Documentof The World Bank FOR OFFICIAL USE ONLY ReportNo. 31793-SL INTERNATIONAL DEVELOPMENT ASSOCIATION COUNTRY ASSISTANCE STRATEGY FOR THE REPUBLIC OF SIERRA LEONE FOR THE PERIOD FY2006-2009 May 5,2005 CountryDepartment10 Africa Region This document has a restricted distribution and may be used by recipients only inthe performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization. 1 Date of Last TSS: March 26,2002 1 CurrencyEquivalents Currency Unit = Sierra Leonean Leones US$l.OO = S L L 2,836 (as of April 2005) Weights and Measures Metric System January 1 - December 3 1 FiscalYear Abbreviations and Acronvms AAA Analytic & Advisory Activities AAP Assessment andAction Plan ACC Anti-Corruption Commission AfDB African DevelopmentBank ASR Agricultural Sector Review BB BankBudget BECE Basic EducationCertificateExamination BHP BumbunaHydroelectricProject CAS CountryAssistance Strategy CEM CountryEconomicMemorandum CET CommonExternalTariff CFAA CountryFinancialand Accountability Assessment CG ConsultativeGroup CPAR CountryProcurementAssessment Review CPIA Country Policy and lnstitutional Assessment CPPR Country Portfolio PerformanceReview CRRP Community Reintegrationand RehabilitationProject cso Civil SocietyOrganization CSR Country Status Report DACO DevelopmentAssistance CoordinationOffice DDR Disarmament, Demobilization,& Reintegration DEPAC DevelopmentPartnership Committee DfID Departmentfor IntemationalDevelopment DHMT District Health MinagementTeam DPO DevelopmentPolicy Operation ECOWAS Economic Communityof West African States E1 ExtractiveIndustries EIR Extractive IndustriesReview EITI ExtractiveIndustriesTransparencyInitiative ENCISS EnhancingInteractionandInterfaceBetweenCivil Societyandthe State to ImprovePoorPeople's Lives ERRC Economic Rehabilitationand RecoveryCredit ERRG Economic RehabilitationandRecoveryGrant ESW Economic Sector Work EU EuropeanUnion FA0 Foodand Agriculture Organization FIAS ForeignInvestmentAdvisory Services FSAP Financial Sector Assessment Program GDP Gross Domestic Product GEF Global Environment Facility GoSL Government o f Sierra Leone GRS Govemance ReformSecretariat FOROFFICIAL USEONLY HIPC Heavily Indebted Poor Countries HSRDP Health Sector Reconstruction and Development Project IDA International Development Association IDB Islamic Development Bank IDPs Internally Displaced Persons IF Integrated Framework IFC International Finance Corporation IFMIS Integrated Financial Management System IMC Inter-Ministerial Committee IMF International Monetary Fund I-PRSP InterimPovkrty ReductionStrategy Paper IRCBP Institutional Reformand Capacity Building Project JSAN Joint Staff Advisory Note JSDF Japan Social Development Fund LC Local Council L G Local Govemment LGA Local Government Act LGDG Local Government Development Grant M&E Monitoring & Evaluation MDAs Ministries,Departments andAgencies MDBS Multi-donor Budgetary Support MDGs Millennium Development Goals MDTF Multi-Donor Trust Fund MIGA Multilateral Investment GuaranteeAgency MODEP Ministry of Development & Economic Planning .MOF Ministry o f Finance MOHS Ministry of Health and Sanitation MOLG Ministry of Local Government Micro, Small and Medium Enterprise I MSME MTEF Medium-Term Expenditure Framework NaCSA National Commission for Social Action NCDDR National Committee for Disarmament, Demobilization & Reintegration NCP National Commission for Privatization NCRRR National Commission on Resettlement, Rehabilitation andReconstruction NEPAD NewPartnerships for M c a ' s Development NGO Non-Governmental Organization NPA National Power Authority NPPA National Public Procurement Authority NPV Net PresentValue NRC The Nonvegian Refugee Council NSAP National Social Action Project NTC National Technical Committee OPIC Overseas Private InvestmentCorporation PASCO Poverty Alleviation Strategy Coordinating Office PEP AErica Private Enterprise Partnership for Africa PER Public Expenditure Review PETS Public Expenditure Tracking Study PFM Public Financial Management PHU Public Health Unit PPA Participatory Poverty Assessment PPB Public Procurement Board PPIAF Public-Private InfrastructureAdvisory Facility PRDACO Poverty Reduction Development Assistance Coordination Office PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper PSIA Poverty and Social Impact Assessment PSMS Public Sector Management Support PSR Project Status Report REBEP Rehabilitation and Basic Education Project RRI Rapid Results Initiative RSLAF Republic of Sierra Leone Armed Forces RTFP Regional Trade Facilitation Project /This document has a restricted distribution and may be used by recipients only in /theperformance of their official duties. I t s contents may not be otherwise disclosed ,withoutWorld Bank authorization. RUF Revolutionary United Front SHARP SierraLeoneHIV/AIDSResponseProject SLEDIC Sierra Leone Export Development andInvestmentPromotionAgency SLIHS Sierra Leone IntegratedHousehold Survey SLP Sierra Leone Police Forces SLPRSP Sierra Leone Poverty ReductionStrategyPaper SLRA SierraLeone Roads Authority SME Small MediumEnterprise TA Technical Assistance TRC Truth andReconciliation Commission TSS Transitional Support Strategy UN UnitedNations UNAMSIL UnitedNations Mission in SierraLeone UNDP UnitedNationsDevelopment Program UNHCR UnitedNations High Commission for Refugee UNICEF UnitedNations ChildrenFund UNIFEM UnitedNations Development Fundfor Women UNMIL UnitedNations Mission inLiberia USAID United StatesAgency for InternationalDevelopment WBI World Bank Institute WFP World FoodProgramme WHO World Health Organization Vice President GobindNankani Country Director Mats Karlsson Task Team Leader James Sackey Country Assistance Strategy for the Republic of Sierra Leone FY2006 .2009 Table of Contents EXECUTIVE SUMMARY ................................................................................... i I Introduction........................................................................................................... . -1 I1. Country Context..................................................................................................... 2 A Political Economy and Social Context ........................................................... 2 B Poverty and Vulnerability ............................................................................... 3 D DebtSustainability........................................................................................... 7 C Economic Developments and Prospects......................................................... .... 4 I11. Sierra Leone's Development Program................................................................. 7 A The Sierra Leone PRSP................................................................................... 7 B Implementation. Monitoring and EvaluationMechanisms.......................... .. 9 I V. Bank Group Assistance ......................................................................................... 9 A Implementation of the Transitional Support Strategy ................................. . 9 B Partnership and Harmonization................................................................... 12 C Participatory and Consultative Process ...................................................... .. 13 V . Results-Based Bank Support to the PRSP......................................................... 14 A Alignment of CAS with PRSP Objectives.................................................... 14 B World Bank Activities -Three Strategic Priorities.................................... .. 15 Strategic Priority 1: Govemance, Decentralizationand Public Financial Management ............................................................................................. -15 Strategic Priority 2: Sustainable Growth, Food Security and Jobs Creation...18 Strategic Priority 3: HumanDevelopment....................................................... 23 D MeasuringResults: The Monitoring& Evaluation Framework..............25 C. Summary . of Bank Assistance ....................................................................... 29 VI . Managing Risks.................................................................................................... 32 Listof Tables Table 1: Sierra Leone - Selected Social Indicators .............................................3 Table 2: Sierra Leone - Selected Economic Indicators....................................... 5 Table 3: Sierra Leone - Financing Requirements ............................................... 6 Table 4: Governance, Decentralizationand Public Financial Management - Selected Targeted Results .................................................................... 16 Table 5: Sustainable Growth, Food Security and Jobs Creation- Selected Targeted Results..,................................................................................20 Table 6: Human Development - Selected Targeted Results.............................. 24 Table 8: Analytical Underpinnings ......................,.,,,....,,., Table 7: IDA Financing Program....................................................................... 26 ,,.............. ................26 , Table 9: Progress Towards Attaining the Millennium Development Goals ......30 Table 10: Policy Performance -Areas for Improvement .................................... 31 Listof Boxes Box 1: Characteristics o f the Poor in Sierra Leone ................................................ 4 Box 2: The Disarmament, Demobilization and Reintegration (DDR) Program ..11 Box 3: Extractive Industries (EI).......................................................................... 23 Listof Annexes Annex 1: Sierra Leone Results Matrices: ............................................................34 Pillar 1: Governance, Decentralization and Public Financial M anagement Pillar 2: Sustainable Growth, Food Security and Jobs Creation Pillar 3: Human Development Annex 2: Consultative Group Results Framework Progress Report ...................44 Annex 3: Sierra Leone: Debt Sustainability Analysis ........................................ 50 Annex 4: Sierra Leone: Review o f TSS hplementation................................... 53 Annex 5: Sierra Leone: Country Financing Parameters ..................................... 65 Annex 6: Standard CAS Annexes: ...................................................................... 69 A2 Sierra Leone at a Glance B2 Selected Indicators of Bank Performance and Management B3 IBRD/IDA Program Summary B4 Summary of Non-Lending Services B5 Sierra Leone Social Indicators B6 Sierra Leone -Key Economic Indicators B7 Sierra Leone -Key Exposure Indicators B8 Operations Portfolio (IBRDLDA & Grants) M a p of Sierra Leone COUNTRY ASSISTANCE STRATEGY FORTHE REPUBLIC OF SIERRA LEONE FY2006- 2009 EXECUTIVE SUMMARY i. SierraLeoneisemergingfromaperiodofpost-conflictreconstructionwhich followed a decade of civil war. The era o f civil conflict began in 1991 and caused destruction, disruption o f agriculture and mining, and the collapse o f public services, health and education. The war led to the displacement o f two million people, half the country's population, the death o f over 20,000 people, and immeasurable suffering. The Lome Peace Accord in July 1999, the deployment o f United Nations Mission in Sierra Leone (UNAMSIL) and the restoration o f security following military intervention ushered in the era o f post-conflict reconstruction in Sierra Leone. Fullpeace has been in place since 2002. The rehabilitation programs for ex-combatants are successfully concluded, most displaced people have returned, and security prevails. Presidential, parliamentary, chieftancy and local council elections have been held. .. 11. Sierra Leone's post-conflict economic performance has been robust, especially during 2002-04, owing to recovery in agriculture and mining outputs. Sierra Leone has sustained a strong economic recovery: 4.3 percent Gross Domestic Product (GDP) growth in 2002, 9.3 percent in 2003, and 7.4 percent in 2004. Recovery has beenpropelled by large-scale resettlement and reconstruction, increases in land under cultivation, a resumption o f mining, a bounce-back in the private sector and the growth o f donor-financed imports. ... 111. Sierra Leone's remarkably successful post-conflictrecovery remains fragile. To sustain the gains, the present transition from a post-conflict to a PRSP-based development framework needs to succeed as well. Some of the challenges include pervasive and deep poverty (about 70 percent o f the population i s below the poverty line); weak govemance (fragile judiciary system, corruption, and weak capacity); dilapidated infrastructure; poor human resource development (including severe gender inequalities); and high unemployment (especially o f the youth in urban settings). Sierra Leone remains 177thout o f 177 countries inthe HumanDevelopment Index. iv. The Sierra Leone Poverty Reduction Strategy Paper (SLPRSP) lays out the Government's commitment and priorities in addressing the causes of conflict and poverty. It focuses on three strategic objectives: (a) good govemance, security and peace; (b) pro-poor, sustainable economic growth for food security andjobs creation; and (c) human resource development. v. This Country Assistance Strategy (CAS) is aligned with the three pillars of the SLPRSP. It is selective and builds on existing programs in economic reform, decentralization, infrastructure development and the social sectors. Economic reform will be underpinned by annual development policy operations (DPOs). Support for decentralization will go beyond institutional reform and capacity building to include transfer o f resources to support innovative approaches to decentralized governance, including the use o f the rapid results initiative (RRI) to boost and empower local councils. It will include public finance management tools at both central and decentralized levels. To sustain high economic growth, reduce poverty levels, generate jobs and improve food security, the Bank's program foresees support to private sector development, infrastructure, agriculture and mining. An integrated rural and private sector development initiative will target agriculture and youth unemployment. The Bank will boost infrastructure by support to power and water, the Bumbuna Hydroelectric Project, and a major transport operation. Roads development will be a critical element in the high-priority food security strategy. A mining sector technical assistance project will facilitate poor people's benefits from this critical growth sector. Building upon the rehabilitation programs for health and education, and the social fund, future interventions will focus on sectoral strategy, efficiency, quality and access, including by vulnerable people, through a social protection scheme. All programs will be supported by analytic and advisory activities (AAA). vi. The monitoringand evaluation (M&E) framework of the CAS is articulated in the CAS ResultsMatrices,which will serve as the basis for assessing progress o f the Bank and the Government in achieving agreed development objectives. Implementation performance will be assessed through a mid-term CAS Progress Report which will draw on yearly portfolio reviews. A CAS Completion Report will be prepared at the end o f the four-year period to assess overall progress. vii. There are five fundamental risks that may impede the successful implementationof the CAS. They are: (a) Limited institutional capacity at both local and central levels; (b) Lack of progress inthe fight against weaknesses ingovernance, including corruption; (c) Too low a level of external support inthe transition from a post-conflict environment to a PRSP-based development framework; (d) Economic shock resulting from weak management o fpublic finances or shiftingterms-of-trade; and (e) Regional turmoil. viii. The followingissues are suggested for Boarddiscussion: Transition: Does this strategy adequately address, both in terms of volume and content, issues of fragility and sustainability in the transition from a post-conflict environment to a PRSP-based developmentframework? Alignment: Does the proposed strategic focus of the CAS adequately align with the PRSP? .. 11 COUNTRY ASSISTANCE STRATEGY FOR THE REPUBLIC OF SIERRA LEONE FY2006- 2009 I. INTRODUCTION 1. This results-basedCAS for Sierra Leone covers the activities of the World Bank Group for the four-year period, FYO6-09. The CAS replaces the Transitional Support Strategy (TSS), which was considered by the Board in March 2002, on the basis o f an I-PRSP. At that time, a PRSP was envisioned by December 2003, but delays in its completion delayed the submission o f this CAS. Sierra Leone's full PRSP was discussed by Executive Directors, along with the Joint Bank-FundStaffAdvisory Note (JSAN), on M a y 3, 2005, and serves as the basis of this strategy. 2. The CAS is based on a broad consultative process, involving the Government,civil society, and development partners. It is fully aligned with the main pillars and cross-cutting issues encompassed in the Sierra Leone PRSP. The CAS also draws on the Government's "Sierra Leone Vision 2025: Strategies for National Transformation." 3. The challenge facing the Bank Group is how to help Sierra Leonebuild on its post-conflictsuccess. The challenge o f the next four years will be to help Sierra Leone transition from the post-conflict period into a PRSP-based framework, to make the best possible use o f limited Intemational Development Association (IDA) resources, and to leverage this engagement to generate additional donor support and achieve a harmonized development partnership. Following three full years o f peace, Sierra Leone i s still heavily dependent on external aid flows. Sierra Leone i s at the bottom o f the Human Development Index, with one o f the highest child mortality rates in the world. While impressive gains have been made inthe areas o f demobilization and reintegration, and the resumption o f agriculture, it i s important to recognize the fragility o fthese gains. 4. Harmonizingwith other partnerswill be a critical aspect of the Bank Group strategy. IDAwill needto remain actively engaged with Sierra Leone's partners inorder to solidify the foundation on which growth can be generated and benefits can be delivered to the country's expectant population. In recognition o f the Government's improved systems, IDA'Sengagement will take the form o f a blend o f investment and budget support. The implications o f this approach include the need to focus simultaneously on harmonization with other donors around key development themes, while at the same time emphasizing institutional aspects o f ownership and accountability - decentralization, capacity building, and govemance. The Bank worked particularly closely with the United Nations, the UK Department for Intemational Development (DfID), the African Development Bank (AfDB), and the European Union (EU) in the preparation o f this CAS. 11. COUNTRY CONTEXT A. Political Economy and Social Context 5. The history of the political economy of Sierra Leone has been mixed, but the post-conflict efforts have been largely successful. The recent economic history can be classified into three distinct phases: the post-independence era (1961-90); the period o f the civil conflict (1991-99); and the period o f post-conflict reconstruction (2000-04). After growing significantly during the 1960s by about an average o f 4.5 percent per annum, the economy slowed down markedly during the 1970s and 1980s, with rapid inflation and severe external payment imbalances. While external developments were a factor, the more fundamental reason was inappropriate government policies and poor govemance. The era o f civil conflict began in 1991 and was characterized by long periods of political instability associated with military interventions, as well as unrest in response to the poor economic and governance environment. Sporadic attacks by the Revolutionary United Front (RUF) in the southeastern part o f the country spread throughout. The conflict caused significant destruction in economic and physical infrastructure, halted major official mining activities, resulted in the abandonment o f farms and plantations, and led to the displacement o f two million people, half the country's population, the death o f over 20,000 people and immeasurable suffering. It also ledto the total collapse o fpublic service delivery, inparticular, health and education. 6. Cessation of hostilities and restoration of security following the Lome Peace Accord in July 1999 ushered in an era of post-conflict reconstruction in Sierra Leone. The Government of Sierra Leone (GoSL) has led the country through the post-conflict transition. The Government completed its disarmament, demobilization, and reintegration (DDR) program for ex-combatants in February 2004 through an impressive program financed by numerous donors and supported by local communities. The Government resettled over 150,000 internally displaced persons (IDPs) and refugees, disarmed and demobilized 72,000 ex-combatants, out o f which 56,000 participated in reintegration activities. Deployment o f the UNAMSIL military component and the improvement o f capabilities o f Sierra Leone Police Forces (SLP) and o f the Republic o f Sierra Leone Armed Forces (RSLAF) have significantly stabilized the security situation all over the country. Government has also been stable and functioning. Local elections were completed in May 2004. The Truth and Reconciliation Committee (TRC) completed public hearings, which were attended by all parties involved in the conflict, and submitted its report in 2004. A UnitedNations-sponsored Special Court has indicted 15 persons for crimes committed during the civil conflict, including former Liberian President Charles Taylor. The end of the war opened up the entire country for the free movement o f goods and services, greatly improved resource allocation and utilization, and boosted the economic and social recovery process. 7. Despite the impressive post-conflict improvements, the country still faces many challenges. A UN assessment mission to the country in March 2004 highlighted the continued need to strengthen the capacity o f the nation's security organizations as UNAMSIL prepares to draw down its operations by end 2005. A national risk assessment focused on the high levels o f extreme poverty and youth unemployment. 2 Because o f the involvement o f some o f the youth in the decade-long conflict, youth unemployment i s considered a major priority. Further study by the Bank points to the need to deal with conflict-related challenges such as poor govemance, regional disparities, weakened coping strategies o f the poor, and the lack o f inclusion for certain segments o f society. B. Poverty and Vulnerability 8. The decade-long conflict exacerbated the poverty situation in Sierra Leone. The country n o w exhibits the classical characteristics o f a poor nation as manifested by low-national income and human development. Sierra Leone i s rated last, 177th o f 177 countries, in the UNHuman Development Index. Poverty in Sierra Leone i s reflected in abysmal social indicators which include the highest under-five mortality rate inthe world (Table 1). The conflict deepened and expanded poverty through social dislocation, the emergence o f large numbers o f war victims (amputees, orphans, widows and widowers, drugvictims, refugees and the homeless), and the loss o f coping mechanisms. Table 1: Sierra Leone - Selected Social Indicators 2002 or otherwisenoted 9. An Integrated Household Survey (SLIHS), conductedfrom May 2003 to May 2004, highlightedthe following characteristicsof poverty in Sierra Leone. 0 The proportion o f the population below the national poverty line (defined at L e 2,111 or about $0.75 per day) i s estimated at 70 percent. Some 26 percent o f the population may be classified as extremely poor, that is, unable to meet 50 percent o f their daily needs. 0 Poverty i s heavily concentrated inthe areas outside Freetown. The proportion below the poverty line inFreetown i s estimated at 15 percent, compared to 79 percent inthe rural areas and 70 percent in other urban areas. 0 The Gini coefficient i s calculated at 0.39, implying that income distribution i s moderately skewed. Income inequality i s relatively higher in the rural areas (0.36), compared to Freetown (0.32) and other urban areas (0.33). 10. Participatory poverty assessments (PPAs) conducted by GoSL during the preparation of the PRSP (Box 1) highlight poor people's focus on the lack of access to food, shelter and the absence of support mechanisms. The association between 3 agriculture and high incidence o f poverty points to the need to focus on production and productivity concerns o f the sector inany poverty-reduction policy for Sierra Leone. Box 1: Characteristics of the Poor in Sierra Leone Category Characteristics Thepoorest (popolipo) Those who cannot meet immediate needs (food, shelter, and clothing); cannot invest for the future; and have exhausted the charity'and goodwill of others. They have dirtyitom clothes; cannot meet medical expenses when they fall ill;and are often physically challenged.Those without family to care for them also fall into this category. Thepoorer They have some ability to meet some basic needs but not always. They are unable to (Po-pas-po) invest for the future through educationand savings. Their credit is limited. They cannot afford decent clothes. Often, they do not have enough to support a family. They highly depend on others for bothwork, housingand generalsupport. Thepoor (Po) They can meet some of their daily needs including a meal though it may not be nutritious. They can barely afford to send their children to school and have no savings. They can hardlyafford medical care. Thebetter off They tend to see well-being in terms of their ability to provide the essentials of life for themselves and their families. They can provide good food, shelter, education, clothes and medical facilities for their families; and are gainfully employed andphysically fit. burce: GoSL, PPA. 11. The SLIHS shows that with an average population growth rate of 2.1 percent, the economy has to grow by at least 4.7 percent in real terms annually to prevent the number of poor peoplefrom rising. The rural per capita incomes have to grow by at least 5.6 percent annually and the urban by 4.0 percent annually. These calculations point to the need for growth as a necessary (but not sufficient) condition for dealing with poverty inSierra Leone. C. EconomicDevelopmentsand Prospects 12. The main sources of growth in the economy are agriculture and mining, complemented by services and manufacturing. Agriculture sustains about 70 percent o f the population and accounts for about 40 percent o f the GDP. The mining sector accounts for 20 percent o f GDP and contributes significantly to export earning. Both diamonds and iron ore (supplementedby rutile and bauxite) were significant inthe past in determining the economic prosperity o f Sierra Leone. The service sector (comprising transport, communications, and Government) accounts for about 40 percent o f GDP. The manufacturing sector i s small with mainly import-substituting industries and employs only about 2 percent o f the labor force. 13, Sierra Leone's post-conflicte-conomicperformancehas been robust, owingto recovery in agriculture and mining. With a real GDP growth of 4.3 percent in 2002, Sierra Leone's recovery continued into 2003 and 2004 when real GDP grew by an estimated 9.3 percent and 7.4 percent respectively, despite an oil price shock (Table 2). Recovery has been propelled by agriculture andmining, revivedcommunities, the growth o f donor-financed imports, large-scale resettlement and reconstruction activities, increases inland under cultivation and growing remittances and investments by the Sierra Leone expatriate community and other investors. The officially registered output o f diamonds has grown considerably, offshore oil exploration i s expected to get underway soon. The average real growth rate i s expected to be about 7 percent per year over the 4 2005-07 period. This i s the minimum growth rate needed to ensure that the number o f poor people does not increase. Table 2: Sierra Leone- Selected Economic Indicators Estimates Projections [ndicative Scenario GrowthRates teal GDP Growth a/ Aggregate 9.3 7.4 7.5 7.1 6.5 6.0 6.0 Per-capita 7.2 5.3 5.4 5.0 4.4 3.9 3.9 GDP Shares [nvestment 14.3 19.6 20.7 21.0 21.1 21.1 21.2 ForeignSavings 21.3 16.2 17.5 14.1 12.8 11.2 10.3 FiscalSavings -3.2 -1.2 0.0 1.3 2.3 2.8 3.4 Exports Goods & Non-factor Servicesb/ 19.9 22.9 24.9 29.0 30.5 31.7 31.7 Imports Goods & Non-factor Services 41.3 39.1 42.4 43.1 43.3 42.9 42.0 Current Account Balance c/ -7.6 -4.9 -8.0 -6.2 -4.8 -4.1 -3.7 Revenue and Grants 20.2 21.3 22.4 21.9 23.1 23.1 23.6 Revenues 12.4 12.3 13.0 14.7 15.8 16.6 17.6 Grants 7.8 9.0 9.4 7.3 7.3 6.4 6.C Expenditures 26.9 24.8 26.4 25.9 25.3 25.I 25.2 Consumption 15.6 13.2 13.0 13.2 13.3 13.6 14.C Interest and Other 6.4 6.9 5.5 4.5 3.9 3.3 2.5 Development 4.9 4.6 7.9 8.2 8.1 8.1 8.1 Fiscal Balance -6.7 -3.5 -4.0 -4.0 -2.2 -2.0 -1.; Other Consumer Price Inflation (%, p.a.) di 7.5 14.2 8.5 7.4 5.7 4.7 4.( Treasury Bill Interest Rate (%, e.0.p.) 20.2 28.0 18.5 17.4 15.7 14.7 14.( Exchange Rate (LelUSS, p.a.) 2,348 2,69 1 1 ai The statistical authorities have provisionally revised their GDP estimates for 2001-03. bi Includes estimates of unrecorded diamond exports. c i Includingcurrent official grants. d/ Period average. Western Area only. Sources: International Monetary Fund through 2007; staff estimatesthereafter. 14. Export growth has shown rapid post-war recovery at a rate of 27 percent in 2003 and 17 percent in 2004, mainly on the strength of alluvial diamonds. The external current account deficit (including official transfers) stood at 7.6 percent o f GDP in2003 and is estimated to have improvedto 4.9 percent of GDP in2004 due inpart to a 10 percent contraction in imports in2004. This i s mainly due to a large reduction inUN forces, and the departure o f some post-conflict NGOs. The current account deficit was financed mainly by concessional external assistance. 15. Fiscal performance in 2003 was complicated by delays in external budget support. Expenditures were adjusted downwards, but not enough to compensate fully for the loss in external financing. As a consequence, recourse to domestic credit and monetary growth were higher than planned. Spending i s expected to have fallen in 2004, due in part to additional delays in budget support which led to a reduction in the procurement o f goods and services. This left an estimated fiscal balance equivalent to -3.5 percent o f GDP in2004. 5 16. Inflation had been negative in 2002 as the end of the war allowed renewed access to goods, both domestic and imported. The situation in 2003-04 has beenmore challenging due to a combination o f external shocks, delays in aid disbursements and incomplete fiscal adjustment. The average inflation rate for 2003 grew to 7.5 percent and i s estimated to be 14.2 percent for 2004. There has also been a sharp increase in domestic interest rates. The nominal, end-of-period rate on treasury bills was 20 percent in 2003 and 28 percent in 2004, up from an average o f 15 percent in 2001-02. The exchange rate depreciated to an average o f 2,691 Le/US$ in2004. 17. Cumulative financing requirementsfor Sierra Leone between 2005 and 2009 are projected by the IMF to be U S 9 9 6 million (Table 3). Identified financing for fiscal operations i s expected to total US$847 million for the period 2005-09. Financing i s expected to come from US$452 million in grants (including those for Heavily Indebted Poor Countries [HIPC] relief), US$218 million in loans and US$177 million in debt relief. This leaves a residual gap o f US$193 million to be filled by the expected PRGF and other sources. These numbers are consistent with implementation o f PRSP priorities under the macroeconomic framework agreed with the International Monetary Fund(IMF) on the basis of identified external financing. Implementation o f the PRSP beyond core priorities will require additional financing. 18. Increasedrevenues, and expected declines in domestic interestdue, will allow an expansion in developmentexpendituresbeginningin 2005 and a reduction in the deficit by 2007. The fiscal balance, after grants, is expected to improve to -1.7 percent of GDP by 2009 from -4.0 percent o f GDP in2005. The Government also plans to create a buffer against delays in budget support by following a fiscal rule where spending does not exceed the discounted envelope unless the full amount o f aid i s actually received. This fiscal tightening, combined with prudent monetary policy i s expected to lead to a reduction in the inflation rate to 4.0 percent in 2009 from an average o f 14.2 percent in 2004. Table 3: Sierra Leone - FinancingRequirements 2004 `05-07 I 3oss FinancingRequirement (US$Millions) 267 5 210.0 190.2 197.3 196.9 201.4 995.8 Current Account Balance (less interest & grants) 100 9 128.6 103.3 100.0 91.O 90.7 513 6 Debt Service Due (before relief) 91 6 83.2 66.9 17.3 85.9 90.7 404.0 Reduction in Arrears 9 5 0.0 0.0 0.0 0.0 0.0 0.0 Increase in Reserves 65.5 -1.8 20.0 20.0 20.0 20.0 18.2 inancing Sources (US$Millions) 267.5 210.0 190.2 197.3 196.9 201.4 995.8 Govemment Budget 229.2 181.9 168.0 170.9 162.1 164.3 847.2 Grants 97.2 93.9 86.5 92.9 88.8 89.8 451.9 Loans 90.3 53.1 46.0 43.0 38.0 38.0 218.1 Debt relief 41.6 34.9 35.5 35.1 35.3 36.5 177.2 Bank of Sierra Leone 41.2 21.6 0.0 0.0 0.0 0.0 21.6 All Other -2.9 -11.1 -21.5 -7.4 -12.3 -13..7 -65.8 ForeignDirect Investment 12.5 27.2 7.2 2.2 2.2 4.6 43.3 Loans 38.4 5.6 -4.0 11.0 5.0 0.0 17.6 Other -53.8 -43.8 -24.6 -20.5 -19.4 -18.3 -126.7 Unidentified 0.0 17.7 43.6 33.7 47.1 50.8 192.8 ource: IMF through 2007; staff projectionsthereafter. 6 D. Debt Sustainability 19. In March 2002, Sierra Leone reached the Heavily Indebted Poor Countries (HIPC) decision point which made it eligible for US$950 million in debt service relief. This relief is equal to 80 percent o f the country's outstanding (foreign) external debt as o f end-2000 (US$600 million in Net Present Value [NPV] terms). Under the HIPC Initiative, 10 out o f 11Paris Club creditors have agreed to provide debt relief. A significant debt reduction i s expected after Sierra Leone reaches the HIPC completion point, All non-Paris Club official creditors have agreed to deliver debt relief, or indicated their willingness to do so. A second debt buy-back operation, to be financed by the Bank, for validated commercial obligations i s also under preparation. 20. An external debt-sustainability analysis was recently completed by the IMF. The analysis suggests that Sierra Leone faces moderate risk o f external debt distress, despite low debt service requirements relative to exports, because o f the fragility o f the recovery process. In the baseline scenario, without any shocks, the ratio o f external debt service to exports o f goods and non-factor-services i s projected to fluctuate around an average o f 5 percent for the period 2006-2021. The ratio o f the net present value o f external debt-to-exports i s projected to level o f f at around 120 percent. Interest on domestic debt, as a share o f revenues and grants, falls from 14 percent to 8 percent. This i s made possible by the improving fiscal balance which takes pressure o f f the domestic interest rate. Total debt service due (after all relief) falls from 19 percent o f revenues and grants in 2003 to 13 percent by 2021, Under the baseline scenario, the total stock o f debt falls to 69 percent o f GDP by 2022 from 76 percent in 2003. Within this amount, domestic debt falls from 41 percent in 2003 to 16 percent in 2021 while external debt rises to a peak o f 59 percent o f GDP in 2011 before declining to 53 percent o f GDP in 2021 (Annex 3). 111. SIERRA LEONE'SDEVELOPMENTPROGRAM A. The Sierra LeonePRSP 21. The SLPRSP outlines the strategies and priorities the Government intendsto employ to address the country's main development challenges. It addresses the long-term causes o f conflict and poverty and relates explicitly its poverty reduction goals to the Millennium Development Goals (MDGs). The SLPRSP underscores the need to achieve high and sustained broad-based economic growth particularly in rural areas where agricultural development and increased food production are central; to provide essential social and economic services and infrastructure to the poor; to create job opportunities for the large and growing number o f young people; and to improve govemance. I t also recognizes that continued broadening and deepening o f reform on several fronts will ensure that growth translates into improved poverty and human development outcomes. The SLPRSP was discussed by the Board on M a y 3,2005. 22. A series of extensive consultations was conducted throughout the country during 2003-04 to underpinthe SLPRSP. These consultations were coordinatedby the Poverty Alleviation Strategy Coordinating Office (PASCO) with the support o f the National Commission for Social Action (NaCSA), the Government agency responsible 7 for community-driven rural development. They were conducted through workshops, focus group discussions and PPAs, involving a total o f 8,591 community members nationwide. Government held a national consultative conference to discuss the draft in May 2004, followed by district-level consultations in June 2004. Four workshops were organized at the regional levels, with stakeholder representatives to validate the final draft o f the SLPRSP. These consultations were characterized by open dialogue between Government and key stakeholders. Radio and television discussions were an important part o f the communication and sensitization strategy. The donor community was also extensively consulted and provided a wide range o ftechnical support. 23. The SLPRSP establishes the Government'svision aroundthree complementary pillars,backedby a wide array of strategies and proposed programs: 0 Good governance, security and peace. The SLPRSP underscores the Government's commitment to eradicate corruption, improve governance and strengthenthe institutional capacity for security and peace building. Although significant progress has been made in rebuilding various institutions for governing the state and safeguarding national security, there i s still a need for deeper reforms and for strengthening Government's capacity for effective and efficient delivery o f basic services. The PPA undertaken for the PRSP identifies various aspects o f bad governance as one o f the main causes o f deepening poverty. The SLPRSP provides for programs that improve public safety, law and order, police reforms, anti-corruption measures, judicial systemreforms, civil service reforms, public financial management, and local government reforms. 0 Pro-poor sustainable economic growth for food security and jobs creation. This pillar encompasses food security for the poor and vulnerable and expansion o f job opportunities for the unemployed and under-employed, especially youths inboth rural and urban areas. The main goal inthe SLPRSP i s the reduction o f the poverty headcount from the current level o f 70 percent to the 1990 level o f 57 percent by 2007. This i s to be achieved through an ambitious growth rate o f 8-9 percent per annum (6-7 percent per capita). The Government's growth targets are premised on increased productivity in agriculture, mining, trade and industry. Increased productivity and growth will depend on the rehabilitation and expansion o f Sierra Leone's degraded infrastructure and, in particular, on increased involvement o f the private sector. The SLPRSP identifies policies to rehabilitate dilapidated infrastructure in the areas o f roads, energy, telecommunications, the port, and air transport. Also underpinning a return to growth will be reform o f the financial sector and the privatization o f state-owned enterprises. 0 Human resource development. The SLPRSP argues that investment in the health and education o f the population and improvement in access to basic services provide the basis for fighting poverty on a sustainable basis. Programs include putting in place measures to achieve 100 percent net enrollment at primary level and to raise quality at all levels o f education, improving health care coverage, continuing the battle against HIV/AIDS, reducing gender gaps and regional poverty disparities, carrying out 8 institutional reforms to enhance employment creation through vocational training. The SLPRSP emphasizes labor market reforms to quicken the pace o f productivity growth. The SLPRSP also provides for poverty-targeted programs aimed at poor communities and marginalized groups. B. Implementation,Monitoringand EvaluationMechanisms 24. The SLPRSP establishes a coordinating and implementation framework to provide the oversight required for PRS implementation. The coordinating bodies comprise the Inter-Ministerial Committee (IMC), a National Technical Committee , (NTC), and a Poverty Reduction and Development Assistance Coordination Office (PRDACO). Further analysis and consultations will be undertaken to ensure full integration o f effort with key ministries, including the Ministry o f Finance, and other public institutions. 25. Monitoring and evaluation activities will benefit from support by key developmentpartnersincludingDfID, UNDP and the EU. The SLPRSP focuses on a limited number of monitorable indicators derived from the MDGs. Structures are being established for improving the quality and availability o f poverty-related data to monitor progress o f the SLPRSP. The Government i s preparing a national statistical development strategy with the support of a multi-donor trust fund (MDTF) for Statistical Capacity building managed by the Bank. A nationalcensus for 2004 was recently completed and a national demographic and housing survey i s planned. An integrated financial management system (IFMIS) is expectedto be implementedinmid-2005. IV. BANKGROUPASSISTANCE A. Implementationof the TransitionalSupport Strategy 26. The TSS set out to mitigatethe risk of renewedconflict and increase access to basic services, targeting the rural population,women and children. The strategy also emphasized the decentralization o f service delivery and the restoration o f local government in order to reorient the allocation o f resources from the capital to the rural communities. The TSS was based on an Interim Poverty Reduction Strategy and was reviewed by the Board on March 26, 2002. The Board review of the Decision Point on HIPC took place on March 5, 2002. Through the TSS, the Bank sought to achieve a number of outcomes relating to: (a) consolidating peace and security; (b) resettlement, rehabilitation, and reintegration; (c) improving governance, targeting institutional reform and capacity building down to the local level; (d) accelerating economic growth; (e) expanding access o f the poor to basic social services, infrastructure, markets, and assets; and (f) combating HN/AIDS. In addition, the Bank supported the preparation o f the PRSP through providing analytical work and funding. 27. Since the beginningof the TSS, IDA has committedUS$230 millionin Sierra Leone(Annex 6, Table BS). This represents an extraordinary effort by IDAto assist ina post-conflict environment. Inaddition to emergency support provided through a series o f Economic Recovery and Rehabilitation Credits (ERRCs) and a Public Sector 9 Management Support (PSMS) project, IDA'S assisted in three areas: social sectors; community development and decentralization; and infrastructure. The TSS originally covered the period 2002-03. As a new CAS needed to follow the completion o f the PRSP, FY05 has become an interim year for IDA. The major commitment to infrastructure i s followed through by three projects: the Power and Water Project, the Bumbuna Hydroelectric Project and a Transport Project (IDP Transport, FY06). Furthermore, an ERRG in FY05 maintains continuity in economic reform and support to public finances, and bridges to a future multi-donor framework for budget support. 28. The Bank's support to the social sectors focused largely on rehabilitation, reconstruction and response to HIV/AIDS. The Bank is providing support to the education sector through a US$20 million grant for the Rehabilitation of Basic Education Project (2003-2008). The objectives o f the project are to assist GoSL to reestablish education services and to build up the capacity o f the education sector. Similarly, Bank effort in health i s focused on rehabilitating health sector facilities with emphasis on the most exposed districts. The US$20 million Health Sector Reconstruction and Development Project (HSRDP) i s a sector investment grant with some features o f a sector-wide project. To supplement the health project, the US$15 million Sierra Leone HIV/AIDS Response Project (SHARP) finances a wide spectrum o f activities including prevention, care, support, and impact mitigation. 29. Community development and decentralization has been at the forefront of the Bank's engagement in Sierra Leone. During the latter phases o f the civil war, the Bank was fully engaged in programs for vulnerable groups. The Bank strove to complement diplomatic, peace-keeping and humanitarian efforts through the Community Reintegration and Rehabilitation Project (CRRP, US$25 million) which provided support to: (a) the Government's DDRprogram; and (b) the Government's Emergency Recovery Social Fund which supported the return o f IDPs and refugees and the rehabilitation o f basic social and economic infrastructure; in addition, (c) a Bank-administered multi-donor DDR Trust Fund (US$36.6 million) strengthened donor coordination and broadened the country's limited "donor base." As a result o f the implementation o f this program and several complementary bilateral programs, over 70,000 soldiers were demobilized (see Box 2). These activities were followed up in 2003 by the National Social Action Project (NSAP, US$35 million), with a key objective o f continuing to assist communities in restoring infrastructure and building local capacity for collective action, using a community-driven development approach. The Institutional Reform Capacity Building Project (IRCBP, US$25 million) i s aimed at supporting the newly elected local councils, after the first such elections in recent Sierra Leonean history, and at improving the public financial management system. The objectives o f the project are to help establish a functioning local government system and improve inclusiveness, transparency, and accountability o f public resource management at all levels o f govemment. 10 Box 2: The Disarmament,DemobilizationandReintegration(DDR) Program I Immediately after the conflict, the international community and the Government o f Sierra Leone financed a massive and successful DR program which demobilized 72,000 ex-combatants from all factions, provided training and r egration activities to 56,000, and supported communities in ex-combatants' reintegration. The program also provided special support to child ex-combatants and could be considered a successful special youth program. The overall cost o f the DDR program was almost US$lOO million, in large part financed by the donor community through a MDTF, the World Bank (through a credit to the Government and extensive technical assistance), the GoSL and other partners. The National Committee for Disarmament, Demobilization and Reintegration (NCDDR) was a key player in this process, providing policy guidance to the DDR program and technical assistance and, later on, direct implementation support. As part o f the broader reintegration process, the Bank and other donors financed activities through instruments such as the Emergency Recovery Support Fund to support communities in rehabilitating basic infrastructure, hence creating the conditions for the return o f IDPs. o f refugees. and o f former combatants. 30. The recently approvedPower and Water Project (US35 million) will address prioritized issues in water and sanitation, urban waste management and power through the rehabilitation of essential infrastructure and institutional capabilities. Concurrently, it will pursue power and water sector reforms aimed at increasing private sector involvement through investment and public-private partnerships, particularly through instituting a performance-oriented management contract for the National Power Authority (NPA) and the Guma Valley Water Corporation. Additional financing i s also being requested to cover additional costs associated with the restructuring o f the Sierra Leone Urban Water Supply Project (FY1995-2000) which was necessitated by the outbreak o f conflict in 1999. 31. The Bumbuna Hydroelectric Project (BHP) will respond to the urgent need for new power supply. By completing a near-finished dam, installing generators and rehabilitating transmission lines, 50 MW will be added to today's functioning levels of 10-20 MW in the Westem Region, average cost o f bulk power will be radically cut and the rotating power black-outs will end. An IDA partial risk guarantee o f up to US$30 million will complement investments by Italy, AfDB and the OPEC Development Fund. The BHP will be complemented by: (a) an IDA grant supporting the implementation o f environmental and social safeguard measures associated with the impacts o f BHP; (b) a local community development initiative for which funding i s being sought from the Japanese Social Development Fund (JSDF); and (c) a carbon financing operation to be provided by the Prototype Carbon Fund. 32. In order to facilitate the transition from post-conflict to a PRSP-based development,an Economic Rehabilitation and Recovery Grant I V (ERRG-Iv) will be provided for FY05. The ERRG IV is a one-tranche quick-disbursing budget support grant o f US$15 million, covering the period April 2005 through March 2006. It is designed to help the Government make the transition from post-conflict recovery to sustainable development by: (a) consolidating core capacity for public resource management; (b) building capacity for PRS implementation in sector ministries and local governments; and (c) promoting private sector development. 11 33. Overall, the Bank's portfolio is performing satisfactorily. All six projects are rated satisfactory with regard to their implementation. The quality o f the portfolio has improved in recent months through intense supervision. In terms o f impact, limited technical and administrative capacity remains a major constraint to project implementation. For example, although the Education and Health projects have been successful in achieving their primary objective o f restoring the delivery of basic services, their sustainability remains questionable because o f concerns about shortage o f human and capital resources. Implementation constraints (mainly in financial management and delays inprocurement) have created substantial delays indisbursement. 34. An Economic Sector Work (ESW) programwas developed to inform Sierra Leone's post-conflict development challenges and the Bank's responses. It includes core analytical work covering public expenditure (Public Expenditure Review [PER] and Public Expenditure Tracking Study [PETS]), and poverty (Household Income & Expenditure Survey), as well as analysis o f public sector reform options, reform o f the mining sector, and the agriculture sector. In addition, the Government undertook an in- depth governance diagnostic assessment with participation from civil society reps and support from DfID, the EU and UNDP. A major social assessment was undertaken. Legal and Judicial Sector Assessment was completed jointly with DfID in 2004; and a Country Gender Assessment i s currently underway. Finally, the Bank provided advisory support to the development o f the Investment Code as well as the Procurement Law. 35. The following lessons emerge from the review of the implementationof the Bank'sTSS: 0 Where the implementation capacity o f the country i s weak, project design should be simple and well articulated. Commitment and ownership depend on the stakeholders' understanding o f what i s implied in implementing a program. 0 Weaknesses in public sector management have a strong impact on portfolio performance. This is particularly so in cases where weaknesses in procurement could lead to implementation delays and financial mismanagement. The lack o f adequate counterpart funding may also cause slippages inproject implementation. Grass-root community development works should be promoted especially in rural areas where the sense o f community i s strong. If appropriately supported by a technical agency and by a decentralized structure o f Government, local communities can work effectively and in a sustainable way for their own development. Direct community financing should be encouraged as it helps improve governance and accountability. B. Partnershipand Harmonization 36. Donor coordination is led by Government through the Sierra Leone DevelopmentPartnershipCommittee (DEPAC). The first meeting was held on March 20, 2003, co-chaired by the Vice President o f Sierra Leone with the Bank and the UNDP, and comprising Government, its development partners and representatives o f civil 12 society. An additional 11 DEPAC meetings have been held through April 2005, each with strong donor representation on a wide variety o f topics. Eachmeeting has reviewed progress in implementing the Results Framework for Peace, Recovery and Development, agreed at the 2002 Consultative Group (CG) meeting-the "CG Matrix" (Annex 2). 37. Donor coordination has been particularly strong on issues of governance and public financial management, and will further be strengthenedin the areas of support to local councils and communities, to the social sectors, and to infrastructure. In particular, it will be important to create frameworks that will allow donors to participate injoint action with minimal overhead costs. As the financing needs will continue to be high, it will be important to seek to maintain and expand the number o f development partners and their contributions. There i s a risk that Sierra Leone will face a reduction in overall support as previous allocations to support the country during its post-conflict phase are reconsidered by donors. Unless this risk i s effectively met, Sierra Leone could face considerable challenges just as the absorptive capacity for long-term PRSP-based development cooperation i s improving. The DEPAC will continue to promote stronger harmonization, lower transaction costs and joint financing frameworks. 38. Key budget support donors - AfDB, DfID, EU and the World Bank - have agreed in principle to the development of a Framework for Multi-Donor Budget Support (MDBS) to cover the period 2006-08. The framework aims to coordinate donor support for the Government's reform program and PRS. It will set out goals, monitorable progress indicators and areas o f responsibility. The initial framework i s expected in the first half o f 2005, in time for the 2006 budget. The Government, the World Bank and the UN are organizing a CG meeting in June 2005 to consider the SLPRSP, and to promote a results-oriented, harmonized support framework within which partners can mobilize increased levels o f coordinated support. A Results Matrix o f ongoing and planned donor activities, organized by SLPRSP-defined strategic areas, will be developed as the framework for partnership coordination during the implementation o f the SLPRSP. C. Participatory and ConsultativeProcess 39. This CAS draws upon a consultative process that was carried out during January-March 2005. Consultations were carried out with Government counterparts at the sectoral level to the proposed Results Framework, as well as the program o f lending and ESW. Consultations with civil society and community groups were undertaken in two phases: (a) an upstream discussion addressed the expected role of the Bank and donor community in supporting the SLPRSP; and (b) a downstream consultation validated the final draft o f the CAS to ensure that client inputs are reflected. Each event had between 50 and 60 participants. The main objective o f the consultations with civil society was to bring together a broad range o f representative opinion on Sierra Leone's poverty reduction challenges and responses as contained in the SLPRSP to guide the preparation o f the CAS. 13 40. Overall, the CAS consultations confirmed the direction of the proposed strategy. Participants endorsed the proposals for Bank support to local councils, public sector reform, and the anti-corruption agenda as the first, second, and third most important interventions in addressing the problem o f poor governance. In dealing with food security and unemployment, participants felt that the provision o f supportive infrastructure and promotion o f private sector development were the most critical interventions. Similarly, private sector development and legal regulatory and institutional reforms were identified as prerequisites for economic growth. Participants cited the need for supporting basic education, technical and vocational training, as well as maternal and child health care, health education, and affordable access to health care. Water and sanitation, rural water supply, urban water supply, sanitary education and sewage management were also highlighted. V. RESULTS-BASED BANK SUPPORT TO THE PRSP A. Alignment of CAS with PRSP Objectives 41. This CAS builds on the three pillars of the SLPRSP. It focuses on govemance, decentralization and public financial management; sustainable growth, food security and jobs creation; and human development. In alignment with other development partners, the strategy addresses the country's overriding challenge o f extreme poverty, which i s accentuated by high unemployment (especially o f the youth), food insecurity (compounded by poor infrastructure) and dismal social sector indicators. 42. Bank Group support for the SLPRSP will be selective and build on the existingprograms in economic reform, decentralization,infrastructure development and the social sectors. Economic reform will be underpinned by annual development policy operations. In recognition o f Government's improved systems for the management o f public resources, the Bank proposes to join a multi-donor budget support framework. A fourth ERRG has been developed for FYOS as a bridging operation. Support for decentralization will go beyond institutional reform and capacity building to include significant transfer o f resources to support innovative approaches to decentralized governance, including the use o f the RRI, to boost and empower local councils in the districts. It will include expansion o f public financial management tools at both the central and decentralized levels o f Government. To support the growth and employment agenda, the Bank will expand its support to infrastructure through the FY05 Power and Water Project and the Bumbuna Hydroelectric Project with a major transport project. A multi-donor support framework for roads development and maintenance will be especially critical for the food security agenda. An integrated rural and private sector development initiative will target growth and youth unemployment. Inthe areas o f health and education, the Bank's strategy builds upon the current rehabilitation programs, to develop sector programs, focusing on efficiency, quality and access. The ongoing social fund is contributing to all three results areas. The rationale for the strategic priorities o f Bank Group support are outlined below. 14 B. World Bank Activities-Three StrategicPriorities StrategicPriority 1: Governance,Decentralizationand PublicFinancial Management 43, Introduction. Sierra Leone's govemance problems are pervasive. The 2002 Governance and Corruption Surveys reveal the following problems: Over-centralization o f power and resources in Freetown; 0 Weak enforcement of laws and regulations; 0 Weak monitoring mechanisms; 0 Inadequate watch-dog role o f the civil society and the media; 0 Non-transparent management o fpublic resources; and 0 Weak capacity both in the public and private sectors (for example, lack o f awareness o f civil rights, unqualified government personnel in certain critical positions, inadequate training infrastructure). 44. Based on the Bank's assessment o f political commitment and implementation capacity, IDA has chosen to support GoSL to pursue two routes o f govemance reform: (a) one focusing on fiscal decentralization and empowerment o f local govemment and communities to more effectively determine their own development priorities and undertake development initiatives; and (b) the other focusing on improving transparency, promoting accountability and effectiveness o f public financial management. Other partners, especially DfID, EU and UNDP, are providing support to the Anti-Corruption Commission, legal reform and capacity building, and civil society organizations, and WBI is supporting the Governance Reform Secretariat by helpingto monitor the success o f institutional reforms underway, conducting workshops and establishing a Global Distance Leaming Center in Freetown. (a) Supporting fiscal decentralization and empowering local government and communities to effectively determine local development priorities and undertake development initiatives 45. Context. Key findings on the causes o f civil conflict in Sierra Leone point to: (a) exclusion o f local communities from major national decisions; (b) exclusion o f vulnerable groups; and (c) mismanagement o f public resources. To help ward against future conflict, the Bank will continue to support the local provision of social services and productive activities using a demand-driven approach with strong community involvement. Over the next four years, GoSL will gradually transfer a significant set o f service-delivery responsibilities and corresponding budget resources inthe form o f grants to local councils. To ensure equity and transparency in resource allocation across localities, the Local Government Act 2004 requires that the allocation o f each o f these grants be determined by a formula using objective indicators o f service-delivery needs and revenue capacity. IDA will support GoSL in designing and implementing this transfer system. In addition, under the ongoing NSAP, the Bank i s helping communities restore infrastructure and services with priority given to areas that have not been previously served by Govemment and to the most vulnerable groups. 15 Table 4: Governance, Decentralization and Public FinancialManagement - SelectedTargeted Results Strategicand Long-TermCountry CAS Outcomesthat the Bank Expectsto Influence DevelopmentOutcomes Fiscal decentralization and (a) Each )car, central Go\ernment transfers functions to local councils empowerment of local government and according to the Local Government Act 2004 and the Devolution Plan communities 2005. Local government empowered with (b) Each year, local councils receive grants from central Government in service-delivery responsibilities, local the amount necessary to provide the same coverage and quality of revenue mobilization capacity and services as in the prior year. central Government grants A local government system, which (c) By 2008, all 19 councils will be able to use an inclusive process to adopts an inclusive, transparent and produce development plansthat respondto local priorities. accountable governance culture and is (d) By 2008, at least 14 local councils will meet the transparency and capable of discharging service-delivery financial management accountability requirements as per the Local responsibilities GovernmentAct of 2004. (e) By 2008, at least 14 local councils will be able to sustain or improve the level and quality of all devolved services. Poor and marginalizedpeople and (f)100%compliance with participatoryproject selection and communities are empowered through implementation process in communities with subproject and shelter inclusive, transparent and accountable financing (NaCSA & JSDF). institutions andprocesses at the local (g) Increases in access and utilization of social and economic level infrastructure and services at the community level. Improve transparency, accountability Imvroved strategic orientation of budpet: and effectiveness ofpublic resource management by central Government (a) Key MDAs (Agric, Educ, Health, SLRA, Transport, Mineral Resources) have strategic plans and 3-year program-basedbudget by 2008, consistent with SLPRSP. (b) To help finance decentralizedservice-delivery responsibilities, central Government will provide tied grants to local councils based on published formulae using objective indicators o f service-delivery needs and revenue capacity. Imvroved transvarencv of overall Government resource envelope and allocation: (c) 90% donor funding captured in budget and fiscal reports using Government classifications by program and object of expenditures. (d) In-year reports on poverty-related expenditurespublished on quarterly basis. Imvroved accountability of svending units: (e) 95% of Vote Controllers submit monthly reports on actual revenue and expendituresto the Financial Secretary. (f)Cabinetrecommendationsto address the issuesrevealedbythe annual ExpenditureTracking Survey (ETS) are implemented in a timely manner. (g) 90% of reporting entities provide satisfactory responseto Auditor General's recommendations. Imvroved transvarencv and accountabilitv of procurement: (h)Improvedpublic perception oftransparency inpublic procurement process and reduced level of perceived corruption inprocurement, comparedto 2002 Governanceand Corruption Survey. Imvroved staffing for vublic financial management: (i)More qualifiedmanagerialandprofessionalstaffin the Ministryof Finance (MOF) and the above key MDAs. 16 46. To help GoSL maximize the development - and peace - dividend o f the decentralization process, IDA, through the IRCBP, i s helping GoSL establish a local government system, with an inclusive, transparent and accountable governance culture capable o f discharging service delivery responsibilities. IRCBP i s helping local councils build management capacity in inclusive development planning, financial management, project identification and implementation, and revenue mobilization. IDA i s also supporting the ministries, departments and agencies' (MDAs) devolution programs to ensure a smooth process o f decentralization and capacity building. IRCBP has earmarked US$6 million in seed money to help GoSL establish and finance the Local Government Development Grant (LGDG). As part o f the inter-governmental transfer system, LGDG provides untied block grants to local councils to finance discretionary development projects. In September 2004 the LGDG financed 19 local council R R I s in agriculture, feeder roads and small bridges, rural water and sanitation, urban traffic and solid waste management. This experimentation with LGDG demonstrated that the local councils can manage small infrastructure and service delivery initiatives. These successful R R I s have encouraged the councils to embrace a results-oriented management approach which will prove useful as they take over more and more responsibilities under the devolution program. IDA, through IRCBP, possible supplementary funding and other programs, will continue to facilitate the adoption o f results-focused management approaches. The Bank will also explore with GoSL a transition strategy for the NaCSA, so its resources can be channeled through local councils to establish them as relevant leaders for local development and encourage them to embrace a community-driven development approach. 47. ExpectedResults. The long-term strategic outcome is the empowerment o f local governments and communities to identify local development priorities, leverage resources and undertake their own development initiatives. The CAS outcomes include: 0 Local governments empowered with service-delivery responsibilities and resources: (a) each year, central Government transfers functions to local councils according to the Local Government Act 2004 and the Devolution Plan 2005; and (b) each year, local councils receive grants from central Government in the amount necessary to provide the same coverage and quality o f services as was provided inthe prior year. 0 Local government capable o f inclusive development planning, accountable financial management and effective service delivery: (c) by 2008, all 19 councils will be able to use an inclusive process to produce development plans that respond to local priorities; (d) by 2008, at least 14 local councils will meet the transparency and financial management accountability requirements as per the Local Government Act o f 2004; and (e) by 2008, at least 14 local councils will be able to sustain or improve the level and quality o f all devolved services. Communities in pilot areas (NaCSA and JSDF intervention areas) use participatory project selection and implementation processes (100% compliance in communities with subprojects). 17 0 Increased access and utilization o f social and economic infi-astructure and services at community level. (b) Improving transparency, accountability and effectiveness of public financial management 48. Context. IDA'Ssupport to the ongoing public financial management reform and the anti-corruption agenda will focus on: improving budget classification and coverage to enable budget analysis and reporting; re-orienting the budget to support SLPRSP implementation; improving accountability o f those entrusted with public resource management responsibilities; establishing a transparent and efficient public procurement system; and supporting human resource management. 49. Through a series o f development policy operations and the IRCBP, IDA will continue to strengthen the capacity o f the Ministry o f Finance (MOF) to manage the budget and to lead public financial management reform. IDA will support the establishment o f sustained capacity in the Budget Bureau, the Economic Policy and Research Unit, the Local Government Finance Department, the Accountant General Department, and the National Public Procurement Authority (NPPA). IDA will also help strengthen the strategic policy analysis and program design, financial management, monitoring and evaluation capacity o f some key Ministries, Departments and Agencies (MDAs). 50. Expected Results. The strategic and long-term development outcomes will be improved transparency, accountability and effectiveness o f public resource management (Table 4). The CAS outcomes will include: 0 Improved strategic orientation o f the budget: key MDAs (Agriculture, Education, Health, Mineral Resources, Transport, Sierra Leone Roads Authority) will have strategic plans and a three-year, program-based budget by 2008, consistent with the SLPRSP. 0 Improved transparency o f overall Government resource envelope and allocation: 90% o f donor funding captured in the budget and fiscal reports using Government classifications by program and object o f expenditures; in-year reports on poverty-related expenditures published on a quarterly basis. 0 Improved transparency and accountability o f procurement: improved public perception o f transparency inpublic procurement process and reduced level o f perceived corruption in procurement, compared to 2002 Governance and Corruption Survey. 0 Improved staffing for public financial management: more qualified managerial and professional staff inthe MOF and the above key MDAs. StrategicPriority2: SustainableGrowth, Food Security and Jobs Creation 51, Introduction. The four over-arching objectives related to this strategic priority are: 0 Sustain real GDP growth at above 6 percent per annum; 18 Reduce the share o f the population in poverty from 70 percent in 2004 to 66 percent in2009; Eliminate food-poverty; and 0 Reduce unemployment. 52. Recognizing that a multitude o f factors will affect the ability of Sierra Leone to achieve these goals, the strategic objectives o f this CAS pillar are focused on two aspects o f the country's enabling environment and on the two primary sources o f growth. The strategic and long-term development outcomes are: 0 Improved investment climate and access to finance for the private sector; Increased investment in, and improved maintenance of, infrastructure; Growth in agriculture; and Growth inpro-poor mining. 53. Inaddition to the Bank operations and activities described inthe sections below, the Bank will support these goals through annual DPOs, investment projects and policy dialogue, all backed by analytical work. The policy reforms supported by the DPOs, and amplified through a framework for Multi-donor Budget Support, will help increase the private savings and investment rates needed to drive long-run growth and job creation, and the biannual PERs will assess the level and composition o f public investment. (a) Investmeiit climate and access tofinance 54. Context. In order to sustain the current levels o f high growth, the Govemment will need to deepen its macroeconomic reform program and create an enabling environment for diversification o f the economy through private sector initiatives. The Bank will continue its assistance in overall economic policy dialogue (along with the IMF). Emphasis will be placed on (a) continued macro-economic stability, reducing interest rates, and increasing access to finance by the private sector; (b) improved investment climate, through better services, appropriate regulation, and public enterprise reform. 55. Analytical work will include the Bank's Integrated Framework, a multi-sector approach to private sector competitiveness, building on the FY05 Foreign Investment Advisory Services (FIAS) Administrative Barriers work. A regional trade insurance study may be launched to investigate potential investor demand for political risk insurance to cover trade and direct investment in Sierra Leone. A labor market and youth study will identify policy options to increase employment while still maintaining decent wages. The study will also be used to establish a baseline and a target for future reduction in unemployment which will be monitored through periodic surveys financed by the Bank and/or other donors. Financial sector policy reform requirements will be assessed through a Financial Sector Assessment Program (FSAP). The policy recommendations that emerge from this analytical work will feed into the DPOs and will drive the Rural and Private Sector Development Project and the Mining Sector TA Project. 19 Table 5: Sustainable Growth, Food Security and Jobs Creation - Selected Targeted Results climate and access to administrative barriers, and competition policy. long-term finance (b) Financial sector reform, including establishment of long-run financial instruments. Increase investment in, and (a) Minimum continuous electrical power supply of at least 37.8 M W nationally maintenance oJ; (b) Increased volume of water supplied to Freetown, from a base of 95,340 m3/day infrastructure in 2003. (c) Ensuring that four districts have appropriateall-weather access to district headquartersand all major agricultural projects. Growth in agriculture (a) Increased rice production from 2002 base of 422,000 MT. (b) Higher volume of agricultural and fishery exports from 2003 base of zero. (c) Increased access to roads, inputs and extensionservices. (d) Establishmento f regulatory capacity within Ministry of Agriculture for quality o f inputs and exports. (e).Increased private sector participationin the provision of agricultural inputs and extension services. Growth in pro-poor mining (a) Improved legal and regulatory framework for miningwith special emphasis on I explorationandminingrights (administeredunder cadastral system). (b) Increase inthe number of extensionservice contracts. 56. ExpectedResults. The strategic and long-term development outcome will be an improved investment climate and access to finance for the private sector. The CAS outcomes will include: 0 Reforms aimed at improvements in competitiveness through a reduction in administrative barriers, and the introduction o f competition policy; and 0 Financial sector reform, including the establishment o f long-run financial instruments. (b) Infrastructure 57. Context. The deteriorated state o f infrastructure is a major constraint to pro-poor growth, job creation, food security and human development. Evenconservative estimates indicate that hundreds o f millions o f dollars would be needed for a minimal infrastructural platform. The PRSP emphasizes that the Government considers infrastructure a top priority, and that it will look to the private sector to meet the challenges o f massive financing needs as well as improved management. 58. New financing under the CAS will focus on power and roads. The Transport Development Project scheduled for FY06 will be a multi-modal operation focusing on prioritized road rehabilitation and maintenance and on physical investments and institutional support for the ports and airport. The feeder road component of this project i s expected to be a substantive source o f employment. The content o f the proposed FY09 infrastructure project will be determined inthe context o f the CAS Progress Report. The telecommunications sector may be addressed through IFC & Public-Private Infrastructure Advisoy Facility (PPIAF) collaboration on technical assistance or projects aimed at improving the telecommunications management and establishing a sound legal regulatory and institutional framework. Rural infrastructure (water, feeder roads) i s also 20 expected to be supported by the NSAP and IRCB-funded projects. All infrastructure support will be conducted in coordination not only with the relevant sector ministries but also with the National Commission for Privatization (NCP). NCP is responsible for eventual commercialization or privatization o f key infrastructural assets including the NPA, the water authorities, the Road Authority and the Sierra Leone Telecommunications Company. DflD i s expected to provide technical assistance to NCP for its reform program. A Poverty and Social Impact Assessment (PSIA) i s proposed for the power sector. 59. ExpectedResults. The strategic and long-term development outcome will be increased investment in, and improved maintenance o fthe country's infrastructure. The CAS outcomes include: 0 Minimumcontinuous electrical power supply o fat least 37.8 MW for Freetown from a 2003 base o f 19.8 MW effective capacity at the Freetown Kingtom power station; 0 An increase inthe volume o fwater supplied to Freetown, from a base o f 95,340 m3/dayin2003, and 0 Adequate roads to ensure that four selected districts (supported by the Transport Development Project) have appropriate access to the main road network. (c) Growth in agriculture 60. Context. Agriculture and fishing provide the highest potential in the short- to medium-term for addressing Sierra Leone's food security agenda, as well as the high level o f unemployment. At present, there i s insufficient access by farmers to inputs and equipment, technology, credit, markets and information. The current approach to land allocation and land use induces most farmers to maintain small plots at close to subsistence levels. Similarly, fishing continues to be characterized by small vessels devoid o f modern technology and marketing infrastructure. Lntegrating the rural economy into the national economy will require the development o f agricultural markets, a dynamic agribusiness sector, and infrastructure that meet the needs o f producers and the private sector. Better roads will be a key priority. Processing and value added to agricultural production, including fisheries, will be necessary to raise incomes and create employment. Sustained increases in productivity will be necessary to improve the competitiveness o f domestic agricultural production and to improve agricultural incomes. 61. Bank support for promoting agriculture and fishing would build on the FY05 Agricultural Sector Review (ASR). A regional trade study may be undertaken to investigate regional opportunities for trade cooperation and expansion. The policy recommendations from the ASR, the Integrated Framework (IF) the labor market study, and existing analytical work will inform design o f a proposed rural and private sector development project. 62. Expected Results. The strategic and long-term development outcome i s sustained growth in agriculture with increased competitiveness in export crops and higher 21 value crops; increased employment; and, in particular, increased rice and palm oil production. The CAS outcomes include: 0 Increased rice production from the 2002 base o f 422,000 MT; 0 Higher exports of agricultural and fishery output from a 2003 base of virtually zero; 0 Increased access by farmers and fishermen to roads, inputs and extension services; 0 Establishment o f regulatory capacity within Ministry o f Agriculture for quality o f inputs and export; and 0 Increased private sector participation in the provision o f agricultural inputs and extension services. (d) Growth in pro-poor mining 63. Context. The mining sector is the second most important productive sector after agriculture and fishing for employment and income generation. Mining households are also the second poorest group after agricultural households. Mining development has beenhinderedby a weak regulatory environment and lack o f technical support. Through ERRC 111, the Bank and other development partners have supported initial high-priority reforms in the administration o f mining rights (cadastre) and extension services. These advances need to be sustained by countrywide deployment o f the cadastral system and extension services, as well as hrther work on an improved geological information base, fiscal and other regulatory aspects. 64. Bank support continues in FY06 with a focus on capacity building within the Ministry o f Mineral Resources and a Strategic Environmental Assessment on Extractive Industries. This may be supplemented by a Poverty and Social Impact Analysis (PSIA), followed by a Mining Sector Technical Assistance (TA) Project inFY07. This technical assistance will support the improvement o f the legal and regulatory framework around mining rights, investment and taxation regimes, as well as the management o f mineral rents, in line with intemational practice. It will also support artisanal and small-scale mining with a view to mitigating the associated social and environmental impacts. Training programs will also be developed to assist mines in the identification and valuation o f diamonds, marketing, occupation health and safety practices, business practices and stakeholders' roles. The impact o f the Mining T A Project would be amplified through coordination with the Integrated Framework which will examine opportunities to make Sierra Leone metals and minerals more competitive globally. 65. ExpectedResults: The strategic and long-term country development outcome is growth in the mining sector reflected in increased personal income o f alluvial miners, increased government revenues from mining and increased volume and value o f mining exports. The CAS outcomes include: 0 Improved legal and regulatory framework for mining with special emphasis on exploration and miningrights (administered under cadastral system); and 0 Increase inthe number o f extension service contracts. 22 Box 3: Extractive Industries (EI) Sierra Leone has substantial mineral resources. In 2004, raw diamonds accounted for 88 percent of exports and 20 percent of GDP. Govemment has a Mineral Policy (2004) inplace along with a Mines and Minerals Act (1996) and a NationalEnvironment ProtectionAct (2000). The ExtractiveIndustries Review (EIR) identified four areas that need to be addressed: Governance and Transparency. Sierra Leone is participating in the Kimberly process, a scheme that aims to eliminate the sale of so-called "blood diamonds" that have fueled many conflicts, includmg Sierra Leone's. Butmining rights are not secure and are poorly organized. Muchof the productionis unaccountedfor (though the volume moving through official channels in increasing every year), and there is a high degree of dis egohating fiscal and other terms of large scale mining deals. DfID i s providing support for a review of pects of the mineral policy, and Govemment plans to introduce model mning agreements to establish t Government has also formally asked to participate in the Extractive Industnes Trans nitiative (EITI) which would be another important step. Ensuring the E1Benefits reach the Poor Alluvial diamond miners are benefiting from assistance from the Peace Diamond Alliance, an organization consisting of local communities, Govemment mnistries, local and extemal NGOs, private firms and external donors such as DfID and United State Agency for InternationalDevelopment (USAID). The Alliance helpsminers organize into cooperatives, sell diamonds at prices closer to world prices, and teaches methods of conflict management. Bank analytical work may include a PSIA (FY07). Mitigating Social and Environmental Risks. Uncontrolled mining activities have left vast areas deforested and degraded. This will be a key focus of a strategic environment assessment (FY06). Mine sites are often operated in unsafe conditions, with negative impacts on local communities To deal with environmental and social problems, Government has installed a cadastral system to adm ining rights, and is initiating mining extension services to provide advice on safety and environmental responsi Protecting the Rights of People affected by E1 Investments. Government's mining extension services include reporting procedures that will help reduce the employment of children in mining areas. Also, the Ministry of Gender and Children's affairs has begun to work in collaborationwith Non-Governmental Organizations (NGOs) to reducethe number of child miners. Miningtends to haveanegative gender bias (benefits, e g. employment, are typically captured by men and costs, e.g. social disruption and environmental harm, havethe greatest impact on women and children). Strategic Priority3: HumanDevelopment 66. Introduction. The Bank will evolve its existing program to focus on sector approaches to education, health (including HIV/AIDS), and social protection. Ongoing projects in education and health are complemented by service provision through the community and district-based support in NSAP and IRCBP. Analytical work will underpinthe choices for future sector support, foreseen for FY08. (a) Education 67. Context. Bank support (co-financed by the AfDB) through the Rehabilitation and Basic Education Project (REBEP) has helped Government to reestablish education services throughout the country and i s preparing the ground for expansion and quality improvements. Nevertheless, the following issues need attention: (a) the lack o f sufficient and adequate inputs at school level, compounded by insufficient planning, management and implementation capacity at all levels; and (b) the lack o f coordination among the various actors providing education service in the country (including the donor community). Bank support will build on the ongoing REBEP by undertaking an Education Country Status Report (CSR) in FY06. The outcome o f this analysis will be used to guide a sectonvide strategy and to provide a framework for development partners' support. 23 68. Expected Results. The strategic and long-term development outcome will be to achieve primary universal education as well as improved quality, efficiency, equity (in particular, gender parity) and relevance at post-primary levels nationwide. The CAS outcomes include: 0 20 percent increase in enrollment on average for girls in primary schools in targeted districts; 0 20 percent increase in passing rates o f students taking the Basic Education Certificate Examination (BECE); and 0 Pupil/textbook ratio reaches 1:1 at basic level incore textbooks by 2009. Table 6: HumanDevelopment - Selected Targeted Results in targeted districts, (b) 80% o f birthsare attended by trained health personnel; (b) Health 69. Context. Civil war depletedthe country's supply o f social services bothinterms o f coverage and quality, resulting in under-investmentin human capital. A consequence of this under-investment i s the very high under-five mortality rate (284 out o f 1,000 live births), the equally high maternal mortality rate (2,000 out of 100,000 live births) and the lack o f financial sustainability o f the health services currently provided. The Bank-financed HSRDP supports capacity strengthening o f the Ministry o f Health and Sanitation (MOHS) and the District Health Management Team (DHMT) by improving the decision-making process and enhancing capacity for appropriate planning, financial management and supervision. The HSRDP also promotes private sector and civil society participation in the health sector with a view to increase efficiency, ensure equity and improve the quality o f services provided. But a number o f issues hinder the ability o f the system to achieve national goals. Among them are: (a) the limited financial resources allocated to the health sector, which has resulted in limited availability o f good quality health facilities; (b) inadequate planning and management o f the health sector's human resources; and (c) the lack of coordination among the various actors in the heath sector. The Bank will support the implementation o f the revised national health policy by focusing on decentralization, promoting community-level and participatory financing 24 mechanisms, and building partnership among organizations that influence health outcomes. A review o f the health sector i s planned for FY07. 70. Support for HIV/AIDS will continue through the ongoing SHARE) operation, with renewedacceleration usingthe technique o f the RRI. Beyond expanding the emphasis o f the SHARP program in the area o f care and support, effort will be made to mainstream HIV/AIDS concerns in all ongoing and proposed operations, especially the Transport Development Project. 71. ExpectedResults. The strategic long-term outcome will be to improve the health status o f Sierra Leoneans. The CAS outcomes are based on the four districts where the Bank activities are concentrated. They include: 0 70 percent o fthe population have access to essential health services; 0 80 percent o f births are attended by trained health personnel; 65 percent o f children aged 13-24 months are fully immunized; and 0 99 percent o f women aged 15-19 remain HIV negative. (c) Social Protection Strategy 72. Context. Recent surveys in Sierra Leone have recommended the need to strengthen social protection and safety net systems so as to target social vulnerability more efficiently. Proposed Bank intervention in this area will focus on action-oriented research to pilot innovative responses to the needs o f vulnerable groups, such as youth and orphans, and analytical work (FY07) on social protection policies, system reform and implementation. 73. Expected Results. The long-term strategic outcome will be a sustainable caring mechanism for vulnerable groups. The CAS outcome will include a social protection strategy for the Ministryo f Social Welfare, Gender and Children's Affairs. C. Summary of Bank Assistance 74. Based on the resultsframework defined above, the Bank's proposedfinancial support to GoSL is summarized in Table 7. The program builds on the TSS - with a bridge o f three projects in FY05 (Power and Water, ERRG IV and the Bumbuna Hydroelectric Project) - to facilitate the transition from post-conflict to a PRSP-based framework. The assistance program i s built on a strategy o f annual budget support (through a development policy instrument) and selective investment operations. The investment program focuses heavily on infrastructure, support to private sector development, agriculture and mining, and continued investment in education and health. The CAS does not propose base and high cases, but IDA support i s intendedto be scaled up on the basis o f improving performance as measured by the Country Policy and Institutional Assessment (CPIA) and the Annual Review o f Portfolio Performance (ARpP). 25 Table 7: IDA FinancingProgram (Indicative Credit/Grant Amounts in US$ millions) FY06: IDP Transport Project 43 FY07: Development Policy Support 10 RuralandPrivateSector DevelopmentProject 28 Mining Sector Technical Assistance Project 5 Sub-total 43 * FYOS: DevelopmentPolicy Support 10 HealtWEducationProject 3 3 Sub-total 43 * FY09: DevelopmentPolicy Support , 10 InfrastructureDevelopmentProject 20 Public Sector RefodCapacity Building 13 Sub-total 43 * 75. Analytical work will provide the intellectual underpinnings for the Bank's assistance program (Table 8). In addition to analysis in the core areas o f public expenditure, public financial management and poverty monitoring, the Bank will undertake focused analysis in selected areas in response to the specific challenges facing Sierra Leone. Table 8: Analytical Underpinnings 26 76. The program also covers a number of cross-cutting issues, most notably gender, environment, and capacity building. Gender is integrated in many areas o f the work program. One o f the most notable gender issues in Sierra Leone i s maternal health, since the country has extremely high rates o f matemal mortality; the ongoing health project addresses this problem. Female literacy and girls' enrollment rates, including the lack o f parity at higher levels o f post-primary education, are other areas which will be addressed in the Country Education Status Report. The proposed labor market and youth study will build on a detailed survey work and pay particular attention to differences in how men and women fare in the labor market, including issues such as access to credit and land, legal system and gender-based violence. Environmental issues are also mainstreamed in the Bank's program. In addition to the proposed Gobal Environment Facility (GEF) on biodiversity, each o f the infrastructure has adequate environment assessment components and safeguards. Other activities likely to have a positive environmental impact include the ongoing Power and Water project, which should reduce the demand for urban fuel wood use, and help improve water resource management. 77. One of the primary objectives of the Bank's programis to help Sierra Leone regain and develop its capacity to deliver its national PRSP objectives. It aims at enhancing GoSL policy and budget management, strengthening domestic accountability system, and establishing inclusive, effective and accountable local governance. IDA resources will increasingly be channeled through government budget and inter-governmental transfers system. Existing operations will, in addition to achieving their service delivery and infrastructure development objectives, strengthen the capacity o f the counterpart government agencies in policymaking, financial management and procurement, program implementation, and M&E. Existingoperations will also assist the newly established local government to establish necessary capacity to execute decentralized service delivery and infrastructure development responsibilities through leaming-by-doing, Substantial efforts will be put into helping GoSL unleash latent capacity and build on existing capacity to implement its ambitious development agenda. The RRI, successfully piloted under IRCBP and SHARP, may be disseminated to other govemment agencies. IDA will also support GoSL to play an effective leadership role in ensuring aid from all donors help strengthen (rather than bypass or undermine) domestic capacity. 78. Complementing the efforts to improve governance, as laid out in Strategic Priority 1 above, capacity buildingwill also be supported by the results focus of the DPO and by mainstreaming in the investment projects. A major piece o f ESW, building on the FY04 report, Strategic Optionsfor Public Sector Reform, August 2003, will address public sector reform and capacity building. Following that assessment, and the mid-term CAS Progress Report, a decision will be made whether to have a dedicated FY09project for this purpose. 27 79. Regional Programs. The Bank will support the implementation by Sierra Leone of regional efforts, such as the Common External Tariff (CEn of the Economic Community of West African States (ECOWAS) countries. To address the concerns o f negative perception associated with the post-conflict environment, Sierra Leone may be included in the Regional Trade Facilitation Project (RTFP) which sets up an insurance mechanism against losses caused by political risk. Opportunities for Sierra Leone to benefit from regional programs financed by IDA will be sought, in particular regarding roads and power. 80. Other World Bank Group Support. International Finance Corporation (IFC) is aligning its policy to the framework defined for the private sector by the SLPRSP. It has recommenced activities to improve the business climate following the end o f the conflict. IFC has been involved in two operations: (a) Celtel Sierra Leone, a mobile telecommunications operator, supported by US$4 million loan, committed in FY02; and (b) assessment o f a privatization o f the fixed-line telecom service, SierraTel (2001/2002). 81. IFC support focuses on: 0 Technical Assistance: IFC organized a micro-, small- and medium-enterprise (MSME) Forum in Freetown in June 2003 to explore needs in the sector with respect to technical assistance and government's related priorities, and to coordinate any potential interventions with existing development partners. IFC will be holding a series o f capacity-building workshops for MSMEs in Freetown in April/May o f 2005. Through its new Private Enterprise Partnership for Africa (PEP Africa), IFC will consider working with FIAS to improve the investment climate, including a business forum and business registration. 0 Lending Prospects: Lending opportunities to select SMEs and financial institutions will be pursued. As strategic infrastructure and miningsectors are opened to private participation, IFC may also play a direct financing role. 82. While the Multilateral Investment Guarantee Agency (MIGA) had no outstanding gross exposure in Sierra Leone prior to FY05, this situation is changing rapidly, In FY05, MIGA approved cover o f a small (US$300,000) investment by the Kjaer Group, a Danish investor in Freetown. MIGA's pipeline i s expanding quickly and by mid-FYO5, MIGA had three more projects at various stages o f the underwriting process. MIGA expects to see increased demand for support for infrastructure projects and projects in the mining sector. In preparing and implementing Sierra Leone's privatization and divestiture strategy, MIGA can play a useful role both in ensuring wide dissemination o f information on investment opportunities in Sierra Leone and in offering its support - through its guarantee program - to address perceived political risk on the part of foreign investors. MIGA can also provide advice during the project design phase to ensure that projects are so designed as to make the mitigation o f political risk issues easy to address. 28 83. MIGA has become active on the technical assistance front, working in collaboration with FIAS in support of Sierra Leone Export Development and InvestmentPromotionAgency (SLEDIC). The Government overhauledthe investment code in late 2003 with World Bank support. SLEDIC will play an important role in collating and presenting information to the domestic business community and also over time to prospective foreign investors. A further role is to meet with existing investors in the country to identify the issues o f greatest concern. Where possible, SLEDIC should seek to troubleshoot areas o f frustration and ensure that the most serious constraints rise to the top o f the agenda o f business-government private sector forums. As outside interest develops, this institution will serve as a first port o f call for investors seeking information on the economy and identifying trade, investment and contracting opportunities. FIAS, with DffD support, i s already addressing issues related to the investment micro-environment, and MIGA will offer its assistance in training, developing the necessary tools and procedures to enable SLEDIC to develop the capacity needed to play this role. 84. In collaboration with the Governance Reform Secretariat, the World Bank Institution (WBI) organized an anti-corruption survey as part of efforts to address the issue of poor governancein the country. Data collected inthe survey were used to establish quantitative benchmarks for monitoring the success o f the institutional reforms underway. WBI also organized a series o f national and regional workshops to disseminate results o f the survey so as to spread awareness about governance issues. Parliamentarians from Sierra Leone have participatedinthe WBI course on strengthening the oversight roles o f Finance and Public Accounts Committees. Duringthe CAS period, WBI will build knowledge and capacity relating to fiscal decentralization (including chiefdom development issues), anti-corruption and training o f civil servants. It will also facilitate delegates from Sierra Leone participating in regional thematic activities. A distance learning center i s being established inFreetown under the IRCBP. I t i s expected to increase the country's access to WBI programs and help break the country's relative isolation. D. MeasuringResults: The Monitoring& Evaluation(M&E) Framework 85. The performance of the CAS will be reviewed at mid-course, based on the outcomes identified in the results matrices(Tables 3, 4 and 5 and Annex 1). Annual Country Program Reviews (CPRs), undertaken jointly with Government, will assess progress o f the portfolio and alignment o f the Bank's assistance with CAS and SLPRSP objectives. These CPRs will serve as inputs to the CAS Progress Report which will assess whether CAS outcomes are actually being achieved and, in light o f the findings, will determine whether adjustments are needed. A completion report will be prepared at the end o f the four-year CAS cycle to assess the overall progress in achieving the objectives o f the CAS. 86. Monitoringof CAS and portfoliooutcomes will need to rely in large part on the M&E framework that Governmenthas in placefor the PRSP. Effortshave been made to promote consistency between CAS progress indicators and PRSP indicators, but 29 further alignment will be needed. In addition, this involves significant roles for Statistics Sierra Leone, the MOF, the Ministry o f Development and Economic Planning (MODEP), and sub-national government in the implementation o f the M&E system. The Bank i s committed to work with the Government and other donors in establishing the statistical basis for the M&E system. JSDF funding has been approved to support capacity building at Statistics Sierra Leone. 87. MillenniumDevelopmentGoals. Acceleratedprogresstoward meetingthe MDGs will requirefocused action by the Governmentand intensifiedsupport from the Bank Group, as well as fromthe rest of the internationalcommunity. Table 9 shows progress so far. Table 9: ProgressTowardsAttaining the MillenniumDevelopmentGoals school. 3. Promote Gender Equality and Empower Women Target 4: Eliminate gender disparity in IRatio of female to male at 1-- I0.40 1On track tertiary level of education Source UNDP, Human Development Report 2004 30 88. CountryPolicy and InstitutionalAssessment (CPIA). The CPIA assesses the quality of a country's present policy and institutionalframework and plays a key role in the Bank's mechanismof allocatingIDA resources among IDA recipients. In accordance with research on aid effectiveness, IDA resources are directed to countries that are pursuing policies that promote growth and reduce poverty. Along with the performance o f the portfolio, a country's CPIA ratings play a major role in determining the volume o f IDA flows it receives every year. Countries are evaluated according to 16 criteria, grouped into four categories as shown in Table 10: (a) macroeconomic management, (b) structural policies, (c) policies for social inclusion and equity, and (d) public sector management and institutions. These criteria are re-examined periodically and adjustments are made in line with lessons from cross-country experience and research findings. Based on the current assessment, Sierra Leone's performance i s comparable to the average IDA recipient. In order to move to a higher level o f IDA support, the Government would need to take actions that would lead to an increase in the CPIA ratings. Table 10 presents a number of options that could drive improvements in the country's CPIA score, thereby justifying higher volumes o f IDA support. Improvements in the area o f public sector management and institutions are especially important in terms o f delivering results to the country's population. These governance areas are also emphasized inthe allocation of IDA resources. Table 10: Policy Performance - Areas for Improvement Actions Recommendedto Trigger Increased Levels of IDA Support I Macroeconomic Accelerate improvements inthe macroeconomicenvironment as measuredby: Management (a) Substantially reducedinterest rates; and (b) Develop and implement legislation goveming competition policy; and (b) Distribute resources transparently and equitably across local councils. = (a) Key ministries to develop 3-year program-based budgets consistent with and Iristitutioris SLPRSP: (b) Improve transparency of poverty expenditures, including tracking expenditures by function; (c) Improve efficiency of procurement planning and execution; and (d) Improve transparency of overall government resource envelope and allocations, capturing donor funding inbudget. Portfolio Performance (a) Zero projects with unsatisfactory IP and DO ratings; and (b) Satisfactory compliance with procurement procedures. 89. The volume of IDA support that will be made available to Sierra Leone will also depend to some degree on the country's debt sustainability profile over the comingyears. The framework governing the financing terms for IDA'Sassistance over the FY06-FY08 period links the provision o f grants to debt vulnerability. Sierra Leone i s currently classified as an all-grant country, but it i s possible that debt sustainability will improve sufficiently after the HIPC Completion Point and that Sierra Leone may be re-classified as a mixed grant/credit country. Assessments o f debt sustainability will be undertaken on an annual basis, and the financing terms on which IDA assistance i s provided, as well as the volume o f the support, will be adjusted accordingly. While future IDA assistance levels will depend largely on policy performance, portfolio implementation, and debt sustainability, the Bank will seek to respond quickly to 31 opportunities and unanticipated needs that may arise. Similarly, in the event that progress i s not realized as expected, the Bank will re-evaluate its program together with Government with a view to focusing IDA assistance more narrowly in selected areas. VI. MANAGING RISKS 90. There are five risks that may impede the successful implementation of the PRSP and the CAS. They are: 0 Weak InstitutionalCapacity. The failure to strengthen institutional capacity at both central and local levels may lead to slow and partial implementation. The CAS aims to mitigate this risk through its decentralization strategy and by mainstreaming capacity building and prioritizing for possible further direct project support. 0 Poor Governanceand Corruption. Despitethe Government's efforts to root out corruption, it i s far from being eliminated. Sierra Leone i s also vulnerable to money laundering and financial terrorism. Bank assistance and dialogue are designed to give strong support to the anti-corruption agenda strengthening the institutions at local and central levels charged with the responsibility o f ensuringtransparency and accountability. 0 Low Level of External Support. As Sierra Leone leaves the post-conflict phase behind, some donors who were ready to engage with post-conflict related support may choose to reduce their levels. There i s a clear risk that Sierra Leone would face too low levels o f support precisely when the absorptive capacity for PRSP-based objectives i s being restored and enhanced. The CAS provides for approaches in the areas o f budget support, infrastructure (roads in particular), support through local councils, and sector support in the social sectors, that would allow donor coordination and harmonization to reduce transaction costs and provide opportunities for development partners to join efforts. The C G in June 2005 will have this risk as a main theme. 0 EconomicShock. Macroeconomic stability may not be attained as a result o f exogenous shocks such as substantial public sector wage demand, adverse terms o f trade, or a reduction in official flows. This risk i s compounded by the limited preparedness o f Sierra Leone to deal with such shocks. The Bank will work closely with other partners and the IMF to promote appropriate policy response and to mobilize the resources needed to support efforts to achieve and maintain macroeconomic stability. 0 RegionalTurmoil. The regional inter-connectedness between Sierra Leone, Guinea, Liberia, and also Cote d'Ivoire i s strong. Progress in Liberia, in particular, has helped Sierra Leone succeed in its post-conflict stability recovery. The UN, ECOWAS and the Mano River Union are making strong efforts to promote stable developments and regional integration. Nevertheless, it must be recognized that there are major sub-regional security 32 concerns that still need full attention o f the international community and sub-regional organizations. This CAS addresses the root causes o f conflict in Sierra Leone, but further World Bank engagement in a sub-regional effort for conflict prevention, regional integration and accelerated development i s necessary. 91. Sierra Leone has made a remarkably successful transition from conflict. The World Bank engaged throughoutthis transition in a major way. The country's PRSP, and the World Bank's CAS, marks the transition from a post-conflict environment to a new framework for development. Nevertheless, the success o f progress so far remains fragile, the challenges o f extreme poverty remain, and extraordinary efforts by the Government o f Sierra Leone and its partners will be necessary to secure the progress, accelerate action that leads to results, and ultimately empower the people, the communities and the nation o f Sierra Leone. 33 SIERR4LEONE COUNTRY ASSISTANCE STRATEGY Annexes Annex 1: Sierra Leone Results Matrices: Pillar 1: Governance, Decentralization and Public Financial Management Pillar 2: Sustainable Growth, Food Security and Jobs Creation Pillar 3: Human Development Annex 2: Consultative Group Results Framework Progress Report Annex 3: Sierra Leone: Debt Sustainability Analysis Annex 4: Sierra Leone: Review o f TSS Implementation Annex 5: Sierra Leone: Country Financing Parameters Annex 6: Standard CAS Annexes: A2 Sierra Leone at a Glance B2 Selected Indicators of Bank Peifornzance and Management B3 IBRD/IDA Program Summary B4 Summary of Non-Lending Services B5 Sierra Leone Social Indicators B6 Sierra Leone -Key Economic Indicators B7 Sierra Leone -Key Exposure Indicators B8 OperationsPortfolio (IBRDLDA & Grants) IA M L 3 W m y1.f 00 M n v) J 0 d E I 3 d .-x - a0 .-I C 3 -0 Wz Z N d I 6 c B .-E - m .-C 2 I U P P Annex 3 Sierra Leone: Debt Sustainability Analysis This annex summarizes the results o f a fiscal and external sustainability analysis for Sierra Leone carried out in late 2004.' The historical data and projections have since been superseded by new numbers in the Sixth Review o f the IMF Poverty Reduction Growth Facility (PRGF) reported elsewhere in this CAS. While a new exercise will be conducted for the HIPC Completion Point in the fall o f 2006, the main conclusions are not expected to differ substantively from those reported here, barring differences in methodology. The main conclusion i s that Sierra Leone faces moderate risk o f external debt distress, despite very low debt service requirements relative to exports, because o f the magnitude o f shocks it could face inthe future. A. Baseline Scenario Fiscal Assumptions. The baseline scenario assumes that the high real GDP growth seen inrecent years will taper off to an average o f 6.0 percent per annum between 2010 and 2022, with inflation leveling o f f at just under 4 percent per annum. The primary fiscal balance i s projected to strengthen over the medium-term from a deficit o f just under 2 percent o f GDP in 2003 to a small surplus of almost 1 percent o f GDP by 2021 (See Table). This i s brought about, on the one hand, by stronger domestic revenue effort and augmentation o f the revenue base. The improved revenue effort will be necessary because foreign grants are projected to decline from almost 8 percent o f GDP in 2003 to below 2 percent o f GDP by 2021. On the other hand, government expenditures as a whole are projected to decline to facilitate the attainment o f fiscal sustainability in the long run. The reduction should be achieved in part through cost cutting, rationalization, and other reforms to contain costs and improve efficiency o f government services. Furthermore, in light o f the need to limit expenditures, outlays need to be prioritized reflecting developmental and poverty-related needs o f the Poverty Reduction Strategy. The share o f investment expenditure i s projected to increase to promote highoutput growth. Debt Service. The outcome o f the baseline scenario i s that external debt service due (after all relief) is projected to fluctuate around an average o f 7 percent of revenues and grants (or 5 percent o f exports o f goods and services) over the period (See Table). This is facilitated by debt forgiveness under the HIPC Initiative which will lower the net present value o f external public debt. Interest on domestic debt, as a share o f revenues and grants, falls from 14 percent to 8 percent over the same period. This i s made possible by the improving fiscal balance which takes pressure off the domestic interest rate. Total debt service due (after all relief) falls from 19 percent o f revenues and grants in2003 to 13 percent by 2021. Debt Stock. The total stock of debt falls to 69 percent o f GDP by 2022 from 76 percent in 2003. Within this amount, domestic debt falls from 41 percent in 2003 to 16 ' SierraLeone: 2004 Article I V Consultation, IMF Country Report No. 05123. 50 percent in 2021 while external debt rises to a peak o f 59 percent o f GDP in 2011 before declining to 53 percent o f GDP in 2021 (See Table). The net present value o f total debt as a share o f revenues and grants falls from 252 percent in 2003 to 94 percent in 2021. Within this, domestic debt falls from 203 percent o f revenues and grants to 81 percent while extemal debt falls from 94 percent to 13 percent. The NPV o f external debt to exports o f goods and non-factor services falls from 123 percent in 2003 to 116 percent in 2021. B. Sensitivity Analysis The overall macroeconomic environment in which the Government is operating will have an impact on the fiscal outcome, and by extension fiscal sustainability. Thus, it i s important to construct a number o f alternative scenarios to test how sensitive or robust the results are to various changes in assumptions. This was done as part o f the IMF debt sustainability analysis. As a result, the following conclusions were made: 0 Inthe unlikely event that Sierra Leone were to revert to the growth rates and fiscal stance seen during the war, then the debt indicators would deteriorate in the long run. This scenario would require that real GDP contract at a rate o f 0.8 percent annually while the primary deficit o f 3.9 percent o f GDP. 0 Similarly, a temporary negative output shock could lead to an unsustainable fiscal adjustment and rapidly rising debt-to-GDP and debt service ratios. Total expenditures would rise as a percent o f GDP, leading to a large primary deficit and borrowing. 0 If the fiscal primary deficit is maintained at the high level of 3 percent of GDP, the level seen in 2002 when post-conflict spending requirements were still very high, then the debt ratios would exhibit an explosive trend. 0 A temporary worsening o f the primary balance, such as might be caused by delays in external grant financing, may not necessarily affect the Government's long-term fiscal position permanently, provided that the authorities adequately adjust the fiscal portfolio inthe medium-term. It is also worth noting that the current stock o f domestic debt carries a significant rollover risk in the event that domestic interest rates rise. This i s because o f the high GDP share o f the debt stock and its short-term composition.2 The Government should therefore continue to reduce the primary deficit and promote domestic debt markets. * The instrument used to refinance domestic borrowing i s three-month Treasury bills, so that the debt stock i s rolled over four times in a year. 51 Debt istainability Indicators, 2003-2021 - 2003 2004 2005 2006 2007 2008 2009 2010-20 2021 Baseline Fiscal Scenario Revenue and grants 20.1 21.3 21.0 22.0 23.4 23.0 22.7 20 6 19 7 Revenues 12.4 12.2 13.0 14.5 15.6 16.4 17.3 17 5 17 9 Grants 7.7 9.1 8.1 7.5 7.8 6.6 5.4 3 1 1 7 Primary (non-interest) expenditure 21.8 23.4 21.5 22.3 22.6 22.9 23.4 20 8 18 8 Primary deficit 1.7 2.1 0.5 0.4 -0.8 -0.1 0.7 0 2 -0 9 Debt Service Indicators I/ Debt Service as % Revenue & Grants 19.2 24.8 18.4 12.1 11.8 11.0 12.1 I 4 9 12 7 External 5.4 8.7 5.2 1.1 3.2 4.3 6.4 8 1 5 1 Domestic 13.8 16.1 13.2 11.0 8.6 6.7 5.7 6 8 7 7 External Debt Service as % Exports 5.4 8.1 4.1 0.9 2.5 3.0 4.4 5 2 3 1 Debt Stock Indicators I/ Public sector debt as ?4ol'GDP I/ 763 739 77.3 78.0 76.3 76.9 78.1 74 5 69 2 External 35.5 39.2 45.8 49.7 51.8 54.8 57.3 56 2 53 3 Domestic 40.8 34.7 31.5 28.3 24.5 22.1 20.7 18 3 15 9 NPV of Debt as % of Revenue & Grants 2/ 252.0 208.6 163.6 142.0 117.5 109.3 104.7 102 3 94 1 External 48.9 45.8 13.8 13.3 12.8 13.1 13.3 13 7 13 1 Domestic 203.2 162.8 149.8 128.7 104.7 96.2 91.4 88 6 NPV of External Debt as % o f Exports 21 123.0 127.2 123.7 120.5 120.6 119.4 122.2 1190 Key Assumptions Growth of Real GDP (% p.a.) 9.2 7.4 11.4 9.1 8.0 7.5 7.0 6C Growth of US$Exports (%p.a.) 28.8 20.8 27.5 15.1 15.5 15.5 5.4 5 4 5.4 Inflation rate (GDP deflator, % p.a.) 8.3 10.0 2.9 3.3 3.3 3.3 3.4 3 8 3.8 mal HIPC bt relief. 21 Debt service is defined as the sum o f interest and amortization of medium- and long-term debt 52 Annex 4 REPUBLIC OF SIERRA LEONE REVIEW OF TSS IMPLEMENTATION FY2002-04 A. Introduction 1. The main purpose o f this report i s to assess the effectiveness o f the World Bank's Transitional Support Strategy (TSS) for Sierra Leone for FY2002-04, which was discussed by the Board on March 26, 2002. The report i s based on a self- assessment of the country team as well as analysis o f the information gathered from Project Status Reports (PSRs), Project Implementation Completion Reports, various Aide-MCmoire and Back-to-Office Reports. In addition, interviews have been undertaken with clients and representatives o f the donor community in the country seeking their perspectives on the Bank's policy and portfolio performance under the TSS. A CPPR was not undertaken during this period. While the TSS provides a good strategic framework, there are some challenges in terms o f tracking results/outcomes. The Consultative Group Framework Progress Reports have been used to track progress made towards achieving the benchmarks set out inthe TSS (Annex 1-A). 2. During the TSS period, Sierra Leone made considerable progress in restoring security and consolidating peace throughout the country. Completion o f the fourth review o f the IMF PRGF on 23 February 2004 signifies continued maintenance o f a satisfactory macroeconomic framework. The improved security situation strengthened business and consumer confidence, resulting in recovery o f the economy, mainly in the agriculture, mining, manufacturing, and services sectors. Real GDP growth exceeded 6% in 2002, and inflation remained subdued. The economic recovery continued in 2003, with real GDP growth o f 6.5% and a projected growth rate o f 7.4% in 2004. However, inflation increased sharply in 2003 and the first half o f 2004, reflecting higher fuel costs, expansionary fiscal and monetary policies, and a depreciation o f the currency. The currency depreciation was influenced by a number o f other factors, notably a reduced supply o f foreign currency, due to scaling down o f the activities o f the UNAMSIL ahead o fits withdrawal from Sierra Leone. 3. The conclusion of the TSS Implementation Review i s that the Bank's assistance strategy was relevant to the medium-term, post-conflict agenda o f Sierra Leone and that many o f the TSS objectives were achieved. Inparticular, the Bank has been successful inresponding to the immediate post-conflict needs of the country. It played a catalytic role in consolidating peace, recovery, resettling and integrating ex-combatants and refugees, and in rehabilitation and reconstruction o f basic social services (health and education). In addition, ERRC I1 and the ERRC I11 provided critical balance o f payments and budget support that helped to finance costs associated with the 53 Government's DDRprogram and rehabilitation o f social and economic infrastructurein those parts o f the country that had become accessible following the positive developments on the peace and security front. Significant progress was achieved on the macroeconomic front, and policy dialogue (through analytic work such as the Strategic Options for Public Sector Reform and the PER) helped the Government develop an integrated development strategy for the country. Through policy dialogue and adjustment lending (ERRC I1and ERRC 111), the Bank brought attention to key issues on governance, including public expenditure management and procurement reform. It also assisted the Government to make and implement structural reforms (such as enactment o f the investment code and procurement legislation) in a challenging economic and political environment. In addition, the Bank played an important role in the preparation o f the PRSP, through the provision o f analytical work and funding. 4. A t the same time, the Bank strategy was less clear and its achievements were limited inproductive sectors. Inparticular, despite the vital importance o f the sector to the country's long-term economic and social development', policy advice and activities conceming agriculture, rural development and mining were inadequate. While the Bank's support to the NSAP provides assistance to the productive sectors (mainly agriculture and fishing), no systematic productive sector assistance program was envisaged through this instrument. It should be noted, however, that for a country emerging from a decade o f war, the first point o f focus i s often humanitarian and relief activities. Bank Group support for private sector development has been limited and ad-hoc through FIAS. B. Long-TermStrategic Goals 5. Sierra Leone's development strategy was laid down in an Interim PRSP (I-PRSP), which was approved by the Board o f the Directors o f the Bank and the Fund on September 13, 2001. It aims at the establishment o f an efficient link between out-phasing relief action, ongoing rehabilitation programs and long-term development. As laid out in its I-PRSP, the Government adopted a two-phased approach to poverty reduction. In the transitional phase, covering the period 2001-02, the Government focused on addressing the immediate postwar needs, including: (a) consolidating peace, (b) resettlement and reconstruction, (c) improving governance, and (d) maintaining a macroeconomic framework conducive to economic recovery. In the medium-term phase from 2003-05, the focus has been on longer-term development and poverty reduction issues, as elaborated in the full PRSP2. The Government o f Sierra Leone also articulated a medium-term post-conflict agenda that was presented to the CG Meeting on November 13-14, 2002. The agenda under the Frameworkfor Peace, Recovery and Development sought to address the post-war social needs in health, education, and community infrastructure, as well as fostering sustained economic recovery and macroeconomic stability. The agenda also took into account recent developments on peace and security and the NEPAD initiative, which focuses on ' The agricultural sector (including livestock, fisheries and forestry) accounts for about 50% o f the country's total GDP and provides a direct or indirect livelihood to more than 75% o f the population. The PRSP was discussed by the board on May 3,2005. 54 poverty reduction with a potential for contributing to the attainment o f the MDGs in Africa. C. TSS Outcomes 6. TSS Objectives: The Board discussed and approved the TSS for Sierra Leone on Mary 2, 2002. Based on the country's development priorities as expressed in the I- PRSP, the TSS was designed to facilitate Sierra Leone's transition from post-conflict reconstruction to sustainable poverty reduction. To this end, the first year o f the TSS focused o n supporting rehabilitation and restoration o f key services; and the second year funded activities in support o f the development phase o f I-PRSP. The objectives o f the TSS were to help mitigate the risk o f renewed conflict and lay the foundation for sustained poverty reduction and increased access to basic services, targeting the rural population, women, and children. The TSS also stressed the need for support towards the decentralizationof service delivery and the restoration o f local government in order to shift away from a Freetown-biased allocation o f resources to one favoring rural communities. Inthis context, the World Bank sought to achieve a number o f outcomes relating to: (a) consolidating peace and security; (b) resettlement, rehabilitation, and reintegration; (c) improving governance, targeting institutional reform, and capacity building down to the local level, with heavy emphasis on enhancing participation and community-driven development activities; (d) accelerating economic growth; (e) expanding access o f the poor to basic social services, infrastructure, markets, and assets; and (f) combating HIV/AIDS. Consolidatingpeace arzd security 7. In its National Recovery Strategy, the Government's priorities centered on rebuilding the war-ravaged economy as well as addressing the basic needs o f war victims. The different measures and actions to restore the security situation comprised the implementation o f the L o m t Peace Agreement, the implementation o f the DDR Program for some 45,000 ex-combatants, as well as a comprehensive set o f measures to restructure security forces and re-establish basic public administration. The Government also established a social fund to support the consolidation o f peace and lay the foundations for long-tenn de~elopment.~ 8. The DDR Program was highly consistent with the country's development priorities, and it was clearly stated in the Bank's TSS that the DDR program was a pre-condition for any efforts to move from war to peace. The DDR program was at the center o f the Government's peace strategy and was clearly made the first priority o f its National Recovery Strategy. The consolidation o f peace still figures prominently in Sierra Leone's I-PRSP and full PRSP. 9. The Bank contributed significantly towards consolidating the peace and security process as well as resettlement, rehabilitation and reintegration activities. During the first year o f the TSS, the Bank successfully administered the MDTF for the third phase NACSA, which was previously namedas the National Commission for Reconstruction,Resettlement and Rehabilitation (NCRRR) has been supportedby AfDB, UNDP, DflD, and IDA. 55 o f the DDRprogram, including chairing the third CG inNovember 2002 that facilitated the pledging o f US$640 million. The MDTF support has made a significant contribution to the early transition from conflict and the establishment o f basic security, which are preconditions for reconstruction and development. Inthis regard, the results o f coherent post-conflict partnership have been extraordinary. Sierra Leone has made the transition from war to peace and i s now embarking on a set o f structural and other reforms, paving the way for sustainable economic development. 10. Following the completion o f the disarmament and demobilization program in February 2002, ex-combatants were fully integrated, and virtually all IDP and refugees were resettled. Peace was restored, and people and goods could move freely throughout the national territory. Throughout the country, the security situation was stabilized with additional police recruited, trained, equipped and deployed. The Truth and Reconciliation Committee completed public hearings, which were attended by all parties involved in the conflict. The entire country was made accessible to the Govemment and development partners. The Govemment made remarkable progress towards completing the post-conflict transition, with the conclusion o f the disarmament, demobilization, and reintegration exercise for over 72,000 former combatants. The NCDDR was a key institution, providing policy and overall guidance to the DDR program and technical assistance as well as direct implementation support. 11. Through various projects, the international community together with the Govemment o f Sierra Leone financed a massive and successful DDR program, which demobilized 72,000 ex-combatants from all factions, provided training and reintegration activities to 56,000, and supported communities in ex-combatants reintegration. The program also provided special support to child ex-combatants. As part o f the broader reintegration process, the Bank and other donors financed parallel activities such as an Emergency Recovery Support Fund to support communities in rehabilitating basic infrastructure. The Bank also supported the short-term reinsertion program for ex-combatants, supported through the NCDDR, and supported medium term interventions through community-oriented reintegration, rehabilitation and recovery programs for ex-combatants through the National Commission on Resettlement, Rehabilitation and Reconstruction (NCRRR). However, these linkages were not maximized to the fullest extent. The NCDDR's reintegration program succeeded in its primary objective of providing ex-combatants with an early transition to social and economic reintegration and helped them to readjust to civilian life. However, in the Sierra Leonean context, initial social and economic reintegration has beenconstrained by the general poverty inthe country. Expanding access of thepoor to basic social services 12. The provision o f basic social services in rural and underserved areas was identified as a priority in the TSS, and as a means to mitigate the risk o f renewed conflict and lay foundation for sustained poverty reduction. IDA has been active in providing support towards rehabilitating and expanding access to basic social services mainly through its investment projects. IDA provided a US$20 million grant for the 56 REBEP,which became effective on 15 May 20034. The main objectives o f the Project are to assist the Government to reestablish education services, and prepare the ground for building up the education sector. Specifically, the Project assists participating schools to achieve a basic operational level and building up the capacity o f the Ministry o f Education, Science and Technology in planning and managing the delivery o f education services. Similarly, the US$20 million HSRDP, which became effective on 28 M a y 2003, was designed to help the Government restore the most essential functions of the health delivery system with emphasis on rehabilitation o f basic health facilities in four priority districts o f the country. The Project also assists the Government's effort in strengthening the health sector's capacity to improve efficiency and make the health sector more responsive to the needs of the population by supporting eligible district health teams and five key services o f the MOHS. 13. In terms o f implementation, both the education and health projects have been successful in achieving their primary objective o f restoring the delivery o f basic services. They also made significant progress in strengthening management functions both at the ministry and district levels. However, their sustainability i s questionable because o f concerns about a shortage o f human and capital resources. Limited technical and administrative capacity (mainly in financial management and delays in procurement) and lack o f common disbursement procedures by donors have created substantial delays in disbursement. It has also been noted that some o f the Project components were over-ambitiously designed, with their objectives not well articulated. For instance, with respect to the health project, the component dealing with the participation o f the private sector in the health sector has not yet achieved any significant result because o f the lack o f clarity o f what needs to be done. 14. To supplement the health project, the US$15 million SHARP became effective in October 2003. The development objectives o f this four-year project are to: (a) reduce HIV/AIDS incidence, and (b) mitigate the impact o f HIV/AIDS on persons infected or affected by HIV/AIDS. The Project finances a wide spectrum o f HIV/AIDS activities including prevention, care, support, and impact mitigation over a four year period. A National HIV/AIDS Council, chaired by the President, has been established to oversee national strategy and policy issues. Regional HIV/AIDS initiatives involving Guinea, Liberia, and Sierra Leone have also been pursued under the auspices of the Mano River Union. 15. Through its NSAP, the Bank has been providing part o f the funding requirements for N A C S A towards resettlement o f returnees and IDP, reconstruction, and community development in the newly accessible areas (those that were under rebel control until January 2002 and the most vulnerable population groups within those areas). The program has so far been successful, particularly in building community cohesion and supporting the transition from war to peace. NaCSA has supported 174 communities in rehabilitating 60 Primary schools (7 1,286 beneficiaries); 8 Maternity Child Health Posts (34,152 beneficiaries); 12 Community Health Centers (96,677 beneficiaries); 27 Community Health Post (120,7 13 beneficiaries); 17 Water and The Project was jointly prepared by IDA,AfDB and DflD and i s co-financed by IDA and AfDB. 57 Sanitation (35,120 beneficiaries); and 50 other projects. NaCSA has used direct community prioritization, implementation and financing. Insubproject areas, access to and utilization o f social and economic infrastructure and services has increased substantially. However, the activities o f the rural public works program have been delayed due to lack o f qualified implementingpartners. In addition, NaSCA has been less effective than anticipated in the oversight o f the Project. There i s also a need for complementing NaCSA's effort with other government and donor support for decentralization and capacity building activities. Accelerating economic growth 16. The Bank used a combination o f lending and non-lending services to support the Government towards its effort to accelerate growth. IDA provided a total o f US$30 million and US$50 million financing for ERRC I1 and ERRC 111; respectively, as an integral part o f the Bank's TSS to assist Sierra Leone in implementing its program to consolidate peace and enhance governance, re-launch the economy and improve service delivery. These funds contributed to economic recovery and growth by providing foreign exchange resources for imports o f essential goods, including food products, petroleum products and raw materials and intermediate goods required for relaunching the economy and provided macroeconomic stability by closing the financing gap. These credits have also been instrumental in initiating structural reforms, notably the revision o f Mining Policy to promote formal activity (in artisanal mining), and attracting private investment for medium- and large-scale mining. An investment promotion code that will boost private sector activities has also beenenacted. 17. As part o f the Government's effort to address the acute shortage and unreliability o f infrastructure facilities, particularly electricity, water and sanitation, the Bank recently approved a US$30 million credit financing for the Power and Water Project, which is a multi-sector project reflecting a comprehensive development approach. The Project supports the Bank's TSS as well as the Government's I-PRSP and the National Recovery Strategy, o f which power, rural water supply, and urban sanitation are key elements. It i s intended to address prioritized issues across various water and sanitation, urban waste management and power sectors, taking into account all other donor commitments and ongoing and planned programs. The Project supports improved access to essential power, rural water supply, sanitation, and urban solid waste management services. This will be accomplished through the rehabilitation and strengthening o f essential infrastructure and institutional capabilities to plan, manage and maintain these services. The Project provides funds for targeted critical investmentswith the aim o f establishing core infrastructure services that will contribute to poverty reduction and facilitate economic growth. Concurrently, it will continue to support power and water sector reforms aimed at increasing private sector involvement through investment and public-private partnerships, particularly through instituting a performance-oriented management contract for NPA and Guma Valley Water Corporation. 18. While the Bank's adjustment lending instruments (through ERRC I1 and 111) have been instrumental to economic recovery and growth, macroeconomic stability 58 and the implementation o f major structural reforms, there have been substantial slippages particularly in the areas o f mining sector development due to lack o f political commitment at higher levels. As for the agriculture sector, the Bank's intervention was also very limited, although the NSAP included actions for the rural economy. The Project mainly focused on addressing the social and basic infrastructure problems arising from the civil war and using community involvement. Improving governance 19. The Bank has been a key player in supporting the Government in furthering its governance agenda (minimizing corruption and enhancing effective service delivery). The key areas include: (a) Enhancing transparency in budget preparation and implementation: This has been achieved through the creation of Budgetary Oversight Committees, which assist in the determination o f budgetary priorities through the Medium Term Expenditure Framework (MTEF) process and through the production o f budgetary monitoring reports at the activity level, including payroll. (b) Strengtlzeningpublic expenditure management: Two of the Bank projects, namely ERRC I1 and 111, have played a catalytic role in pushing reforms towards strengthening public expenditure management, including deepening o f budget reforms, financial management and procurement reform. The Parliament approved the Public Procurement Act 2004 on December 2, 2004, and the President signed it into a law on December 7 , 2004. Under ERRC 11, the Bank, in collaboration with the Government, undertook the Country Financial Accountability Management System (CFFA) that helped to fdentify the weaknesses o f the financial management system and better ways to improve financial accountability. The PER was also undertaken to help the Government consolidate its post-conflict successes and reorient it policies for long-term sustained growth and poverty reduction. (c) Strengthening local government for service delivey: Following the recommendations o f the analytical study "Strategic Options for Public Sector Reform in Sierra Leone", the IRCBP was designed to help the post-conflict government establish a functioning local government system and improve inclusiveness, transparency and accountability o f public financial management at all levels. Through its decentralization and capacity building component, IRCBP assists the Government in designing a phased approach to decentralization. The public financial management reform component helps establish the core policy advisory and implementingcapacity o f the PFMreform program. 59 D. MeasuringBankPerformance 20. Overall Performance: The Bank i s one o f the largest donors to Sierra Leone with a portfolio o f 8 active projects (with commitments o fUS$215 million) '. Since the beginning o f the TSS, IDA has committed US$230 million in Sierra Leone o f which US$65 million were grants. All the proposed adjustment and investment lending activities in the TSS have been approved and implemented. The Education and Health projects were launched in April 2003; implementation o f the NSAP, which became effective inAugust 2003, i s also underway, and the HIV/AIDS project (SHARP) i s now moving rapidly after a slow start-up. The Power and Water Project became effective in September 2004. Description lDA Undisbursedamount In millions In millions (USS) (USS) (As of 01/28/2005) Second Economic Recovery and RehabilitationCredit (ERRC 11) 50 0.0 Multi-Sector HIViAids Response Project 15 11.41 FY03 Rehabilitation of Basic Education 20 17.83 Health Sector Reconstruction 20 20.18* National Social Action Program 35 29.99 Third Economic andRecovery and RehabilitationCredit (ERRCIII) 30 0.0 FY04 InstitutionalReformand Capacity Building 25 23.06 Power & Water Project 35 35.36* * The higher value is due to exchange rate appreciation 21. Portfolio Assessments: The Projects in the Bank's portfolio are well aligned with the TSS and are generally performing satisfactorily. Out o f the eight active projects, all are rated satisfactory with regard to their implementation, and all projects except one (ERRC 111) are rated satisfactory in terms o f project management. The completed ERRC I1 project was rated satisfactory both at entry and in terms o f implementation by QAG. The quality o f the portfolio has improved in recent months through rigorous supervision (especially, following the application of the rapid response initiative). 22. Review of ESW: A focused ESW program was developed to inform Sierra Leone's post-conflict development challenges and the Bank's responses. It included the Strategic Options for Public Sector Reform; Tapping Mineral Wealth for Human Progress-a Break with the Past, and the LegaUJudicial Assessment (undertaken with DfID), all o f which were recently completed. The Mining Sector Study set forth an action plan, based on international best practices, for the revival and development of the mining sector, including needed fiscal, legal, and regulatory reforms, and requisite institutional frameworks. The Agricultural Sector Review was completed in FY04 as well as a PER. The Bank's PER focused on government's ability to translate PRSP According the GOSL report, the Bank disburseda total o f US$32.7 million accounting for 22 percent o f all multilateral aid flows in2003. 60 objectives into feasible spending and implementation plans. The Bank also supported a PETS undertaken by GoSL. MDTFAdmnistration PrivateSectorParticipationStrategyfor Power (PPIAF) I Completed PropertyRights (Post-conflictFund) 1Not completed E. Consultationsand Coordinationwith DevelopmentPartners 23. The GoSL takes the lead incoordinating donor activities. Recognizingthe need for a more efficient and effective mechanism for aid coordination and implementation, the Government has already established a two-tier structure o f aid coordination, following the C G Meeting in Paris in November 2002. The first i s the joint DEPAC, which i s an organ for policy dialogue between government and development partners. Co-chaired by the Vice President o f the Republic o f Sierra Leone, the World Bank and the UNDP, the Committee has the responsibility for monitoring the agreed C G Benchmarks, which include the preparation o f the PRSP. Since March 2003, DEPAC has met bi-monthly to discuss and reach consensus on pertinent issues relating to the recovery process and the transition from post-conflict to long-term development and it has guided the preparation o f the PRSP. It has also provided an excellent arena for transparent policy dialogue among the donor community, government and several development stakeholders (including Civil Society and NGOs) which has led to significant improvements in the quality and focus o f post-conflict policies, aid coordination and effectiveness. The second tier, the DACO, which became operational in January 2004, serves as the technical support and secretariat to DEPAC. DACO is also a focal point for coordination o f development assistance from external sources, including both financial and technical assistance through multilateral, bilateral and NGO sources. 24. From its experience in other post-conflict countries, the Bank recognizes the importance o f effective aid coordination for improving its responsiveness to the realities o f post-conflict situations. In Sierra Leone, the Bank advised the Government on key policy issues and institutional building. In this process, the Bank has sought to maximize the impact o f its interventions by focusing on greater government ownership and donor coordination. The Bank collaborated with the IMF and other donors (AfDB, the DflD and the EU) in providing budgetary support and played a catalytic role in 61 supporting, mobilizing and coordinating aid for the peace process, as well as the rehabilitation and reconstruction activities. The Bank took the responsibility o f administering Multi-Donor Trust Fund. The Bank also co-chaired, with the GoSL, the C G and DEPAC meetings, which have been instrumental for systematic aid coordination, collective policy dialogue and laying the groundwork for the multi-donor budgetary support arrangement, which i s currently under discussion. Given the complexity and the multiplicity o f players in this post-conflict situation, an expansion o f the Country Office in Sierra Leone has beenusefulto strengthenthe policy dialogue with government and aid coordination with other donors. 25. Donor harmonization has been particularly strong in the areas o f peace process, governance and public financial management. However, donor harmonization was weak particularly in the co-financing o f the education and health sector projects, which contributed to delays in the disbursement o f funds and the implementation o f the Bank programs. 26, Partnership in analytic work has been modest. The Bank and DfID jointly prepared a mini-CFAA and a full CFAA with Government in 2002. The Government, AfDB, UNDP and the Bank jointly prepared an Issues Paper on Public Procurement, which ultimately led to support for the Procurement Act o f 2004. An Agriculture Sector Review was prepared by the UN agencies (notably Food and Agriculture Organization [FAO]), with collaboration from the Bank. Some capacity building support was provided through partnerships and inline with government priorities. 27. Support to the PRSP Process: The Bank provided both financial and technical assistance to the PRSP process and contributed several analytical inputs during the formulation. Through its PMPS 11, the Bank offered a supplementary grant o f US$500,000 to finance, among other things, the Household Income and Expenditure Survey which provided base poverty data for the PRSP, the consultative process, and capacity building activities for the PRSP Coordinating Secretariat. The Bank, in collaboration with other donors, has also provided guidance in the preparation o f the PRSP. F. Lessons Learned 28. The conclusions o f this TSS implementation review concur with the findings and recommendations o f the Operations Evaluation Department's (OED) note on "Lessons Learned from World Bank Experience in Post-Conflict Reconstruction". These lessons include: (a) adapting Bank services and products to post-conflict situations; (b) effective aid coordination and partnerships with other donors and consensus on respective roles for, each donor; and (c) the need for early engagement and strong field presence. In Sierra Leone, as in many other countries emerging from post-conflict situations, the limited technical and administrative capacity o f the Government and weak public sector management impede the implementation and performance o f the Bank's lendingprograms. 62 29. Finally, the following lessons emerge from the review o f the implementation o f the Bank's TSS: 0 Where the implementation capacity o f the country is weak, project design should be simple and well articulated. Commitment and ownership depend on the stakeholders understanding o f what is implied in implementing a program. 0 Weaknesses inpublic sector management have a strong impact on portfolio performance. This is particularly so in cases where weaknesses in procurement could lead to implementation delays and financial mismanagement. The lack o f adequate counterpart funding may also cause slippages inproject implementation. 0 A realistic timeframe should be agreed when attempting to introduce structural reforms which need resources and wider political consensus. In addition, project design should accommodate envisaged future changes resultingfrom exogenous internal and external changes. 0 Active stakeholder participation and high-level commitment i s critical for the success o f the Project. 0 Ina post-conflict situation, effective donor participation and coordination is critical in order to adequately and systematically support short-term emergency needs. 0 Although the Project Implementing Units are effective in achieving rapid results in a post-conflict environment, longer-term measures should be taken to strengthen the institutional development o f a country's permanent institutions. Grass-root community development works, especially in rural contexts where the sense o f community is strong. If appropriately supported by technical agencies and by a decentralized structure o f government, local communities can work effectively and in a sustainable way for their own development. Direct community financing should be encouraged as it helps improve governance and accountability. 63 u -4 V s VI C I D E s c 3 =- 3 2 E 0 8 1 26 Annex 5 SIERRA LEONE: COUNTRY FINANCING PARAMETERS Country financing parameters, pursuant to the Bank's policy on financing for investment projects (OP/BP 6.00, Bank Financing) have been discussed with the Government and are outlined below. Cost shaving 1. The Government i s committed to its poverty reduction program, which was issued in February 2005 (refer CAS paras. 21-23). Sierra Leone's overall spending on development projects in 2004 was around 5 percent o f GDP and the Government funded roughly 20 percent o f this amount with its own resources. This dependency upon external financing i s likely to continue for several years given Sierra Leone's low income and level o f development. All projects funded by the World Bank are aligned with the poverty reduction strategy and are integrated inthe annual budget.' The Government and the Bank are working together to improve the integration o f the PRS into the medium-term economic framework. The overall quality o f public financial management i s adequate and improving (refer CAS paras. 48 to 50). The Bank's IRCB project, ERRG IV and subsequent DPOs are contributing toward addressing these issues. Although Sierra Leone's portfolio had a history o f problems during the conflict years, the current portfolio i s performing satisfactorily (with no problem projects) due to increased government commitment and rigorous supervision over the past year (refer CAS para. 33). 2. Government ownership i s key and will continue to be emphasized. The Bank i s routinely taking measures to assure and enhance ownership and commitment o f proposed projects, such as the requirement that grants to local councils from the IRCBP be matched by devolution grants, and the requirement to establish a road maintenance fund to ensure sustainability and ownership o f the Infrastructure Development Project. Allocations o f the Bank's overall financing envelope to individual projects will continue to be determined by the prioritization outlined in the CAS and in any future Bank's strategic documents. The Bank will in general seek Government counterpart funding in all projects, and in addition the Bank will continue to promote harmonization o f its program with other donors' assistance including through seeking cofinancing. Nonetheless there may be projects in which the Bank finances up to 100 percent o f project costs. Decisions regarding the Bank's financing share will not, however, affect the total volume o f IDA assistance in any given year. Financing o f up to 100percent will be applied after a selective and case-by-case review o f merit/justification. Typically, projects executed by Government entities with own sources o f income (e.g. ports or power) are expected to include counterpart funding contributions and would therefore not ' ~ All external funding for planned expenditures is identified and integrated in the budget The HIPC AAP notes, however, that the current accounting system cannot track what i s actually spent from donor resources This is being rectified through the implementation of a new Integrated Financial Management Information System and a new Chart of Accounts 65 have 100 percent Bank financing. Some projects that may be financed up to 100% include those that support social sector development, governance, and capacity building. Recurrent costfinancing 3. The Bank i s already financing recurrent costs in several projects. Examples o f recurrent cost financing include material and supplies in social sector projects, as well as funding o f PIUs and the salaries o f various consultants. These needs are likely to continue for the foreseeable future given Sierra Leone's current state o f transition out o f the post-conflict stage. 4. Balanced against these needs i s a concern for the fiscal and debt sustainability o f recurrent cost financing. As reported in Annex 3 o f the CAS, Sierra Leone faces a moderate risk o f external debt distress because o f the magnitude o f shocks it could face in the future rather than debt service requirements. In fact, under the baseline scenario projected by the IMF, total debt service due, domestic and external, i s expected to decline from 19 percent o f government revenues and grants in 2003 to approximately 12 percent o f revenues and grants by 2009.2 Moreover, the JMF PRGF required that all external borrowing by Government must be on concessional terms. This is expected to be continued under the next PRGF as well. The Government i s also actively engaged in public expenditure management reforms which are widely supported by donors, including the Bank and the Fund.3 All o f the above suggest that Bank financing o f recurrent costs per se would not have an adverse impact on the country's fiscal and debt sustainability. Financing some recurrent costs in the short to medium term could even have a stimulating effect on the economy and thus contribute to increase the Government's capacity to support larger recurrent costs in the future. Nonetheless, it i s very important that the Bank continues to monitor the fiscal adjustment programs (working closely with the IMF) and public expenditure management and public sector reforms to ensure that recurrent cost financing i s embedded in a credible and sustainable government macroeconomic strategy. The Bank will also carry out general and sector specific Public Expenditure Reviews, where issues o f sustainability will be identified. 5. No country-level limit on recurrent cost financing i s proposed. Recurrent costs may be financed as needed in individual projects, subject to project or program-level assessment. In determining Bank financing o f recurrent costs in individual projects, the Bank will take into account sustainability issues at the sector and project levels, including a consideration o f implied future budgetary outlays. It had been expedient in the recent past to finance the salaries o f senior or skilled Government officials, nominally treated as consultants, in order to attract them into the system. At the request o f the Ministry o f Finance, in order to ensure sustainability, especially for capacity building, projects that include financing for local staff costs will need to be accompanied by explicit agreement All Bank financing expected at the time of the DSA was taken into account in the fiscal and debt analysis. The recurrent and development budgets are notpresently conceived and reported inan integratedfashion, reflecting the current capacity constraints within Government. This i s being addressed as a medium-term issue in the public expenditure management reforms. 66 that Government will assume the cost o f permanent positions after the Bank contribution to the Project i s completed. Local costfinancing 6. The criteria required for Bank financing of local costs are met. First, the financing requirements for Sierra Leone's development program through 2009 considerably exceed the public sector's own resources from taxation and other sources even when PRSP implementation i s constrained to priority programs (refer CAS para. 17 and Table 3). Second, the financing o f foreign expenditures alone would not enable the Bank to assist in the financing o f individual projects. Infact, the Bank has already been financing a significant amount o f local costs in Sierra Leone: these accounted for 49 percent, 60 percent and 79 percent o f disbursements for investment projects in FY02, FY03 and FY04 respectively. This trend i s expected to continue with the Projects that are expected to enter the portfolio, many o f which have a high element o f local expenditure, including those in the social sector and infrastructure sectors. The Bank may finance local costs inany proportions required by individual projects. Taxes and duties 7. Taxes and duties are considered reasonable. The Sierra Leonean tax system does not yet include a value-added tax, though implementation o f the VAT could begin as early as 2007. Firms, local or foreign, are subject to an overall company profit tax rate o f 35 percent. Sierra Leonean nationals are subject to employment income tax rates between 20 percent and 35 percent, depending on the level o f income. Under the ECOWAS Common External Tariff adopted in January 2005, the four tariff bands carry rates o f 0, 5, 10 and 20 percent with a mean o f approximately 13 percent. There i s a diamond export tax o f 3 percent. The tax rates attracted by World Bank funded projects are no higher than the generally applicable ones. There are no taxes and duties that are unreasonable and therefore the Bank may finance all taxes and duties associated with project expenditures. The application o f this general approach will be subject to an ongoing monitoring o f tax policy and how taxes are applied to IDA projects. At the project-level, the Bank would consider whether taxes and duties constitute an excessively highshare o fprojects costs. 67 The country financingparameters for the Republic of Sierra Leone (RSL) are set out below. These parameters will be reviewed on approximately bi-annual basis, and when the next IDAassistancestrategyis prepared. Item RemarWExplanation Cost sharing. Limiton the proportion ofindividual 100% f i e Bank will seek Govemment counterpart funding and project costs that IDA may finance. will promote harmonization through seeking cofinancingin 111 projects. Nonetheless there may be projects in which the Bank may finance up to 100 percent of project costs. Financing at this level will be applied after a selective and :ase-by-case review ofjustification. Typically, projects Zxecuted by Government entities with own sources of income (e.g. ports or power) are expected to include Zounterpart funding contributions. Some projects that may be financed up to 100 percent include those that support social sector development, governance, and capacity building. Any limitsthat would apply to the overall No country IDA, working closely with the IMF,would monitor the amount of recurrent expenditures that level limit. fiscal adjustmentprogram, and public expenditure IDA may finance. managementand public sector reforms to ensure that recurrent cost financing is embedded in a credible and sustainable govemment macroeconomic strategy. In determining IDA financing of recurrent costs in individual projects, IDA will take into account sustainability issues at the sector and project levels, including a consideration of implied future budgetary outlays. Inorder to ensure sustainability, especially for capacity building, projects that include financing for staff costs will need to be accompanied by explicit agreement that Government will assume the cost o f permanent positions after the Bank contribution to the Project is completed. Local costjinancirig. Are the requirementsfor IDA financing Yes The two requirementsare met IDA may finance local costs of local expendituresmet, namely that: in the proportions needed in individual projects. (I) financing requirementsfor the country's development program would exceed the public sector's own resources (e.g., from taxation and other revenues) and expected domestic borrowing; and (ii)the financingofforeign expenditures alone would not enable IDA to adequatelyassist in the financing of individual projects? Taxes and duties. Are there any taxes and dutiesthat the None Taxes and duties are consideredreasonable. The applicatior IDA would not finance? of this general approachwill be subject to an ongoing monitoring oftax policy and how taxes are applied to IDA projects. At the Project-level, IDA would consider whether taxes and duties constitute an excessively high share of projects costs. 68 CAS ANNEXES Annex 6 Sierra Leone at a dance 4/27/05 Sub- POVERTY and SOCIAL Sierra Saharan Low- Leone Africa income 1 Developmentdiamond. 2004 Population, mid-year (millions) 5 4 703 2,310 Life expectancy GNI per capita (Atlas method, US$) 200 490 450 GNi (Atlas method, US$ billions) 1 1 347 1,038 - Average annual growth, 1998-04 II Population (%) 2 0 2 3 1 9 , I Labor force (%) 2 3 2 4 2 3 GNi ~ Gross per primary Most recent estimate (latest year available, 1998-94) capita enrollment ~ Poverty (% of population below nationalpoverty line) 70 Urban population (% of total population) 39 36 30 Life expectancyat birth (years) 39 46 65 I Infant mortality (per 1.000live births) 146 103 82 Child malnutrition (% of children under 5) 44 Access to improved water source Access to an improved water source (% ofpopulation) 28 58 75 illiteracy (% ofpopulation age 15+) 35 39 Gross primary enrollment (% of school-age population) 87 92 I *--* - Sierra Leone Male 94 99 I -Low-incomegroup Female 80 85 KEY ECONOMIC RATIOS and LONG-TERMTRENDS ** 1984 1994 2003 2004 I Economic ratios' GDP (US$ billionsj 1.09 0 99 0 99 108 Gross domestic investmentiGDP 12.7 7 8 14 3 19 6 Exportsof goods and sewices/GDP 10.6 27 1 19 9 22 9 Trade Gross domestic savingsiGDP 10.9 11 3 -7 0 2 8 T Gross national savingsiGDP 9.7 2 5 6 7 14 7 Current account balanceiGDP -4.7 -5 3 -7 6 -4 9 Interest paymentsiGDP 0.5 2 0 1 8 1 6 Total debVGDP 56.6 150 2 162 9 144 7 Total debt sewiceiexports 24.8 59 4 46 6 36 0 Present value of debtiGDP Present value of debtiexports Indebtedness 1984-94 1994-04 2003 2004 2004-08 (averageannual growth) GDP -39 3 0 9 3 7 4 6 8 I Sierra Leone GDP per capita -6 1 0 9 7 0 5 2 4 7 Low-Income group I Exportsof goods and sewices -0 6 STRUCTURE of the ECONOMY 1984 1994 2003 2004 i Growthof investment and GDP (Oh) (% of GDP) I Agriculture 620 377 Industry 189 255 Manufacturing 6 0 5 5 Sewices 19 1 368 Private consumption 821 785 91 4 883 I -10 General government consumption 6 9 102 156 132 Imports of goods and sewices 124 235 412 391 * b "GDi *GDP 1984-94 Igg4-O4 2003 2004L, Growthof exports and Imports (Oh) (averageannual real growth) Agriculture -4.0 Industry 5.8 I Manufacturing Sewices -4.0 Private consumption -4.8 7.6 8.14.8 -7.65.3 General governmentconsumption -3.2 0 99 00 01 02 03 04 Gross domestic investment 53.9 Importsof goods and services 0.8 Note: 2004 data are preliminaly estimates. Group data are for 2003. *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. ** GDP shares prior to 2001 are not comparable to shares thereaffer due to a structural data break. 69 Sierra Leone PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Domestic prices I Inflation ( O h ) 1 (% change) 40- Consumer prices 66 7 24 2 7 5 14 2 Implicit GDP deflator 36 2 8 3 15 9 Government finance (% of GDP, includes current grants) Current revenue 11 8 20 1 21 3 Current budget balance -1 7 -2 0 1 1 I Overall surpiusldeficit -5 5 GDPdeflator -6-CPI -6 8 -3 5 TRADE 1984 1994 2003 2004 (US$ millions) Export and import levels (US$ mill.) Total exports (fob) 126 6 194 1 138 0 174 5 Diamonds (incl. unrecorded exports) 126 2 158 3 I350 T Other 11 9 16 1 Total imports (cif) Food Fuel and energy ! Capital goods Export price Index (1995=100) 98 99 00 01 02 03 04 Import price index (1995=100) mu Exports 0 Imports Terms oftrade (1995=700) BALANCE of PAYMENTS 1984 1994 2003 2004 (US$ millions) ~Current account balance to GDP (%) Exports of goods and services 177 3 269 1 197 3 246 3 Importsof goods and services 215 2 233 9 408 3 420 6 Resource balance -37 9 35 2 -211 1 -174 3 Net income -29 8 .1136 -27 1 -27 6 Net current transfers 16 7 25 5 163 0 150 7 8 10 Current account balance -51 0 -52 9 -75 1 -51 2 12 14 Financing items (net) 25 0 52 4 64 9 98 6 16 Changes in net reserves 25 9 0 5 10 2 -47 4 1-16 Memo: Reserves including gold (US$ mil/ions) 7 7 40 6 59 4 124 9 Conversion rate IDEC, /oca//USS) 2 51 586 7 2 348 2 691 EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 (US$ millionsl Composition of 2004 debt (US$ mill.) Total debt outstanding and disbursed 616 1492 1612 1556 IBRD 8 3 0 0 IDA 47 186 584 534 F 6G 30 Total debt service due (before relief) 44 160 95 92 IBRD 2 0 0 0 IDA 0 2 8 10 Composition of net resource flows Official grants 21 72 83 101 Ofkial creditors 10 47 25 -10 Private creditors -3 0 87 100 Foreign direct investment -4 -3 21 13 Portfolio equity 0 0 0 0 World Bank program Commitments 21 0 105 60 A - IBRD E Bilateral Disbursements 6 38 27 38 B IDA D Other multilateral - -- G- Short-term F Private Principal repayments 1 1 5 7 C IMF -- Net flows 5 37 22 31 Interest payments 1 1 3 3 Net transfers 4 35 19 28 Development Economics, IMF and staff estimates. 4/27/05 70 CASAnnex B2 Sierra Leone - Selected Indicators*of BankPortfolioPerformanceand Management As Of Date03/23/2005 Indicator 2002 2003 2004 2005 PortfolioAssessment Number of Projects Under Implementationa 7 7 7 6 Average ImplementationPeriod (years) 3.5 1.7 2.2 1.8 Percent of ProblemProjects by Number a, 0.0 0.0 14.3 0.0 Percent of ProblemProjectsbyAmount 0.0 0.0 19.4 0.0 Percent of Projectsat Risk by Number a, 14.3 14.3 57.1 16.7 Percent of Projectsat Risk byAmount a, 8.1 22.1 63.8 16.7 DisbursementRatio (%) e 61.7 38.4 11.8 17.9 Portfolio Management CPPRduringthe year (yesho) no no no no Supervision Resources (total US$) 867.5 909.9 1191.9 1317 Average Supervision(US$/project) 123.9 129.9 132.4 146.3 Memorandum Item Since FY80 Last Five FYs Proj Eva1by OED by Number 23 10 Proj Eva1by OED byAmt (US$ millions) 465.5 267.3 9'0 of OED ProjectsRated U or HU by Number 52.2 40.0 % of OED ProjectsRated Uor HU byAmt 48.6 39.9 a. As shown inthe Annual Report on PortfolioPerformance(except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projectsrated Uor HUon development objectives (DO) and/or implementationprogress(IP). d. As defined under the PortfolioImprovement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolioat the beginning of the year: Investment projectsonly. * All indicatorsare for projectsactive in the Portfolio,with the exception of Disbursement Ratio, which includes all active projectsas well as projectswhich exitedduring the fiscal year. 71 CAS Annex B3 IBRDllDA Program Summary - Sierra Leone As Of Date 03/23/2005 Proposed IBRDllDA Base-Case Lending Program Fiscal vear Proi ID U W M ) 2005 SL Power and Water 35.0 SL Bumbuna Support SIL 14.5 SL ERRG 4 15.0 SL Urban Water Supplemental 3.5 Result 68.0 2006 SL IDP Transport 43.0 Result 43.0 2007 SL Development Policy Support 10.0 SL Rural & Private Sector Development 28.0 SL Mining Sector TA Project 5.0 Result 43.0 2008 SL Development Policy Support 10.0 SL Health/Education Project 33.0 Result 43.0 2009 SL Development Policy Support 10.0 SL Infrastructure Development 20.0 SL Public Sector/Capacity 13.0 Result 43.0 Overall Result FY06 FYO9 - 172.0 72 CAS Annex B4 -Summary of Nonlending Services Sierra Leone As Of Date 03/23/2005 Product Completion FY Recent completions Strategic Options for Public Sector Reform FY03 Microfinance Study FY03 Tapping Mineral Wealth for Human Progress FY03 LegaVJudicial Assessment FY03 Public Expenditure Review FY04 CPAR Issues FY04 Agriculture Sector Review FY05 Underway Country Gender Assessment FY05 Education Country Status Report (CSR) FY06 Planned CEM/Poverty Assessment FY06 PRSP Monitoring FY06 Social Accountability Study FY06 FSAP FY06 PSlA (Power & Mining) FY07 PFM Performance Report FY07 PRSP Monitoring FY07 PER FY07 Labor Market and Youth Study FY07 Integrated Framework FY07 Health Sector Review FY07 Social Assistance Scheme FY08 PRSP Monitoring FY08 Decentralization Impact Study FY08 CEM/Poverty Assessment FY08 Investment Climate Assessment FY08 PRSP Monitoring fy09 CAS Impact Evaluation fy09 PFM Performance Report fy09 SME Review fy09 PER fy09 a. Government, donor, Bank, public dissemination. b. Knowledge generation, public debate, problem-solving. 73 I. CASAnnexB5:SierraLeoneSocialIndicators Same regiodincome Latest single year group Sub-Saharan Low- 1970-75 1980-85 1997-2003 Africa income POPULATION Total population, mid-year (millions) 2.9 3.6 5.3 702.6 2,310.3 Growth rate (% annual average for period) 2.0 2.0 2.0 2.3 I.9 Urban population (% of population) 21 4 26.9 38.8 36 I 30.3 Total fertility rate (births per woman) 6.5 6.5 5.6 5.1 3.7 POVERTY I%ofpoptiintion) National headcount index Urban headcount index Rural headcount index INCOME GNIper capita (US$) 280 260 150 490 450 Consumer price index (1995=100) 0 1 271 Food price index (1995=100) INCOME/CONSUMPTION DISTRIBUTION Gini index Lowest quintile(% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) 2.6 2.5 1.2 Education (% of GDP) 3.1 2.6 1.o 3.4 2.7 Social security and welfare (% of GDP) Net primary school enrollment rate M ofnge groicpJ Total 78 Male 84 Female 72 Access to an improvedwater source (% ofpopulation) Total 57 58 75 Urban 75 83 90 Rural 46 45 69 Immunization rate (YOofchildren ages 12-23 months) Measles 60 58 64 DPT 50 54 64 Child malnutrition (% under 5 years) 28 27 44 Lifeexpectancyat birth ('ears) Total 35 36 37 46 58 Male 34 35 36 45 57 74 Female 37 38 39 47 59 Mortality Infant (per 1,000 live births) 206 192 165 103 82 Under 5 (per 1,000 live births) 363 336 284 174 126 Adult (15-59) Male (per 1,000 population) 552 540 587 519 319 Female (per 1,000 population) 534 527 53 1 461 268 Maternal (modeled, per 100,000 live births) 2,000 Births attended by skilled health staff (YO) 42 38 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization:refers to children ages 12-23 months who received vaccinations before one year of age. World Development Indicators databaseAugust 2004, World Bank 75 C A S Annex B6: Sierra Leone Key Economic Indicators - National accounts (as YOof GDP) Gross domestic producta 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Agriculture Industry Services Total Consumption 107.0 . 97.2 96.4 92.7 91.4 89.8 88 8 Gross domestic fixed investment 14.3 19.6 20.7 21.0 21.1 21.1 21.2 Government investment 4.8 8.8 7.4 8.0 8.1 8.1 8.4 Private investment 9.4 10.8 13.3 13.1 13.0 12.9 12.9 Exports (GNFS)b 19.9 22.9 24.9 29.0 30.5 31.7 31.7 Imports (GNFS) 41.3 39.1 42.4 43.1 43.3 42.9 42.0 Gross domestic savings -7.0 2.8 3.6 7.3 8.6 10.2 11.2 Gross national savings' 6.7 14.7 12.7 14.8 16.3 17.0 17.6 Memorandum items Gross domesticproduct (US$million at current prices) 990 1,075 1,136 1,234 1,336 1,441 1,557 -7.6 -4.8 GNI per capita(USS, Atlas method) 190 200 210 210 220 240 250 Real annual growth rates (%, calculated from 1990prices) Gross domestic product at market prices 9.3 7.4 7.5 7.1 6.5 6.0 6.0 Gross Domestic Income 9.7 7.5 7.4 7.0 6.9 6.2 6.1 Real annual per capita growth rates (%, calculated from 1990 prices) Gross domestic product at market prices 7.0 5.2 5.3 4.9 4.3 3.8 3.9 Total consumption 2.0 -3.1 3.4 0.8 2.2 2.0 2.3 Private consumption 0,il 3 2 0.- -0.8 I..? -0.1 -0 h Balance of Payments(US$ millions) Exports (GNFS)b 197.3 246.3 283.0 357.8 408.1 457.5 493.2 MerchandiseFOB 146.3 171.8 203.6 272.4 313.7 354.2 380.0 Imports(GNFS)~ 408.3 420.6 481.9 531.7 579.1 618.9 654.2 MerchandiseFOB 294.8 266.2 312.9 351.5 385.5 412.6 432.4 Resourcebalance 211.1 174.3 -199.0 173.9 171.1 161.4 161.0 Net Factor Service Income -27.0 -27.6 -30.3 -33.7 -31.7 -32.3 -33.2 Net current transfers 163.0 150.7 136.3 129.5 136.3 133.0 135.0 Current account balance -75.1 -51.2 -93.0 -78.1 -66.5 -60.6 -59.2 Net private foreign direct investment 21.0 12.5 27.2 7.2 2.2 2.2 4.6 Long-termloans (net) 2.1 73.8 -13.7 -8.4 6.1 -5.4 -11.4 Official 10.8 43.2 1.3 9.6 6.1 0.6 -0.4 Private (includes Commercial Banks) -8.7 30.6 -15.0 -18.0 0.0 -6.0 -11.0 Other capital (net, includes errors & ommissions) 41.8 12.2 64.9 104.1 94.8 109.5 115.5 76 Change inreservesd 10.2 -47.4 14.6 -24.7 -36.1 -45.6 -49.6 Memorandum items Resource balance (% of GDP) -21.3 -16.2 17.5 -14.1 -12.8 - 1 1.2 -10.3 Real annual growth rates ( YR90 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF) Public finance (as YOof GDP at market prices)e Current revenues and grants 20.2 21.3 22.4 21.9 23.1 23.1 23.6 Current expenditures 22.1 20.2 18.5 17.7 17.2 17.0 16.9 Current account surplus (f) or deficit (-) -1.9 1.1 3.8 4.2 5.9 6.1 6.7 Capital expenditure 4.9 4.6 7.9 8.2 8.1 8.1 8.4 Overall fiscal balance -6.7 -3.5 -4.0 -4.0 -2.2 -2.0 -1.7 Foreign financing (including relief and change in arrears) 2.9 3.8 3.2 3.7 3.1 2.5 2.3 Monetary indicators M2iGDP 20.2 19.3 18.7 18.7 18.7 19.1 19.5 Growth of M 2 (%) 23.9 19.2 11.8 13.4 11.7 12.8 12.0 Private sector credit growth / total credit growth (%) 38.4 435.9 74.6 88.2 123.5 111.4 117.4 Price indices Real exchange rate (YR90=100, USULe)' 91.0 87.1 Real interest rates 11.8 12.0 9.2 9.3 9.5 9.6 9.6 Consumer price index (% change) 7.5 14.2 8.5 7.4 5.7 4.7 4.0 GDP deflator (% change) 8.2 16.0 1.6 5.8 4.7 3.9 3.4 a. Sector shares are based on GDP at factor cost. All other shares use GDP at market prices b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use o f IMF resources. e. Consolidated central govemment. f. "Le" denotes "Leones." An increaseinUS$/Le denotes appreciation. 77 C A S Annex B7: Sierra Leone Key Exposure Indicators - Indicators Estimate Projected 2003 2004 2005 2006 2007 2008 2009 Total debt outstanding and disburseda(TDO) inUS$m 1611.9 1555.8 1529.2 1502.9 1464.5 1411.8 1348.9 Net disbursements (US$m)a -4.2 61.3 14.1 4.9 -10.5 -25.0 -30.0 Total debt service (TDS) (US$m)a, before debt relief 94.9 91.6 83.2 66.9 77.3 85.9 90.7 after debt relief 14.3 24.5 27.1 7.3 11.6 20.8 24.7 Debt and debt service indicators (%) TDO/XGS~,~ 701.0 612.1 525.3 410.4 351.4 302.9 203 s TDOiGDP 162.9 144.7 134.6 121.8 109.6 98.0 86.6 TDSIXGS~,~ before debt relief 46.6 36.0 28.6 18.3 18.5 1S.4 18.1 after debt relief 7.0 9.0 9.3 2.0 2.8 4.5 4.0 IBRDexposure indicators (%) IBRDDSipublic DS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Preferred creditor DSipublic D S (%)d 56.2 44.5 32.0 34.2 35.0 35.0 35.0 IBRDDSiXGS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 IBRDTDO (US$m)e 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Share o f IBRDportfolio (%) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 IDA TDO (US$m)e 583.8 534.3 509.2 IFC (USSm) Loans 0.0 0.0 Equity and quasi-equity' 0.0 0.0 MIGA MIGA guarantees (USJm) 0.0 0.0 a. Includes public and publicly guaranteed debt, private nonguaranteed, use o f IMF credits and net short- term capital. Data are from World Bank Debtor Reporting System. b.FromIMF. c. "XGS" denotes exports o f goods and services, including workers' remittances. d. Preferred creditors are defined as IBRD,IDA, the regional multilateral development banks, the IMF,and the Bank for International Settlements. e. Includes present value o f guarantees. f. Includes equity and quasi-equity types o fbothloan and equity instruments. 78 u m m m v m 3 0 0 0 0 0 3 0 0 0 0 0 U N " " MAP SECTION