Report No. 33293 The Islamic Republic of Mauritania Country Assistance Evaluation August 10, 2005 Country Evaluation and Regional Relations Operations Eveluation Department Document of the World Bank Contents ................................................................................................................................. i Preface Summary of CAE Ratings ............................................................................................... ... 111 1. Mauritania’s Development Situation in 1992-2003 ........................................... 1 Background ............................................................................................................. 1 Economic Performance ........................................................................................... 1 Development Challenges ........................................................................................ 2 2 . The World Bank’s Assistance and Strategy in 1992-2003 ................................ 5 Objectives ............................................................................................................... 5 Relevance o f Overall Strategy ................................................................................ 5 Lending Services ..................................................................................................... 6 Economic and Sector W o r k .................................................................................... 9 Aid Coordination .................................................................................................. 10 3 . n Achieving the Bank’s Major Objectives Progress i ....................................... 10 Objective 1: Sustainable Private Sector-led Economic Growth Anchored in the Sphere o f t h e Poor ................................................................................................. 11 Macroeconomic Stability ................................................................................ 11 Private Sector Development ........................................................................... 12 Anchoring Growth in the Sphere ofthe Poor ................................................. 14 Objective 2: Human Resource Development....................................................... 17 Objective 3 : Institutional Development Based o n Good Govemance .................23 Overall Rating ....................................................................................................... 27 Sustainability and Institutional Development Impact ........................................... 27 Bank Performance ................................................................................................. 29 Government Performance ..................................................................................... 30 Other Development Partners ................................................................................. 30 Extemal Factors .................................................................................................... 31 4 . Recommendations ............................................................................................... 32 Boxes in Text 3.1 O i l in Mauritania ................................................................................................... 25 Tables in Text 1.1 Mauritania-Selected Economic Indicators ......................................................... 2 1.2 Mauritania-Incidence o f Poverty ........................................................................ 3 1.3 Mauritania-Social Indicators. 1980-2003 .......................................................... 4 Contents (continued) 1.4 N e t Receipts o f Development Assistance. 1992-2003 ......................................... 4 2.1 IDA Commitments per Capita in Selected SSA Countries. 1980-2002 ............... 8 2.2 Mauritania-OED Project Ratings. E x i t FY92-04 .............................................. 8 3.1 GDP Growth Performance .................................................................................... 11 3.2 Summary Outcome Rating.................................................................................... 16 3.3 Public Expenditures .............................................................................................. 20 3.4 Maurit ania-Gender Indicators ............................................................................ 22 3.5 Summary Outcome Rating for Human Development Objective .......................... 23 3.6 Institutional Development and Governance: Summary Outcome Rating............. 27 3.7 Overall Outcome Rating ....................................................................................... 27 Figures in Text 2.1 IDA Lending vs . Allocation .................................................................................. 7 3.1 Education-Efficiency and Outcomes .................................................................. 17 3.2 Health-Mortality, Coverage, and Quality ........................................................... 19 3.3 Governance Indicators for Mauritania in 2002. 2000. and 1996 .......................... 24 Annexes A. Statistical Annexes ................................................................................................ 35 B. L i s t of Persons and Organizations M e t ................................................................. 47 C. Management Action Record ................................................................................. 55 D. Guide of OED’s Country Assistance Evaluation Methodology .......................... 57 Attachments 1. Government Comments o n the Draft C A E ........................................................... 61 2. Government Comments on the Draft C A E (English version) .............................. 65 3. OED’s Response to Government Comments ........................................................ 69 4. Chairman’s Summary ........................................................................................... 71 i Preface This country assistance evaluation (CAE) provides an independent assessment o f World Bank’ assistance to Mauritania during the period 1992-2003. The C A E examines whether: (a) the objectives o f Bank assistance were relevant; (b) the Bank’s assistance program was effectively designed and consistent with i t s objectives; and (c) the Bank’s program achieved i t s objectives and had a substantial impact o n the country’s development during this period. Examining these questions allows the C A E to draw lessons and recommendations for future Bank assistance. Annex D describes the methodological approach. The basis for the C A E consists o f O E D background papers, sectoral reviews, project assessments and interviews with past and present government officials, Mauritanian c i v i l society, other donors, as well as Bank and IMF staff at headquarters and in Mauritania. The CAE team did not, however, have access to the full set o f information from the Authorities, especially information regarding key macroeconomic variables, notably for the period 2000-2003. Therefore, assessments about recent macroeconomic performance and management are difficult to make and are somewhat tentative. A l i s t o f those interviewed i s shown in Annex B. An OED mission visited Mauritania during January 2 004. The Regional response to the Management Action Record i s attached as Annex C. Comments from the Government (Attachments 1 and 2) as well as OED’s response to these comments (Attachment 3) are also attached. This C A E was written by Gerard Kambou (Task Manager, OEDCR) with the assistance o f Roger Key (Consultant) o n poverty reduction, Patrice Harou (Consultant) o n rural development, and Pierre de Raet (Consultant) o n the private sector. This evaluation also benefited from comments o f Ren6 Vandendries (Consultant), Laurie Effron (OEDCR), and o f two peer reviewers: Alice Galenson (OEDCR) and Arup Banerji (ECSHD). Danuta Danilova provided research assistance, and Silvana Valle provided administrative and editorial support. ’ Throughout this report, World Bank i s referred to as the Bank, which, in the case o f Mauritania, also means Intemational Development Association (IDA). ... 111 Summary o f CAE Ratings ~ Objectives Outcome Ratings Sustainable Private Sector Unsatisfactory Macroeconomic stability improved but was not sustained and deteriorated sharply toward the end o f the period (paras. 3.5-3.6). 0 Private sector development Strong private investment in the telecom sector, but overall impact o f reforms i s limited (paras. 3.8-3.12) 0 Rural development Environmental management and awareness at the community level produced satisfactory results but rural poverty i s high (paras. 3.15- 3.16). 0 Urban development Limited progress inj o b creation. Most significant project launched in FY02 fDara. 3.20). Human Resource Development Moderately Satisfactow 0 Education Substantial increase in school enrolment but slow progress o n outcomes (para. 3.25). 0 Health Health outcomes improved, but health status o f the poor remains l o w (paras. 3.29-3.30). 0 Access to infrastructure Slow progress with wide disparities between services urban and rural areas (paras. 3.34-3.35). 0 Gender Progress in closing the gender gap in primary education, but income and literacy gaps remain sirmificant (nara. 3.38). Institutional Development and Unsatisfactory Governance 0 Public sector reform and decentralization (para. 3.46). 0 Strengthen legal and Legal and judicial reforms had limited impact judiciary system (para. 3.45). 0 Build capacity for public Fiscal transparency i s inadequate (para. 3.43). resource management Overall I Unsatisfactorv V Summary Mauritania i s a highly dualistic economy, with a modern sector consisting o f mining, industrial fishing, and irrigated agriculture, contrasting sharply with a traditional subsistence sector o f livestock and crop farming. Its population o f 2.6 million, with per capita income o f US$430 (Atlas Methodology, 2003) i s 60 percent urban, although poverty is disproportionately rural. Mauritania has poor social indicators: although there have been some improvements in the last decade, 69 percent o f women and 49 percent o f men are illiterate; l i f e expectancy i s 5 1 years, maternal mortality i s 747 per 100 thousand and under-five mortality, 107 per thousand. Between FY92 and FY03,24 Bank operations for US$491 million were approved, with an increasing trend, so that by the latter half o f the period, Bank commitments averaged about US$21 per capita, significantly above that o f countries o f comparable size and income level in the Afkica region as well as above the IDA allocations. Mauritania also received substantial net ODA inflows from other sources, averaging about US$76 per capita during this period. The sectoral allocation o f Bank lending reflected a shift in the focus o f the Bank’s strategy from the 1980s towards education and health, which accounted for some 27 percent o f total commitments, and urban development, at about 14 percent. The Bank continued to focus on agriculture and rural development, but lending to this sector was relatively lower. Adjustment lending was significant, accounting for about 29 percent o f commitments over the period. A major objective o f the Bank’s assistance program has been to help Mauritania to achieve sustainable, private sector-led economic growth anchored in activities in the rural and urban areas that would be most likely to involve the poor. Progress toward this objective has been mixed. Although macroeconomic stability improved in the early years o f the period under review it has not been sustained. Beginning in 2000 budgetary performance weakened considerably, due to excessive government spending. But the full extent o f the deterioration was not known because lack o f fiscal transparency has made i t difficult for the Bank to engage in dialogue with the authorities. Preliminary estimates o f the recent picture suggest that the macroeconomic situation i s highly unsatisfactory, although exact figures are not yet available. Real GDP growth was robust and steady, averaging 4.4 percent in FY98-03, driven in part by private investment in the telecommunication sector and aid inflows; and the Mauritanian economy grew faster than most economies in the region. But growth was not broad-based and, hampered by rapid population growth (2.7 percent per year), per capita GDP growth was low. Moreover, although the incidence o f poverty declined, fkom 5 1 percent in 1996 to 46 percent in 2000, its geographic distribution was uneven and the incidence o f extreme poverty increased in Nouakchott, the main urban center, and in the Senegal River Valley where agriculture activities are concentrated. Efforts to promote private sector development have met with limited success, and the foreign exchange market and financial intermediation are s t i l l inefficient; the vi judiciary system is weak; utility reforms have been unsuccessful in fostering private sector participation; and private investment has been substantial only in the telecommunication sector. In rural areas, although the Bank’s efforts t o help the country to establish a demand-driven extension service system were Unsuccessful, Bank support for decentralizing environmental management and awareness at the community level produced satisfactory results. It i s too early to know whether recent efforts to increase agricultural value added and rural incomes will succeed. The most significant project aimed at urban development was launched recently, in FY02. The loan i s exceptionally large (US$70 million) and the project ambitious in i t s scope, but if i t achieves i t s objectives i t could have a major impact on urban poverty. Bank assistance toward the second objective, human resource development and increased access o f the poor to basic services, produced some positive results, but weaknesses remain. Bank assistance contributed to the increase in the gross primary school enrollment rate, from 46 percent in 1990 to 88 percent in 2001, a significant gain, and to substantial progress in narrowing the gender gap in primary school enrollment. Large challenges persist: rates o f grade repetition remain high although they are declining, the primary completion rate i s less than 50 percent, with wide disparities between urban and rural areas; and Mauritania’s youth literacy rate i s much lower than that o f the Africa region (49.6 versus 78.5 percent, respectively). M a n y health, nutrition, and population indicators improved. In particular, infant and under-five mortality fell significantly. But maternal mortality, at 747 per 100 thousand, remains high and the health outcomes o f the poor and vulnerable groups have been unsatisfactory. Child malnutrition prevalence i s s t i l l high and access to improved water and sanitation services remains inadequate. Bank assistance contributed to the formulation o f a population policy, but i t was late in supporting sector-wide reforms. The third objective, institutional development based o n good governance, also had some positive results but, overall, this i s an area where outcomes have been unsatisfactory. The Bank contributed to efforts to improve transparency by helping to strengthen the management and monitoring o f public resources, but the lack o f reliable and comprehensive information o n budget execution continues to undermine fiscal transparency, which will be essential for ensuring that the anticipated o i l revenues are managed efficiently and the benefits are shared equitably. The Bank also helped strengthen a number o f policy-making institutions and supported the revision o f key business legislation, such as the investment, commercial and mining codes. On the other hand, Bank support for the decentralization o f public administration, greater participation o f civil society in the development process, and strengthening judicial capacities had limited success; and, as a result o f the Bank’s heavy reliance on project implementation units, administrative capacity in government has remained weak. The overall outcome o f the Bank’s assistance i s rated as unsatisfactory, while the institutional development impact is rated as modest. The sustainability o f the benefits o f Bank assistance i s rated, o n balance, likely but there are important risks. Macroeconomic stability appears to have deteriorated sharply in recent years; accountability and transparency in the use o f o i l revenues are not assured; and the lack o f competition in banking and other k e y economic activities i s exacerbating the economy’s duality. vii In developing the future assistance strategy for Mauritania, it will be essential for the Bank to help Mauritania to formulate a more pro-poor growth strategy, with a stronger focus o n reducing inequalities. This would include adopting an integrated approach to rural poverty, paying particular attention to the relatively neglected area o f rural road improvements. In addition, greater attention needs to be given to removing the institutional constraints to private sector development, including by addressing the difficulties in obtaining foreign exchange in commercial banks, expanding access to credit beyond the few businesses associated with bankers, and helping to strengthen the judiciary system. In the area o f human development, ensuring that resources and services reach their intended destination, particularly by addressing the needs o f the poorest segments o f the population i s a priority for the Bank. The Bank should maintain a consistent focus o n population issues, starting with analytic work o n the proximate determinants o f fertility, and proceeding to develop a clear strategy for supporting the demographic transition o f fertility reduction that appears to be underway. Finally, govemance issues deserve more emphasis. As the government expects to begin receiving o i l revenue in 2006 and there are already issues o f fiscal transparency, the Bank needs to condition i t s support o n ensuring that the o i l sector i s managed transparently and the benefits reach all segments o f the population. In line with the recommendations o f the Extractive Industries Evaluation, the upcoming country assistance strategy also needs to discuss explicitly the sector’s current and potential contribution to sustainable development in Mauritania and devote more attention to analytical and advisory services aimed at improving the institutional and governance framework. Vinod Thomas by N i l s Fostvedt Director- General Operations Evaluation 1 1. Mauritania’s Development Situation in 1992-2003 Background 1.1 Mauritania, with a land area o f over 1 m i l l i o n square kilometers, is one o f Africa’s largest countries but 90 percent o f the land consists o f desert, and less than 1 percent i s arable. The population o f 2.6 million, with a gross national income per capita o f US$430 in 2003 (Atlas Methodology, 2003), has been growing at 2.7 percent in recent years. A series o f severe droughts in the 1970s and 1980s brought widespread desertification, provoking a massive rural exodus and transforming the largely nomadic population into a sedentary one. By the end o f the 1990s less than 10 percent o f the population was nomadic and about 60 percent was urban-based, the majority o f which lives in Nouakchott, the capital city. The ethnic composition, consisting o f a majority o f Arabic-speaking Moors and a minority black African population concentrated along the Senegal River valley in the south, reflects Mauritania’s history and its unique location as a bridge between N o r t h and Sub-Saharan Africa, and is also a source o f social tensions. 1.2 Until recently, its natural resources consisted o f livestock, iron ores and fisheries. In 2001, o i l was discovered offshore with production expected to begin in 2006. Despite the rapid urbanization, agriculture i s a major source o f employment for the population, especially women.’ Mining, historically the main source o f growth, has seen i t s share in GDP decline in recent years but iron ore exports remain the major source o f foreign exchange, accounting for about 50 percent o f exports. Mauritania’s coastal waters are among the richest fishing grounds in the world. While fishing contributes a small share o f GDP it accounts for about 45 percent o f exports and i s a growing source o f government revenue. Thus, iron ores and fish account for almost all o f the country’s exports. Yet, located in the north, the mining and fisheries industries are not only highly capital intensive, they are also served by a modern transport system that provides little interaction with economic activity in the southern region, which i s organized around traditional agriculture. Bridging this duality in the economy remains a severe challenge. Economic Performance’ 1.3 Mauritania entered the 1990s with a weak economy and few achievements. Recurring droughts and trade shocks, combined with poor economic management and political instability, resulted in l o w and erratic per capita growth, deteriorating living standards and a heavy debt burden. These factors, aggravated by the suspension by most donors o f their assistance in response to the position taken by Mauritania during the 1991 Gulf crisis, culminated in a balance o f payments crisis in 1992. In late 1992, the government embarked o n an ambitious stabilization and adjustment program supported by the Bank and the IMF. The program included a large currency devaluation and major ’ In 2001, about 55 percent o f the economically active population was employed in agriculture; o f these, 63 percent was female (down from 79 percent in 1980). * The Country Assistance Evaluation (CAE) team did not have access to the full set o f information from the Authorities regarding key macroeconomic variables and, therefore, assessments about macroeconomic performance and management are somewhat tentative. 2 structural reforms in trade, price liberalization, privatization, taxation, public expenditure management, civil service, and the social sectors. I t was implemented with some determination and, for the period up to the end o f the 1990s, economic performance strengthened, supported by stable policies. As a result, real GDP growth was robust, exceeding 5 percent in 1999, and above population growth. Consumer price inflation declined, and the external position strengthened(table 1.1). But, after periods o f overall surplus in the budget, fiscal deficits emerged in 2000 and 2001 and m a y have worsened considerably in the past two years. While it reflected an increase in government capital and social expenditures, the rise in the fiscal deficit, with the attendant widening o f the current account deficit, also highlighted continued macroeconomic fragility. Still, progress has been made in reducing poverty (table 1.2). Table 1.1: Mauritania-Selected Economic Indicators 1993-95 1996-98 1999 2000 2001 2002 2003‘ 2004p Real GDP growth (%) . , 5.0 4.5 5.2 5.2 3.6 2.3 6.4 6.9 Inflation, EPI (“/I* 6.6 5.7 4.1 3.3 4.7 3.9 5.5 10.4 Gross domestic Investment (% o f 17.5 19 18.6 32.1 22.2 21.9 n.a. n.a. GDP) Fiscal balance (excluding grants, YO -2.1 5.8 2.2 -4.4 -6.5 3.8 -36.4 -23.0 o f GDP) Current account balance (% o f -13.1 -9.2 -4.3 -5.8 -9.3 -0.8 -22.5 -19.3 GDP) a Current account balance ( X “ I of -4.8 -0.2 2.4 -2.6 -6.5 1.1 -22.3 -27.9 GDP) Debt service before debt relief (YO) 34.1 34.2 36.4 32.2 28.5 30.1 n.a. n.a. Debt service after debt relief (YO) 26.9 25.1 22.4 23.0 12.3 11.5 n.a. n.a. Gross reserves (months o f imports) 1.3 3.9 5.8 6.9 5.5 5.8 n.a. n.a. Note: For consistency purposes, IMF data are used exclusively in table 1.1. Therefore, these data differ slightly from annex table 2, which uses official World Bank data for years 1992-1998. a/ Excluding official transfers, and oil and mining-relatedactivities. b/ Including official transfers, and oil and mining-related activities. e/ Estimate. p i Projection. * Period average. Source: IMF, Public InformationNotice (PIN) No. 05/71, June 2,2005; IMF staff reports. Development Challenges 1.4 The robust economic growth was driven by the non-traded goods sector. In the second h a l f o f the decade the impetus for growth came from the services sector, especially telecommunication, transport, and commerce. In addition, boosted by aid- financed public investment, construction and public works have been strong. On the other hand, mining production and industrial fishing fluctuated sharply; manufacturing output grew modestly; and growth in agriculture and livestock was uneven. As a result, the shares o f the tertiary and secondary sectors in GDP have increased, while the share o f the primary sector has declined. The increased activity in the non-traditional sectors is encouraging, but sustainable growth cannot be l e d by non-traded services alone. Stimulating agricultural growth, in particular, will be necessary to reduce poverty. 1.5 The export base remains un-diversified and private investment has been conjned to afew sectors. The export base i s s t i l l concentrated o n iron ore and fish. Non- traditional exports are still a very small part o f total exports, at about 5 percent. As a result, Mauritania remains vulnerable to external price and demand shocks. Domestic investment was sluggish throughout the 1990s, averaging 18 percent o f GDP. About 20 percent o f the investment came from government capital expenditures, and the remainder 3 was a combination o f investment by public enterprises and private companies. Owing to the privatization o f the national telephone company and the sale o f two cellular licenses, and oil-related investment, the investment to GDP ratio was high during 2000-03, averaging 30.3 percent annually. With this surge, Mauritania’s average investment ratio compares favorably with the average for Sub-Saharan Africa; but private investment has not been particularly strong outside o f the telecommunication and o i l sectors. Consequently, employment creation has been limited, and given the rapidly growing labor force, unemployment i s high. 1.6 Mauritania’s overall poverty situation improved in the 1990s but poverty remains widespread in rural areas. The incidence o f poverty declined f i o m 57 percent in 1990 to 46 percent in 2000, with poverty falling among urban and rural households (table 1.2). However, the pace o f poverty reduction was slower in the second half o f the 1990s even though GDP growth rate accelerated, suggesting that rising income inequality may have lowered the growth elasticity o f poverty. In addition, whereas poverty fell in other towns and in the non-river based rural areas, it rose in Nouakchott3, the main urban center, and in the Senegal River valley region where agricultural activities are concentrated. While droughts m a y have been an underlying factor, the sharp increase in extreme poverty in these areas calls for greater attention to the quality o f the growth process. Table 1.2: Mauritania-Incidence of Poverty (in percent) 1990 I996 2000 I I990 1996 2000 Below the poverty line I Geographic distribution ~. Total population 57 51 46 Nouakchott 36 21 25 Urban households -- 30 25 River-based rural 74 60 72 Rural households -- 66 61 Nonriver-based rural 69 72 55 Other towns 45 39 26 Extreme poverty Inequality Total population 28 33 31 Gini coefficient 34 38 39 Nouakchott 13 8 12 River-based rural 39 37 54 Nonriver-based rural 39 53 39 Other towns 18 22 13 I Source: The 2000 household survey; World Bank and IMF data. 1.7 Mauritania has made gains on many social indicators but progress has been slow on several others. Most notably, the gross primary education enrollment rate has increased substantially and the share o f girls in total primary enrollment rose, narrowing the gap with boys. Progress was also made in the areas o f child vaccination; l i f e expectancy; and child mortality (table 1.3). Still, ranked 152 out o f 177 countries in the 2004 Human Development Report o f the United Nations Development Programme (UNDP), Mauritania remains a l o w human development country. In particular, the poorest quintiles o f the population have limited access to education, health, and other social services. Preliminary results o f an ongoing household survey suggest that the incidence o f poverty may have declined in Nouakchott during 2000-02, but also that inequality o f income distribution increased markedly in that period. 4 Table 1.3: Mauritania-Social Indicators, 1980-2003 1980 1990 2003 * Immunization, DPT (% o f children ages 12-23 months) 33 83 Improved sanitation facilities (% o f population with access) 30 33** Improved water source (% o f population with access) 37 37** L i f e expectancy at birth, total (years) 47 49 51 Literacy rate, adult total (% o f people ages 15 and above) 29 35 41 Mortality rate, infant (per 1,000 live births) 118 110 77 Mortality rate, under-5 (per 1,000) 175 162 107 School enrollment, primary (% gross) 37 49 88 Source: World Bank data. * Or most recent year available. ** 2000101 data. 1.8 Aid and external debt remain high. Aid inflows, consisting o f concessional loans and grants, have been critical in helping Mauritania correct i t s balance o f payments problems. Over the period 1993-2003, Mauritania received on average US$253 million in net official development assistance (ODA) per annum, equivalent to 25 percent o f GDP. I n per capita terms, net aid averaged US$lO2 annually, compared with the Sub- Saharan Africa average o f US$26.3. Bilateral aid decreased substantially in the latter part o f the 1990s, and there has been a relative increase in aid from multilateral donors (table 1.4). The European Union (EU), the International Development Association (IDA), and the African Development Fund (ADF) are the leading sources o f multilateral assistance. Net flows from Arab countries and agencies, which had been the main source o f foreign aid in the 1980s, became smaller or negative after the Gulf war. Table 1.4: N e t Receipts of Development Assistance: 1992-2003 (US$ millions, US$per person) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Bilateral 109.1 190.4 117.9 110.1 87.4 83.8 56.6 94.0 82.7 79.9 145.0 137.1 Multilateral, 91.1 134.7 149.5 120.2 184.9 154.2 108.2 124.8 129.3 187.7 200.2 105.7 0fwhich:IDA 12.2 27.1 33.3 28.8 34.1 31.8 21.1 16.0 53.1 48.1 38.9 41.6 Totalinel. Others 200.2 325.1 267.4 230.4 272.3 238.0 164.7 218.8 211.9 267.6 345.3 242.7 Amount per capita 94.0 149.1 119.4 100.2 115.4 97.9 65.9 85.1 80.0 98.4 124.2 85.2 Source: OECD Geographical Distributiono f FinancialFlows to Aid Recipients. a. Computed as disbursements minus repayments on earlier lending (for more details, see Annex Table 3a). 1.9 As Mauritania borrowed heavily in the 1970s to finance an unsuccessful industrial expansion program and in the 1980s t o finance mining investments, i t s foreign debt increased rapidly. The outstanding foreign debt stock reached a peak o f US$2.6 billion in 1998, with debt service absorbing 28 percent o f export eamings. Following debt relief on Cologne terms in 1999, Mauritania qualified for additional debt relief under the heavily indebted poor countries (HIPC) Initiative in February 2000. In June 2002, Mauritania reached the completion point for debt relief under the enhanced HIPC Initiative and will receive, under this framework, debt service relief equivalent to US$622 m i l l i o n in net present value (NPV) terms. A recent internal Bank document determined that Mauritania’s N P V o f debt-to-exports ratio and debt service-to-exports ratio are w e l l below i t s indicative debt-burden thresholds, suggesting that it i s a l o w debt-distress country. Still, as OED review o f the H I P C Initiative has argued, Mauritania’s weak export growth and un-diversified productive base underscore the importance o f 5 improving export performance, closely monitoring the debt level and applying prudent debt management policies to ensure long-term debt ~ustainability.~ 2. The World Bank’s Assistance and Strategy in 1992-2003 Objectives 2.1 The Bank’s assistance program in Mauritania in the decade 1992-2003 evolved in two distinct phases. In the first phase, covering the period 1992-1997, the Bank’s overriding objective was helping the country attain long-term sustainable economic growth with equity. Two country assistance strategies for FY92-94 and FY95-97 guided the Bank’s assistance during this period, with a focus on (i) private sector-led economic growth, (ii) human resource development, and ( iii) economic management and capacity building. In the FY95-97 strategy, the third area would be broadened to include institutional development and governance objectives. A strong macroeconomic agenda aimed at restoring internal and external balances underpinned the Bank’s interventions. 2.2 From 1997 onward, helping to achieve growth with a particular focus o n poverty reduction became the Bank’s stated overarching objective. The first country assistance strategy, covering the period FY97-00, was well articulated with an explicit poverty reduction orientation. In addition to the above three areas, emphasis was placed o n interventions targeted to the vulnerable. The next country assistance strategy was not presented until FY02, which means that the Bank operated without a strategy in FYO1- 02. N o t only did Bank lending continue during these years, but i t was very high. 2.3 At the time o f preparation o f the 2002 assistance strategy, Mauritania was implementing the strategy set out in the PRSP that the Bank and the Fund had endorsed in 2001. The FY02 Country Assistance Strategy encompassed the four pillars o f the PRSP: (i) accelerating private sector-led growth, ( ii) anchoring growth in the sphere o f the poor, (iii)developing human resources and ensuring universal access to basic infrastructure and services, and (iv) promoting institutional development based upon good governance. Thus, in the 2002 strategy, the earlier emphasis o n safety nets was replaced with the concept o f “growth anchored in the sphere o f the poor”, which highlights the need for growth to be grounded o n activities that would be most likely to involve the poorer segments o f the population. Relevance o f Overall Strategy 2.4 With Mauritania suffering from severe internal and external imbalances in the early 1990s, the initial focus o f Bank’s assistance in getting the macroeconomic hndamentals in place was highly relevant. The Bank’s later efforts to diversify and accelerate competitive agriculture growth and integrate livestock into the economy reflected a clear recognition that overcoming the duality in the economy would require a strategy aimed at increasing output and incomes in the rural sector. In this context, the Debt Relieffor the Poorest: An O E D Review of the HIPC Initiative, World Bank, 2003. 6 Bank’s assistance appropriately moved from a narrow focus o n agriculture to a broader rural development strategy. In the process, attention was paid to ensuringthat growth was environmentally sustainable. The strategy also recognized that growth was not enough to combat poverty; achieving improved living standards among all segments o f the population required that investments in productive sectors be complemented by a strategy aimed at directly promoting human capital development. In this regard, the Bank appropriately focused o n raising the efficiency and effectiveness o f education, and improving access to health services and water supply and sanitation. Efforts were also made to address the social dimensions o f adjustment through social protection measures. 2.5 Consistent with the large demographic shifts that Mauritania was experiencing, the strategy progressively adopted a focus on urban development. The Bank appropriately supported labor-intensive activities to create employment for the urban poor while expanding their access to basic infrastructure and social services. As the strategy evolved, the Bank strengthened i t s focus o n institutional development and good governance, recognizing their importance for creating an environment conducive to private sector investment. In sum, the elements o f the Bank’s strategy were relevant to Mauritania’s development situation. The strategy was coherent and consistent with the government’s priorities, and reflected the evolution o f thinking about poverty within the Bank. With the advent o f the PRSP, the country assistance strategy became closely aligned to government policy. 2.6 Although the Bank’s overall strategy was relevant, several criticisms could be raised. The Bank was slow in developing a more pro-poor growth strategy. The rural development strategy was based on an appropriate diagnosis o f the constraints in the rural sector but it did not pay adequate attention to inter-sectoral linkages, particularly with respect to transport. In the human development sectors, the strategy was late in addressing overall health sector reform, population issues were not sufficiently emphasized, and inequities in the health and education sectors were not addressed adequately. The strategy recognized the need for restructuring the banking sector, but the formulation o f the reforms overlooked the extent o f concentration in the sector, which has remained oligopolistic and characterized by a high degree o f connected lending. Finally, the emphasis placed o n govemance issues has been inadequate. While reforms have focused on public expenditure management, the promotion o f transparency, an essential tool for building good governance, received limited attention until recently. These shortcomings are discussed in the rest o f the report. Lending Services 2.7 Bank lending over the 1992-2003 period was significant, totaling US$491 million. Though fluctuating f i o m year to year, lending exceeded agreed IDA allocations throughout the period (figure 2.1). Since FY95, actual lending has consistently exceeded the amounts envisaged in the high case scenarios even when the triggers for the high case lending were not fully met.’ Several unplanned projects were financed, including a social For example, in the FY97 country assistance strategy, triggers for the high case assistance included opening water and electricity to private investment, which was not successfully achieved. 7 protection project in FY93, a regional hydropower project in FY97, a fiscal reform operation and an environmental project in FY00.6 Finally, in FY02, a very large urban project was approved. Figure 2.1: I D A Lending vs. Allocation 80.0 70.0 60.0 4 v) 50.0 2 40.0 v) 3 30.0 20.0 10.0 -IDA - Fiscal Year Actual Lending IDA Allocation 2.8 The sectoral allocation o f lending did reflect the shift in the focus o f the Bank’s strategy towards education, health, and urban development (annex table 3C). The combined share o f health and education in total commitments increased to 27 percent from 12 percent in the 1980s, and the share o f urban development rose to nearly 14 percent. The Bank maintained a focus o n agriculture and the rural sector but i t s share o f lending was relatively lower. Adjustment lending accounted for 29 percent o f total commitments over the period, and was particularly high in the first half o f the 1990s, when it represented 5 1 percent o f total lending. 2.9 Table 2.1 presents annual average IDA commitments o n per capita basis in a sample o f African countries for the period 1980-2002.’ It shows that Bank lending to Mauritania has not only been rising; since FY95, it has been significantly higher than in countries o f comparable population size in the Africa region. There i s evidence that Mauritania attracted this level o f commitments because o f its relatively high country policy and institutional assessment (CPIA) ratings. Indeed, OED 2003 Annual Review o f Development Effectiveness (ARDE) found that “Bank lending over the period 1999- 2003, both overall and o n a per capita basis, was concentrated in countries that had relatively good policy environments.” But the lending did not seem to have adequately taken into account Mauritania’s rising foreign indebtedness, which necessitated relief under the enhanced HIPC Initiative. Lending in support o f urban development, in particular, was exceptionally large. Whereas the F Y 9 7 country assistance strategy had Classified as an environmental project, the Cultural Heritage project, supported by a Leaming and Innovation Loan (LIL), was rather designed to determine h o w to safeguard and enhance the cultural heritage o f Mauritania, an objective that was not identified in the country assistance strategy. Sample includes Sub-Saharan African (SSA) countries w i t h population greater than 1 million but less than 5 million. planned for a relatively small investment loan to support the government’s urban development program, the loan approved in FY02 was US$70 million, by far the largest single investment project ever approved for Mauritania. Table 2.1: IDA Commitments per Capita in Selected SSA Countries, 1980-2002 (in US$) Countty/Fiscal Year 80/91 92/94 95/9 7 98/02 Central African Republic* 9.8 2.8 I .6 2.4 Congo, Republic of 2.4 11.7 1.o 4.9 Eritrea* 0.0 2.5 2.1 16.4 Gambia, The 10.8 8.1 0.0 15.1 Guinea-Bissau 14.1 5.7 9.9 9.1 Lesotho 4.7 6.0 4.8 4.3 Mauritania 8.8 11.5 19.5 20.8 Sierra Leone* 2.1 15.2 6.7 5.2 Post-conflictcountries. Source: World Bank data, April 2004 2.10 Assessment o f closedprojects. During the period 1992-2003, OED reviewed a total o f 21 closed Bank-financed projects in Mauritania, representing US$383 m i l l i o n in commitments (table 2.2). Outcome was rated satisfactory for 71.4 percent o f the closed projects. This i s similar to the Bank-wide average o f 70.8 percent but above the Africa Region average o f 57.9 percent. When the analysis i s conducted in terms o f the value o f commitments, Mauritania’s satisfactory rate rises to 86.7 percent, higher than both the Bank average o f 76.6 percent and the Africa Region average o f 64.3 percent. The institutional development impact o f 25 percent o f the closed projects was judged to be substantial, and the sustainability o f 57.1 percent o f the closed projects was rated likely. Overall, Mauritania’s ratings have improved compared to the 1980s and the early 1990s. This was due, in part, to the actions taken by the Bank to restructure problem projects, strengthen the capacity o f project implementation units (PIUs), and reinforce supervision, but also to the Government’s growing commitment to and ownership o f the assistance program. Still, efforts are needed to improve the institutional development impact o f Bank assistance. Table 2.2: Mauritania-OED Project Ratings, Exit FY92-03 Inst. dev. Inst. dev. Total Total Outcome Outcome Impact impact Sustainability Sustainability evaluated evaluated % sat. % sat. %subs. % subs. % likely % likely Country ($MI (No.) (8 (NO.) (8) (No.) ($1 (No.) Mauritania 383.3 21 86.7 71.4 18 25.0 64.4 57.1 AFR 32,954.5 926 64.3 57.9 30 29.1 41.3 37.4 The World Bank 235,358.8 3,107 76.6 70.8 43 38.7 66.4 56.4 Source: World Bank data, April 2005. 2.1 1 Assessment o f ongoingprojects. T w o o f the 12 active Bank projects (16.7 percent) in Mauritania are considered at risk, compared with the averages o f 24.9 percent and 17.6 percent for the Africa region and the Bank, respectively. About 9.7 percent o f commitments are at risk, compared to 24.7 percent and 16.6 percent for the Africa region and the Bank, respectively (annex table 4b). 9 Economic and Sector W o r k 2.12 Economic and sector work (ESW) became increasingly important in the Bank’s assistance program, especially from 1997 onward as the focus o f Bank strategy turned to issues o f poverty reduction, broad-based economic growth, and competitiveness. During 1992-95, E S W consisted o f a few major reports, including the FY94 Public Expenditure Review (PER) and the FY95 Poverty Assessment, prepared by the Bank. After FY95, a different approach to ESW was undertaken: a large number o f smaller, government-led AAA products were prepared. The ESW effort in the 1998-2002 period was extensive: some 19 pieces o f ESW were prepared, most o f them under the direction o f the government with Bank support. The studies dealt with a broad range o f topics including taxation, trade reforms, regulation, public expenditure management, and sector strategies for rural development, education, livestock, mining, and fisheries. 2.13 An internal assessment o f Mauritania’s AAA program was undertaken in 2002. The assessment covers the period FY00-03, and only two tasks in the program were formally assessed. The AAA program was rated satisfactory. However, the assessment noted the lack o f selectivity and coherence in the program; it found that tasks were supply-driven with n o unifying thread. OED’s review o f the ESW program over a longer period o f time (FY92-03) also found that the studies undertaken were broadly consistent with the Bank’s core objectives during this period; but several unplanned tasks were carried out, while k e y planned studies were not prepared. Sector work in support o f the growing lending in the education and health sectors was thin, especially in health. Analytical work o n poverty reduction and private sector development, two major areas o f focus o f the Bank’s strategy, was also surprisingly limited. Moreover, there was no mechanism for assessing the quality o f the ESW prepared under the direction o f the Government. 2.14 There were also major gaps in core diagnostic work: at the end o f the 1990s, core diagnostic work consisted only o f the FY94 PER and the FY95 Poverty Assessment. It was not until FY03 that an economic memorandum (CEM) and a financial accountability assessment (CFAA) review were prepared, and the next PER and poverty assessment were launched, while the country procurement assessment review (CPAR) i s s t i l l outstanding. This core diagnostic work i s critical for the formulation o f the Bank’s strategy and the planned transition to programmatic lending. The cross-country empirical evidence that the efficiency and composition o f public expenditures are critical determinants o f growth and poverty underscores the importance o f periodic reviews o f public expenditures. 2.15 Interviews with former and present Government officials indicate that the Government places a high value o n the Bank’s ESW and judges positively the quality o f dialogue and the technical advice it has received from the Bank. OED’s review found that the ESW effort has helped to deepen dialogue around the k e y economic and social issues facing Mauritania. At the same time OED found that dialogue was limited to government officials. International consultants carried out most o f the studies prepared under government supervision, with limited contribution from Mauritanians; and dissemination has been inadequate, beyond government officials. 10 Aid Coordination 2.16 Mauritania has been a Consultative Group (CG) country since 1985, and C G meetings have provided a framework for donor coordination, in which the Bank assumed a central position and responsibility. Cooperation with the Fund has been good, though it has been hindered by the recent macroeconomic situation. There was a reasonable division o f labor, with the Bank taking the lead in public expenditure analysis and the Fund providing advice to the government o n overall macroeconomic policy as well as technical assistance in areas such as tax policy, exchange rate management, and banking supervision. But the Bank’s focus o n macroeconomic adjustment in the mid-1990s was felt by some UN agencies to have been at the expense o f a more explicit poverty focus. Most donors interviewed expressed a strong disappointment at their limited involvement in the preparation and assessment o f the PRSP progress r e p o r k g 2.17 In the sectors where the Bank has adopted a sector wide approach, i t s leadership has helped assure consistency o f policies and investments, especially in education, where the Bank has sustained a long-term dialogue o n the financing o f education. However, implementation o f a recent project in the area o f rural development, where the Bank appears to have financed a duplicative investment because o f lack o f communication with other donors, has underscored the need for greater coordination at the local level. 2.18 The PRSP has provided a framework for the Government to play an active leadership role in donor coordination. Capacity at the Ministry o f Economic Affairs and Development (MAED), the government agency responsible for the overall policy dialogue with donors, i s being strengthened so that i t can coordinate extemal assistance effectively. The Bank, through the resident mission, i s taking part in these efforts; and Bank missions are increasingly consulting with other donors. Given the breadth o f the government poverty agenda and the need for the Bank to be selective in i t s interventions, donor coordination will remain important and the Bank will need to continue to play an active role in this process. 3. Progress in Achieving the Bank’s Major Objectives 3.1 The Bank’s assistance program in Mauritania in 1992-2003 pursued three main objectives: (i) sustainable private sector led-growth that i s anchored in the sphere o f the poor; ( i i) human development with access to education, health, and basic services; and ( iii)institutional development based o n good governance. This chapter assesses the contribution o f the Bank’s assistance to progress made and the results achieved under these objectives. * OED has recently completed, jointly with the Independent Evaluation Office (IEO) o f the IMF, a review o f the PRSP process. The Mauritania case study for the PRSP review notes the limited participation o f other donors and civil society in the PRSP process. See Poverty Reduction Strategy Initiative: Findings of I O Country Case Studies o f World Bank and IMF Support, World Bank and IMF, 2005; and “OED Review o f the Poverty Reduction Strategy (PRS) Process: Mauritania Case Study,’’ Background Paper, Operations Evaluation Department, World Bank, 2004. 11 Objective 1: Sustainable Private Sector-led Economic Growth Anchored in the Sphere o f the Poor 3.2 Achievement o f this objective required progress in three areas: macroeconomic stability; private sector development; and anchoring growth in the spheres o f the poor, which involved rural sector and urban development. The Bank's lending in support o f these objectives was substantial, but progress has been mixed. Although macroeconomic stability improved in the early years o f the period under review it was not sustained. Real GDP growth was robust and steady. Driven in part by private investment in telecommunication and aid inflows, Mauritania's economy grew faster than those o f the Afkica region in recent years (table 3.1). But, despite the strong growth, the economy did not generate employment and increase the incomes o f the vast majority o f the poor. Although the 2000/01 household survey shows an overall decline in poverty (table 1.2)' there was a sharp increase in extreme poverty in Nouakchott and the Senegal River Valley, and unemployment i s widespread.' 3.3 That growth was not pro-poor could be traced to three factors. First, the growth effort was hampered by rapid population growth. While poverty was falling by about one percentage point a year during the 1990-2000 period, population was growing at a much faster rate, with the result that the absolute number o f the poor increased." Second, growth was not broad-based: in particular, it was not supported by sustained expansion in the agriculture and livestock sectors where most o f the poor are found. Third, private sector investment, normally the driving force for economic growth, has been modest outside o f the telecom and o i l sectors. These findings are discussed further below. Table 3.1: GDP Growth Performance 90-94 95-97 98-03 GDP growth (annual YO) Mauritania 3.2 3.1 4.4 Sub-Saharan Africa 0.6 4.2 3.1 Low income 3.3 5.6 5.0 GDP per capita growth (annual YO) Mauritania 0.7 1.o 1.7 Sub-Saharan Africa -2.1 1.4 0.7 Low income 1.1 3.4 3.0 Source: SIMA database as May 3,2005. Macroeconomic Stability 3.4 The Bank's assistance in pursuit o f macroeconomic stability focused o n improving resource mobilization and public expenditure management. The Bank pursued these objectives with a public resource management credit (PRMC) and a fiscal reform credit (FRSC). An Oil Shock Supplemental Loan was provided to mitigate the impact o f The 2000/01 household survey estimated the unemployment rate at 29 percent at the national level, 39 percent in Nouakchott, and 38 percent in other cities. loThe household survey also reports that the absolute number o f the poor increased from 1.1 million in 1990 to 1.25 million by 2002. 12 the unexpected increase in o i l prices in 1998-99. The FRSC, provided under the Higher Impact Adjustment Lending (HIAL) initiative, and the O i l loan were unplanned.” Nonetheless, the three credits were consistent with the private sector-based growth objective. Both the P R M C and FRSC addressed weaknesses in public expenditure management and resource mobilization, based o n the analysis contained in the FY94 PER. A third PER, which was planned for FY98, was not delivered and this left a gap in guiding future operations. 3.5 Mauritania’s macroeconomic environment improved in the second h a l f o f the 1990s, reflected in single-digits inflation rates, a stable exchange rate, and growing foreign reserves (table 1.1). This stability owed a lot to the pursuit o f prudent fiscal policies. The fiscal deficit was reduced sharply from 11 percent o f GDP in 1993 to a surplus averaging 4.7 percent o f GDP in 1996-97 and 2.2 percent in 1998-99. This fiscal improvement was facilitated, in part, by a surge in fish license fees since 1996, which resulted from the opening o f deep-sea fishing to European vessels. However, beginning in 2000, fiscal performance has weakened. The government has recently reported that the fiscal situation deteriorated significantly in 2003 and 2004, due to overspending. The full extent o f this deterioration i s now emerging, and although the exact figures are not yet available, i t i s expected to show a very precipitous increase in the fiscal deficit; the past under-reporting reflects a lack o f fiscal transparency that characterizes government budgetary procedures. 3.6 The Bank’s contribution to fiscal consolidation has been limited. The reforms supported by the P R M C and FRSC contributed to broadening the tax base, lowering marginal tax rates on company and private income, and simplifying tax administration. The tax ratio has not, however, risen. In 1993-97, the ratio o f tax revenue to GDP averaged 17.4 percent; in 1998-2002, this average fell to 14.3 percent, well below the Sub-Saharan Africa average o f 18 percent. In contrast, the ratio o f non-tax revenue to GDP averaged 8 percent and 11.4 percent over the same periods, reflecting the growing dependence o f budgetary revenue o n fishing licenses. Similarly, although these Bank’s operations helped contain the growth o f current expenditures, particularly the wage bill, improve expenditure planning, and enhance the poverty focus o f government expenditures in the early 1990s, they have been ineffective in fostering solid budgetary institutions to guarantee the permanence o f these achievements. The fact that there i s no transparent accounting o f contingent liabilities o f the public sector and other quasi-fiscal activities suggests that the institutional context in which fiscal policies are formulated remains inadequate. In short, to a significant extent, the improvement in fiscal balances in the 1990s was achieved without sustainable progress toward fiscal consolidation. Private Sector Development 3.7 The Bank’s assistance in support o f private sector development aimed at improving the overall business environment, enhancing financial intermediation, OED evaluation o f the HIAL initiative found that it was yielding positive results and, based on these findings, O E D encouraged the Africa Region to continue with this approach. See “Higher Impact Adjustment Lending (HIAL): Initial Evaluation,” Operations Evaluation Department, World Bank, 1999. 13 reducing the cost o f doing business, and reforming public enterprises. To these ends, a private sector adjustment credit was launched in F Y 9 5 to support reforms aimed at liberalizing the exchange rate and trade regime, improving the legal and judiciary framework, and increasing the efficiency o f financial intermediation. And four investment credits focused on reforms in the water supply and sanitation, electricity, and telecommunication sectors. But a study examining Mauritania’s regulatory and institutional environment for private sector development was only completed in FY03. 3.8 Mauritania’s overall business environment showed im rovements in some respects during the 1992-2003 period. A recent OED review‘ found that major public enterprises have been either restructured or privatized; the regulatory framework has improved; and bank credit to the private sector has increased. Foreign direct investment (FDI) as a share o f gross capital formation increased from 3.3 percent in 1990 to 11.2 percent in 2001, well above the average o f 3.9 percent for low-income countries as a group. l3 However, outside o f the o i l and telecommunication sectors, the supply response from the private sector, including FDI, has been modest. Output growth in the manufacturing sector has been weak, and private sector participation in the delivery o f services has been minimal. The limited supply response reflects the persistence o f problems in several areas, including a segmented foreign exchange market, inefficient financial intermediation, weak judicial system, limited competition in key economic sectors, and infrastructure bottlenecks. 3.9 Bank assistance produced mixed results. First, the measures aimed at improving the operation o f the foreign exchange market have not been sufficient t o eliminate market segmentation. Investors, especially micro-entrepreneurs, continue to experience difficulties in obtaining foreign exchange from commercial banks. Moreover, the banking sector was consolidated in the context o f a highly un-competitive market structure. With a few extended family-owned investment groups dominating k e y economic activities, such as banking, construction, and transport, the restructuring o f the banking sector into the ownership o f these groups acted to reinforce the concentrated market structure. A s a result, financial intermediation has remained inefficient; loan concentration ratios are very high; and, while credit availability has improved in recent years, access to credit i s limited to a few business groups and privileged individual borrowers. Bank assistance recognized the need for viable small and medium-scale enterprises (SMEs) to emerge and expand, given their ability to generate employment opportunities. But the lack o f access to financial services remains a severe constraint to their development; and the planned financial sector study, which was to help formulate a strategy to address these issues, had been delayed to FY05. 3.10 Second, the Bank’s efforts to improve the legal framework did not fully succeed in making the reforms work o n the grounds. K e y business legislation has been revised to simplify procedures for business activities. For example, the commercial and c i v i l procedure codes as well as the mining code have been streamlined. In 2002, the l2 “Project Performance Re-Assessment Report: Mauritania-Public Enterprise Sector Adjustment Program Project,” Operations Evaluation Department, World Bank, 2004. l3World Development Indicators, World Bank, 2003. 14 Government adopted a new investment code designed to provide incentives and security to both local and foreign investors. However, the application o f the revised codes has been slow due to long delays in passing the necessary implementation decrees. As a result, the business environment still lacks a clear set o f rules. 3.1 1 Third, public utilities reforms are s t i l l incomplete. Bank assistance made a significant contribution to the privatization o f the telecommunication sector. It supported the establishment o f an independent regulatory authority and the separation o f the post and telecom activities. The telecom sector was successfully privatized and yielded a dramatic expansion in service coverage. But, while the postal company has undergone structural restructuring, it has not yet achieved financial viability. The energy/water and sanitation project launched in FY02 facilitated the split o f the water and electricity state enterprise into two entities, each with a legal and statutory framework. However, the reforms have been unsuccessful so far in attracting private sector participation. An attempt in 2002 to privatize the electricity company failed. l4 3.12 Prior to these regulatory reforms, the Bank’s two interventions in the water and energy sector met with limited success. The outcome o f the FY92 water supply project was unsatisfactory. The project did not achieve i t s objectives o f improving the water supply system, increasing the supply o f safe and affordable water, and strengthening the national Water and Electricity Company (SONELEC). The FY97 power project appears to have made progress in improving the efficiency and reliability o f the power system. But, indicators are scarce and installed capacity has expanded very slowly. Anchoring Growth in the Sphere of the Poor 3.13 The Bank’s assistance in pursuit o f this objective had two main elements: integrated rural development and urban development. In the area o f rural development Bank support focused o n developing the livestock potential, diversifjmg agricultural production, increasing the productivity o f small farmers, and protecting the environment. Urban development was pursued through interventions aimed at increasing the supply o f and access o f the poor to basic infrastructure, generating employment and facilitating the development o f micro and small enterprises. The Bank provided six loans in pursuit o f these objectives, and undertook several analytical studies. 3.14 Rural development. The Bank supported the objective o f rural development through an extension service project aimed at smallholder farmers, a natural resource management project, and an integrated agriculture development project, the latter two designed as adaptable programmatic loans (APL). Beginning with the FY94 Fisheries Sector Review and Country Environmental Strategy, the ESW grew to include a strategy for rural sector development and studies o n livestock and artisanal fisheries. 3.15 The performance o f the agriculture sector has been uneven. In 1992-97, output growth was strong, averaging about 17 percent, but the high growth rates occurred in l4The closing date o f this project, initially planned for December 2003, had to be extended so that another attempt to privatize the electricity company could be undertaken. 15 rebound from droughts. In 1998-2002, under less favorable rainfall, agricultural growth was negative, averaging -3.8 percent per year. Agriculture s t i l l engages over half the workforce but produces only about 5 percent o f GDP. After stagnating in 1992-96 with an annual average growth rate o f 2.2 percent, livestock production has increased in recent years, growing at 3.1 percent on average in 1998-02, but backward and forward linkages with the rest o f the economy are weak. Artisanal fishing was also characterized by slow growth, with production growing by only 0.4 percent in 1992-97 and 2.1 percent in 1998-02. As a result, the primary sector has contributed only modestly to GDP growth and poverty reduction. After declining in the mid-1990s, poverty increased sharply between 1996 and 2000 in the river-based rural areas (table 1.2). 3.16 The contribution o f the Bank’s assistance to the rural development objective has been modest. The extension service project did not achieve i t s objective o f establishing a sustainable, demand-driven national agricultural extension service system. The natural resource management project helped strengthen the capacity o f rural communities to manage their natural resources in a sustainable manner. It supported village investments, which increased incomes; and promoted the creation o f decentralized rural institutions. Overgrazing and deforestation continue, however; and, although experience suggests that in environments prone to desertification, priority investments should be set in the context o f community driven natural resource management plans to enhance environmental awareness, this was not the case under the initial phase o f the project. Furthermore, while the project established village development associations to manage common natural resources, it bypassed the communal institutions responsible for implementing the national decentralization policy. Designed to increase areas under irrigation, diversify production into potentially exportable crops, improve linkages with livestock production, and improve the delivery o f extension services to small farmers, the integrated agricultural development project appears to be making progress. Available data point to increases in rice yields, diversification toward fruits and vegetables, and exports; but i t i s too early to tell whether the project will succeed in stimulating agricultural growth. 3.17 Improvements in road infrastructure are often necessary to support agricultural growth. Most o f the beneficiaries interviewed during field visits identified the lack o f adequate roads as a major constraint to agricultural production. Rural roads are in poor condition, and transport networks for agriculture produce are inadequate and unevenly distributed across the country. High transport costs, stemming primarily from the fact that road transport had not been effectively liberalized, together with the lack o f adequate rural roads, reduced the impact o f the Bank’s interventions. Bank assistance was designed under the assumption that the road constraints would be mitigated by programs supported by other donors, which did not happen to the extent expected. EU, the lead donor in the transport sector, has concentrated i t s interventions o n the main roads. 3.1 8 Urban development. Bank support for urban development began with the Construction Capacity and Employment Project in FY93, followed by the Urban Infrastructure and Pilot Decentralization (UIPD) Project in FY96. B o t h projects were designed to create employment in urban areas through labor-intensive public works and small enterprise development. In addition, the U I P D project was to support a pilot decentralization phase designed to improve the capacity o f local governments to manage 16 urban infrastructure assets and mobilize revenues. In FY02, the Urban Development Program (UDP) Project, an APL, was launched. Lending was underpinned by the FY95 Poverty Assessment, which outlined a strategy for urban development, and a medium- term expenditure framework (MTEF) in FY02. The municipal development study programmed in the FY94 country assistance strategy was not undertaken, however. 3.19 Comprehensive data o n income and employment trends are scarce, but figures from the 2000/01 household survey suggest that the urban poor continue to face considerable difficulties in finding remunerative employment owing to the lack o f investment and j o b creation in the private sector. In recent years, faced with declining real rural incomes, people have moved to the main towns, particularly Nouakchott, in search o f jobs, but most have ended up in the informal sector or in open unemployment. This has contributed to the increase in the incidence o f poverty in Nouakchott. 3.20 The contribution o f Bank assistance to urban development has been modest. The outcomes o f the CCE project and the U I P D project were rated satisfactory. But the main impact o f the CCE project has been on mitigating the social cost o f adjustment through short-term employment creation. The U I P D project, which led to the creation o f AMEXTIPE, a public works executing agency, contributed to the creation o f temporary employment and introduced a number o f instruments to support municipal administration. But efforts to strengthen private sector construction f i r m s were unsuccessful. The ongoing U D P project builds on past experience and addresses k e y long-term issues facing the poor, such as access to credit; it is, however, quite ambitious in scope. Yet, because o f i t s size (US$70 million), the project represents a large concentration o f the Bank’s lending efforts. If it turns out well, it could have a major impact o n urban poverty; but if i t fails to achieve i t s objectives, it could have an adverse effect o n the Bank’s assistance program. 3.21 In summary, Bank support led to modest improvements in macroeconomic stability for most o f the period, but recent budgetary performance has deteriorated very sharply and significantly, threatening internal and external stability, and the achievement o f macrostability i s considered highly unsatisfactory. The outcome o f Bank support i s considered less than f i l l y satisfactory in the areas o f promoting private sector development, increasing agricultural growth, generating productive employment, and improving the living standards o f the rural and urban poor. The robust GDP growth has not achieved a significant reduction in extreme poverty, which rose in the capital city and in river-based rural areas. Based on these results, the outcome o f Bank assistance in pursuit o f the objective o f sustainable private sector-led growth anchored in the sphere o f the poor was, o n balance, unsatisfactory (table 3.2). Table 3.2: Summary Outcome Rating Objectives Outcome Sustainable Private Sector-Led Economic Growth Unsatisfactory Anchored in the Sphere o f the Poor Improve Macroeconomic Stability Highly unsatisfactory Improve Environment for Private Sector Moderately satisfactory Anchoring Growth in the Sphere o f the Poor Moderately satisfactory 17 Objective 2: Human Resource Development 3.22 The Bank's support to the human development objective aimed at improving education and health outcomes, addressing specific constraints in these sectors, improving access o f the poor to basic services, mobilizing resources for social services, and taking into account the situation o f women through gender mainstreaming. 3.23 Education. The main objectives o f Bank assistance in the education sector were to expand access, improve the quality, and strengthen the effectiveness o f education. The Bank's assistance increased rapidly, evolving from a project to a sector approach, with a focus o n primary education. During the FY92-02 period, the Bank launched three projects, focused on technical educational and vocational training (FY93), basic education, with particular emphasis o n girls' education (FY95); and the entire government's education sector development program (FY02). Analytical work included a study o f Mauritania's education system and a MTEF for the education sector. 3.24 Mauritania has made substantial progress in expanding access to education. Progress in increasing primary school enrollment and in narrowing the gap between boys and girls has been particularly significant. The gross primary school enrollment rate has increased rapidly and closed the gap with the Africa region and low-income countries. The net primary enrollment ratio increased from 35 percent in 1990/91 to 67 percent in 2001/02, exceeding the Africa region average. Secondary and higher education enrollment rates also increased, though not as rapidly as those in primary education. But the evidence suggests that progress in improving education outcomes has been less rapid. Rates o f grade repetition remain high although they are declining, and rates o f survival to higher grades are s t i l l low. Primary completion rate i s less than 50 percent with wide disparities between urban and rural areas; and the youth literacy rate rose to only 49.5 percent in 2002 from 45.8 percent in 1990, a rate that i s significantly lower than the African region average o f 78.5 percent (figure 3.1). Figure 3.1 : Education-Efficiency and Outcomes School Enrollment, Primary (Gross) School Enrollment,Primary (Net) 100 0 1 00 1890 2002 Literacy Rate, ages 15-24 Primary Completion Rate, Total +Sub.Saharan Afnca 40 0 +tow ,"come +tow Income 30 0 20 0 100 ! 188) 2002 004 1990 2002 I Source: World Bank data and World Economic Indicators. 18 3.25 The contribution o f Bank assistance to primary education was significant. The targets for school construction, teacher recruitment, and textbooks were exceeded under the successful basic education project, resulting in a rapid expansion in primary school enrollment. The gross enrollment ratio reached 92 percent in 2002/03, a significant gain, though below the target o f 100 percent by 1999/2000. The focus o n girls’ education permitted the rise in the enrollment o f girls to 49 percent o f total enrollment in 2001 from 46 percent in 1996. The repetition and dropout rates declined during this period o f rapid expansion, though the project targets were not achieved. The project was also designed to expand access to and improve the quality o f secondary education, improve the quality and management o f higher education, and promote private sector provision o f education. These objectives were met. However, student learning outcomes, a k e y measure o f the quality o f education, were not part o f the project design and so it i s not possible to tell whether student learning has improved. In addition, although the outcome o f the technical and vocational training project was rated satisfactory, the project did not focus on areas o f high market demand such as electronics, telecommunication and computers. These, as well as the slow progress in raising literacy rates, are major gaps that the ongoing education sector program project seeks to address. 3.26 In i t s 2002 evaluation o f progress towards the Millennium Development Goals (MDGs), the U N D P concluded that Mauritania can reach the M D G s related to primary education, including that o f gender equity.15 This will be a major achievement given that the gross enrollment ratio was only 46 percent in 1990. But further progress in improving the efficiency o f the education system will be needed. The Presidential decision in 1999 to shift from a predominantly Arabic language system to a French- Arabic system i s a further challenge. Although this decision has received the support o f most donors, including IDA, i t has raised new challenges, including the supply o f . bilingual teachers and teaching materials. 3.27 Health. The initial focus o f Bank assistance in the health sector was o n developing a national population policy, improving the delivery o f basic health, and family planning services. This focus was subsequently broadened to expanding health coverage, strengthening the effectiveness o f primary health care facilities, averting the rapid spread o f HIVIAIDS, and achieving financial sustainability in the sector. The Bank’s assistance consisted o f a health and population project (FY92), a Health Sector Investment Program (HSIP) project (FY99) and a nutrition project (FY99). Analytical work has been very limited. It was only with the completion o f the Demographic Health Survey in 2000 that a clear picture o f heath status emerged. 3.28 Mauritania has made progress in improving the health status o f the population, as indicated by the sharp decline in infant and under-five mortality (figure 3.2), the increase in life expectancy from 49 years in 1990 to 5 1 years in 2002, and the decline in the total fertility rate from 6 percent in 1990 to 4.1 percent in 2003. However, despite the recent gains, the demographic and health situation continues to be characterized by rapid population growth, high burden o f illness and high maternal and child mortality, l5Rapport sur Les progris dans la mise en oeuvre des Objectiji de Ddveloppement pour le Milldnaire en Mauritanie, PNUD (UNDP), Nouakchott, decembre 2002. 19 especially among the poorer socio-economic groups whose health outcomes have remained poor. Figure 3.2: Health-Mortality, Coverage, and Quality Immunization, DF’ T (‘%of children 12-23 months) Immunization, Measles (“A of children 12-23 months) 1 100 , - I 100, -SubSaharan Africa I -Low income 20 0 2o 1990 2002 1990 2002 Infant Mortality Rate Under-five Mortality Rate 200 -Mauritania -9.1bSaharan Africa -&Saharan Africa -Low Income -Low Income 50 20 1990 2003 1990 2003 Maternal Mortality Ratio (per 100,000 live births) I Malnutrition Prrvalence i n Mauritania 1200 600 d &Saharan Africa children under 5 ) I 1 400 20 -D- Malnutrition 4 ‘i 200 prevalence, weight , , , for age(% of children under 5) 1990 1995 2000 1991 1996 2000101 Source: World Bank and UNICEF data. 3.29 The Bank’s contribution to Mauritania’s health, nutrition and population outcomes has been mixed. The health and population project had a satisfactory outcome. A population policy was developed; and cost recovery initiatives resulted in increased availability o f affordable essential drugs as well as in increased utilization o f health facilities. HSIP targeted key determinants o f health outcomes and achieved positive results. Between 2000 and 2003, child mortality declined steadily. But available evidence suggests that the poor still have limited access to effective and affordable drugs and other services because o f weaknesses in financing and delivery o f primary health care. Under-five mortality rates are substantially higher in households with an illiterate 20 mother (152 per thousand) and in the Senegal River Valley (146 per thousand), where the incidence o f poverty i s highest.16 3.30 A significant proportion o f maternal and child mortality can be attributed to the poor nutritional status o f mothers and children, which the ongoing nutrition project seeks to improve. But progress has been slow and uneven (figure 3.2). And outside the health sector, access o f the poor to water and sanitation services did not receive adequate attention, despite their well-known impact on child mortality (para. 3.34). In i t s 2002 evaluation, U N D P concluded that Mauritania was unlikely to reach the health MDGs, in part because o f the slow progress in improving the health outcomes o f the poor. 3.3 1 Financing for basic social services. Bank assistance placed emphasis on increasing financial resources for social services by rationalizing government expenditure and re-orienting i t towards the social sectors. The Bank’s approach evolved from an early emphasis on loan conditionality to developing annual public expenditure programs, three-year rolling public investment programs (PEPS) and MTEFs as a way o f achieving a more transparent, efficient and poverty-focused public expenditure program. This effort, supported by the P R M C and the FRSC, was based on the analysis contained in the F Y 9 4 PER and FY95 Poverty Assessment. 3.32 Public expenditures for health and education as a share o f GDP have risen over time. But, as table 3.3 shows, the most dramatic increases in social spending have occurred with the advent o f HIPC resources in 2002. Moreover, the poor have received a disproportionately smaller share o f social expenditures. In education, wide disparities in the resources available at the school level are reported, with schools in poor communities disfavored. As o f 2000/01 , about a quarter o f rural communities and almost 30 percent in the Senegal River region reported that their community did not have a school. These include the most impoverished areas. In the health sector, an incidence analysis o f health expenditure by income quintiles shows that the poorest quintile o f the population benefits from only 5 percent o f health expenditure while the best-off 40 percent receive 65 percent o f the benefits. These inequities represent a major constraint to the accumulation o f human capital by the poor. Table 3.3: Public Expendituresa(as % ofGDP) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Education 3.7 4.1 4.1 4.3 4.8 5.1 5.0 5.3 4.5 4.6 5.5 Health 1.0 1.2 1.5 2.0 1.7 1.7 1.7 1.7 1.6 2.0 2.9 Poverty 0.0 0.6 0.7 1.1 0.5 0.5 0.8 0.7 1.3 1.7 2.2 Total 4.7 5.9 6.3 7.4 7.3 7.3 7.5 7.7 7.4 8.3 10.6 a. See footnote 2, p.1. 3.33 Bank assistance has been effective in enabling the Government to prepare MTEFs for the education and health sectors. The results o f the MTEFs have translated into increases in budgetary allocations in the context o f the 2002 budget. However, one l6In contrast, the under-five mortality rate was 66 per 1000 in households with mothers that had secondary education and 106 per 1000 in Nouakchott. 21 objective o f the FRSC, namely to protect social expenditures, was partially achieved. OED rated the outcome o f the PRMC and FRSC moderately satisfactory in part because the objective of redirecting more resources to the social sectors was met with only partial success17. This appears to be due to the limited institutional and implementation capacity in government, particularly at the Ministry o f Health. 3.34 Access o f thepoor to basic services. Bank assistance to increasing access o f the poor to infiastructure services (water, sanitation, and energy) was pursued through the public utilities projects reviewed earlier. Progress has been slow, with disparities between urban and rural areas. The proportion o f the population with access to safe drinking water was only 37 percent in 2000, unchanged fkom 1990. This i s below the SSA average o f 58 percent. Only 34 percent o f the urban population and 40 percent o f the rural population had access to safe drinking water. A major concern in urban areas i s the high retail price o f water: estimated at more than one dollar per cubic meter, the average price of water in Nouakchott i s one the highest in Africa. Access to sanitation services improved slightly: the proportion o f the population with access to sanitation facilities increased to 33 percent in 2000 from 30 percent in 1999, but this is significantly below the SSA average o f 54 percent. Only 19 percent o f the rural population had access to sanitation facilities compared to 44 percent in urban areas. 3.35 The Bank’s contribution to the supply o f basic services has been modest. The FY92 water supply project was unsuccessful in i t s efforts to provide affordable safe water to the urban poor in Nouakchott. The power project has not resulted in a significant expansion in installed capacity and average costs have not declined. The energy, water, and sanitation project helped restructure the regulatory framework but has not been effective at attracting private sector participation. A s a result, services have not expanded. In i t s 2002 assessment, the U N D P concluded that Mauritania can achieve the water supply MDG but this will require further improvements in the institutional environment and increased investments, which have been slow to materialize. 3.36 Gender mainstreaming. The Bank’s assistance program also aimed at improving the situation o f women. Several projects had a gender focus. The health and population project was centered on upgrading the status o f women and improving maternal and child health. The nutrition project works through women’s cooperatives to address child malnutrition; and the basic education project sought to eliminate the gender gap in primary education. The Bank also supported efforts to strengthen the economic power o f women through i t s rural development projects. But the ESW devoted t o gender issues has been very limited, consisting mainly o f a regional study o n rural women in the Sahel prepared in FY95. The Women in Development assessment programmed in the FY92 country assistance strategy was not undertaken. l7Government has recently reported a very large increase in poverty spending, but details o n the extent to which this spending was well targeted are not available, nor i s information about the sustainability o f the spending. 22 3.37 Available data confirm Mauritania’s progress in closing the gender gap in primary education, and provide evidence that the improvements in education may have induced a demographic transition o f fertility reduction. But, the data also point to the slow progress in narrowing the gap in adult illiteracy and earnings (table 3.4). Table 3.4: Mauritania-Gender Indicators Selected Gender Indicators 1993 2001 Total fertility rate (births per woman) 5.8” 4.6 Life expectancy at birth (years) Female 53.3 53.5 Male 50.1 50.3 Adult literacy rate (%) Female 25.3 30.7 Male 48.6 51.1 Combined Gross Enrollment Rate at all levels (%) Female 29.5 40.0 Male 39.5 45.0 Share o f earned income (“A) Female 37 36 Male 63 64 Estimated earned income (PPP US$) Female 1,429 Male 2,566 Female economic activity rate as % o f male rate 78 74 Percentage o f National Assembly seats held by 0 3 women UNDP Gender-related Development Index 0.338 0.445 a. Extrapolationbetween 1990 and 1995 estimates. Source: UNDP Human Development Reports. 3.38 Bank assistance contributed to the progress observed in recent years. The health and population project promoted open discussion o n reproductive health and women’s issues in the country and the basic education project targeted effectively girl’s education. The gender gap in adult literacy remains significant, in part, because o f the great disparity between men and women at the beginning o f the 1990s. The gender gap in earned incomes is also very large and has increased slightly in recent years, reflecting the lack o f employment opportunities, especially in agriculture where most women are employed. 3.39 In summary, Bank support was successful in expanding access to primary and secondary education, and in narrowing the gap in primary school enrollment between girls and boys. In addition, the rapid increase in primary enrollment was achieved at the same time that repetition and drop out rates were falling. However, despite this progress, the literacy rate has remained relatively low. In health, Bank support contributed to the decline in infant and child mortality. But while many health, nutrition and population indicators improved, access o f the poor to health services has been less than fully satisfactory. And the Bank has been even less successful at increasing access o f the population to safe drinking water and sanitation, a major determinant o f health outcomes. O n the basis o f these results, the outcome o f Bank assistance under the human resource development objective was moderately satisfactory (table 3 S ) . 23 Table 3.5: Summary Outcome Rating for H u m a n Development Objective Objectives Outcome H u m a n resource development Moderately Satisfactory 0 Raise access, improve efficiency and Moderately satisfactory effectiveness o f education system 0 Improve access and quality o f health services Moderately satisfactory 0 Improve access to basic services Moderately unsatisfactory 0 Gender mainstreaming Moderately satisfactory Objective 3: Institutional Development B a s e d on G o o d Governance 3.40 The objectives o f the Bank’s assistance in this area were to reform the public sector and decentralize public administration; strengthen the legal and judiciary system; improve the management o f public resources and accountability; and capacity building. Theses objectives were pursued through a combination o f adjustment and investment lending, complemented by three stand-alone capacity building projects focused on private sector, mining, and global distance learning (GDLN). Analytical work in support o f lending was very limited. The FY94 PER drew attention to the need for sustained government commitment to institutional development and governance, but the Institutional Development Note planned in the FY94 country assistance strategy was not delivered. 3.41 The World Bank Governance Indicators 1996-2002 shows uneven progress across the six dimensions o f governance in Mauritania.” Progress appears to have been pronounced on the measures o f “control o f corruption” and “regulatory quality,” but less consistent o n the measures o f “government effectiveness,” and political stability, which the Bank did not pursue. Progress was relatively less rapid on the measures o f “rule o f law”; but remained modest o n “voice and accountability” (figure 3.3). The indicators show that Mauritania compares favorably to the regional average on five out o f the six measures o f governance, although i t compares poorly to the regional average o n measures o f “voice and accountability.” 3.42 Notwithstanding these indicators, the recent developments o n the fiscal situation suggest that the lack o f fiscal transparency i s a major issue. Moreover, the Bank i s currently revising Mauritania’s C P I A ratings, which are expected to show a significant decline on fiscal management and related issues. These events indicate that there is s t i l l considerable progress to be made before Mauritania can claim to have a system o f effective governance. See “Govemance Matters 111: Govemance Indicators for 1996-2002,” World Bank Policy Research Paper No. 3106, World Bank Institute, World Bank, 2003; and also www.worldbank.org/wbi/govemance/govdata2002/ 24 Figure 3.3: Governance Indicators for Mauritania in 2002,2000, and 1996 Voice and accountability Political Stability 2002 Government Effectiveness 2000 Regulatory Quality Rule o f Law 0 1996 Control o f Corruption 0 25 50 15 100 I Comparison between 2002,2000, 1996 (top-bottom) Country’s Percentile Rank (0-1 00). Source: Kauhann, D., R. Kraay, and M. Mastruzzi, 2003: Governance Matters 111: Governance Indicators for 19962002. 3.43 The contribution o f Bank assistance to these results has varied. The Bank’s contribution to the control o f corruption has been limited. I t s focus has been on strengthening the management and improving the monitoring o f public resources. Designed to achieve this objective, the P R M C and FRSC helped initiate the MTEF process, which was expected to establish more transparent patterns o f public expenditure. But, as a recent IMF report concluded, progress i s required in many areas before Mauritania can achieve a high degree o f fiscal transparency.” There i s still no reliable and comprehensive information o n budget execution. Yet, given that o i l i s likely to become a major source o f income (box 3.1) the need for a broader framework to ensure the transparent use o f the anticipated o i l revenues i s critical. More than any other natural resource, fuel and minerals have exerted a detrimental effect o n economic growth by impairing institutional quality in other countries, so it i s important that Mauritania manages this new resource well. But, progress in this area has been slow so far due, in part, to the government’s reluctance to engage in a dialogue o n the use o f these resources. l9See “Islamic Republic o f Mauritania: Report on the Observance o f Standards and Codes (ROSC), Fiscal Transparency Module,” Fiscal Affairs Department, IMF, December 2002. 25 Box 3.1: Oil in Mauritania Exploration: Following several exploration campaigns, o i l fields were discovered in Chinguitti and Thiof o f f the coast o f Mauritania in 200 1. Production from the Chinguitti field i s set to start in early 2006, with reserves estimated at 123 million barrels. Production from the Thiof field, whose recoverable reserves are thought to be more important, i s expected to follow soon, though its commercial viability has yet to be fully assessed; while exploration campaigns on potential fields are set to intensify. The o i l sector i s likely to become a major source o f income for the economy, offering Mauritania the opportunity to make significant progress toward poverty reduction. Government strategy for managing the oil sector: The government recently outlined its strategy for managing this sector, covering communication and the utilization o f o i l revenue. In the area o f communication, the elements o f the government’s strategy are to (i) provide all the information necessary for macroeconomic and budget management (e.g., production, investments, and employment); (ii) share this information with the Bank and the IMF; (iii) accelerate the implementation o f governance reforms and the modernization o f public administration; and (iv) develop a communication strategy for the public that would present o i l exploitation to the population as an instrument for wealth creation. Concerning the utilization o f o i l revenue, the government’s strategy w i l l be to ensure that allocation i s in line with national priorities as defined in the PRSP. The priority sectors will be: human resource development, including education, health, and nutrition; the modernization o f the public sector and decentralization; and infrastructure development. In addition, three funds would be set up as follows: (i) a risk management fund to mitigate the effects o f o i l shocks or natural disasters o n the government budget; ( iian inter-generational fund to finance public expenditure in the post-oil period; and a development fund ) to provide assistance to other countries to the extent feasible. Bank response: In i t s initial response, the Bank stated that the exploitation o f fuel in general and the optimal management o f government revenues would be key elements o f good governance, and stressed that the implementation o f an exemplary communication policy w i l l strengthen the international image o f Mauritania and benefit the economy. The Bank encouraged the government to (i) consider joining the Extractive Industries Transparency Initiative (EITI), which promotes transparency in every aspect o f extractive industries; (ii)officially give the consortium exploiting the Chinguitti o i l field i t s consent for the disclosure o f all pertinent information regarding their operations in Mauritania; and (iii) communicate simultaneously the same information to the public. Regarding the management o f the government share o f o i l production, the Bank drew attention to the problems that the establishment o f a national company would create. 3.44 The Bank’s contribution to improvements in regulatory quality has been mixed. The FY95 private sector adjustment credit helped reduce the excessive regulation in trade and business. The import licensing system has been liberalized; key business legislation, such as the investment and commercial codes, has been revised to streamline procedures; and a one-stop investment window has been established. But govemance issues appear to have received little attention in the restructuring o f commercial banks. The resulting banking system i s highly concentrated in the hands o f a few industrialists, and access to credit for anyone outside o f a small circle o f firms, especially micro-entrepreneurs, i s problematic. 3.45 The Bank’s contribution to the promotion o f the rule o f law has been modest. In pursuit o f this objective, as part of the new emphasis on private sector development, laws on the organization o f the judiciary were revised, the professions o f court auxiliaries were liberalized and their statutes were revised, a training program for judges and auxiliaries 26 was implemented, and the commercial registry was computerized. But these reform measures were limited in their scope and depth and so the judicial system i s not working efficiently. 3.46 The Bank’s contribution to efforts to improve government effectiveness has been mixed. The PRMC and FRSC yielded some improvement in economic management capacity: the Inter-ministerial Committee on Economic Policy was strengthened, and tax administration has been reinforced. A mining project strengthened capacity to promote and manage applications for exploration permits. But progress has been negligible in many other areas. OED rated the institutional development impact (IDI) o f the two private sector development projects modest because application o f the revised business legislation has been slow, the formulation o f a financial sector strategy to promote access o f SMEs to credit was not carried out, the Chamber o f Commerce was not strengthened, and capacity to manage and monitor fishing resources was not developed. The ID1o f the P R M C and FRSC was also rated modest. In particular, the reorganization o f five key ministries, as a first step towards a complete revamping o f the public administration, was unsuccessful. In the area o f decentralization, revenue raising and administrative capacity at the local level i s s t i l l weak. 3.47 In 2002, the Bank launched the GDLN Project to improve Mauritania’s access to global knowledge and information relevant to i t s economic development and policy reforms. The project supported the creation o f Centre de Formation et d’Echanges a Distance de Mauritanie CFED . But, although in i t s early start-up phase, the CFED i s 10 considerably underused. 3.48 A factor underlying the modest ID1has been that the implementation o f Bank- financed projects was carried out by PIUs, in parallel to normal ministerial structures. N o t only were government procedures circumvented, the staff had minimal involvement in project management. In addition, compared to regular c i v i l servants, PIUs had better conditions o f services including higher salaries, thus distorting the incentives system. Although the P I U approach demonstrated that i t could be highly effective in implementing projects, the Bank’s heavy reliance o n the PIUs has retarded capacity building in government. 3.49 Finally, the Bank’s attempts to increase dialogue between government and c i v i l society have been largely unsuccessful. An Institutional Development Fund (IDF) grant designed to strengthen c i v i l society so as to enhance i t s participation in the national poverty alleviation efforts did not achieve i t s objectives, and the outcome o f the grant was rated unsatisfactory. Weak government commitment to c i v i l society participation was an important factor behind the lack o f progress in this area. *’ This finding i s consistent with OED evaluation o f the Bank’s Knowledge Initiative, which found that distance learning centers, such as the CFED, that currently rely heavily on GDLN, face utilization rates below that required to achieve financial sustainability. See Sharing Knowledge, Innovations and Remaining Challenges: An OED Evaluation, World Bank, 2003. 27 3 S O Summing up, the Bank’s assistance toward institutional development and governance produced less than satisfactory results. Some progress was made in strengthening public resource management and policy-making institutions, and in improving regulatory quality. But fiscal transparency remains inadequate, Bank support for legal and judiciary reforms had limited impact; in the areas o f decentralization and administrative capacity, the outcome has been very modest; and support to civil society has been unsuccessful. The outcome o f Bank’s assistance under the institutional development and governance objective was unsatisfactory (table 3.6). Table 3.6: InstitutionalDevelopment and Governance: Summary Outcome Rating Objectives Outcome Institutional Development and Governance Unsatisfactory Reform public sector and Decentralize public Moderately unsatisfactory administration Strengthen the Legal and Judiciary System Moderately unsatisfactory Improve management o f public Unsatisfactory resources/Capacity building Overall Rating 3.51 The overall outcome o f the Bank’s assistance program in Mauritania over the 1992-2003 period i s rated unsatisfactory. The Bank’s strategy was relevant to Mauritania’s development situation, and the assistance program has had some success. However, the outcome o f Bank support has been less than satisfactory in a number o f areas as discussed above and summarized in table 3.7 below. Table 3.7: Overall Outcome Rating Objectives Outcome Overall Unsatisfactory Sustainable Private Sector-Led Growth Anchored in the Spheres o f the Poor Unsatisfactory Human Resource Development Moderately satisfactory Institutional Development and Governance Unsatisfactory Sustainability and Institutional Development Impact 3.52 Sustainability. The sustainability o f the benefits o f Bank assistance program is rated, on balance, likely. Although the sustainability o f certain aspects i s considered unlikely or non-evaluable, as discussed below, most o f the benefits are considered to be resilient to risks. 3.53 The sustainability o f results in the macroeconomic area seems unlikely. Although the government has implemented a vast array o f reforms, recent developments suggest that to secure a more stable macroeconomic environment, Mauritania would need to base the pursuit o f stable policies o n strong institutional underpinnings and greatly improve public expenditure management. With o i l revenues expected in 2006, Mauritania faces 28 the risk that an influx o f foreign exchange from o i l exports could lead t o an appreciation of the exchange rate and make the non-oil sectors uncompetitive. 3.54 The progress made so far in private sector development i s likely to be sustainable. The program o f public enterprise reforms has been sustained by the government; and the successful privatization of the telecommunication sector will demonstrate the importance o f competition as well as strengthen the role o f the private sector in the economy. The reduction and simplification o f the corporate tax regime implemented recently indicate that the business environment i s likely to continue to improve. The private sector s t i l l faces, however, a fair amount o f regulatory risk that i s also compounded by weaknesses in the judicial system; and the inadequate infrastructure and transport services remain important obstacles to business. But, as o f now and with the support o f donors, the government was taking steps to address these areas o f weak performance, such as privatizing the national energy company. 3.55 In the rural and urban sectors, the sustainability o f the two rural development APLs and the UDP project i s rated non-evaluable. These projects are in their initial phases and i t i s too early to tell whether their outcomes would be sustainable. 3.56 In the human development sectors, the sustainability o f achievements in education, health, population, and gender mainstreaming i s likely. There i s strong government commitment to human resource development and growing ownership o f the reforms, as part o f efforts to achieve the MDGs. This commitment i s very clear in education, especially in the area o f primary education, where consistent progress has been made toward the MDGs. In health, there i s also evidence o f growing government commitment to the assistance program, particularly since the latter has adopted a sector investment program approach. The government’s commitment to population and gender issues i s also apparent; it has reiterated i t s support for actions aimed at reducing the gender gap in education, raising the socio-economic status o f women, and integrating family planning in the primary health care package. Finally, in the area o f basic services, the government i s committed to completing the reforms in the public utilities sector. 3.57 In governance and institutional development, the small gains achieved so far are likely to be sustainable, but there are risks. Capacity constraints and political considerations present risks that will affect progress toward fiscal transparency. Intense international pressure will help to ensure that the emerging o i l sector i s managed transparently; but, government policies regarding the o i l sector are not clear, and do pose some risks to economic development. Government commitment to market-fi-iendly policies suggests that improvements in regulatory quality will continue, but concentration o f economic power in the hands o f a few industrialists poses a risk to efforts to establish a framework for market competition. The political commitment to decentralization, expressed formally through the PRSP and reflected in ongoing efforts to deconcentrate public services, i s offset by a weaker government commitment to a participatory process inclusive o f civil society. 3.58 Institutional development impact (IDI,). Most o f the Bank-financed projects during the 1992-2003 period had an institutional development component, reflecting the 29 importance o f strong institutions for successful economic management. But progress in promoting institutional development has been slow, with few achievements. In addition, the use o f PIUs (para. 3.48) and the lack o f local involvement in recent ESW (para. 2.15) have both undermined capacity building. Recognizing that its reliance o n PIUs has undermined the capacity building effort the Bank has announced a shift toward a strategy focused o n capacity building in the public sector. Institutional development impact i s rated modest. Bank Performance 3.59 The Bank has played an important role in Mauritania’s economic and social progress over the 1992-2003 period. The assistance strategies were largely relevant, feasible, and consistent with the Government’s priorities. Early on, when Mauritania was facing a balance o f payments crisis, the Bank’s assistance focused o n stabilization to restore macroeconomic balances before moving o n to address the structural impediments to growth. The ESW prepared in the early 1990s was o f high quality and provided the analytical underpinnings to Bank’s lending. 3.60 The lending in the early part o f the period under review adhered to the Bank’s strategy, in i t s sectoral allocations and objectives. In education, in particular, the Bank’s assistance evolved rapidly and appropriately toward the sector approach and was supported by relevant analytical work. The Bank’s earlier support for public enterprise reforms formed the basis for infrastructure and regulatory reforms, enabling the Bank to play a critical role in the privatization o f the telecommunication sector. The Bank maintained its focus on the agriculture sector and, in recent years, has shifted i t s emphasis toward developing a framework for rural development. 3.61 The design o f Bank-financed projects was generally adequate, although some, like the private sector adjustment credit, were very ambitious with many components; and implementation has been sustained, though with delays. Project supervisions were reinforced, with a greater involvement o f the resident mission. In sum, Bank performance in the 1992-2003 decade has been good in many respects. 3.62 But the Bank’s assistance also had shortcomings. The Bank adopted a pro-poor growth strategy relatively late, beginning only with the 1997 country assistance strategy (para. 2.6). The implementation o f country strategies after F Y 9 4 deviated from plans, with lending exceeding levels planned under the high case assistance scenario even when the triggers for the high case lending had not been fully met. During FY00-02, the Bank operated without a new country assistance strategy, and lending rose sharply in per capita terms with no clear justification. During this period, the Bank approved an exceptionally large urban development project (para. 3.20); the Bank also financed the Cultural Heritage project whose relevance i s questionable. The macroeconomic agenda was, in retrospect, somewhat deficient, in that it did not sufficiently stress the need for an appropriate institutional setting to ensure a degree o f transparency in budgetary procedures consistent with sustainable fiscal consolidation (para. 3.6). At the sector level, the Bank’s strategy in finance also paid inadequate attention to governance issues in i t s support for commercial bank restructuring (para. 3.9). In the health sector, the 30 Bank’s early strategy was narrowly focused o n population issues, even though other health issues had been clearly identified in the early 1990s as a preoccupation for the poor. In addition, the focus on population issues has not been sustained, and the Bank moved with considerable delay to a sector approach in health. 3.63 On ESW, after a sound start, the Bank did not maintain its work o n core diagnostic issues, such as poverty and public expenditure, and has not yet completed a CPAR, although all three areas are the focus o f upcoming reviews. The ESW undertaken in more recent years (FY98-02) appears to be largely supply-driven, with inadequate Bank oversight o f the analytical work prepared under the supervision o f the Government, and limited dissemination. Government Performance 3.64 The Government’s commitment to reforms was a key factor behind Mauritania’s improved macroeconomic performance in the early part o f the period under review and sustained growth effort. Since 1992, the government has implemented a wide range o f reforms, and in 2001, i t provided leadership to the preparation o f one o f the first PRSPs in the region and was successful, through i t s steady implementation, in obtaining debt relief under the enhanced HIPC initiative. The Government also contributed significantly to the AAA effort, supervising the preparation o f a growing body o f analytical work. But in a number o f areas, the Government’s policies and actions have impeded progress toward stated objectives. The Government was slow in moving to provide broader support to the health sector. I t did not construct the knowledge base needed to guide sector priorities until 2000/01 and, until recently, government expenditures o n health stagnated. The Government’s commitment across the various dimensions o f governance has been uneven. Public information o n government finances i s not readily available, and the government has been slow in implementing many o f the actions that are necessary to improve fiscal transparency. This situation h s t r a t e s attempts to identify fiscal risks and formulate policy responses. Fiscal transparency matters because it helps to strengthen fiscal discipline, which i s essential for maintaining macroeconomic stability. Yet, dialogue with the Bank o n issues pertaining to aspects o f the rule o f l a w and the transparent management o f anticipated o i l revenues remains difficult. Similarly, the government’s commitment to strengthening c i v i l society organizations has not been particularly strong, handicapping participation o f these organizations in the development process. O t h e r Development Partners 3.65 While the Bank has played a major role in Mauritania’s economic and social development in the 1992-2003 decade, other donors have also contributed to the government’s poverty reduction efforts. This section presents the contribution o f key multilateral donors, namely, the IMF, EU, and AfDB. 3.66 The IMF. During the 1992-2002 period, Mauritania completed three Fund programs supported by the Enhanced Structural Adjustment Facility (ESAF) and i t s successor the Poverty Reduction and Growth Facility (PRGF). Financial support under 31 these arrangements totaled SDRll9.14 million (approximately US$175 million). The Fund’s programs supported reforms in critical areas o f macroeconomic management, including money and banking, the foreign exchange and trade systems, and budget management. As examples, the Fund’s technical assistance aimed at strengthening the hnctioning o f the treasury bill market, improving the tax system including the unification o f the value added tax (VAT) rates, narrowing the spread between the official rate and parallel exchange rate, and strengthening public expenditure management. The Fund also prepared in 2002 a Report on the Observance o f Standards and Codes that assessed fiscal transparency practices in Mauritania, and highlighted the areas where progress i s required. Nevertheless, there remains issues o f fiscal transparency as reflected in the failure to report overspending such as occurred in 2003 and 2004. 3.67 The A D B . Mauritania has maintained a long-standing good relationship with the African Development Bank since joining i t in 1973. As o f June 2001, AfDB’s total net commitments in Mauritania amounted to Unit o f Accounts (UA) 289.26 m i l l i o n (approximately US$425 million). In the 1990s, i t s lending was concentrated in areas such as artisanal fisheries, transport infrastructure, and rural water supply, where the Bank has not been particularly active, thereby complementing Bank assistance. In addition, it supported education and health reforms in the context o f the sector-wide investment programs, and contributed to economic capacity building at the Ministry o f Economic Affairs and Development. I t also co-financed with IDA the capacity-building project aimed at strengthening the capacity o f women to undertake income-generating activities. 3.68 The EU. The European U n i o n was a major source o f concessional multilateral assistance to Mauritania in the 1992-2003 period. In 1997-99, i t accounted for 40 percent o f public aid to Mauritania. A k e y priority area o f the EU’s interventions has been transport infrastructure, where i t s support i s helping to address Mauritania’s massive road investment needs. EU’s assistance i s also contributing to expand access o f the population to safe drinking water particularly in the rural areas, with investments designed to rehabilitate and expand rural water supply systems. In addition to infrastructure development, EU’s assistance contributed to macroeconomic stability, co- financing the PRMC with the Bank. In the ongoing assistance program, covering the period 2001-2007, transport infrastructure remains the main focus o f EU’s strategy, with capacity building as the second major area o f interventions. External Factors 3.69 With a productive and export base concentrated o n fish and iron ores, Mauritania’s economy i s vulnerable to demand and price shocks; and given i t s geography, it i s also exposed to weather shocks. The economy suffered all three types o f shocks during the C A E period. Severe droughts during the 1992/93 and 1996/97 agricultural seasons resulted in sharp falls in the production o f the traditional cereal crops. The 1996/97 drought was accompanied by a high rate o f abandonment o f land cultivation by small farmers. Although these crops benefited from favorable rainfall in the intervening seasons, both production and area under cultivation have remained below their peak o f 1995/96. During 2001, storms and unusually cold weather resulted in losses 32 in livestock and crops in the southern parts o f the country. After a steady rise in 1994- 97, iron ore prices declined in 1998 and in 1999. Prices recovered in 2000 but world demand weakened in 2001, bringing down exports to their lowest level since 1993. The fisheries sector experienced a severe crisis caused in part by climatic or biological factors in 1994 and in 1997-98, with catches and exports falling sharply. These shocks contributed to the reduction in the pace o f GDP growth, especially during 2001 and 2002. In addition to these shocks Mauritania also suffered a locust invasion, which may have affected more recent macroeconomic performance. 4. Recommendations 4.1 In the period 1992-2003, Mauritania received high levels o f both IDA resources and official development aid in support o f i t s reform program. Economic growth was stimulated and the incidence o f poverty fell. But the benefits o f growth have not effectively reached the lower income groups, either in the provision o f social services or through the creation o f employment opportunities. This C A E found that this was due, in part, to the lack o f sustained growth in agriculture and poverty reduction in the river- based rural areas, where the latter have the highest concentration o f the poor; but also to a substantial degree o f inequality, reflected in market concentration and inequities in the health and education sectors. In developing the future assistance strategy for Mauritania, i t will be essential for the Bank to formulate a more integrated approach to rural poverty, paying particular attention to the relatively neglected area o f rural road improvements. 4.2 In addition, greater attention should be given to removing the institutional constraints to private sector development, including by addressing the difficulties in obtaining foreign exchange in commercial banks, expanding access to credit beyond the few businesses associated with bankers, and helping to strengthen the judiciary system. These should complement efforts to restore and maintain macroeconomic stability, based on achievement o f sustainable fiscal consolidation. 4.3 With regard to the accumulation o f human capital by the poor, the Bank should focus o n achieving more effective service delivery by addressing the inefficiencies and inequalities in the health and education sectors. Emphasis should be placed o n ensuring that resources and services reach their intended destination, giving priority to addressing the needs o f the poorest segments o f the population. 4.4 A sharper reduction in fertility would have increased the benefits o f high growth rates. Driven largely by gains in education, a demographic transition o f fertility reduction appears to be underway but i t s speed has been relatively slow. The Bank should maintain a consistent focus o n population issues, starting with analytic work o n the proximate determinants o f fertility, and proceeding to develop a clear strategy for supporting the demographic transition. If sustained, the fertility reduction would pave the way to improved economic performance. 4.5 Finally, the Bank needs to condition i t s program o n progress o n governance issues, promoting in particular transparency, especially in fiscal issues, and the rule o f 33 law. With the government expected to begin receiving o i l revenue shortly, the Bank needs to focus i t s efforts on working with the government to ensure that the o i l sector i s managed transparently and the benefits reach all segments o f the population. In line with the recommendations o f the Extractive Industries Evaluation, the upcoming country assistance strategy should explicitly discuss the sector's current and potential contribution to sustainable development in Mauritania and devote more attention to AAA aimed at improving the institutional and governance framework.*' 2'Extractive Industries and Sustainable Development: An Evaluation of World Bank Group Experience, World Bank, Intemational Finance Corporation and Multilateral Investment Guarantee Agency, 2003. 35 Annex A: Statistical Tables 1. Mauritania at a Glance 2. Mauritania and Comparator Countries-Key Economic and Social Indicators, 1992-2003 3. Mauritania-Development Assistance and World Bank Lending 3a: N e t Receipts o f Official Development Assistance, 1992-2003 3b: W o r l d Bank Lending by Sector, 1992-2003 3c: Sectoral Composition o f Bank Loans, 1980-2003 4. OED Ratings and Portfolio Status Indicators for Mauritania 4a: OED Ratings, Exit FY92-03 4b: Portfolio Status Indicators 5. Mauritania-World Bank's Senior Management 6. Mauritania-Millennium Development Goals 37 Annex A (continued) Annex Table 1: Mauritania at a Glance 9/15/04 Sub- POVERTY and SOCIAL Saharan LOW. Mauritania Africa income 2003 Population, mid-year (millions) 2.7 703 2,310 Life expectancy GNI per capita (Atlas method, US$) 430 490 450 i i GNI (Atlas method, US$ billions) 1.2 347 1,038 Average annual growth, 1997-03 Population (%) 2.4 2.3 1.9 GNI Gross Y Labor force ( , ) 2.8 2.4 2.3 Most recent estimate (latest year available, 1997.03) capita enrollment Poverty (% of population below national poverty line) 46 Urban population (% of tota/popu/ation) Life expectancy at birth (years) Infant mortality (per 1,000 live births) 62 51 120 36 46 103 30 58 82 II 1 Child malnutrition (% of children under 5) 32 44 1 Access to improved water source Access to an improved water source (% ofpopulation) 37 58 75 i Illiteracy (% ofpopulation age 15+) 59 35 39 Gross primary enrollment (% of school-age population) 86 87 92 Mauritania Male 88 94 99 Low-income group Female 85 80 85 _iil KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1983 1993 2002 2003 Economic ratios' GDP (US$ billions) 0.79 0.94 0.99 1.1 Gross domestic investmenffGDP 26.4 20.6 30.8 41.2 Exports of goods and servicesiGDP 45.7 43.8 38.5 33.5 Gross domestic savingslGDP -4.2 4.7 2.4 0.1 Gross national savingsiGDP -2.0 9.5 42.3 24.9 Current account balancelGDP -27.0 -11.1 -21.1 -32.6 Domestic ! Interest paymentsiGDP 2.9 4.5 1.6 1.4 -I Investment savings Total debffGDP 161.9 230.4 228.9 209.5 Total debt sewiceiexports 15.1 29.0 24.1 20.0 Present value of debt/GDP 57.6 i Present value of debffexports 217.2 Indebtedness 1983-93 1993-03 2002 2003 2003-07 I (average annual growth) GDP 2.4 4.2 3.3 5.4 6.7 Mauritania "' GDP per capita 0.0 2.1 0.9 2.9 0.4 Low-income WOUR Exports of goods and services -2.1 -2.8 -7.3 -9.5 9.5 STRUCTURE of the ECONOMY 1983 1993 Zoo2 2003 Growth of investment and GDP ( O h ) (% of GDP) 60 Agriculture 338 274 208 193 Industry 21 2 31 5 294 300 Manufacturing 13 4 89 87 20 Services 450 41 1 499 508 o o o o * -20 '- "9 8 99 00 01 02 03 Private consumption 71 2 746 79 1 81 6 General govemment consumption 330 20 7 184 183 GD! 0 GDP imports of goods and services 763 597 669 746 1983-93 1993.03 2o02 (average annual growth) Agriculture 20 21 -1 5 Industry 38 12 00 49 Manufacturing 10 -20 -46 -5 6 Sewices 26 65 71 Private consumption 23 45 11 4 79 General govemment consumption -34 50 24 4 Gross domestic investment -21 11 5 -74 194 Imports of goods and services -47 37 11 9 101 Note: 2003 data are preliminary estimates. This table was produced from the Development Economics central database. *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 A (continued 38 Mauritania PRICES and GOVERNMENT FINANCE 1983 1993 2002 2003 Inflation (%) lq Domestic prices (% change) Consumer prices 9.3 4.0 5.3 0 Implicit GDP deflator 7.3 0.3 3.8 4.5 0 4 0 0 Government finance 2 0 0 (% of GDP, includes current grants) 0 i Current revenue 27.2 37.3 29.5 98 99 00 01 02 03 Current budget balance 6.7 17.8 10.2 GDP deflator 0 CPI Overall sumlus/deficit -9.6 8.6 0.2 TRADE 1983 1993 2002 2003 Export and import levels (US$ mill.) (US$ mii/ions) Total exports (fob) 380 370 388 lmn ore 159 184 172 500 T 400 Fish 221 143 145 Manufactures 300 Total imports (cif) 405 200 Food 104 106 110 100 Fuel and energy 37 108 125 Capital goods 114 56 61 0 97 98 99 00 01 02 03 Export price index (1995-700) 132 82 85 Import price index (1995=100) 109 97 98 0 Exports 0 Imports Terms of trade (1995=100) 121 85 87 BALANCE of PAYMENTS 1983 1993 2002 2003 Current account balance to GDP (%) (US$ millions) Exports of goods and services 346 413 382 370 Imports of goods and services 555 563 663 825 Resource balance -210 -150 -281 -455 Net income -62 -69 -187 -127 -10 Net current transfers 59 114 259 214 -20 - U Current account balance -213 -105 -209 -368 Financing items (net) 194 131 96 413 Changes in net resewes 19 -26 113 -45 1-40 A Memo: Reselves including gold (US$ miiiions) 110 49 372 400 Conversion rate (DEC, iocai/US$) 54.8 120.8 271.7 263.0 EXTERNAL DEBT and RESOURCE FLOWS (US$ millions) 1983 1993 2002 2003 I Composition of 2003 debt (US$ mill.) Total debt outstanding and disbursed 1,276 2,174 2,269 2,362 IBRD IDA 59 52 19 256 0 547 0 634 I G: 174 Total debt service 54 128 63 64 iBRD 3 15 0 0 IDA 1 3 4 5 Composition of net resource flows Official grants 62 173 231 Official creditors 135 92 76 86 Private creditors 22 0 4 4 Foreign direct investment 1 16 12 Potlfolio equity World Bank program 0 0 0 I D: 680 Commitments 8 27 0 18 A - IBRD - E Bilateral Disbursements 30 28 41 42 5 . IDA D Other multilateral F - Private C - IMF - ~ Principal repayments 1 14 1 1 G Short-terr Net flows 29 14 41 41 Interest payments 4 4 3 4 Net transfen 25 10 38 37 Note: This table was produced from the Development Economics central database. 9/15/04 Annex A (continued) 39 =I Q =I 0 Annex A (continued) 40 41 Annex A (continued) rota1 by sector Sector Board 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 board Education 52.5 52.5 Educ. Sec Dev APL 49.2 49.2 Global Dist. Learning Center 3.3 3.3 Energy and Mining 11.1 15.0 9.9 36.0 Regional Power 11.1 11.1 Mining Sect. Capacity 15.0 15.0 EnergyiWateriSanitationSector Reform TA 9.9 9.9 Envirnnment 5.0 5.0 Cultural Heritage 5.0 5.0 Global InformationlCommunIcationsTechnology 10.8 10.8 Telecom &Postal Reform 10.8 10.8 Health, Nutritlon and Population 15.1 24.0 4.9 44.6 Pop. Health 15.7 15.7 Health Sector invest. Program 24.0 24.0 Nutr. Food Sect. & SOC. Mobii LIL 4.9 4.9 Private Sector Development 1.3 31.2 38.5 P.E. Sector Adjustment (supplement) 1.3 1.3 Financial & Private 30.0 30.0 FinanciaVPrivate Sector Capacity 7.2 7.2 Public Sector Governance 2.5 2.2 20.8 0.6 0.4 0.1 30.1 18.3 15.1 Public Ent. Sector Adjutment (supplement) 2.5 2.5 P.E. Sector Adjustment (supplement) 2.2 2.2 Private Sector Dev. Cr. (supplement) 0.8 0.8 Public Resource Mgmt. 20.0 20.0 Public Resource Mgmt. (supplement) 0.6 0.6 Public Resource Mgmt. (supplement) 0.4 0.4 Public Resource Mgmt. (supplement) 0.1 0.1 Public Resource Mgmt. (supplement) 0.1 0.1 Fiscal Reform DONOTUSEIN FY02 30.0 30.0 Oil Shock Supplemental 18.3 18.3 Rural Sector 18.2 18.0 38.1 14.3 Agric. Services 18.2 18.2 Rainfed Natural Resource Mgt. 18.0 18.0 TechnicaWocatlonal 12.5 12.5 General EducationV 35.0 35.0 Urban Development 14.0 10.0 84.0 Urban Infrastructure& Pilot Dec. 14.0 14.0 Urban Development Program 70.0 70.0 Water Supply and Sanitation 10.5 Water Supply 10.5 10.5 Total Lending 28.1 26.1 19.5 12.2 34.8 29.1 24.4 30.8 83.1 18.3 122.5 0.0 490.8 Annex A (continued) 42 Annex Table 3c: Sectoral Composition of Bank Loans, 1980-2003 (in Percent of the Value of Commitments) Sectors FY80-89 FY90-95 FY96-03 FY90-03 Education 12 21 15.3 16.5 Environment 0 0 1.5 0.8 Health, Pop, Nutrition 0 6.9 8.4 10.8 Infrastructure 43 4.7 13.6 12.3 Energy 0 0 3.2 1.8 Energy/Mining 41 0 4.4 5.4 Energylwater 0 0 2.9 1.6 Telecom 0 0 3.1 1.8 Transport 2 0 0 0 Water supply 0 4.6 0 1.7 Private Sector 3 17 0 6.3 Public sector govern 23 26 20.4 21.3 Rural sector 19 19.1 16.3 16.3 Social protection 0 5.3 0 1.9 Urban development 0 0 24.5 13.8 TOTAL 100 100 100 100 Share of adjustment loans 17.4 50.8 20.5 28.8 Source: Author's computations based on World Bank data. Annex A (continued) 43 Annex A (continued) 44 Annex Table 5: Mauritania-World Banks Senior Management Division Chiefl Resident Year Vice President Country Director Representative 1991 Edward V.K. Javcox Michael J. Gillette Sunil Mathrani 1992 Edward V.K. JGcox Katherine Marshall 1993 Edward V.K. Jaycox Katherine Marshall Claude Delapierre 1994 Edward V.K. Jaycox Katherine Marshall Claude Delapierre 1995 Edward V.K. Jaycox Jean Louis Sarbib Claude Delapierre 1996 Jean Louis Sarbib 1997 Jean Louis Sarbib Hasan A. Tuluy Claude Delapierre 1998 Jean Louis Sarbib Hasan A. Tuluy Jean Mazurelle 1999 Jean Louis Sarbib Hasan A. Tuluy Jean Mazurelle 2000 Callisto Madavo Hasan A. Tuluy Jean Mazurelle 2001 Callisto Madavo A. David Craig Yves A. Duvivier 2002 Callisto Madavo A. David Craig Yves A. Duvivier 2003 Callisto Madavo A. David Craig Yves A. Duvivier 45 Annex A (continued) Annex Table 6: Mauritania-Millennium DevelopmentGoals 1990 1994 1997 2000 2003 Goal 1: Eradicate extreme poverty and hunger 2015target. halve 199O$l a daypoveqandmalnuhitionrates Percentage share of income or consumption held by poorest20% 62 Populationbelow $1 a day (“4 29.5 25 9 Populationbelow minimum level of dietary energy consumption (“4 1’1 1’ G Povem gap ratio at $1 a day (incidencex depth of povetiy) 9.5 76 Poverty headcount, national (*of populahon) 50 46.3 Prevalenceof underweight in children (under five years of age) 47.6 23 32 Goal 2 Achleve universal prlmaly educatlon 2015target=netenrolImentto 100 Net primary enrollment raeo (% of relevant age group) 35.3 62.6 65.9 67.5 Primary completion rate, total (% of relevant age group) 33 34 39 50 43 Proportion of pupils starting grade 1 who reach grade 5 75.3 65.2 54.7 Youth literacy rate (% ages 15.241 45.8 47 48 48.9 49.6 Goal 3: Promote gender equality and empower women 2005 target = education ratio to 100 Proportionof seats held by women in nationalparliament (“4 4 4 Ratio of girls to boys in primary and secondary education (%) 67.5 90.5 89 9 93.8 Ratio of young literate females to males (X ages 15-24) 65 67.3 69.2 71.2 72.7 Share ot women employed in me nonagncuituralsector (%) 43.3 Goal 4: Reducechlld m o r t a l i i 2015 target = reduce 1990 under5 mortality by two-thirds Immunization, measles (* of children ages 12-23 months) 38 53 64 62 71 Infant mortality rate (per 1,000 live births) 112 99 e4 77 Under5 mortality rate (per 1,000) 162 142 119 107 Goal 5: lmpmve maternal health 2015 target = reduce 1990matemal morcllity by threefourths Births anended by skilled heaith staff (?o‘ of total) 40 56.9 Maternal morhlity ratio (modeled estimate, per 100,000 live births) 1000 Goal 6 Combat HIVIAIDS, malarla, and otherdlseases 2015 target = halt, and begin to reverse, AIDS, etc. Contraceptive prevalence rate (Yo of women ages 1549) 8 incidenceof tuberculosis (per 100,000people) 234.2 249.2 261.2 273.6 286.7 Numberof children otphaned by HIVIAIDS 1000 2000 Prevalence of HIV, female ( O h ages 15-24) Tuberculosb cases detected under DOTS (%) Goal 7: Ensure envlronmental sustainability 2015 target = various (see notes) Access to an improved water source (% of population) 41 56 Access to improvedsanitahon (% of popuiahon) 28 42 Access to secure tenure (x of population1 C02 emissions (metric tons per capita) 1.3 1.4 1.2 1.2 Forest area (% of total land area) 0.4 0.3 GDP per unit of energy use (1995 PPP $ per kg 011 equivalent) Nationally protected areas (x of total land area) 1.7 Goal 8: Develop a global partnership for development 2015 targei= various (see notes;’ Aid percapita (current US$) 116.8 119.4 98 80.1 85 2 Debt service (%of exports) Fixed line and mobile phone subscnbers (per 1,000people) 3 39 5.5 13.4 141.4 Internet users (per 1,000 people) 0 2 4.4 Personal computers (per 1,000 people) 5.9 9.8 10.8 Total debt seNice (%of exports of goods and se~ices) 29 8 24 4 24.5 Unemployment,youth female (x of female labor force ages 15-24) unemployment,youth male (% of male labor force ages 15-24) Unemployment, youth total (%of total labor force ages 15-24) Other Fertility rate, total births per woman) 6 4.9 4.6 GNI per capita, Anas method (current US$) 540 480 450 390 400 GNi, Aths method (current US$) (billions) 11 11 1.1 1 1.1 Gross capital formation (%of GDP) 20 20 7 17 6 30.5 44.8 Life expectancy at birth, total (years) 49 1 50.5 51 Literacy rate, adult total (“loof people ages 15 and above) 34 8 37 1 38.7 40.2 41.2 Population, total (millions) 2 22 2.4 2.6 28 Trade (%of GDP) 106.4 87.7 88.1 96.2 109.4 Source: World DevelopmentIndicators database, April 2005 Figures in italics refer to periods other than those specified. Goal 1 targets: Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day. Halve, between 1990 and 2015, the proportion of people who suffer from hunger. Goal 2 target: Ensure that, by 2015, children everywhere,boys and girls alike, will be able to complete a full course of primary schooling. Goal 3 target: Eliminategender disparity in primary and secondary education preferably by 2005 and to ail levels of education no later than 2015. Goal 4 target: Reduce by two-thirds, between 1990 and 2015, the underke mortality rate. Goal 5 target Reduce by threequarters, between 1990 and 2015, the maternal mortality mho. Goal 6 targets Have halted by 2015, and begun to reverse, the spread of HIVIAIDS. Have halted by 2015, and begun to reverse, the incidence of malaria and other major diseases. Goal 7 targets Integrate the principles of sustainable development into country policies and programsand reverse the loss of environmental resources. Halve, by 2015, the proportion of people without sustainable access to safe drinking water. By 2020, to have achieved a significant improvementin the lives of at least 100 miliion slum dwellers. Goal 8 targets: Develop further an open, NlebaSed, predictable, non-discriminatorytrading and financial system. Address the Special Needs of the Least Developed Countries. Address the Special Needs of landlocked countriesand small island developing states. Deal comprehensivelywith the debt problems of developing countries through national and international measures in order to make debt sustainable in the long term. In cooperation with developing countries,develop and implement strategiesfor decent and productive work for youth. In cooperation with pharmaceuticalcompanies,provide access to ahbrdable,essential drugs in developing countries. In COOperatiOnwith the private sector, make available the benefits of new technologies, especially information and communications. 47 Annex B Annex B: List o f Persons and Organizations M e t Ministry o f Economic Affairs and Development (MAED) H.E. Abdellah Ould Souleymane Ould Cheikh-Sidia, Ministre Mr. Ahmed Youra Ould Haye, Charge de mission, Coordonnateur du Programme National de Bonne Gouvernance Mr. Mohamed Ould Abba, Conseiller charge des Politiques de Developpement Mr. Mohamed Ould El Abed, Conseiller Charge de l a Promotion du Secteur Prive, Directeur de 1’Unite de gestion du programme de reforme du secteur parapublic ; Mr. Isselmou Ould Sidi El Moctar, Assistant technique du Directeur de 1’Unite de gestion du programme de reforme du secteur parapublic Mr. Abba Ould Ahmed Tolba, Directeur de l a Programmation et des Etudes (DPE) Mr. Mohamadou Youssouf Diagana, Directeur Adjoint, DPE Mr. Sidi Mohamed Ould Bakha, Directeur des Financements Dr. El K h a l i l Ould Khalifa, Chef du Projet PARSEAE Mr. K e l l y Oumar Sada, Directeur de l a Promotion de 1’Investissement Prive Mr. Mohamed Ould Babetta, Coordonnateur, Cellule de Coordination du Programme de Developpement Urbain Mr. Sidna Ould N’ Dah, Directeur General, Office National de l a Statistique Mr. Mohamed Mahmoud Ould Chrif M’hamed, Coordinateur Technique Central, Direction des Projets Education - Formation Mr. K a m i l H. A. Wedoud, Directeur, Direction des Projets Education - Formation Office o f the Prime Minister Mr. Mohamed Lemine Ould Deidah, Conseiller Economique Mr. Amadou Ousmane Diallo, Conseiller charge du Bureau Organisation et Mkthodes Ministry o f Finance Mr. Mohamed Ould Didi, Directeur du Budget et des Comptes Mr. Diombar Thiam, Directeur Adjoint du Budget et des Comptes Mr. Mohamed Abderrahmane El Hadi Ould Seyid, Directeur de l a Dette Exterieure Mr. Mohamed Sidiya Ould Mohamed n a l e d , Directeur General des Imp& Commissariat aux Droits de I’Homme, a l a L u t t e contre l a PauvretC et 1’Insertion Mr. Mohamed El Heyba Ould Lemrabott, Directeur des Etudes et de l a Programmation Mr. Ahmedou Ould Ely, Directeur de 1’Insertion Mr. Saad-Bouh Sidaty, Chef de Service, M i c r o et Petites Entreprises Mr. Mohamed Ould Teghre, Chef de Service, Insertion Mohamed Ould Brahim, Directeur Adjoint des Etudes et de l a Programmation Mohamed El Moctar Ould Sidi Bacar, Chef de Service, Analyse et Suivi de l a Pauvrete Mariem Mint El Mouvid, Assistante, Suivi et Analyse de l a Pauvrete, Direction des Etudes et de l a Programmation Annex B (continued) 48 Mohamedou Ould Abdellahi, Expert Suivi-evaluation du Programme d' Appui du P N U D A l a mise en ceuvre du CSLP Sidaty Ould Sidaty, Chef de Service de Developpement Participatif Ministry o f Health and Social Affairs Dr. Mohamed Nezhir Ould Hamed, Directeur de l a Planification, de l a Cooperation et des Statistiques Mr. Ahmed Baba Ould Cheiguer, Responsable de l a Passation des Marches a l a Direction de l a Gestion des Investissements Ministry o f Justice Mme. Marieme Mint Khlil, Directrice de 1'Administration Judiciaire et des Affaires Civiles Dr. Haimoud Ould Ramdan, Charge de Mission Mr. Nemime Ould Mohamed Mahmoud, Secretaire General Ministry of Water and Energy Mr. Tall Ousmane, Directeur de 1'Electricitk Mr. Cheikhna Ould Ahmed, Conseiller, Cellule Nationale de Maitrise de 1'Energie Mr. Hamedi Ould Mohamed Lemine, Directeur de 1'Hydraulique et de 1'Assainissement Ministry of Fisheries and the Maritime Economy Mr. Sidi Mohamed Ould Sidina, Directeur de l a P6che Mr. Mohamed El Hafedh Ould Ejiwen, Chef de Service, P k h e Industrielle Mr. Cherif Ould Toueilib, Directeur, Direction des Etudes et de 1'Amenagement des Ressources Halieutiques Ministry of R u r a l Development and Environment Mr. Baba Ould Boumeiss, Directeur, Direction des Politiques, du Suivi et de 1'Evaluation Mr. Corera Alassane, Environnementaliste, Projet Developpement Rural Communautaire Mr. Mohamed Fall, Charge du Programme Regional du Projet Developpement Rural Communautaire au Trarza Ministry of Interior, Posts and Telecommunications Mr. Abdi Ould Horma, Directeur des Collectivitds Locales Mr. Moctar Ould El Hagen, Directeur, Direction de 1 'Amhagement du Territoire 49 Annex B (continued) Ministry o f Education Mme. Nebghouha Mint Mohamed Vall, Directrice de l a Planification et de l a Cooperation Ministry o f C i v i l Service and Labour Mr. Mohamed Abdallahi dit Isselmou Ould Maouloud, Directeur de 1'Emploi M. Mocktar, Statisticien Ministry o f Mines a n d Industry Mr. Samory Ould Soueidatt, Directeur du Projet de Renforcement Institutionnel du Secteur Minier Mr. Mohamed Salem Ould Mamoune, Directeur de 1'Industrie S N I M (National Mining Company) Mr. Mohamed Saleck Ould Heyine, Administrateur D616gue Mr. Ammar Ould Mohamed Vall, Directeur Financier Audit Office, Supreme C o u r t Mr. Liman Ould Brahim, Secretaire General, Cour des Comptes Mr. Moustapha Ould Abdellahi, President, Chambre des Entreprises Publiques, Cour des Comptes Mr. Benhemeida Sidaty, Conseiller charge de l a Planification, Organisation, et Formation, Cour des Comptes Mr. Ahmed Ould Abdellatif, President, Chambre des Finances Publiques, Cour des Comptes. Secretary o f State for W o m e n Affairs Mme. Fatimetou Mint Lekhliffe, Directrice de l a Cooperation et de l a Planification des Projets Mme. Aminetou Mint Haimed, Directrice de l a Promotion Feminine Mme. Hetoutou Mint Abdoullah, Directrice de l a Famille et de 1'Enfant Mme. Mounina Mint Abdellah, Directrice du Projet N U T R I C O M Information, Technology and Communication Mr. B b Ibrahima Demba, Directeur, Centre de Formation et d'Echanges A Distance de Mauritanie (GDLN) Annex B (continued) 50 Urban Development Colonel Ahmedou Ould Mohamed El Kory, Directeur General, Agence de Developpement Urbain. Agence Mauritanienne d’ExCcution des Travaux d’IntCrGt Public pour 1’Emploi Mr. N’Guissaly Fall, Directeur General Mr. Mohamed Lemine Ould Khalil, Directeur Administratif et Financier National AIDS Committee Dr. Abdallah Ould Horma, Executif Secretary Universal Access Agency Dr. Mohamed Ould Die, Directeur General Mr. Mamadou Amadou Kane, Directeur des Etudes et Developpement Mr. Sid’ Ahmed Ould Raiss, Directeur Financier Cultural Heritage Project Mr. Mohamed Hai%etna Ould Sidi Hai%a, President du ComitC &Orientation, Projet Sauvegarde et Valorisation du Patrimoine Culture1 Mauritanien (PSVPCM) Mr. Abdallahi Salem Ould Gleiguem, Secretaire Permanent, PSVPCM Artisanal Fisheries Mr. Mohamed Mahmoud Ould Sadegh, Secretaire General, Federation Nationale de PCche. Central Bank Dr. Mohamed Lemine Ould Raghani, Directeur des Etudes Centre Mauritanien d’Analyse de Politiques Mr. Zeine Ould Zeidane, Directeur Mr. Abderrahim Ould Didi, Expert macro-economiste Chamber o f Commerce, Industry and Agriculture Mr. Mohamedou Ould Mohamed Mahmoud, President Mr. Habib Ould Hemet, Secretaire General 51 Annex B (continued) University o f Nouakchott Dr. N’D6ry Niang, Professeur d’economie Dr. Haimoud Ould Ramdan, Professeur de droit Dr. Ahmed Ould A.M. Ragel, Chef du Dkpartement de Gestion Dr. Ismail Ould Khalef, Expert en Bonne Gouvernance Economique Mr. Mohamed Lemine Ould Moulaye Ahmed, Professeur d’economie Mr. Ismail Ould Sadegh, Professeur Mr. Debbe Ould Sidy Zeine, Professeur d’economie L a b o r Unions Confkdkration Gknkrale des Travailleurs de la Mauritanie (CGTM) Mr. Niang Mamadou, Comite Executif, Departement International Mr. B a Ali Moctar, ComitC Executif, Formation Mr. Abdallahi Ould Mohamed, Secretaire General Mr. Samba Dicko, ComitC Executif, Departement des Affaires Sociales Confkdkration Libre des Travailleurs de la Mauritanie (CLTM) Mr. Samory Ould Beye Ms. Semeta B i l a l Mr. Eida Ould Ahmed Allah, Secretaire General Adjoint Mr. Alioune Ould Sidi, Secretaire charge des relations exterieures et aux immigres Mr. Sy Amadou, Secretaire charge du secteur informel et des activitks economiques Mr. El Moktar Ould Mohamed, Membre du Bureau ExCcutif Fddkration Nationale des Postes et Tdlkcommunication (FNPT) Mr. Isselmou Ould Hanafi, Secretaire General Union Gknkrale des Travailleurs de la Mauritanie (UGTM) Mr. Dahane Ould Taleb-Ethmane, Secretaire General Mr. Hassan Ould Mboyrick, DeleguC r6gional Mr. Sidi Elemine Ould Cheikh Mr. Sidi Mohamed Ould M o l a Mr. Samba Fall, le‘ Secretaire general adjoint Union des Syndicats Libres de la Mauritanie (USLM) Mr. Sidi Ould Ahmed Ould Boye, Secretaire general adjoint Mr. Ameth Saloum Fall, Cadre Ms. Kane Sokhna, Membre du Bureau Exkcutif Mr. Kane Moktar, Secretaire general Mr. Tabara Ba, Membre du Bureau Executif Union des Travailleurs de la Mauritanie (UTM) Mr. Batty Ould Boydial, Secretaire l’organisation Mr. Hadrami Ould Boydia, Secretaire executif aux affaires Cconomiques et sociales Annex B (continued) 52 NGOs Mr. Abdel Moumen Ould Deye, Coordinateur National des ONGs de Mauritanie et President ONG SOS Villes Anciennes Mr. Kane Yaha Ahiouna, Consultant, Association Feminine pour l a Promotion de 1’Hygikne Mr. Mohamed Salem Ould Bouh, Coordinateur du Cyberforum Mr. Banemou Ould Tlayor, Coordinateur de 1’ONG AGREEN, Facilitateur du Groupe Environnement du Cyberforum Mr. Tambo Camara, President de 1’ONG ADGM et Facilitateur du Groupe Handicap Mr. Madieng Daouda, ONG Tenmiya M m e Aissata Kane, Consultante, AIFF, A P E M M m e Fatimetou M. Sid Ahmed, Presidente de 1’ONG AFPSH et Presidente du RENAM Mme Irabiha Abdelwedoud, FNPDF (Forum Droits des Femmes) Mr. El Hacen Ould Taleb, President GNAP Micro Finance Mr. Ahmed Ould Bouchei%a, Directeur National, Agence de Promotion des Caisses Populaires d’Epargne et de Credit World Bank Mr. Yves Duvivier, Country Manager Ms. Hawa Cisst5 Wague, Economiste Mr. Amadou Oumar Ba, Specialiste, Developpement Rural Mr. Cherif Diallo, Specialiste, Developpement Social Mr. Ismael Ouedraogo, Senior Agricultural Economist International Monetary Fund Prosper Youm, Resident Representative UNDP and UN agencies Ms. CCcile Molinier, Resident Representative Ms. Marikme Bekaye, Leader Thematique Environnement Mr. Sory Ibrahim Ouane, Representant, P A M Mr. Mouradi Benzaghou, Representant ai, FA0 Dr. Hervk Peries, Coordinateur des Programmes, U N I C E F French Embassy Mr. Michel de Verdikre, Chef du Service de Cooperation’et &Action Culturelle 53 Annex B (continued) GTZ Dr. Joachim Hoettcke, Conseiller Technique European U n i o n Ms. Dominique Pavard, Ambassadeur, Chef de Delegation Others Mr. Mohamed Ould Nany, ancien Ministre des Affaires Economiques et du Developpement Mr. Jean-Marie Cour, Consultant Mr. Ahmed Ould Mohamed Val1 dit H'meiditt, PrCsident ONG Action Environnement et President Societe Protectrice des Animaux et de l a Nature Mr. Yahya El Ould Waghf, Directeur, Parc National du Banc d'Arguin et Ex-Chef de Projet PARSEAE 55 Annex C Annex C (continued) 56 57 Annex D Annex D: Guide to OED’s Country Assistance Evaluation Methodology 1. This methodological note describes the k e y elements o f OED’s country assistance evaluation (CAE) methodology. CAEs rate the outcomes o f Bank assistance programs, not the Clients’ overall development progress 2. A Bank assistance program needs to be assessed on how well i t met its particular objectives, which are typically a sub-set o f the Client’s development objectives. If a Bank assistance program i s large in relation to the Client’s total development effort, the program outcome will be similar to the Client’s overall development progress. However, most Bank assistance programs provide only a fraction o f the total resources devoted to a Client’s development by donors, stakeholders, and the govemment itself. In CAEs, OED rates only the outcome o f the Bank’s program, not the Client’s overall development outcome, although the latter i s clearly relevant for judging the program’s outcome. 3. The experience gained in CAEs confirms that Bank program outcomes sometimes diverge significantly from the Client’s overall development progress. CAEs have identified Bank assistance programs which had: 0 satisfactory outcomes matched by good Client development; 0 unsatisfactory outcomes in Clients which achieved good overall development results, notwithstanding the weak Bank program; and, 0 satisfactory outcomes in Clients which did not achieve satisfactory overall results during the period o f program implementation. Assessments of assistanceprogram outcome and Bank performance are not the same 4. By the same token, an unsatisfactory Bank assistance program outcome does not always mean that Bank performance was also unsatisfactory, and vice-versa. This becomes clearer once we consider that the Bank’s contribution to the outcome o f i t s assistance program i s only part o f the story. The assistance program’s outcome i s determined by thejoint impact o f four agents: (a) the Client; (b) the Bank; (c) partners and other stakeholders; and (d) exogenous forces (e.g., events o f nature, international economic shocks, etc.). Under the right circumstances, a negative contribution from any one agent might overwhelm the positive contributions from the other three, and lead to an unsatisfactory outcome. ’ In this note, assistanceprogram refers to products and services generated in support o f the economic development o f a Client country over a specified period o f time, and client refers t o the country that receives the benefits o f that program. Annex D (continued) 58 5. OED measures Bank performance primarily o n the basis o f contributory actions the Bank directly controlled. Judgments regarding Bank performance typically consider the relevance and implementation o f the strategy, the design and supervision o f the Bank’s lending interventions, the scope, quality and follow-up o f diagnostic work and other AAA activities, the consistency o f the Bank’s lending with i t s non-lending work and with i t s safeguard policies, and the Bank’s partnership activities. Rating Assistance Program Outcome 6. In rating the outcome (expected development impact) o f an assistance program, OED gauges the extent to which major strategic objectives were relevant and achieved, without any shortcomings. In other words, did the Bank do the right thing, and did it do it right. Programs typically express their goals in terms o f higher-order objectives, such as poverty reduction. The country assistance strategy (CAS) may also establish intermediate goals, such as improved targeting o f social services or promotion o f integrated rural development, and specify how they are expected to contribute toward achieving the higher-order objective. OED’s task i s then to validate whether the intermediate objectives were the right ones and whether they produced satisfactory net benefits, and whether the results chain specified in the CAS was valid. Where causal linkages were not fully specified in the CAS, i t i s the evaluator’s task to reconstruct this causal chain from the available evidence, and assess relevance, efficacy, and outcome with reference to the intermediate and higher-order objectives. 7. For each o f the main objectives, the C A E evaluates the relevance o f the objective, the relevance o f the Bank’s strategy towards meeting the objective, including the balance between lending and non-lending instruments, the efficacy with which the strategy was implemented and the results achieved. This i s done in two steps. The first i s a top-down review o f whether the Bank’s program achieved a particular Bank objective or planned outcome and had a substantive impact o n the country’s development. The second step i s a bottom-up review o f the Bank’s products and services (lending, analytical and advisory services, and aid coordination) used to achieve the objective. Together these two steps test the consistency o f findings from the products and services and the development impact dimensions. Subsequently, an assessment i s made o f the relative contribution to the results achieved by the Bank, other donors, the Government and exogenous factors. 8. Evaluators also assess the degree o f Client ownership o f international development priorities, such as the Millennium Development Goals, and Bank corporate advocacy priorities, such as safeguards. Ideally, any differences o n dealing with these issues would be identified and resolved by the CAS, enabling the evaluator to focus on whether the trade-offs adopted were appropriate. However, in other instances, the strategy may be found to have glossed over certain conflicts, or avoided addressing key Client development constraints. In either case, the consequences could include a diminution o f program relevance, a loss o f Client ownership, and/or unwelcome side- effects, such as safeguard violations, all o f which must be taken into account injudging program outcome. 59 Annex D (continued) Ratings Scale 9. OED utilizes six rating categories for outcome, ranging f r o m highly satisfactory t o highly unsatisfactory: Highly Satisfactory: The assistance program achieved at least acceptable progress toward all major relevant objectives, had best practice development impact on one or more o f them. N o major shortcomings were identified. Satisfactory: The assistance program achieved acceptable progress toward all major relevant objectives. No best practice achievements or major shortcomings were identified. Moderately Satisfactory: The assistance program achieved acceptable progress toward most o f its major relevant objectives. N o major shortcomings were identified. Moderately Unsatisfactory: The assistance program did not make acceptable progress toward most o f i t s major relevant objectives, or made acceptable progress o n all o f them, but either (a) did not take into adequate account a key development constraint or (b) produced a major shortcoming, such as a safeguard violation. Unsatisfactory: The assistance program did not make acceptable progress toward most o f i t s major relevant objectives, and either (a) did not take into adequate account a key development constraint or (b) produced a major shortcoming, such as a safeguard violation. Highly Unsatisfactory: The assistance program did not make acceptable progress toward any o f i t s major relevant objectives and did not take into adequate account a key development constraint, while also producing at least one major shortcoming, such as a safeguard violation. 10. T h e institutional development impact (IDI) can b e rated as: high, substantial, modest, o r negligible. ID1measures the extent t o w h i c h the program bolstered the Client’s ability t o m a k e m o r e efficient, equitable and sustainable use o f i t s human, financial, and natural resources. Examples o f areas included injudging the institutional development impact o f the program are: 0 the soundness o f economic management; 0 the structure o f the public sector, and, in particular, the c i v i l service; 0 the institutional soundness o f the financial sector; 0 the soundness o f legal, regulatory, and j u d i c i a l systems; 0 the extent o f monitoring and evaluation systems; 0 the effectiveness o f aid coordination; 0 the degree o f financial accountability; 0 the extent o f building NGO capacity; and, 0 the level o f social and environmental capital. Annex D (continued) 60 11. Sustainability can be rated as highly likely, likely, unlikely, highly unlikely, or, if available information i s insufficient, non-evaluable. Sustainability measures the resilience to risk o f the development benefits o f the country assistance program over time, taking into account eight factors: technical resilience; financial resilience (including policies o n cost recovery); economic resilience; social support (including conditions subject to safeguard policies); environmental resilience; ownership by governments and other key stakeholders; institutional support (including a supportive legal/regulatory framework, and organizational and management effectiveness); and, resilience to exogenous effects, such as international economic shocks or changes in the political and security environments. 61 Attachment 1 Republique lsixmique de Mauritanie 1lcivl::clt .. l+~:rcri~il~': Jt sik.i: Ministere des AZzires Economiques - - et du Dewdoppement c-. . 0..o . * Y . r-.. S,~.??. w?,.,..!, Monsieur R. Kyle Peters, Chef de Division, Evaluation de5 pays et relations r&ionoles, DGpnrtement de 1'Evnlratioii RCtrospecdvc des OpCrations, Banque mondlale, Washington, D.C, USA. Ol,ict : 13valuatioii retrospective de I'aide de l a Banque nioiidiale & 13 Mauritanic Monsicur IC Chef dc Division, .I';~cc\iscrkccption de votre leltrc pal- laquelle vous avez bien voulu nous soulnettre pour coniiiic'iitiiires le rapport d'evaluation rftiospective de I'aide apportfc par l a Banquc iiiondialc h iiotrc pays au cows dc la ph-iode 1992-2003 ct jc Y O U S c n rcmcrcie. Cc rapport nppclle de notrc part ICs observations suivaiitcs : 1 hoiis pamgeairs globalemerit I'apprtkiation du rapport en ce qui cocicerrie In pcrlinence de I'aide de In Banque niondiale par rapport aux objcctib de dcvcloppement de n o m pays et l e rcilc di5tciminant qu'cllc a jou0 au cours des clcrnrkrcs niinCes pour appuyer nos efforts dc dkveloppemenl notammen1 en melitre