de Pilotage des reformes structurelles a ete mis en place. IL est preside par le Premier Ministre et comprend le Ministre de l'Economie et des Finances et le Ministre de la Fonction Publique. Ce Comite de Pilotage est dote d'un Secretariat technique qui a en charge au quotidien, le suivi et l'evaluation de la mise en ceuvre des reformes, mesures et actions adoptees par le Gouvernement et convenues avec les partenaires au developpernent. 43. Dans le cadre du programme de relance economique, le Comite de Pilotage veillera A sa bonne conduite et a la mise en cruvre effective des mesures arretees. Un rapport d'execution sera produit A chaque tranche. L'impact de ces mesures fera l'objet d'un suivi A l'aide d'indicateurs qui seront definis dans le cadre du dispositif de suivi-evaluation qui sera mis en place dans le DSRP. Annex 3 C6te d'Ivoire: Economic Recovery Credit Page 1 of 5 C8te d'Ivoire Economic Recovery Credit Matrix of Policy Actions Objectives Actions Through June 2002 Second Tranche Third Tranche Indicators A) CREATING CONDITIONS FOR RENEWED BROAD- BASED GROWTH 1. Agriculture Sector Coffee/Cocoa Sector Ensuring effective Formal elimination of state- Implementation by BCC/FRC Elimination of State role in Competition in the run marketing of cocoa and of a competitive marketing the marketing of cocoa and Coffee/Cocoa Sector coffee with liquidation of strategy for the 2002/2003 coffee CAISTAB (December 2001) cocoa and coffee crop year, excluding any administrative allocations or quotas, unless as otherwise agreed with IDA Introduction of an Efficient Launching of a study of the Adoption by government of a Consolidation of the Regulatory Framework regulatory framework to new regulatory framework for liberalization of the cocoa ensure competition at all cocoa and coffee trade, based and coffee sectors with stages of the cocoa/coffee on competition and excluding introduction of a regulatory chain; as well as to define the any administrative allocation framework excluding use of marketing mechanism to put or quotas, unless as otherwise quotas in place for the 2002-2003 agreed with IDA crop year Ensuring Greater Efficiency Launch of audit of activities Implementation by ARCC, BCC, of Producer Institutions and and financial operations of and FDPCC of the Higher Return to Producers ARCC, BCC, and FDPCC recommendations of the audit of through March 2002; and the activities, procedures and preparatio of operationl . financial statements; adoption by preparation of operational them of levels of non-tax levies program and budget for for cocoa and coffee in the 2002- 2002/03 2003 crop year on the basis of recommendations of the audit; and adoption by them of their annual programs for the 200212003 crop year Annex 3 CMte d'Ivoire: Economic Recovery Credit Page 2 of 5 C6te d'Ivoire Economic Recovery Credit Matrix of Policy Actions Objectives Actions Through June 2002 Second Tranche Third Tranche Indicators Cotton Sector Pursuit of Conditions to Privatization (take to point of Elimination of State role in Enhance Competition sale) of the "CIDT-Nouvelle" cotton ginning and marketing Adoption of an Efficient Adoption by the government Clearer operational Regulatory Framework of an institutional and environment for agents in the regulatory framework to cotton sector; ensure competition at all Greater role of producers in levels of the cotton chain sector management 2. Private Sector Development Relaunch of Privatization Declaration of new policy stance on privatization in a Privatization Policy Statement Pursuit of rehabilitation of Selection of a qualified Greater private sector Financial Sector technical partner for the ownership of and say in the CAA; and privatization (offer operation of the CAA for sale to willing buyers) of at least 51 percent of the outstanding shares Re-establishment of Inauguration of new state- Adoption and publication Re-affirmation of the Confidence with the Private private sector partnership and (entry into application) of the presumption of taxpayer Sector launching of collaborative revised Fiscal Procedures innocence until proven work on revision of the Fiscal Manual otherwise. Fewer disputes Procedures Manual (manual involving cases of abuse of on the public's relation with authority of tax officers tax authorities) Annex 3 C6te dI'voire: Economic Recovery Credit Page 3 of 5 CMte d'Ivoire Economic Recovery Credit Matrix of Policy Actions Objectives Actions Through June 2002 Second Tranche Third Tranche Indicators B) EXPANDING ACCESS TO AND IMPROVING DELIVERY OF BASIC PUBLIC SERVICES (EDUCATION AND HEALTH) 1. Education and Health Strengthening Local Publication of legal texts Signature of agreements Greater responsibility of Community Participation in (decree and arrdte') between the Ministries of parents in the management of Service Delivery through reorganizing the COGES in Education and Health, on the education services; increase COGES the education sector; enabling one hand, and the selected in level of services managed them to manage resources education and health COGES, by beneficiaries permitting an transferred to them from the on the other; the opening of increase in school enrollment budget or directly collected bank accounts in appropriate especially of girls by them, with a reinforced institutions by the COGES; role and responsibility for and the deposit of at least 60 parents; and the adoption of a per cent of the budget in guiding manual of procedures those accounts Expansion of access to Increase in the allocation for Completion of a study for Increased access to education education and health services primary schools within the procuring and distributing (via delivery of basic inputs by increasing resource approved 2002 budget of the essential drugs for the public free-of-charge at the lowest allocation to critical input Ministry of National sector; the adoption of an level; and higher volume of areas, with some targeting to Education by CFAF 6.8 action plan based on the resources to break bottlenecks the very poor billion; with CFAF 2.5 billion results of the study to to schooling) by the very poor for textbooks; CFAF 2.2 improve the procurement of and girls billion for school kits; CFAF essential drugs; and provision 1.8 billion to transfer to of evidence, satisfactory to Increased availability and use COGES; and CFAF 0.3 IDA, that essential drugs for of generic drugs, thereby billion for canteens the public sector have been reducing health care costs procured in a manner consistent with the modalities of the action plan Annex 3 Cote dI'voire: Economic Recovery Credit Page 4 of 5 CMte d'Ivoire Economic Recovery Credit Matrix of Policy Actions Objectives Actions Through June 2002 Second Tranche Third Tranche Indicators Increase the 2002 budget Increased access to primary allocation of the Ministry of health services (via allocation Health by CFAF 680 million of resources to subsidize the for subsidizing essential cost) by the very poor in four drugs in the poorest health poorest districts districts: Tiassale, Grand- Lahou, Guiglo, and Duekoue Reduction of the Cost of Opening to competition of the School Textbooks by Freeing textbook publishing and the Market; sector; and supply to the IEPS in the Supply of Free Primary 43 selected school districts of Textbooks to Very Poor their stock of free textbooks Pupils in Targeted Districts C) PUBLIC EXPENDITURE MANAGEMENT 1. Budget Formulation Joint agreement with the Diagnostics of public World Bank and EU on expenditure allocation and Concept Paper for the 2002 management processes as a PER basis for reinforcing the EU- supported program 2. Budget Execution Improving Efficiency of Introduction of an integrated Accelerated implementation Budget Execution publicfinancial management of programs and projects in system (SIGFIP) and launch the public development of a review of procurement program procedures (1999-2000). Modification of SIGFI processes by institution of advances for funding project/program operation, I supported by regular audits. I Annex 3 Core d'Ivoire: Economic Recovery Credit Page 5 of 5 CMte d'Ivoire Economic Recovery Credit Matrix of Policy Actions Objectives Actions Through June 2002 Second Tranche Third Tranche Indicators Assignment of the duties of "regisseur" to project financial managers and accountants, to allow for efficient use of the advances Improving Procurement Preparation of new draft Budget execution via clearer Procurement Code (2001) procurement processes, permitting savings and probity in the use of public resources 3. Budget Reporting and Transmission (disclosure) to Transmission to the National Transmission (disclosure) to Disclosure of outcomes in the Governance: Internal the National Assembly of the Assembly for the National Assembly of the use of budgetary resources in Controls, Auditing and audits (Lois de R&glement) of adoption/passage of the new audit of the 2001 budget and 1999-2001 to elected External Oversight the 1999 and 2000 budgets draft laws on the Procurement the report by the representatives, with scope and the reports on them by Code and establishment of Cour/chambre des Comptes for sanctions/corrective the Chambre des Comptes on the Supreme Audit Court on it action. the (May 2002) (Cour des Comptes) I Annex 4 C6te d'Ivoire: Economic Recovery Credit Page I of 2 SYNERGY BETWEEN THE ERC AND THE PROJECT PORTFOLIO Linkages with the On-going Portfolio. IDA's interim assistance strategy is designed to establish a strong synergy between the proposed ERC and the on-going IDA-financed sectoral programs: the ERC supporting inter-sectoral and cross-cutting issues (such as public sector management), while intra-sectoral priorities and efficiency issues will be dealt with under the specific sectoral programs. IDA's active portfolio in Cote d'Ivoire includes 12 operations (Annex 9). This portfolio is being restructured around broader, multi-sectoral programs in support of the PRSP's two main objectives: (i) sustained growth (agricultural services, PSD, transport infrastructure.. .);and (ii) improved social service delivery (health, education, water supply) - - and strategic instruments: decentralization and capacity-building. However, the full impact of this restructuring requires that the constraints which had increasingly impeded project implementation over the last three years be immediately addressed. As of December 31, 2002, total IDA commitments amounted to US$585 million under the on-going portfolio, of which US$250 million remained undisbursed. Project implementation had been slow even before disbursement suspension in March 2001, because of an increasingly acute lack of counterpart funds and the rigidities of the newly introduced Integrated Computerized Financial Management System (SIGFIP). The funds provided by the ERC would contribute significantly to the improved availability of the counterpart funds necessary to implement the government's priority programs. In addition, the government has taken several steps to address bottlenecks in project implementation: * Counterpart funding. The government has set up a "Cellule de revue des depenses publiques" to prepare global and sectoral public expenditure reviews and medium- term expenditures frameworks, to better align budgetary allocations with available resources and government priorities. This will minimize counterpart funds constraints. In addition, PERs will focus on practical implementation issues and controls and will build a strong base for moving toward a full CFAA in 2003. * SIGFIP. Improvements have been introduced in the SIGFIP to make the system more flexible and compatible with decentralized implementation arrangements. Projects coordinators have all been trained in SIGFIP procedures. A special Unit has been established within the Ministry of Economy and Finance to monitor the impact of SIGFIP on project implementation and rapidly address deficiencies. A comprehensive revue of SIGFIP operations will be undertaken at the end of 2002 to recommend further improvements as needed. * Public procurement. The new Public Procurement Code has been prepared with IDA's assistance. It will be submitted to the government for approval by May 2002 and to the National Assembly for approval before the end of the year. The new Code addresses both the fiduciary shortcomings highlighted by the 1999 and 2000 audits, and the need to make public procurement more attuned to the requirements of decentralized implementation. Annex 4 Cote dI'voire: Economic Recovery Credit Page 2 of 2 The government has set up a task force to handle the backlog of procurement contracts which has accumulated during the suspension of disbursements and monitor the implementation of public expenditure programs, and take corrective actions where necessary. A full CPPR would be undertaken in 2003. Annex 5 C6te d'Ivoire: Economic Recovery Credit Page I of 2 Cote d'Ivoire at a glance 517/02 Sub- POVERTY and SOCIAL C6te Saharan Low- dilvolre Africa Income Development diamond' 2001 Population, mid-year (millions) 16.3 659 2,459 Life expectancy GNI per capita (Atlas method, USS) 630 480 420 GNI (Atlas method, US$ billions) 10.4 313 1,030 Average annual growth, 1995-01 Population {X) 2.3 2.6 1.9 Labor force (%) 3.2 2.6 2.4 GNI I . Groas per K - primary Most recent estimate (latest year available, 1995-01) capita enrollment Poverty (% of population below national poverty line) Urban population (% of total population) 51 34 32 Life expectancy at birth (years) 54 47 59 Infant mortality (per 1,000 live births) 88 92 77 Child malnutrition (X of children under 5) 24 .. .. Access to improved water source Access to an improved water source (% of population) 63 55 76 Illiteracy (X ofpopulation age 15+) 57 38 38 Gross primary enrollment (% ofschool-age population) 71 78 96 Cotedlvoira Male 82 85 102 Low-income group Female 61 71 86 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1981 1991 2000 2001 Economic ration' GDP (US$ billions) 8.4 13.6 10.6 10.4 Gross domestic investment/GDP 25.9 6.1 10.6 9.9 Exports of goods and services/GDP 35.2 23.2 39.8 39.4 Trade Gross domestic savings/GDP 18.8 8.5 17.3 16.9 Gross national savings/GDP .. -3.8 7.2 7.7 Current account balance/GDP .. -9.9 -3.4 -3.0 Domestic Interest payments/GDP 8.2 3.6 5.5 5.4 osaings t Investment Total debt/GDP 96.5 137.4 93.5 88.3 I vings Total debt servicelexports 51.2 40.4 19.2 20.4 1 Present value of debt/GDP .. .. 55.6 57.1 1 Present value of debt/exports .. .. 1385 143.9 1981-91 1991-01 2000 2001 2001-05 Indebtedness (average annual growth) GDP 1.2 7.6 -2.3 -0.9 4.5 - Cote dlvoire GDP per capita -2.5 4.7 -4.2 -2.8 4.2 ! _ Low-income group Exports of goods and services 2.0 4.1 -6.7 -1.2 4.5 STRUCTURE of the ECONOMY 1981 1991 2000 2001 Growth of Investment and GDP (%) (% of GDP) Agriculture 26.5 25.7 24.2 24.3 Industry 18.6 19.0 22.2 21.6 °- Manufacturing 11.8 17.3 19.1 18.8 Services 54.9 55.2 53.7 54.1 go 5 Private consumption 63.6 78.9 73.9 74.0 .30 General government consumption 17.6 12.7 8.8 9.1 GDI * GDP Imports of goods and services 42.3 20.9 33.1 32.3 1981.91 1991-01 2000 2001 Growth of exports and Imports l%) (average annual growth) Agriculture 2.2 3.2 12.9 -1.6 40 Industry 6.3 5.1 -9.5 -2.4 30 Manufacturing 5.4 4.4 -7.2 -1.7 20 Services -2.1 13.3 -5.8 0.1 I0 Private consumption 1 0 8.4 4.3 1.3 General government consumption -1.2 2.4 -11.8 2.3 -1s 99 Gross domestic investment -72 11.2 -21.0 -22.5 - Exports -Imports Imports of goods and services -2.1 1.5 -1.4 -4.0 Note: 2001 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. Annex 5 Cote d'Ivoire: Economic Recovery Credit Page 2 of 2 Cote d'Ivoire PRICES and GOVERNMENT FINANCE 1981 1991 2000 2001 Inflation (%) Domestic prices (% change) 15 Consumer prices 8.7 1.6 3.6 3.1 10 Implicft GDP deflator 1.1 -1.0 -0.1 2.1 5 Government finance o (% of GDP, includes current grants) 96 97 go 99 00 01 Current revenue 15.1 16.8 17.2 -s Current budget balance -8.1 1.6 2.3 GDP deflator CPI Overall surplus/deficit -10.4 -1.2 -0.9 TRADE (US$ millions) 1981 1991 2000 2001 Export and Import levels (USS mill.) Total exports (fob) 2.435 2,810 3.788 3,668 scoo Cocoa .. 739 783 839 nueac 164 134 4.000 Manufactures 988 1.299 1,277 3.000 Total imports (ciR) 2.445 2,103 2,821 2,722 2.000 Food 457 490 433 444 Fuel and energy 530 530 838 720 1.000 Capital goods 677 404 447 439 o Export price index (1995=100) 45 42 93 94 gs ss 97 so 9 X 01 Import price index (1995=100) 41 52 123 121 KExports mImports Terms of trade (1995=100) 112 82 76 77 BALANCE of PAYMENTS (US$ millions) 1981 1991 2000 2001 Current account balance to GDP (%) Exports of goods and services 2,966 3,149 4,226 4,100 0 Imports of goods and services 3.566 2,832 3.514 3,364 Resource balance -600 317 711 736 Net income -522 -1.371 -767 -629 2 Net current transfers -488 -293 -282 -337 I 11111 Current account balance N/A -1,347 -363 -311 Financing items (net) 1,397 175 192 Changes in net reserves N/A -50 188 119 Memo: Reserves Including gold (US$ millions) 37 29 663 729 Conversion rate (DEC, local/US$) 271.7 282.1 710.0 732.5 EXTERNAL DEBT and RESOURCE FLOWS 1981 1991 2000 2001 (US$ millions) Composition of 2001 debt (USS mill.) Total debt outstanding and disbursed 8,141 18,643 9,935 9,198 IBRD 341 1,986 599 491 Gu57491 IDA 8 38 1.366 1.362 6 1362 Total debt service 1,533 1.279 820 898 IBRD 40 324 158 97 IDA 0 0 18 19 / F: 7,043 ComposRbon of net resource flows Official grants 11 312 116 .. 4.950 Official creditors 74 393 -202 -278 Private creditors 659 -4 -4 287 Foreign direct investment 33 16 134 138 Portfolio equRty 0 0 81 87 E: 3,868 World Bank program CommRtments 317 452 0 0 A - IBRD E - Bilateral Disbursements 48 219 191 115 8- IDA D- Other mulblatoral F- Private Principal repayments 14 154 109 55 C - IMF G - Short-term Net flows 35 64 82 60 Interest payments 26 169 67 61 Net transfers 9 -105 15 -1 Development Economics 5/7/02 Annex 6 Cote d 'Ivoire: Economic Recovery Credit Page I of 3 Cote d'Ivoire - Key Economic Indicators Actual Est. Proj. Indicator 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 National accounts (as % GDP at current market prices) Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Agriculturea 24.7 24.6 23.3 24.1 22.0 24.2 24.3 24.1 23.9 23.4 Industrya 20.8 20.4 23.7 23.0 24.2 22.2 21.6 21.8 22.0 22.9 Services' 54.5 55.0 53.0 52.9 53.8 53.7 54.1 54.1 54.1 53.7 Total Consumption 77.1 80.2 77.2 80.3 78.7 82.7 83.1 80.0 78.4 77.7 Grossdomesticfixed 13.7 14.8 14.5 16.0 14.4 11.0 9.0 13.1 14.1 14.3 investment Government 5.1 4.9 5.4 6.0 4.2 2.8 1.2 4.0 4.3 4.3 investment Private investment 10.5 7.2 9.0 7.3 8.9 7.8 8.6 9.5 10.3 10.7 (includes increase in stocks) Exports (GNFS)b 41.8 41.1 41.4 39.4 40.3 39.8 39.4 38.6 38.8 38.9 Imports (GNFS) 34.4 32.4 33.1 33.0 32.2 33.1 32.3 32.1 31.9 31.6 Gross domestic savings 22.9 19.8 22.8 19.7 21.3 17.3 16.9 20.0 21.6 22.3 Memorandum items Gross domestic product 10999 12138 11722 12806 12576 10622 10418 11023 11831 12745 (US$ million at current prices) Gross national product per 670.0 670.0 730.0 720.0 710.0 680.0 640.0 650.0 670.0 690.0 capita (US$, Atlas method) Real annual growth rates (%, calculated from 1987 prices) Gross domestic product at 7.7% 5.7% 4.8% 1.6% -2.3% -0.9% 3.0% 4.7% 4.9% market prices Gross Domestic Income 8.2% 5.1% 5.5% 1.8% -1.4% -1.1% 3.2% 4.6% 4.9% Real annual per capita growth rates (%, calculated from 1987 prices) Gross domestic product at 4.5% 2.9% 2.3% -0.4% -4.2% -2.8% 0.9% 2.6% 2.9% market prices Total consumption 3.2% 4.3% 2.4% 5.8% -1.5% 0.5% -0.6% -0.6% 1.3% 2.7% Private consumption 2.2% 5.2% 2.6% 7.7% -2.5% 2.3% -0.7% -0.6% 1.0% 3.0% (cont 'd) Annex 6 Cote d'Ivoire: Economic Recovery Credit Page 2 of 3 Cote d'Ivoire - Key Economic Indicators , - : - . - . . ~Advual a ?Mb>....Est:. . Proi. i Iiidicar; . 1995 1996 >194 I998. . 199 .200M 2001. 2002 1003 2004 Balance of Payments (US$m) Exports (GNFS)b 5077.6 4988.9 4855.1 5047.3 5073.2 4225.7 4099.8 4253.7 4596.0 4958.7 Merchandise FOB 4303.7 4256.4 4275.5 4431.7 4486.1 3788.1 3668.0 3797.2 4105.9 4430.7 Imports (GNFS)b 3806.8 4187.9 4053.7 4232.2 4046.6 3514.2 3364.1 3539.5 3772.9 4021.0 Merchandise FOB 2473.8 2762.7 2712.5 2759.9 2642.9 2321.3 2240.1 2300.1 2484.3 2677.7 Resource balance 1270.8 801.0 801.3 815.1 1026.6 711.4 735.7 714.2 823.1 937.7 Net current transfers -466.3 -342.4 -380.4 -394.3 -387.1 -282.0 -337.2 -353.0 -376.0 -454.0 (including official current transfers) Current account -112.9 -378.2 -321.3 -303.0 -107.2 -363.7 -311.0 -192.9 -194.3 -175.3 balance (after official capital grants) Net private foreign 234.4 222.8 313.9 246.5 195.7 134.0 138.0 190.1 200.8 217.9 direct investment Long-term loans (net) .. .. .. .. .. .. .. Official 189.9 -45.2 70.0 7.8 -110.6 -202.1 -278.4 -299.5 -325.1 -280.5 Private 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other capital (net, 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 including errors and omissions) Change inreservesd -221.6 -38.5 -82.1 1.5 116.9 187.5 119.1 20.0 -9.6 -48.3 Memorandum items Resource balance (% of 11.6% 6.6% 6.8% 6.4% 8.2% 6.7% 7.1% 6.5% 7.0% 7.4% GDP at current market prices) Real annual growth rates (YR87 prices) Merchandise exports 4.7% 22.5% 10.3% 0.6% 2.4% -5.8% -1.3% 1.0% 5.5% 5.4% (FOB) Primary 9.0% 30.9% 1.6% -9.1% 8.5% 6.3% 1.5% 1.6% 1.6% 1.3% Manufactures 1.2% 11.5% 2.0% 6.0% 7.1% 7.1% 3.6% 4.6% 4.9% 5.4% Merchandise imports 25.0% -2.6% 10.6% 5.2% -1.5% -0.5% -3.3% 0.5% 5.6% 5.5% (CIF) Public finance (as % of GDP at current market prices)e Current revenues 20.7 20.5 20.1 19.1 17.0 16.8 17.2 18.2 18.2 17.6 Current expenditures 24.5 22.5 22.1 21.2 19.8 18.1 16.6 18.8 18.2 18.0 (Continued) Annex 6 Cote d'Ivoire: Economic Recovery Credit Page 3 of 3 Cote d'Ivoire - Key Economic Indicators Actual Est. Proj. Indicator 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Current account -0.9 -5.3 -4.2 -1.8 -2.7 -2.8 -2.5 -1.7 -1.2 -0.8 surplus (+) or deficit (-) Capital expenditure 5.1 4.9 5.4 6.0 4.2 2.8 3.2 3.9 3.8 4.0 Foreign financing 4.4 3.3 1.5 1.3 0.7 4.7 4.9 -5.6 0.2 -0.2 Monetary indicators M2/GDP (at current 24.4 22.3 22.7 21.9 21.5 21.8 22.1 22.5 22.6 23.0 market prices) Growth of M2(%) 1.6 7.2 6.1 -3.1 0.4 -0.1 2.7 2.7 3.3 3.4 Private sector credit growth / 2.2 14.8 3.8 -8.4 3.2 6.2 7.8 8.9 8.9 totalcreditgrowth 0.7 10.2 7.5 5.1 -2.2 -5.5 3.4 3.8 2.1 (%) Price indices( YR87 =100) Merchandise export 128.1 103.9 99.9 101.8 95.7 74.8 69.1 68.8 70.5 72.1 price index Merchandise import 132.7 128.7 124.6 129.5 119.1 101.0 92.7 90.7 92.6 94.7 price index Merchandise terms of 75.4 77.7 80.3 77.2 83.9 77.4 107.8 108.0 108.5 108.7 trade index Real exchange rate 70.7 70.7 69.5 74.1 72.7 69.4 70.0 70.6 70.9 71.2 (US$/LCU)' Real interest rates Consumer price 7.7% 3.5% 5.2% 2.0% 0.7% 3.6% 3.1% 3.0% 3.0% 2.7% index (% growth rate) GDP deflator 11.0% 5.0% 4.2% 5.2% 0.9% -0.1% 2.1% 2.3% 2.0% 2.2% (% growth rate) a. If GDP components are estimated at factor cost, a footnote indicating "Data-YR" fact should be added. b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequitted transfers excluding official capital grants. d. Includes use of IMF resources e. Should indicate the level of the government to which the data refer. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. Annex 7 Cote d'Ivoire: Economic Recovery Credit Page 1 of ] Cote d'Ivoire Social Indicators Latest single year Same regionhlncome group Sub-Saharan Low- 1970-76 1980-85 1993-99 Africa Income POPULATION Total populabon, mid-year (millions) 6.8 9.9 15.5 642.8 2,417.1 Growth rate (% annual average for period) 3.7 2.9 2.6 1.9 Urban populabon (% of population) 32.1 37.5 45.8 33.8 31.4 Total ferblity rate (births per woman) 7.4 7.1 4.9 5.3 3.7 POVERTY (% of population) National headcount index .. Urban headcount index Rural headcount index .. INCOME GNI per capita (USS) 570 . 640 670 490 420 Consumer price index (1995=100) 18 51 112 131 138 Food price index (1995=1 00) .. INCOMEICONSUMPTION DISTRIBUTION Gini index .. .. 36.7 Lowest quintile (% of income or consumption) .. 7.1 Highest quintile (% of income or consumption) .. 44.3 SOCIAL INDICATORS Public expenditure Health (% of GDP) .. .. 1.2 1.7 1.2 Education (% of GNI) 6.3 7.2 5.0 4.1 3.3 Social security and welfare (% of GDP) .. 7.3 Net primary school enrollment rate (% of age group) Total .. .. 55 Male .. .. 63 Female .. .. 47 Access to an Improved water source (% of population) Total .. 20 77 55 76 Urban .. 30 90 82 88 Rural .. 10 65 41 70 Immunization rate (% under 12 months) Measles .. .. 59 57 64 DPT .. 25 60 59 70 Child malnutrition (% under 5 years) . .. 24 Life expectancy at birth (years) Total 47 51 46 47 59 Male 45 49 46 46 58 Female 49 52 47 48 60 Mortality Infant (per 1,000 live births) 119 101 111 92 77 Under 5 (per 1,000 live births) 240 170 180 161 116 Adult (1 -59) Male (per 1,000 population) 526 421 524 499 288 Female (per 1,000 populabon) 428 346 497 453 258 Matemal (per 100,000 live births) ., ., 600 Births attended by skilled health staff (%) ,, 13 47 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rabos exceeding 100 indicate discrepancies between the estimates of school-age population and reported enrollment data. Latest year for access to improved water source data is 2000. 2001 World Development Indicators CD-ROM, World Bank Annex 8 Cote d'lvoire: Economic Recovery Credit Page I of I Cote d'lvoire Operations Portfolio (IBRDIIDA and Grants) As Of Date 04J02/2002 Closed Projects 74 IBRDlDA Total Disbursed (Active) 277.90 of which has been 0.00 repaid Total Disbursed (Closed) 3,681.00 of which has been 2,323.80 repaid Total Disbursed (Active + 3,958.90 Closed) of which has been 2,323.80 repaid Total Undisbursed (Adive) 248.32 Total Undisbursed (Closed) 0.00 Total Undisbused (Acive + 248.32 Closed) Acdvo Prolects Difference Lag PSR Expected and Supervision Rating Orlainal Amount In US# Millions Disbu=emcnts# Project ID ProjectName Deveobment Imomanta Fiscal year IBRD IDA GRANT Cancel. Undlsb. Orig. Frm 2th!fgLm onProorg g RVfd P055073 ADULT LITERACY S S 2000 5 4.3 3.2 (LIL) P037588 AGRIC. SVCS. 11 U U 1999 50 39.2 42.4 P001184 CI PRIVATE S S 1995 79.7 12.2 23.4 11.1 ELECTRICITY P066353 DISTANCE LEARNING S S 2000 2 1.9 1.6 - LIL P035655 EDUC. & TRG U U 1998 53.3 46.7 41.8 SUPPORT P037581 EXPORT S S 1995 5.8 2.1 3 3.1 PROMOTION AND P001214 INTEG HLTH SERV S S 1996 40 9.2 13.5 26.7 2 DEVP P001186 LABOR FORCE S S 1994 17 1.9 2.6 2.6 TRAINING P037575 MUNICIPAL U U 1995 40 14.6 18.9 SUPPORT P043736 PSO TA U U 1998 12 9.4 9.8 P001194 RURALLAND S S 1997 41 26.3 16.3 (PNGTER) p001177 TRANSP SECTOR U U 1998 238.8 76.2 26.3 3.6 ADJ Overall reslt Resulh 584.6 9.2 248.3 216 22.3