Document of

The World Dank

Report No: 1CROOOOJ709

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-4642)

ONA

PUBLIC FINANCE SUPPORT CREDIT

fN THE AMOUNT OF SDR 40.4 MJLLlON (US$60.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF SENEGAL

FORA

PUBLIC fiNANCE SUPPORT CREDIT

September 8, 20 I 0

Poverty Reduction and Economic Management 4 Country Management Unit AFCf I Africa Region

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AAP ACAB

AFD AIDB AGS ARMP

BCEAO

BOAD CAS CFAA COM CPAR CY DPC DPO FCFA FDI FDD

FECL FERA GOP GEF GPOBA GTZ HFRP IIIPC lAS JCS IDA lOB

CURRENCY EQUIVALENTS

(Exchange Rate Effective 5/18/08)

Currency Unit US$1.00 ==

FCFA CFAf 425.1

FISCAL YEAR (January I -December 3 I)

ABBREVIATIONS AND ACRONYMS

Africa Action Plan Accord Cadre pour les Appuis Budgetaires (Arrangement framework for budget support)

Agence Fran9aise de Developpemenl (French Developmenl Agency) African Development Bank Accelerated Growth Strategy Agence de Regulation des Marches Publics (New Procurement Regulating Agency)

Banque Centrale des Etats de /'Afrique de ! 'Ouest (Central Bank of West African States) Banque Ouest Africaine de Developpement (West African Development Bank) Counlry Assistance Strategy Country Financial Assessment Council ofMinisters Country Procurement Assessment Review Calendar Year Development Policy Credit Development Policy Operation r.ranc CFA Foreign Investment Direct Fonds de Dofation de Ia Decentralisation (Endowment Fund for D ecc n tra I i za ti on) Fonds d 'Equipement des Col/ectivites Locales (Local Equipment Fund) Fonds d'Enrretien Ro11tier A utonome (Autonomous Road Maintenance Fund) Gross Domestic Product Global Environment Facility Global Partnership on Output-Based Aid Gesellschaft fur Technische Zusammenarbeit (German Technical Cooperatjon) Hospital Financial Recove1y Plans Heavily fndcbted Poor Countries Initiative International Accounting Standards Industries Chimiques clu Senegal (Senegal Chemical Jndustries) Jntemational Development Association lslamic Development Bank

IFC rFRS IMF KFW LOP MOO MDRI MEF MOU NSBD OHADA PEFA PFM PHRD PFSC PNDL ppp PROGEDE PRS PRSC PRSP SAl SENELEC SIGFIP TA WAEMU WBG

International Finance Corporation Intemational Financial Reporting Standards International Monetary Fund Kreditanstalt fur Wiederautban (German Reconstruction Credit l.nstitute) Letter of Development Policy Millenium Development Goals Multilateral Debt Relief Initiative Ministry of Economy and Finance Memorandum of Understanding National Standard Bidding Documents Organization for the Harmonization of Business Laws in Africa Public Expenditure and Financial Accountability Public Finance Management Japan Policy and Human Resources Development Trust Fund Public Finance Support Credit National Program for Local Development Pub] ic-Private Partnership Sustainable and Participatory Energy Management Project Poverty Reduction Strategy Poverty Reduction Support Credit Poverty Reduction Strategy Paper Cour des Comptes (Supreme Audit lnstitution) Societe Nationale d 'Eiectricite (National Power Utility of Senegal) Computerized Budget Management System Technical Assistance West African Economic and Monetary Union World Bank Group

Vice President: Obiagcli K. Ezekwesili (AFRVP) Sector Director: Habib Fetini (AFCF I) Sector Manager: Miria Pigato (AFTP4)

Task Team Leader(s): Alain D' Hoore and Mamadou Ndiooe (AFTP4) JCR team Leader Yves Duvivier

ii

SENEGAL IMPLEMENTATION COMPLETION AND RESULTS REPORT ON A PUBLIC

FINANCE SUPPORT CREDIT CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Program Performance in ISRs H. Restructuring

I. Pr:ogram Context, Development Objectives and Design ...... .. ..... .. ...... ....... .. ...... ...... .. ...... .... ..... I 2. Key Factors Affecting Implementation and Outcomes .......... ...... ............................................. 5 3. Assesstnent of Outcomes .. .............. .. ..... .. ...... ....... .. ....... ....... ..... .. ...... .. ..... .. ..... .. ..... .. ...... .. .... . \ 4 4. Assessment of Risk to Development Outcome .......... .. ............ ... ................ .. ....... .... .... .. .... .. ... 17 5. Assessment of Bank and Bon·o•ver Performance .................................................................... 17 6. Lessons Learned ... .... ... .... .... ... ... .... .... ... .... .... ....... ... .... ... .... ... ..... .. ..... .. ...... .. .... ... ..... .. ............. 19 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ................. ..... .... . 20

Annex I: Bank Lending and Tmplementation Support/Supervision Processes ................ 21 Annex 2: Beneficiary Survey Results .......... ... .... .... ... ... ... ... ..... ......... ... ............................. 22 Annex 3: Stakeholder Workshop Report and Results .. .... ... .... .... ... .... ... ... ... .... .... .. ..... .. ..... 23 Annex 4: Summary of Borrower' s ICR and/or Comments on Draft fCR ........................ 24 Annex 5: Comments of Co financiers and Other Partners/Stakeholders ........................... 29 Annex 6: List of Support ing Documents ...... ..... ... .... ... .... .. ..... ... ....... .... ....... ... ... .... ... .... .... 30 Annex 7: Government's Policy Matrix and Outcome Indicators ..................................... 31

MAP

iii

A. Basic Information

! I r- iSN- DPO-Public !Senegal rogram Name: .Financial Support

_ ~ __ __ __ . !cr~dit ---1

r---=-·------~~-1_0?28_8_ ---· jLIC/TFNumber(s): IIDA-464_20 ____ j ·--·-- ···----· --· j~~~/20 l.Q_ ____ , _____ _!~R T~p-~ : ____ _jCore ICR

1

. I I GOVERNMENT OF ~endm: Instrument: IDPL -··-----~~orrow~~: !sENEG_AL ____ _

!original Total 1 i [ · ~t?rnit~ent: _!D~~-0.4M _____ fi~~urs~d Am-~-unt: __ t~~ 40.~~--- ---··-4

.Revised J\mount: _ j~~ 40..:.4M j__ _ ____ _,_I ______ _

1Implementing Agencies: ' Ministry of Economy and Finance ,_ -··-- - - --- -- ------------------~ !cofinanciers and Other External Partners:

'B. Key Dates

07/30/2009

1 P rocess Date Process

I Con~-~-.,t~evie'":::_l_ Q:li~~(~Q_09 ·-jEffectiven~s~_: ... Or iginal Date

Revised I Actual Date(s)

07/30/2009

I

~

I ' Appraisal : t Restructuring(s): i -- --- ---- -- -i ----·-··--··--~pproval: . ~-.61291209_9 _ Mid-tenn Revie~.:_ l _ _ ___ _ __ ·-·-------- _____ -·--·---·- _f_los~ng: _ __ I 03/_3_11_2_0_10_~_0_3_/3_1_12_0_10_

-----·-·----~

C. Ratings Summary ~c.l Performance Rating by ICR

lsatisfactory --------------4

~ Outcom_e_s_: __ _

1 Risk to Development Outcome:

i BankPerl-ormanc~ : --

;Moderate __ , ;

Satisfactory r -- ---- ~

i ~?~?~ .. e~. Peiio~_an._~_:·--···---·---····-----_!_~~-tis~act~~-y ------------------- ~

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower

Quality at Entry: I Satisfactory ,Government:_ i I :Implementing -·T

Quality of Supervision_: __ Satisfactory iAge~~yj~g~cies:

Overall Bank Satisfactory !~~r_f~rlll~l!~~=--····- -·· -·· _ _ _ _ .

'overall Borrower ,Performance:

Ratings Not Applicable I

- -·· .. . .. ·-····-·· .. ····- ·-·-·]··· Not Applicable

Satisfactory j -- - ·-··- ·-····· -·

~3 Quality at Entry and Implementatio!_l ~erform~_nce_!_!ldic_a_to_r_s _ _____ _

Implementation Indicators QAG Assessments Performance (if any) Rating:

Potential Problem 1 J --

Program at any time o one t !Quality at Entry

,()'es/No): ___ -··· j(QEA): ----1-----------'

lProblem Program at any IN !Quality of j o . None

~..i~e (Yes/No): --......._,.....-- )Supervision (9SA-'-)_: -+----

1 DO rating before 1

i ---- ·-'

I $atisfactory l9?sing/Inactive_stat_u_s:_.._! __________ _,__ _______ __L -------------'

D. Sector and Theme Codes

f

Original

,Sector Code (as% of to_tal Bank_fi_ma __ nci_n_g)___ __ __ _ 1 i r Central government adJEinistr~tion __ -_-_-_-_-__ -·· !_-_-- 60-·--·-r=- -6-0-----l

lF orestry -----.,. 1100 _ _J___ 1100 ~~~lth ------~~----

: Roads and highways I J 0 I I 0

~b-na~on~l-~o~~:_~t administration ____ }_Q _____ · _ .. __ IQ___j I

15

10

15

!Theme Code (as% of total Bank financing) .

loe;ntr~lization- ----] 15

~;:;::::::~i:ii~~ri;:~ ~;~or dev~l;-:ent - ~ --; ~ I 10

I -; I

50 .... ---.1._. ____

I Other public ; ector go~m~nce - --- r 10 ~ Public-;;;;nctit~~.-fi~~nci~J m~nagement and ·----;~----5-0----+----:Erocurement

E. Bank Staff Positions At JCR At Approval

J9blageli Katryn Ezekwesili ;obiageli Katryn Ezekwesili I Vice President:

[S:_?~nt'1: pJ.r~!or:_ I Sector Man~ger:

!Habib M. Fetini Habib M. Fetini . ... - - - --·----·- r·~_:':v ·~--- -------· _____ .. ....., 1Miri~~- Pigato _ -------~~~ss~---

f2ogram Team !:eader:

! ICR Team Leader:

iA!ain W. D'Hoore !Alain W. D'Hoore --- _....._ ---------i I !Yves A Duvivier

r·- --

~R Primary Author: .. J vves ~.:_!?l!_~ivier ____ _ _) __

ii

F. Results Framework Analysis

Program Development Objectives (from Project Appraisal Document) Support the Authorities efforts to bring the fiscal stance to a sound and sustainable track, mitigate fiscal risks emanating from public sector entities, and protect critical developmental objectives at a time when the Authorities must maintain a tight fiscal policy and cope with the impact of the global crisis.

Revised Program Development Objectives (if any, as approved by original approving authority) None

(a) PDO lndicator(s)

Original Target Formally Actual Value Va lues (from Revised Achieved at

approval Target Completion or Indicator Baseline Va lue

documents) Values Target Years :Amount of budget carry-overs (reports de credit) from previous years (in% of I

Indicator 1: _ total budget); j

'-'

Value ,!3.8 Jl (quantitative or 10.7 5 'Qualitativ_~L... ... ... .. __ .... Date achieved 12/31/2008 03/31 /20 I 0 ·:o3/3lf201 0

~~ I ;(incl.% 1

~~~hi~v~ment) -·· -< ....... . .. _ _ ___ .. __ ·-· · ·-- ........ __ _ ___ _ ____ -- · - ... _ ..... - ..... ..... - ........... ___ .. 1 =

1 d' t

2. !Time to produce monthly Public Accounts Statements (Balances du Tresor), in

n tea or . ; h .c II . 1 . d 1 ~t s 10 owmg_ re evant peno ; __ ~ -1 Value f

~~=~~:~i~~~.or-·Severa~ :ont~s ··· __ __ ts_~~.~~ ...... _. ___ ..... ... L .......... .... _ ..... -.. .. -~.0-~:~_s _ ... _I Date achieved 12/31/2008 03/3 ~20 I 0 ___ ____ 03!31120 I 0 _ --J .Comments (incl.% I ~chievement) __ _ ... .. .. ___ .. _ .... - -... -........ ___ ....... - ... - ....... _ .. ___ j Indicator:_3~ ____ Time _!~publish monthly Budget Execution reports; ___ .. _ ........ ____ __j

Value !(quantitative or ;Qualitative) :Oate achieved r---- ··~--

Comments (incl.% achieveEl-~!19 _ Indicator 4: Value

More than 6 months 60 days One week

12/3112008 03/31120 10 - - ........... ,_ .. ___ ,

03/3ll20 1 0 ! ·~--- ~

(quantitative or More than 3 years LQua~.ita~iy~)-· .. --.. - .. _ .. _ ,_ .. _ .. __ ..

Less than 2 years ' Less than 2 years _ , __ _ .. .......... _,....!

iii

Date achieved ·-Comments (incl.% achievement)

Indicator 5:

Value

03/31/201_0 __ -i] 12/31/2008 .03/31120 10 --'--------

·-Number of quarterly agency budget execution reports submitted to MEF under new ~<:_"Y_; _ _ __ _

(quantitative or None Qualitative)

2 for at least I 0 agencies

5 agencies

.Date achieved 'cornme~ts (incl.% achievement)

Indicator 6:

Value (quantitative or Qualitative) Date achieved

,Comments (incl.%

.~chi~~-~~~nt)

Indicator 7:

Value (quantitative or Qu~-i~!ive) Date achieved -Comments (incl.%

:achiev~~~n_tL Indicator 8: Value (quantitative or Qual i~ativ~_

Date achieved Comments (incl.%

achi~~~-~~':1.!2 ... Indicator 9: Value

12/31/2008 03/31/2010 03/31/2010

----Number of hospital financial recovery plans (HFRP) prepared and approved by authorities;

None 20 20

.. 12/31/2008 03/31/20 I 0 03/31/2010

Usc by contracting authori ties of bidding templates consistent with national legislation an~ best-practice -···----··

At least 90 percent Uneven of contracting NA

authorities

12/31/2008 03/3 1/20 I 0 03/31/2010

-l

Tonnage of quotas issued allowing charcoal produ~~~n

I -··-··--j ---···-·1

74,000 tons

12/31 /2008

0 in first quarter of 2010

03/31 /2010

NA

03/31/2010

Proceeds from !oad user -~~arge transferred to !.'.~13:~ account

(quantitative or 0 Qualitative)

CF A F 17 billion CF A F 45 billion

Date achieved 12/3 I /2008 03/31 /2010 03/31/2010

Comments ( incl.% achievement) ~ -···-

IV

- -Indicator 10:

Time to transfer budget appropriation to decentralization funds (in number of

I mont~~)_ ·- ·-··- ··- __ ··· ··-·-·· _

12 3 Value (quantitative or Q~alitativ~)

Date achieved

Comments (incl.% ~~h~evement)

12/3 1/2008 03/3 1/20 I 0

(b) Intermediate Outcome lndicator(s)

Indicator Baseline Value

Indicator 1: N.A. Value (quantitative or N.A. Qualit~~i~~} ... Date achieved Comments (incl.% achievement)

12/31 /2008

Original Target Values (from

appro, a! documents)

12/3 1/2009

Form~tlly Re,ised

Target Values

G. Ratings of Program Performance in ISRs

No. Date lSR Archived

12/09/2009

H. Restructuring (if any) Not Applicable

DO IP

_ _§)atisfactory Satisfactory

v

1 I

Less than 3 months I

03/3 11201 0 J

Actual Value Achiend at

Completion or Target Years

Actual Disbursements (USD millions)

63.15

1. Program Context, Development Objectives and Design

1.1 Context at Appraisal

From the mid-90s unti I 2005, Senegal had one of the best economic performances in Sub-Saharan Africa. Real GOP grew annually at an average rate of about 5 percent and poverty decl ined rapidly 1

• The regional monetary arrangement- a cuJTency union, managed by the supranational Central Bank of the West African States- provided a framework of monetary and price stabi lity. On the fiscal pol icy front, the authorities have generally pursued a broadly stable track, enhancing revenue mobilization and maintaining control on current expenditures, while allowi ng for a gradual increase in capital and pro-poor spending. Senegal also benefitted from the HlPC initiative, reaching completion point in 2004, and from the MDRI in 2005.

Senegal has also benefitted from a broadly stable political climate. President Wade won his second term with the 2007 elections. The local elections of March 2009 saw the victory of opposition parties in several key urban centers. A new cabinet was nominated but key ministers, including the Min ister of economy and finance stayed. Still, the relative victory of the opposition suggested that policies and refo rms on which a broad consensus has not been forged could be more difficult to implement.

The authorities laid out their poverty reduction program first in the Poverty Reduction Strategy Paper (PRSP-1 ) for 2003-05. This PRSP aligned with the Millenium Development Goals (MDG) focused on: (i) wealth creation through economic reform and private sector development; (ii) capacity building and development of basic social services; and (ii i) improving living cond itions of vulnerable groups. The PRSP-2, covering 2006-201 0. was articulated around four pillars (of which the first three were consistent with those of PRSP-1 ): (i) wealth creation and pro-poor growth; (ii) improvi ng access to basic social services; (iii) protecting vulnerable groups against catastrophic exogenous shocks; and (iv) greater transparency and better governance combined with participatory processes. This fourth pillar was added to strengthen the effectiveness of public spending through efiicicnt budgetary procedures and control.

The Bank group provided support to both poverty reduction strategies (PRS) PRS-J and PRS-2 through a series of three one-tranche development policy operations (DPO) implemented over the 2004-07, PRSC I. TI and Ill. As set forth in the Bank' s 2003-2006 Country Assistance Strategy (CAS) for Senegal (Report No. 25498-SN). the PRSCs were seen as critical instruments to support the PRSP agenda. The reforms supported by these operations were to help Senegal implement its poverty reduction program by helping to: (i) to ma.Lntain economic growtb and improve living conditions for the Senegalese; (ii) enhance ownership and fu nctionality for the Government in policy planning and budget management, and thereby help the country achieve progress towards the MDGs; and (iii) promote coordination and collaboration within the Government and among donors. which would lead to a comprehensive approach to the delivery of basic social services. The PRSCs provided support to the Government in five priority areas.

1 The fraction of the population tbc poverty line declined from 68 percent in 1994/95 to 5 1 percent in 2005/06.

Two2 of those areas are to be highlighted with respect to the follow-up DPO - the Public Finance Support credit (PFSC) reviewed by this lmplementatjon Completion and Results Report (ICR): (i) strengthening budgetary and financial procedures and procurement processes and systems; and (ii) the decentralization process, by securing financiaJ transfers to local Governments, as well as disseminating and implementing the Poverty Reduction Strategy agenda at the local level. The ICR for the three PRSCs (Report No. ICR0000669) rated the overall outcome of each of tJ1ese operations as moderately satisfactory.

In 2006 and 2007. Senegal's GOP growth fell to respectively 2Y2 percent and 4% percent as a series of shocks buffeted the economy. First the run up in oil prices and the surge in food prices, weighing down on the economy, driving up inflation, and contributing to a widening of the external current account deficit. Second, problems of the parastatal power company, SENELEC resulting among other things in high costs and blackouts, poor rains leading to a fall of agricultural output and a sharp slowdown in activities and tinancial difticuJti es of the largest exporting ftrm, the phosphate mining and phosphoric acid production finn ICS. Still, performance remained strong in the construction and services sectors, particularly telecommunications, and investment expanded 3 fueled by a continued robust growth in remittances, a steady expansion of public works and foreign direct investment.

ln June 2007. the Bank's Board discussed the FY07-0 I 0 CAS for Senegal (Report No. 36608-SN). This CAS had three pillars: (i) accelerated growth/wealth creation; (ii) human development/shared growth; and (iii) rural and urban synergy. In order to address the challenge of weak governance in SenegaL it was also structured around a governance filter- aiming inter alia at: (i) improviJ)g transparency and efficiency in the usc of public resources; and (ii) increasing public sector accountabil ity. Its objectives follow Senegal's national priorities as set out in the PRSP-1 and 2. It did mention a number of downside risks for the medium term but did not foresee a context of external shocks and ri sks of the magnitude experienced in 2008-2009.

With the onset of the global recession, 2008 came out as an unusually stressful year for Senegal. GDP growth declined to 2 1.1:! percent and - while Senegal has long prided itself for strong macroeconomic management - fiscal performance turned out unusually weak. Budget slippages emerged early in the year, reflecting the interpl ay of external shocks and internal policy facto rs: the fiscal impact of exogenous shocks, difficulties in accessing financing. and weaknesses in fiscal policy and public fmancial management. Faced with a continued surge in o il and food prices the authori ties enacted early in the year unbudgeted tax cuts and subsidies equivalent to about I Y2 percent of GOP. The iJlitial fi scal policy response proved inadequate- attempts by the authorities to tighten commitment controls already by May could not rein in overall spending to a commensurate degree. At the same time, the Treasury faced growing cash constraints. Access to domestic tinancing through short- and medium-term paper issues in the local and regional money markets fell short of budget plans by a sign ificant margin4

• The fi scal slippages lead to an accumulation of unpaid bills by the Government to domestic suppliers equivalent to 3~ percent

2 The other three being: (i) health serv icl:$, with a focus on improving information, ftnancinl and human resources

management in the sector, as well a~ increasing access to basic health services; (ii) wealth creation: and (iii) irnproviog lh ing conditions of the most vulnerable groups.

3 From 24 percent of GOP in 2003 to 3 1 percent of GDP in 2007.

4 By about I Y1 percent of GDP, as 1 iquidi ty conditions in the~e markets tightened in early 2008 in the wake of

unusually high and early access by other countries in tJ1e zone.

2

of GDP by October 2008. Construction and commercial activity slowed sharply with the combined effect of substantial payment delays to suppliers and the negative impact of surging oil and food prices on the demand for domestic output.

A 2008 audit carried out by the Min istry of Economy and Fi nance (MEF) Inspectorate in the context of the Senegal' s program under the IMF's Policy Support Instrument (PS I) identified weaknesses in Publ ic Financial Management (PFM) which reflected part of the difficulty in controlling overall spending. lt exposed extra-budgetary expenditures - for a cumulative total of about 1\4 percent of GOP -carried out over 2006-08 mainly by Senegal's numerous autonomous agencies, and a frequent recourse to cash payments ("treasury advances'') under emergency procedures for non-emergency items. By the end 2008, in the context of the IM F-supported PSI program, the authorities adopted a plan of strong corrective actions. These included a cut in planned spendjng of about 2 percent of GOP and the elimination of fuel and food-related tax cuts and subsidies to stem the accumulation of further arrears and make room for their repayment, the presentation of a Supplemental Budget in which previous treasury advances were also regularized, and steps to elim inate the use of treasury advances in thei~r current form and narrow the scope for exceptional spending procedures strictly to genuine emergencies. The authorities also revised various budget plam1ing and execution procedures so as to strengthen control of spending envelopes.

With the completion of the PSJ program review5, the Government was able to secure financing

from various sources to effect a rapid repayment of domestic arrears. By end-December 2008, the Government managed to secure about % of the fu nds needed. f undi ng included substantial support from donors (counterpart funds of projects. budget support. and a large non-conccssional loan from France). This prompt domestic arrears clearance proved to be a key element of the policy response to the crisis. The stock of domestic arrears was reduced from 3% percent of GOP to less than % percent by the end of February 2009. The repayment of a large fraction of domestic arrears6 constituted a s ignificant injection of liquidity in the economy, contributing to strengthen private sector balance sheets, increasing bank liquidity and providing stimulus to the local economy and also helped restore the State's credibility.

By early 2009, as the country was striving to emerge from its 2008 fiscal problems, further effects of the growing st ress in the gl obal environment on Senegal bec-ame increasingly likely. Being a very open economy, Senegal' s exposure to the global crisis is significant - with major channels of transmission of the global economic recession to the Senegalese economy being exports, remittances. tourism and foreign direct investment. With the transmission of the global crisis being felt increasingly, the authorities had to revise their budget plans for 20097

. While revenues

5 TI1e fMF approved the second review of the PSI program at end-December 2008, plus drawings under its Exogenous

Shock Facility.

6 llowcver arrears from the autonomous public agencies, also about 3!. of GOP had not been rapid in fu [J as hudget

resources tightened early in 2009.

7 The original budget. prepared before evidence of the impact o ft he global crisis and a resulling domestic growth

slowdown began to emerge, assumed an unreali~tic GOP grow1h rate of 5Y:t percent. Jt envisaged an overall deficit (including grants) of 3 percent of GOP. wi th moderate growth in revenues and the suppression of fud and food substdics creating fiscal space in part for a resumplion nf capital spending, while lcaviJ1g room to finance the repayment of residual arrears carried over from 2008.

3

were expected to fall short of the budget's original targets by about lO percent, leaving overall spending targets unchanged and allowing a widening of the deficit appeared as a more desirable option by avoiding a contractionary s tance at a time when the economy could least afford it and when developmental goals were most vulnerable. A Supplemental Budget was prepared leaving original spending broadly intact, and targeting the fiscal deficit at 4Yz percent of GDP. The budget was to be ft.llly financed by additional recourse to domestic financing, and additional expected donor suppo11.

In this challenging context, in became clear that further actions were urgently needed to restore budget disci pline and avoid a recurrence of slippages by accelerating public financial management reforms, mi tigate fiscal risks emanating ti·om weak corporate governance of public sector entities and protect key developmental objectives as the authorities adopt corrective tiscaJ measures. The authorities thus undertook to engage in a core set of critical actions, complementary to the actions already being taken under the IMF-supported PSI program. A new Bank DPO - the stand-alone Public Finance Support Credit (PFSC) - was tbus prepared to respond to Senegal's urgent need for financial assistance and to support those new actions with a primary focus on fi scal issues. The urgency and the relatively narrow focus on fiscal issues made an interim stand-alone operation a more appropriate instrument for Bank supp011 to the authorities at this juncture than a new series of PRSCs as originally envisaged in the FY07-010 CAS.

1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved)

The overall program objectives were: (i) to bring Senegal' s fiscal stance to a sound and sustainable track; (ii) mitigate fisca l risks emanati ng from public sector entities; and (iii) protect critical developmental objectives at a time when the authorities had to maintain a tight fiscal policy and cope with the impact of the global cris is. These objectives were closely aligned with the Government reform priorities laid out in the PRSPs. There were 10 speci fie obj ectives, each. with an indicator. These I 0 indicators focused on outcomes, wet:"e specific and measurable, with baselines as of end 2008 and targets for the first quarter of 20 I 0.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, a nd Reasons/Just ification

The above PDOs and indicators remained unchanged.

1.4 Original Policy Areas Supported by the Program (as approved )

The PFSC provided support in the fo llowing three priority areas:

(i) Public fina nce management (PFM): restoring budgetary discipline and avoiding a recurrence of fiscal slippages by accelerating PFM reforms, and increasing transparency, with actions covering budget preparation, execution, systems, transparency, controls, and procurement.

(ii) Fiscal t isks from public sector entities: mitigating the fi scal risks emanating from Senegal's significant number of autonomous public sector agencies and specialized funds, including hospitals.

(iii) Protecting Key Developmenta l Objectives: p rotecting selected developmental objectives in forest resource management, road maintenance and decentralization.

4

As explained above. the focus of this stand-alone operation was on fiscal issues and particularly geared to respond to Senegal's plight during this 2008-2009 stressful period. With this focus, the selected priority areas \vere areas in which a number of reforms were envisaged or being launched or under way and for wh ich specific corrective actions cou ld be taken with a reasonable prospects of success.

In those individual areas, the Bank and the authorities had al ready an ongoing dialogue, supported inter alia by other Bank operations and/or sector work underpinning the reforms. There was particularly continuity in a number of specific areas8 in which the PRSC l , Jl and III were already being providing support: (i) strengthening budgetary and financial procedures; (ii) procurement processes and systems; and (i ii) decentralization. particulm·ly tinancial transfers to local Governments. Significant prior analytical work had been carried out on the fiduciary front. Of particular help was also tbe work undertaken fo r the LMF PS I. In road maintenance, the second transport sector program PST2 (closed in 2007) and the preparatory work for the new Transport and Urban Mobility Project (approved May 3. 2010), provided solid analytical underpinnings and a strong basis for dialogue. Likewise, in forest resources management, the PROG EDE I project and its follow-up administered under the 2005 Rural electrification project, pJus the preparatory activities for a future Sustainable and Participatory Energy Management Project PROG EDE 11 provided signiJicant input for the design of th is PFSC. All in all , the selected priority areas were also key areas within three pill ars of tl1e Government's PRSPs: better governance (pat1icularly the fiduciary reforms and decentralization), wealth creation and access to social services.

1.5 Revised Policy Areas (if applicable)

The policy areas remained unchanged.

1.6 Other significant changes

None

2. Key Factors Affecting Implemen tation and Outcomes

2.1 Program Performance

Tranche# Amount Expected Actual Release Release Release Date Da te

Single tranche US$60 June 30, July 30, 2009 Regul ar mi llion 2009

Most of the PFSC's supported actions build upon steps undertaken during the PRSC I, II and lJl program and its performance needs thus also be assessed in terms of reinforcing/deepening PRSCs supported reforms. Stil l. it is more appropriate to first assess its performance with respect

8 The focus of the three f'.R SC's on health services was different and quite broad, with only a small part of the

operations devoted to hospitals themselves.

5

to the policy actions selected as prior actions. Performance in the three policy areas and the status of corresponding actions (primarily prior actions) is detailed below and also shown in Annex 7 (Government's Policy Matrix and outcome indicators).

Public finance management

Regarding PFM, the PFSC aimed at restoring budget discipline and increasing transparency through a set of measures covering on the one had mainly budget preparation, execution, controls and on the other hand procurement. While significant progress had been achieved under the PFM refonn program pursued by Government since the early 2000s, the various assessments carried out in 2007-2008 highlighted a number of \veaknesses and deficiencies.

Weaknesses in budget preparation, incl uding poor expenditure estimates, undermined the credibility of the budget and complicated budget execution. This often created the need for many subsequent adjustments through shifts and line transfers of budget appropriations, and resulted in budget overruns, as well as cash flow problems. To address these problems, a new budget preparation decree was issued in February 2009, to improve the budget procedures by revising the budget preparation calendar for early preparation and with clear early top-down constraints to individual ministries budgets. The decree also reinforced the quality of the Parliamentary budget debate9

. The implementation of the Medium-Term Expenditure Framework (MTEF) had only yielded limited gains 10 by early 2009 and no specific MTF related actions were included under this PFSC. It was recognized that the reform of budget preparation through a program budget approach is an. ambitious and lengthy undertaking, requiring among other things a new organic law on budget laws.

A number of weaknesses had also been identified in budget execution procedures. First an overly broad and frequent recourse to simplified expenditure payment procedures ("treasury advances"), normally reserved for emergencies. As a consequence the authorities adopted revised regulations prohibiting "treasury advances", and confining strictly derogatory expenditure procedures to the cases envisaged by the regulations. Second, the principle of circumscribing budget execution operations strictly within the annual budget cycle was found not lo be strictly followed, with budget operations taking place we ll after the end of the budget year, and large carry-overs from year to year. In response. the authorities restated by decree the budget-closing scltedule, and issued a decree by end February 2009 - a prior action of the PFSC- that strict(l' limits carry-overs to no more than 5 percent o f current year appropriations, with residual carry-overs applied against (and substituting fo r) current year appropriations. To make this mechanism fully operational, tm inventory of all active public procureme111 co11tracts needed to be carried out (second part of that prior action). Final ly, as a third pa11 of that prior action. tire Council of Ministers at/Opted for fiscal year 2009 a Supplemental Budget reflecting new carry-over rules.

Measures were also undertaken to address weaknesses on the IT front. The computerized budget management system (S!GI' IP) of .IvfEF had not yielded all its potential for generating increased

9 The Government must present by early July n report on recent cconomsc and public finance developments, including ~ medium-term

e•·aluatlon of the State's resource~ and the composition ofthe budgets on broad funcllonclllmcs

10 MTEPs of sector ministries arc mere annexes to the budget law, having limi ted force in budget debates, approval

seeking by Parliament and rep<)rting on execution

6

transparency and controllability of U1e budget, in part because of delays in completing the upgrading of the accounting computer system and the development of integration tools for budget and accounting systems. The obsolescence of the existing IT tool used for accounting hampered the capacity to produce timely and reliable information for budget payments, cash flow management and budget steering, as well as the production of controllable public accounts. The IT application at the Treasury was rudimentary and outdated. To start addressing those weaknesses, the Government undertook, as prior actions: (i) to make the new accounting system (ASTER) futTctional in all the centralizing accounting stations, as evidenced by the production of a monthly balance of the T reasury on ASTER; and (ii) to publish monthly hu.dget execution reports (Situation d'execution budgetaire) from SIGFIP on the website of the MEF.

One important ol~jective of the Government PFM's reform program is to reinforce external control of the budget. Senegal has ao Audit Office (Cow· des Compres). functional since 200 I, with the mandate to pass judgment on the accounts of the publ ic accountants, ensure the auditing of accounts and of the management of public establishments and enterprises, assist the Parliament and the Government in controlling budget Jaw execution, and conduct all manner of studies on the public finances and the Government accounts. However, its effectiveness had been hampered by delays in examin ing public accounts. The authorities thus committed to speed up the transmission of budget execution laws and public accounts to this Audit Office. As a prior action to the PFSC, U1e authoriti es prepared the public accounts for 2006 and submitted them to the Audit Office. Beside the issue of late tiling of public accounts by the Treasury, there is also a need to improve the technical capacity of the Audit OOice staff, for which donor assistance has been secured.

Follo·wing the 2003 CPAR the Government showed a clear commitment to modernize the N ational Procurement System (NPS). The procurement regulatory and institutional framework and management capacity have considerably improved since. In 2006 a new Procurement Law was adopted which complies w·ith theW AEMU's Procurement Directives and a new procurement code was approved by the Government in April 2007. A Public Procurement Regulatory Authority, Agence de Regulation des ivfarches Publics (A RMP). an autonomous and independent structure - responsible for policy, handling complaints from bidders, carrying out independent audits was created and the National Procurement Department (OCMP) was set up to ensure appropriate internal controls of procurement transactions handled by the contracting authorities. Several key implementing regulations were prepared, including national standard bidding documents (NSBDs) for works, goods and consulti11g services. Still, those were not yet officially approved by the Govemment, and the use of ARMP user's procurement manua l for contracti ng entities was not yet mandatory. Adoption of the NSBD.'I and making their use compulsory was another PFSC's prior action. Finally. the authorities also contracted a large-scale audit of procurement contracts for 2008, covering all sole source contracts11 and a significant sample of other contracts, that was completed by the end of 2009.

Further reform actions on the PFM front have been prepared to be implemented later, as follow­up of those carried out at tlle time of preparation of the PFCS and of its prior actions. To move more forcefully on the.se issues, the MEF developed and adopted in October 2009 an overall PFM action plan. This comprehensive plan of reforms. actions and capacity upgrading spans the full an·ay of PMF issues under an exhaustive, time-bound and sequenced program, drawing on self-

11 An excessive percentage of receJ)t Public commcl$ had been procured sole-source.

7

assessment and recommendations from development partners. Moreover. since the adoption of this plan, Senegal has undertaken to modernize further its budget framework within the context of new WAEMU Directives adopted in June 2009.

Fiscal risks from public sector entities

Roughly one quarter of Senegal's the investment budget (or about 2 percent of GDP) is executed by a growing number12 of autonomous publ ic sector agencies and specialized funds. which enjoy relative management autonomy. Their budgets and budget execution plans are only weakly monitored . A strong monitoring, accountability and control apparatus of the management of public resources by these agencies has been Jacking. A Jaw with its implementing decrees was therefore prepared to improve the framework for the creation, operat ion and eventual closure of public sector agencies. As a prior action to the PFSC this law was submitted to parliamellt, adopted, and the implementing regulatiOil!:l' were issued.

This problem of fi scal risks extends to Senegal 's public hospitals which arc in a difficult financial situation. The reform of the hospital system started in 1998 aimed at enhancing hospital autonomy. But at the same time however. very limited accountability was put in place. Given the fiscal risks emanating fi·om the deep financial problems of the public hospital sector, a set of urgent corrective measures needed to be taken. As prior action to the PFSC, an action plan was thus initiated to rebuild the oversight function and begin to restore the financiaL soundness of hospitals, comprised of: (i) the adoption by the managers of the twenty hospitals. the Ministry of Health, and the MEF of a memorandum of understanding that ensures that twenty hospitals develop a financial recovery plan as a condition for state financial assistance; (i i) the creation of an inter-ministerial committee, including representatives from the Ministry of Health and the MEF, responsible for the oversight of hospital recovery plans; ( iii) the creation of an oversight tw it f or the Sesame plrm u of the Ministry of Health: and (iv) adoption and publication of a decree by the Council of Ministers that sets out a health map for 2008-2013.

Protecting key developmental objectives

At a time when it was essential that the authorities maintain a tight fi scaJ policy, it was also important that they pursue their efforts towards key developmental objectives. Following that approach, the PFSC focused on three areas where efforts were particularl y needed and on which the Bank had a good dialogue with the Government, including through other Bank projects and programs: forest resources management, road maintenance and decentralization.

With respect to forest resources management. there has been increasingly heavy pressure on those resources as wood fuels remain the poor households' main energy source in Senegal. The Senegalese policy ti'amcwork for forest resources management provides tor a transfer of the responsibility of natural resources and community forests where charcoal is produced to local governments. The strategy adopted by the authorities to meet an important part of tl1e rapidly growing urban demand fo r household fuels without the loss of forest cover and the ecosystem 's

12More than 50 operating agencies were idcmified in 2009 .

13 A new Govenunenl initiative allowing for full and free coverage of hospital care to all ci ti7..ens above the age of 60

that should be C\ aluated wi th respect to its financial implications.

8

carbon sequestration potential and biodiversity, combines sustainable wood fuels supply management in target areas and demand management and inter-fuel substitution options at the national level. lls implementation has been supported since 1998 by the Sustainable and Participatory Energy Management Project 14 PROGEDE I.

However achievement of its objectives has continued to be undermined by the persistence of an outdated charcoal quota system with a centrally-controlled administrative all ocation system for wood cutting licenses. Licenses were fraudulently used to produce charcoal outside the zones managed under locally approved forest management plans under this system wllich: (i) was fundamentally inconsistent with the objectives of transferri ng to local communities the management of forest resources and (ii) was reportedly rife with opportunities for corruption. The abolition of the quota system and the un iversal enforcement of decentralization principles fo r community forest resource management was thus a policy priority. As prior action under the PFSC, the Ministry in charge of environment adopted and published a ministerial ordinance confirm ing the abolition of the quota system, starting from 2010, and the prohibition of wood cutting for charcoal production in non-community managed forests.

Senegal's road network, once in relatively good shape, has been deteriorating since the early I 990 as road maintenance has been beset by under-budgeting and budget under-execution. First the basic institutional design- a road fund held by the Treasury. funded from general resources tllrough a line appropriation in the general investment budget- has not ensured that resources allocated to road maintenance kept pace with the expansion of the nef\.vork. Second, when cash tensions emerge, difficult arbitrages between competing priorities have not favored road maintenance. Funds to be transferred to the road works agency AATR, in charge of implementing the maintenance programs, have often been paid out with imponant delays and on a non-predictable basis. Efforts made over the years to increase fu ndjng IS have remained insufficient. Studies under the Bank supported Second Transpor1 Sector Program PST2 estimated that the annual allocation to routi ne road maintenance should rapidly be scaled up to about US$80 to US$1 00 million to avoid accelerated depreciation of the country's road capital and identified a serious backlog in road rehabilitation of about US$400 million. The studies also confirmed the need to improve the institutional arrangements.

As a result, the Govenuncnt decided to create an autonomous second generation Road Fund -Fonds d'Entretien Routier Autonome (FI::RA) - to be positioned in the central bank and to be funded directly by fuel distributors from existing and additional taxes on gasoline and gasoil (user charges). The FERA is to be administered under a chief executive selected competitively for a three year period. As the implementation of the new financing arrangements would be phased over three years, the FERA will in the interim be funded through a mix of budget appropriations, declining over time, and the user charges, increasing over time. With the objective to make the FERA fully operational by mid-2009, as prior actions under the PFSC, the fo llowing corresponding actions were thus taken: (i) adoption by the Council of Ministers (COM) of the decree creating FERA; ( ii) adoption by the Ministry of Economy and Finance of the decree creating the road user charge; (i ii) appoi11tment of FERA 's administrator; (iv), opening of

14 rhis first operation with US$20 mill ion funding and ended in December 2004 was follow.od by US$ 7.2 million

successor operation up to December 2008.

15 The road fund allocation increased tripled from US$12 mi ll ion in 1998 to US$36 million in 2008.

9

FERA 's account at the central bank, and (v) transfer to litis account of proceeds f rom tlte road user cltarges through the adoption by the COM of a supplemental budget for F Y 2009 authorizing such transfer. Making the FERA operational is a significant achievement of this PFSC after a long history of unsuccessful efforts - under a series of Bank supported transport/infrastructure projects- to set up an appropriate road maintenance funding mechanism.

Under Senegal's cautious and progressive decentralization policy, central Government has devolved to local Governments the management of public programs in nine competencies (environment and natural resources, education, health, population and social action, youth, sport and leisure, culture, local development pl anning, urban development, and housing). However in practice the transfer of resources has not yet been aligned with the transfer of responsibilities as among other things the tax base is highly centralized. The flow of fiscal transfers to local Governments is managed from the central budget through two dedicated funds, a local Government operating fu nd the Fonds de Dotation de Ia Decentralisation (FDD) and a local Government investment fund the, Fonds d'Equipement des Collectivites Locales (FECL). Weak local Government capacity also remains a significant constraint in the decentralization process and the Government has thus developed an institutional program for supporting the gradual improvement in local Government capacity with donor support. Addressing these political, institutional and operational constraints to an effective decentralization program will be a long term undertaking, beyond the scope of the PFSC. For the short term, it is important that fundi ng both for direct local Governments and for Government agencies responsible for technical assistance to local Governments be protected and increased. The immediate challenge remains thus that of providing; suffic ient central Government transfers. As prior action to the PFSC, the MEF thus tran.sferred budgetary appropriations for the FDD ami FECL to local communities for FY 2009.

The number of prior actions, I 0, may appear large for a swiftly prepared stand alone operation, but was manageable, given the prior work undertaken by the Government with the Bank and other donors, includi ng through the PRSCs and a number of projects in the different selected policy areas. All 10 prior actions were completed in a timely manner.

2.2 Major Factors Affecting Implementation.

The factors which contributed to the successful implementation of the PFSC include fi rst the experience gajned in preparing and implementing the series of three PRSCs, plus a number of factors w hich already contributed to the largely successful outcome of those the PRSCs: strong Government ownership. sound underlying analytical work and good coordination among donors. The design of operation - a quick-reaction stand-alone operation responding to Senegal urgent need for financial assistance, and its agenda narrowly focused on a relatively few pol icy areas with well selected core objectives, were also tactors of success. Weak administrative capacity was identified as a potentially negative factor; but as an improvement to the PRSCs, it turned out as generally adequate at all Govem mcnt levels involved. Another potentially negative factor could have been an unfavorable political context/calendar. These key factors are further discussed below.

Government ownership was strong, particularly around the theme of PFM modernization. for which Senegal has been pursuing a program of re forms s ince the early 2000s. The modernization of PFM is central to the fourth pillar of the PRSP2 and more broadly constitutes a cornerstone for the successful implementation of Senegal's overa ll poverty reduction strategy. The 2007 PRSP Annual Progress Report (APR) had highlighted that performance on this PRSP pillar of economic

lO

governance had been mjxed. The 2008 fiscal slippages also represented a significant setback. Hence the increased resolve of the authorities to restore the integrity and transparency of the budget framework and to put in place appropriate measures to strengthen PFM at large. Another factor underpinning the Government comm itment on this core PFM strengthening theme is the fact that this theme is a central component of the dialogue with the donors on the management of external assistance in the spirit of the Paris Declaration. Also, since the 2003 CPA R the Government has showed a clear commjtment to modernize its public procurement system. Likewise, the Governrnent has also demonstrated a new commitment on starting to reduce the fiscal risks emanating from the increasing number of public entities as a first step to improve their governance. Finally, overall, the key implementing agency, the MEr has shown strong commitment to push the reform efforts, starting with the prior actions.

Sound background analysis and other work. The PFSC benefiued fi·orn high quali ty background work by the Bank in all the policy areas selected for this DPO - work in support to the first series of PRSCs as well as for specific projects and T A activities in those areas. The PFSC complements particularly well other Bank development policy, capacity building and investments operations in those areas. Substantial analytical work was carried out with respect to PFM, including core diagnostic assessment~ by the Bank in collaboration with the Government and other donors, such as Public Expenditure Reviews (2005 and 2006). the 2002 CFAA and the 2003 CPAR. These works documented fisca l policy issues as well as the numerous \veaknesses in PFM, and provided a range of recommendations on the legal framework and operational approaches (including the integrated PFM system). on which the preparation of the PFSC has drawn extensively. The design of PFM reforms also reJjed on the EU-funded PEF A djagnostic of 2007, and on an IMF Fiscal Affairs Department Technical Assistance report on PFM. In procurement, this DPO has drawn not only on the 2003 CPAR but also more broadly on the Bank's longstanding program of suppor1 to procurement reforms in Senegal, including capacity building under the Private Investment Promotion Project (FY03). In the non-PFM areas. the PFSC builds on sector work, T A and policy dialogue supported by Bank financed activities including: (i) a report on the implementation of hospital reform in Senegal over 1998-2007 and other preparation work for a future Hospital Refom1 TA project; (ii) a Country Environmental Assessment (FY08), a.s well as project preparation work activities for the follow-up Sustainable and Participatory Energy Management project (PROGEDE2); (iii) a Transport and Infrastructure Study (FY07), as well as other work for the second Sectoral Transport Project PST2 and the new Transport and Mobi lity Project (FYOlO); and (iv) activities related to the Local Authorities Development Program and the National Program for Local Development and Urban Mobility Improvement.

Donor Coor dina tion : The PFSC benefitted - like the PRSC series before - from the close coordination existing among donors in most policy areas. Most bilateral and multi lateral development agencies have an active presence in Seoegal and support the PRSP. Considerable progress has been made in recent years in harmonizing development assistance to Senegal, following the principles articulated in the Paris Declaration on Aid Effecti veness and in the Africa Action Plan (AAP). A significant number of Senegal's development partners deliver assistance through budgetary support (EU. France, Netherlands, and Canada) and are thus particularly concerned by the modernization of Senegal's PFM.

The partners have enhanced their coll aboration in the design of budget support operations, including with the adoption in early 2008 of a Memorandum of Understanding- the Framework Agreement on Budget Support (Accord Cadre pour les Appuis Budgetaires, ACAB). Under the ACAB, common evaluation processes have been set up on macroeconomic conditions, progress in implementing the PRSP-ll, and PrM reforms. Particularly relevant to the Pres is the close

I l

working relationship between the IMF and the Bank, especially with respect to PFM reforms, an area in w hich they maintain close coordination and collaboration to ensure that consistent advice is provided to the authorities. This productive collaboratjon has continued under the IMF three­year program under the PS I approved in December 2007. The implementation o f PFM and procurement reforms is supported by several other donors (France, EU, Canada, and the Netherlands) with technical and fi nancial assis tance. The Bank and/or other donors are also supporting improvement efforts in decentralization, hospital reform, road maintenance and forestry resource management. £n particular the EU and AFDB have a strong partnership with the Bank in the road sector in Senegal.

Design of operat ion a nd participatory process. The specific design of the PSFC as a quick­reaction stand-alone operation responding to Senegal urgent need for financial assistance -generating a new momentum for reforms - and its agenda focused on a few policy areas with well selected core objectives, were also factors of success. The design of the PFSC has drawn on the PRSP ll wh ich has benefited from broad stakeholders consultations, plus consultative inputs from stakeholders participation in the Government 's PRSP and ACAB policy matrix reviews and the update of the PRSP monitoring indicators. It benefited also from s takeholder consultations undettaken through the preparation of the ICR on the fi rst series ofPRSCs.

The political context and calenda r, fi rst with the March 2009 local elections marked by the victory of opposition parties in several key urban centers, did not tumed out as a negative factor during preparation and implementation of this DPO. The post election cabinet changes did not result in significant discontinuity affecting the key poli cy actions, as key Ministers, including the ministers of economy & finance and budget kept their post. A changing and more complex political context may have an impact later, with the upcoming presidential elections in 201 2. It is more in the longer term that the political context could impact negatively the outcome of thjs operation - with some risks of slowing down of reforms or worse, reversals.

Relevance of Risks identified a nd Risks Mitigation

Three types of risks that could jeopardize the expected outcomes and benefits of this operation had been identi fied: (i) a deeper and/or longer macroeconomic downturn in the current global context than anticipated; (ii) opposition from vested interests; and (ii i) weak capacity to implement re forms. It was anticipated that the desi gn of this operation, with a relatively focused agenda and high donor involve).llent, would help mitigate these r isks. The risks of weak administrative capacity was expected: (i) to be relatively minor, in part given the large num ber of highly trained technocrats in Senegal; and (ii) to be mitigated by the support from several donors plus the Bank with techn ical and financ ial assistance for the implementat ion of PFM/ procurement reforms, and by support fi·om the Bank or other donors to capacity improvement in the other selected policy areas. Political opposition, including from vested interests, could represent important obstacles to reform, especially reforms that foster transparency in the use of public resources. Under the PFSC those risks were expected to be mitigated by tJ'le fact that all key policy measures were to be implemented before cred it approval and were also contingent on the dialogue between the Government and the IMF under the PS I second review.

For the longer term, there are risks of reversals, but continued Bank engagement with a core team almost entirely fi eld-based also enl1ances the likeli hood that reforms are being followed through and policies sustained. A deeper and/or longer macroeconomic downturn in the cun-ent global context than anticipated still represents a significant risk, as Senegal's short-term prospects continue to depend to a significant extent on developments in the global economy. One clear mitigation strategy is for the authorities to continue to steer a stable fi scal course and adopt

12

resolute refonns, especially in the PFM area., that may in turn mobilize donors to prov ide additional resources to buffer the budget from the consequences of a more abrupt slow down. So far been the authorities have maintained this course and on the macro-front, GDP growth rate is expected to reach 31h percent and could return by 20 12 to the historic trends of 4~ percent.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utiliza tion:

The PFSC used the monitoring and evaluation system of Senegal's PRSP which is considered to be broadly well designed and relies primarily on the relatively good M&E system jn MEF. The Prime Minister chairs quarterly high level PRS supervision meetings wi th the participation of top Government officials. A joint annual review of the PRSP is prepared on an annual basis. The annual review of the PRS agenda is well aligned with the budgetary calendar. facilitating the monitoring of links between the PRSP progress review and the preparation of the budget. Since the approval of lhe PFSC the authoritjes have continued to exchange detailed budget execution data and fully collaborated wit h Bank staff on the implementation ofthc PFM reforms. Under the ACAB arrangements a common policy matrix between Government and donors, facilitates joint review and supervision on macroeconomic developments, progress in implementing the PRSP and especially in Public Sector Management/PFM reforms. Overall, the engagement with a Bank team almost entirely based in Dakar has allowed to monitor the progress on a continuous basis. During the short (nine months) implementation period of the PFSC, very limited wr itten reporting material has been prepared by the authorities or the Bank team 16 specifically and only for the PFSC. Progress has been primarily repo11ed separate ly and discussed in various documents prepared for: (i) the follow-up PRSC4 approved on Apri l 30, 2010; and (ii) several investment and TA operations s ubsequently approved or currently under preparation in the policy areas of the PFSC other than PFM and procurement, as detailed below.

2.4 Expected Follow-up Operations:

The FY07-FY 10 C AS had anticipated that the first series ofPRSCs was to be followed by a new series of PRSCs initia lly expected to start in FY09. In the exceptional circumstances Senegal was facing in late 2008-early 2009, it was clear that the PFSC as an interim stand-alone operation for FY09 would be a more appropriate instrument for immediate Bank support at that critical juncture instead of the first of the new series o f PRSCs. This approach al so provided breathing room to the authorities for the design and implementation of medium-term agenda that could be supported by the next series of PRSCs. Considering the progress t7 accompl ished during 2009 in the implementation by the Government of the structura l and fi scal corrective actions needed to avoid recurrence of budget s lippages, the positive outcome of the PFSC and the sustained commitment of the Governn1eot to pursue reforms under the PRSP2, preparation of the new PRSCs went ahead during F YO lO. PRSC-IY, the first of a series of three programmatic PRSCs was approved in April 20 I 0. Their overarching o~jective is to suppo11 impl ementation of PRSP2 in its last year and assist the authori ties in the development and earl y implementation of PRSP3 which should be fi nalized by December 20 10. The focus of the new PRSCs include among other

16 Only one lSR of December 12, 2009. No separate specific reponing was prepared for the PFSC on the progress related to other items of the Govcnum:nt Policy M~ttrix (annex 3 o f report 48557-SN) than tl)ose covered by the l'rior Actions.

17 lncludJng reducing the stock of domestic arrefus.

13

things PfM and Public Procurement 18, road maintenance, and the hospital policy (including corporate and financial governance) - with their corresponding com ponents and actions in follow-up to the PFSC.

Although they are not strictly speaking tollow-up operations to this DPO, other new Bank projects in the policy areas of the PFSC should be mentioned. In non PFM areas, the Bank: (i) prepared the US$55 mill ion T ransport and Urban Mobility Project (approved in May 20 I 0) featuring a Sector Policy Letter stressing road maintenance and financing around the FERA; ( ii) prepared the Second Phase of the Sustainable and Participatory Energy Management Project (PROGEDE ll) to fUJ1her improve forest resources management; and (iii) is preparing a TA project in the health sector to suppot1 hospital reform.

3. Assessment of Outcomes

3.1 Relevance of O bjectives, Design and Implementation

The PFSC objectives and des ign were highly relevant to country development pnonttes and specific circumstances in 2008-2009, and were consistent with Bank strategies and goal s. T he PFSC was aligned with the FY07-0l 0 CAS which focused on three pillars ((i) accelerated growth/wealth creation; (i i) human development /shared growth; and ( iii) rural and urban synergy) and was also structured around a governance filter aim ing inter alia at: (i) improving transparency and efficiency in the use of public resources; and (ii) increasing public sector accountability. The PFSC's three areas o f focus - improving PFM, rnitigating th e fiscal risks emanating from public sector entities and protecting selected developmental objectives - are well aligned w ith Government's priorities under both PRSP- 1 and PRSP-2. The measures supported by the PFCS were essential for the Government efforts to restore budget discipline and increase transparency. These measures were complementary to critical actions being taken under the IMF PSI. The PFSC also complements well the Bank' s portfolio of investment projects. The PFSC entailed significant synergies with other donors, especially those involved in budgetary support ..

The choice of a stand-alone operation and its narrowly focused des ign were quite appropriate given Senegal's urgent need for financial assistance in 2008-09 and the authorities increasing focus on PFM issues. The stand-alone nature of the PFSC was important to respond to a crisis situation in which Bank support needs to be customized to the pa11icular country circumstances and priorities. T he measures under the third area of focus, particularly on forest resources and road maintenance, deserve special mention: abolishing the quota system for charcoal production and operationalization of the FERA were complex but critical actions in their respective sectors that had been contemplated 19 for significant time but were not taken by the Senegalese authorities under the previous Bank supported opera tions. The number of prior actions was relati vely high but manageable.

" The US$8 million Economic Governance Project (approved in May 20 I 0) wil! also strengthen effective the Investigation Unit of the Pub I ic Procurement Agency .

19 Tit is is thus a good example of go\ld leverage associated w ith a DPO.

14

3.2 Achievement of Program Development Objectives

The overall program development objectives of the PFSC were threefold: (i) to bring Senegal's fiscal stance to a sound and sustainable track; (ii) mitigate fiscal risks emanating from public sector entities; and (iii) protect critical developmental objectives at a time when the authorities had to maintajn a tight fiscal poJjcy and cope with the impact of the global crisis.

Most of the PFSC's actions build upon actions started during the PRSC I, ll and Ill and other Bank operations. One can thus not entirely disaggregate the impact of the PfSC from those operations. Likewise one should not minimize the linkage with activities of other donors, particularly the IMF. The achievements of higher level objectives should thus not be attributed exclusively or primarily to the PFSC. Its achievements can be first assessed with some degree of certainty in relation to the specific policy objectives for which prior actions were carried out. Given the short period of implementation of this operation 20

, assessing now its long term achievements may be premature or overoptimistic. The longer term achievements of the PFSC could be discussed on the basis of the progress achieved until today in the preparation of PRSC TV (Report No. 52748 - SNCFT) and preparation and/or implementation of the other new Bank operations mentioned in section 2.4.

As detailed above (in Section 2.1 Program Pe1jormance), the PFSC was successful in supporting the Government's acti ons in three policy areas. The outcomes rating in this ICR are based on an assessment of the indicators set out to track progress in the areas of focus, primarily as a result of the prior actions. For 9 of the l 0 indicators, the outcome by early 2010 match or exceed the targets set at appraisal. Regarding the remaining indicator - the extent o f the use of National Standard Bidding documents - the outcome has not yet been measured21 precisely but there are indications that thei r use on a steady increase (??). /\ significant achievement of the PSFC has been to give a new impetus or to reinforce the impetus for reforms particularly in PFM, procurement, forest resources management and road maintenance. As mentioned before, particularly worth mentioning is the operationalization of FERA.22 for road maintenance and the abolition of the wood cutting/charcoal quotas eventually achieved under this DPO. As currently seen in the context of the PRSC-IV, the authorities are now pursuing with vigor the comprehensive PFM action plan adopted in October 2009 and have undertaken to modemize further the budgetary framework following the new W AEMU Directives. Likewise, sustained progress can be seen: (i) in bringing the new road maintenance arrangements to speed with increased funding under the PRSCJV and the FYOIO Transl)ort and UJban Mobility Project; and (ii) in further improvements of forest resources management under the FYO 10 PROGEDE II project. Progress is also anticipated in the hospital sector with the implementation of the

20 Evaluating its achievements cannot be done like for multi-tranche operation covering a looga period o f time or that

of a series of PRSCs like the ser ies that preceded this PFSC'.

21 Measuring in terms of percentage of ngcncies using NSBD may not be o practical way of assessing progress over a

short period of time. Full success should be considered as achieved when the ARMP will report the occurrence of non­usc ofNSBD as exceptional.

22 A significant achievement of this Pf'SC considering the long history of unsuccessful efforts under a series of Bank

Stlpported transpor1/infrastructurc projects to set up an appropriate road maintenance funding mechanism.

15

Government's Hospital Polic/3 under the new PRSCs. Reinforcement of the oversight o f Public Agencies has also made a s ignifi cant progress \Vith the adoption of the new law on the regulatory framework of public agencies. In this vein, the Govenu11erH established a Parastatal Sector Directorate in the Treasury to improve the supervision of the Agencies and is committed to strengthen its capacity with technical and fi nancial resources. T here is less concrete evidence yet that progress will be sustained in the medium to long term in the area of decentralization.

3.3 Efficiency.

Not applicable

3.4 Justification of Overall Outcome Rating (combining relevance, achievement of P DOsj

Rating: Satisfactory

Justification: T he PFSC's design, objectives and measures taken were highly relevant to Senegal overall development needs and PRSP goals; its design and fast reaction approach were particularly adapted to the unusual crisis context of Senegal in 2008-2009, especially after the budget slippages. Its achievements arc overall satisfactory. with immediate concrete positive outcomes and longer term benefits which so far seem to be sustainable considering the sustained momentum of reforms (as seen under the subsequent FYO I 0 operations) and the steady commitment of the authorities. As detailed in the next section, the institutional impact of this operation has been impoxtant.

The outcome is particularly significant in the enJ1ancement of budget preparation and of external controls of the budget. For example (as just seen in the course of preparation of the PRSC IV) the budget execution laws up to 2008 have now been submitted to the Audit Office (Cour des Comptes) and Parl iament has now at last approved the reviewed budget execution laws fro m 1999 to 2002. T he outcome is also highly satisfactory for road maintenance, where the operational ization of FERA is long-awaited critical step for Senegal transport sector and poverty reduction.

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty I mpacts, Gender Aspects, and Socia l Development

(b) Institutional C hange/Str engthening

The significant institutional strengthening and changes took place in the areas of PFM. supervision ofPublic Agencies, Public Procurement and Road maintenance.

As explained above, the whole framework fo r budget planning/preparation has been improved, budget implementat ion has been made more transparent, and its post control enhanced, and the

23 Performance contracts to be prepared and signed for at least 5 public hospitals as triggec for PRSC V.

16

annual budgeting and budget comprehensiveness principles restored. Oversight of the public otT­budget entities was reinforced with the adoption of the new law on the regulatoty framework of public agencies and the establishment of the Parastatal Sector Directorate in the Treasury. In the hospital sector, the PFSC was instrumental in: (i) the creation of an inter-ministerial committee, including representatives from the Ministry of Health and the Ministry of Economy and Finance, responsible for the oversight of hospital recovery plans; (ii) the creation of an oversight unit for the Sesame plan of the Ministry of Health.

Regarding public procurement, a significant institutional step has been the fonnal adoption by ARMP of the standard bidding documents for works. goods and consulting services and the making the use of such documents mandatory in public procurement. Finally, as mentioned above, the operationa.lization of FERA has been a significant institutional change for road maintenance.

(c) Other Unintended Outcomes and Impacts (positive or negative, if any)

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

Not applicab le

4. Assessment of Risk to Development Outcome

Rating: moderate

Justification: The reform steps and policy actions undertaken under the PFSC provide a basis for additional reforms under subsequent operations. The fiduciary framework has been strengthened, and a number of actions taken have created a momentum that should not be easily stopped. There continues to be however a number of risks to sustainability. Further surges in international foodstuffs and energy prices could threaten economic stabil ity. But mostly a long macroeconomic downturn in the global context affecting Senegal's fairly open economy represents a significant risk. While major policy reversals are unlikely, there is still a risk of a slowdown with a lack of resolve to move forward with diffi cult structural refonns especially in the context of 20 l2 presidential elections. Weaknesses in ti scal governance, and some administrative capacity constraints in pursing effectively reforms can also not be entire ly discounted.

Mitigating factors to these risks include the policy dialogue underpinned by a continued Bank engagement with a core team almost entirely field-based, continued budgetary support in the context of the follow-on PRSCs; Government commitment and donor support to the goals of Senegal's poverty reduction program; and improved coordination among donors through the ACAB.

5. Assessment of Bank and Borrower Performance

5.1 Ba nk Performance

(a) Bank Per formance in Ensuring Quality at Entry

Satisfactory.

17

The Bank was able to respond to the Senegal ' s urgent financia l needs in a difficult juncture with a stand-alone operation designed around a core set of critical actions focused on the authorities' concern on PFM issues, starting with budgetary matters. Its objectives were well aligned with the Government's development agenda, priorities, and policies as set out in the PRSPs. Its priority areas were consistent w ith the PRS strategy and complementary to other Bank operations and actions of other donors involved in budgetary support and PFM reform. It was closely coordinated with the IMF PSI. lt incorporated key lessons leamed from the series of PRSC 1-IH and built on extens ive and solid analytica l/fiduciary work unde11aken by the Bank in suppo11 the PRSP and for other operations in several sectors. It was designed in a generally partici patory manner. 1t relied on specific indicators and emphasized concrete res ults.

It was put together primarily by a well-balanced Bank team, composed to a large extent o f fi eld based staff, involved in a continuous dialogue with the authori ties and local representatives of the other donors. The exemplary way thjs multi-sectoral team used synergies to develop rapidly a DPO covering several policy areas and that was still well focused, deserves to be specially highlighted.

(b) Qua lity of Superv ision

Rating: Satisfactory

Supervision appears to have been appropriate in substance. The Bank team conducted the supervision while at the same time monitoring the implementation of tbe actions/reforms in the policy areas in the context of preparation of PRSC IV. However, except for one single ISR, no specific \Vritten supervision material was produced for the PFSC. Achievements under the PFSC and further progress of reform can be assessed primarily by reviewi_ng the material written 111

preparation of the PRSC IV and through interviews.

(c) J ustification of Rating for Overall Bank Performance

Ra ting: Satisfactory

The overall performance can be considered as satisfactory. The Ban.k was able to respond rapidly to Senegal's urgent needs with a stand-alone operation, with a design appropd ately tailored to circumstances, w ith a focus and policy content based on a solid dialogue with the Senegalese authorities.

5.2 Borrower Performance

(a) Government P erfo rm ance

(b) Implementing Agency or Agencies Performance

(c) of Ra ting for Overall Borrower Performance

Rating: Satisfactory.

J us tification: Strong o•vnership and commitment of the Govemment underpinned the satisfactory implementation of the PFSC. The rapi d complet ion o f the many prior actions bears

18

testimony to the Government's commitment. Political will of the Government to pursue reforms was present throughoul preparation and irnplemcntation of this DPO and was sustained thereafter in the course of preparation of the follow-up PRSC TV. The institutional stability - with the key ministers for the DPO staying despite the reshuffle following the local e lections - was also a factor of success. A major factor behind the positive results was the willingness and overaU capacity of the MEF - the implementing agency to push the PFSC actions across the different policy areas.

The PFSC benefi tted from the paJticipatory process used for PRSPs. Consultative inputs were also drawn from stakeholders participation in the Government's PRSP and ACAB policy matrix reviews and the update of the PRSP monitoring indicators and stakeholder consultations undertaken through tbe preparation of the ICR on the first series of PRSCs. The PFSC relied on the system monitoring and evaluation system of the PRSP which had proven to be broadly well designed and was further improved for the preparation of the APR for the year 2007. The authorities ful ly collaborated with the Bank in the implementation of the reform acti ons and in exchanging detai led data.

6. Lessons Learned

Several lessons were learned:

1. A quick reaction stand-alone operation responding to lhe needs and predicament of Senegal in the critical 2008-2009 period like the PFSC can be prepared swiftly and sti ll produce significant results if it is underpinned by solid analytical work and a strong and dialogue in well selected areas. This was particularly the case in the PFM and Public Procurement areas of this DPO.

2. Despite a being stand-alone operation, sucb a DPO can have a significant development impact particularly if it is following-up on a series of prior DPOs and other Bank operations, and even more so if in turn it is followed by DPOs and other operations, wh ich deepen the actions undertaken under the stand-alone DPO by building on the reform momentum helped create. Working on such a long term basis allows to select for the stand-alone DPO appropriate objectives wh ich can realistically achieved. Designing in fu ll isolation a stand-alone DPO is a much more risky proposition.

3. In that vein, PFM reforms are complex and ambitious programs that can only be reasonably envisaged over a long time span follo,ving a carefully designed long term action plan. PFM modernization measures included in the PFSC provided a solid basis and impetus for further reforms; but those are likely not be fully achieved unless the Government is fully committed to implement such a long term action plan, and if possible with further donors support Such support can indeed be a follow-up series of DPOs but should ideally also include a dedicated PFM reform T A project. The cmrent plan of the Bunk team for Senegal to prepare such T A project for Senegal is quite timely.

4 . !laving a multi-sectoral group of Bank staff wltich ·worked as real team very closely together across sector botmdaries, allowed to produce rapidly a coherent multi-sectoral operation in which the different measures for the different policy areas jibed well. This teamwork was faci li tated by having the core staff workin g from the same location in the field. In turn, location of the core staff in the field allowed to have a continuously strong dialogue and close coll aboration with the Senegalese counterparts.

19

5. Without proper oversight, public agencies and other parastatals can rapidl y become poorly performing entities, run into a difficult financial situation and cause significant fiscal burden on the State. Many countries have a tendency - like Senegal - to let Public Agencies proliferate, without paying enough attention to their oversight and governance at large. Likewise. while elaborating CASes the Bank has tended to overlook those growing problems and not to react to a serious backtracking24 with respect to parastatals. This is unfortunate especially when one compares the current situation with the situation in many countries in the eighties and early nineties when the Bank was supporting the parastatal reforms with dedicated T A operations and Adjustment Operations focusing inter alia on parastatals. The stance taken by Bank country teams in a number of countries that systemic privatization and/or liquidation of parastatals would basically solve the problems of performance of these entities, has often proven to be unrealistic. When elaborating new CASes the Bank could usefully systematically review the performance and governance of the countries' parastatals and consider accordingly if dedicated actions in this area should not be included in the country program.

6. Several of the lessons learned in the series of PRSCs f-111 listed in their ICR apply also to this DPO: effectiveness of budget support instruments to address cross-cutting issues, importance of an institutional anchor, contribution of multi-donor and harmonized budgetary support to reform implementation (in the context of the ACAB) providing incentives to the Government to proceed with complex rcfonns. The related and well known lesson is the importance of close coordination with the lMF for the design and implementation of PFM reforms.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies

Not yet available

(b) Cofinanciers

NA: there were no cofinanciers (c) Other partners and stakeholders

24 Having been involved in such operations with Senegal para~talals in the 70s and 80s, one author of 1his ICR w ll:>

surprised 10 discover that significant parastatal problems had emerged again.

20

Annex 1: Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

l\amcs Title Unit Responsibility/

Specialty Lending and S upervision (from Task Team in Program Document)

. Alain D'Hoorc Lead Economist AFTP4 Macroeconomics

Mamadou Ndione

Tonia Marek

Vincent Turbat

Moctar Thiam fbou Diouf Christian Diou

Demba Balde

~Awa Seck

Charles Coste

Eric Yoboue

Nathal ie Munzberg

Wolfgang Chadab

Pieter Siegenthaler Jacques .Morisset Johannes Mueller Astou Diaw-Da Judite Fernandes

(b) Staff T ime a nd Cost

Sta~c

Lending

Supervision/IC R

Senior Economist

Lead Public Health Specialist

Consultant

Sector leader

S~. T~nsp~~- Spec. Senior Municipal Engineer Senior Social Development

2 pecial ist Senior Economist

Sr. Financial Management Specialist

Procurement Hub Coordi nator

Sr Counsel

Senior Finance Officer

Senior Economist WBGN Lead Economist

1Assistant Director Program Assistant :Program assistant

AFTP4 'Macroeconomics

AFTH2 11-Iealth, N~trition & Populatton

AFTH2 Health, NL~trition _ & Populatwn

AFTTR Transport AFn'R "Cransport _ AFTU2 Urban & Water

AFTCS Pos~ Conflict & Soctal Oev

1 AFTEG Energy _

1 AFTFM Procurement

I AFTFM Procurement . -LEGAF Legal and Judicial

I .Issues __ . I 1 LOA FC Loan Fiduciary &

Controls I AFTP3 Macroeconomics I

AFTPI Macroeconomics I AFRE2 fMF AFCF I Assistant AFTP4 :Assistant

Sta iTTimc a nd Cost (Bank Budget Onl))

No. of ~h1ff ncchs

T ota1:1 38.13

Total : 3.2

2 1

USD Tbousands (includ ing tn n d and ':oosultant costs)

162,855.19

15,301.86

Annex 2: Beneficiary Survey Results

Not applicable.

22

Annex 3: Stakeholder Workshop Report and Results

Not applicable.

23

Annex 4: Summary of Borrower's ICR and/or Comments on Draft ICR

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25

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6 Au lll"cau Jc l'c.'\C\.Ution .lu hud&et. de nou..,dlcs Jillpc-;iuons ont C:1.: I' ''..:s p.•ur ·~ k t ·~o.1lt11" 1\ll\ prnccliUJ ,·~ d..!n~g.tiOtH·~ en n~atu!rc d.! llcpcn~.:s pt.1hltqu.:, l~

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26

II u di~•r:ul1•n th: ~d t:ouvcrllll'\!, :mn ..: ITicm:J !~ rt :m sccurit~ . (\: logicid a lkja p ·nni-, .me rCdu.:U• 11 :<~ub~I;Ulli'"ll..: des d.!lah o:l ~,.: ., couts d~ pmcuC".i(lo d<.'$ '>1\U.rtior::> d'.:ll.cculiun

bud Ut'• • t.•ut en unnmo:nt.ull lo liabil i1!! tk l' inrorm;uion hudgcr ai t·~. Pour >!.cmitrc Ia IJ'Illl I n • .: o:t "Ill 'f'CCT J'act..:s Cll r nhh" :1 l'inf\)rm;Uil'm huJ.tc.:tairc. lc gnu' o:mcmc:nr ;1,

Jc UlS d&:~r-hr.· ~008. sy-:tcmutili.:r Ia puhlic<uion de-. )i:u.llin;~ J \ :xl!cul}ufl hutlg.:tnirc

wll~!l, r r minister.: C! J'.lr litre sur internet I\' ?-OUIIcmcmcnl u c~nl..:nl t'l11 n:ufntc•.: l" suh i ct mpt3htc dl' 1\:'\~.:ulion h·ulgclair<: n rcrdant li lllct:on:1cl k rmk!i .. iel 1\~ 11 :R

c.t ~~ I• II~ I.'; pthtC:. cumplnhlcs l.' ~ n tr.lli s<lk\ U'S llill~l 1pt' :'1 lG! rui.:lie g~n..!l ah:. /\10) 1 lc.• bnl~ ~ n t1 ..:die:-. dc.:s comp:..:, sont rrodullcs a p;ar1i .. cf. \ ' TFR. "a~t)\ant du ..:olllr• •k ~ x ll:mi!l uu hudgtl. k l!l 'll \ ~ rnt:ml'ul u lt<Jn"'mi'> lc~ ..:omrtcs d<! gc~tionJ> ~:t Jc., pr•lict:, Jc 101.:. • ..: :. 1c1 .nl l..o..'itlll en 2009 ~1 1,1 lnur d~, comp • ..:~.

7. Au oL:Il d · l'o ,,unisscm..:nt :t J,, m.•itrix..: dr.:, uperations de 1'/\dmmi,lr:tti(\n

11\!ltk. le t..''!J I' :1 <;CIUtcnu k gouvcm..:m\'m t!an<; 1.:: r.-nl't•r~cmcnl l iH -;uh i ct du c<'ntrok tk. t l·'l'·..: . 'bui.J!-'~lairc.<; lie:-. aux JC\Iv HL;s elm. ;.~ 11tt\' S cntlt~~ du ~cclt:lll publil: tl.: t:l', k-..

net U<Jlll ua.clo t:t lcs ct:ll'lli-.._<>c nentl> puhhcs, d.•nt ks hopll:w' qut h:ncll<.:i ..:•1t de plu, ··n 11lus li>! tt·:m' crto,; rk IJ part du htrdgct J~: I' H at. "· cd c!V,·t. unc loi detinis~,t1t lc c::drc de lTt 111 :15 •" u d•,,ohniun de~ :tgcn~X':. airc;1 que lcl! rcy l..:,. ck inncli .mn~.n en! c t . .:

1.0 lrt•l• d~ il.f!\ 'lCd .tUUlllUillc:~ a ~ 1c adoptee. \ :nc cin:ul:urc du f'rcmi<:r ;\1 tm~lle

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wll.:ut .. tlts :lJ<.:nl ~ .:omptnbk:. ""' ~l~ no•mn~s d.in'i tout..~ k ; ngcnn::. qui r.:\Otv-:t:t Uti

tr.:uuf, r I l.'t. .: imponam. ( e dtspn'>llll qui :1 dejA cnmm..:nce a donn~· r de' r~:sult .11~ ' "

UJ',;I:'I ''..: rt..'Tll()r~~ Ia tr:m:;pnretll:\! t!:.~n~ cc\0 <:rructuro.: ~ ..:t pcr!ll<.!ll ta I,: nw;l! u di~po•,itinn ll'W1c ill< 1 n h'tl <: t>mpll:ll.: ~ur lcs :\gcncc-.. tlao s II!S lm~ d..: lin:tr.C<''i. ofli ant JU Parlc.:tn<."l\ I II'

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.tu \ .:;.teur p.u-apuhlk ro:pn:~n:an t I~ \l int:.tcrc en <.:harg..: J~ I inane.:~-

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27

ecun ' '. ~ a lion T .e FF.RA ~• pllote par une en lite tripurttt~ ou k:. Admuu:.tmtions conud.. ' lr>.. lc, les U!>-iOCtauon~ 1.1~ lrJnl'portcur~. les organi~ations ptll ronal~ et lcs rn•<lfh.:m c:n..s d..: consommntc:urs soul reprt\.: ntc!s. T c financcm<.·lll percrmc du Fonds .;st

are J'.llf un_ suhvcn!icm :mnucllt= du bud~d d~ I 'Et.11 Cl lc pl\\tluit d'um: 13XC p:tralisc,Jie :\ hi ch~rg. J · utilis.ttcurs Ccci u th:J.'l J>~:nnis d ' uugmcnh.:r ~i~nificnuvcmentle~ dotation-: butl,!:d:lll c~ pour le lin:tnc\.m..:nt do: l '~:ntretic.:u routtcr. Ccpcndnnt, certn•r.cs dsOicuhes dnn., l'c :o.c..:u11on des progrrunmc:.~ p.:r.>i<>tent. A tctme. h: produit de In tn\c parafi~calc

I.IC'."l'U t (IU\ ri~ Ulll,; borutc partie des dl•trgc~ du fonds. l e credit II e~olemcnl nccornpagn-: Ia >11 J'('I'C '1. t'n d..: l.r subvcntron d \1 g:v hnt:'IM en :tppu)'ant 1<: 1 111n~l\:rt dcfinillf de lu gc~tion d~ r. s •llrc,·.s fomtteres :\OX cullecti-.itcs local~s ct domidllcr en m~mc temp$ r~,plorltll i •'n du ch3rl'On de boi .. slrictcment d:tn~ lcs fore!\ .rmcnag~s En eiTct, le

guu, c-mc11 ·nt a J.!fiml t\·cment abolt le :.ystemc de quotH dmh lc ~c~o.tCllT.

IJ. Conmcntaire.~ 2i!ncr:1u'< sur lc t·uppurl

I 0 Cc lul:nr 'om main: d.:s pro~ r~:lJi,.:s par lc: ~~~~~~JI au cours de ccs dcmu~rc!l ann.:c:~ mnntt.: qu.: l\!s rC:,ullats constgn~s dano; k mppon ~ont en ligne aH:c nom: analy!lc E,eale11 <:nt nou-, ran:~gcons globokmcnt )e$ prrndr.) C) lct,Ons hrc:cs d.a.ns k do.:umtnl, no:.,nuncnt lc d rc de l1c1<ibitit~ Jc rin~trum..:ul d Ia mobtlbatinn rJpidc ,~.;, rc<.~;ource~ C I)'J'C d' ithln rnen t est pan•culi.:r.:mcnt cnicacc don:~ In rqwru;c .tU\ chocs c.\ogenes qur n~ to ~flu\Cnt de~ rcs:;ources contJ.l ·c} chques. I 'h•mnonrs;ttaon de.<~ instruments d'!'IJll'' 'i bud£ 1 me au~st, ••ou!> purait importanl~e . I e S~ncgal J realise un irnpon;~nt

"' ' 'In \ cu 111:1 i ··rc d..: coordinAtion d ... -s nppui' budgcl.rill:s, en !>lgllttnt avec hull (OS} ~Min:, ·~\;" iquc:; ,;( financkrs un .'\ rrangcment utdre de:. ApplllS Budgewirc:. ( \l ' •\1\) n '" . 1 rni~e en ttUH~ rcste crml'ronlc.: II des tlilli <.:ult~~ o~ rcll) nJmrsatJO!I csl 'II CvUI !> (:t UC\ rail abouhr ii l'~l:lbnmtron d 'une mol nee ..:ornmunc tJUI lcruit I ouj.: l de 1iUI\ i "· •ula. cl ~ouucndrait lc diuloguc nu sci11 de I'ACI\ 13.

11 . t\ lin ~IC .:onsohd.:r tOUS h:.<; progr.::" reali~..:s JUSqu 'ict et d' dV:lncer dJns ht mi:>c en O:U\Te de b D..:damuon de Pam., k <;ou\'erncment pcnsc qu.: l':~ppu i bud~cwu e est l'ln trum: nl ltl. •I e\ privil ..:gic. Lc c~rp ainsi que lcs nppUIS bullg..:ta rrel> d..:s autr<:s pnrt n 1 r=s 1~111 tlTI! d3uo;.mcnt qu-: -:c\ 1:1 tnrmc;nt c .. t pith ~lhcl\:nt nee le:. programmes,

r fomte<i C:l pnl.;..;tlurc:. nationnu;-. Cl pit~ apte a prndutn: de' rt~uhal.\ SOUICnllblcs dons lc h nt~. Par con ~·' l"cnl. nous pcnsons qu..: lc CSfP ct k:. Crcdns de Souticn 11 In Rctlucuo11 deb r \ ret..: ( "'~!')qui On( jouc Ull impOIIUlll role wns 13 rc:r .unse A Ia cris.:. dcH3U!'ll dn,·an• •e j\JUCt u. role de cat.rlyscur ,,u sc:in de I'AtA B et do~ns Ia transition d ... -s &utie-1 pa;t, n;lan;:. \"CI'$ J' o.~rpUI bud~;~l3ire. C~pcnd: rrt l Cet in~tnlmCnl lfCVI<lit OCCUpcr plus de (llto<;; en term.: de \ Oiume dan<; lc. ptJndcutllc de~~ Danque

28

Annex 5: Comments of Cofinanciers and Other Partners/Stakeholders

Not applicable.

29

Annex 6: List of Supporting Documents

Not available

30

Annex 7: Government's Policy Matrix and Outcome Indicators

Objective Actions and Measures Outcome Indicator end 2008 target actual

March 2010 March 2010

RESTORING BUDGETARY DJSCIPLINEAND AVOIDlNG A RECURRENCE OF FISCAL SLIPPAGES Enhancing budget (i) Adoption of a decree by the Council of Ministers that limits spending Carry-overs (reports de Less than 3.8 percent preparatjon and carryover to the budget of the next fiscal year to 5 percent of the previous credit) from previous 5percent ensuring better fiscal year's appropriations: (ii) carrying out of an inventory by the MEF of years, in percent of total enforcement of all active public procurement contracts; and (ii i) adoption by the Council of current-year budget-budget execution Ministers of a supplemental budget (Loi de Finances Rectijicatil·e) for the I 0.07 percent procedures fiscal year 2009 reflecting such new carry-over rules Improve PFM \-fake the new public financial accounting system (ASTER) functional in all T ime to produce monthly ASTER-based 30 days systems for budget the centralizing accounting stations, as evidenced by the production and Public Accounts Statements execution and submission to the Association of monthly balances of the Recipient's Statements (in months available 45 accounting Treasury on ASTER with the objective to produce consolidated public following relevant days after the

account balances. period- long and end of each variable, often exceeding month several months

Increase Publication on the web si te of the MEF of monthly budget execution reports Time to publish monthly Time to One week transparency by fro m SIGFIP every month, including the January, February and March Budget Execution reports publication of reinforcing public monthly reports ( in months, fol lowing no more than access to budgetary relevant period)- 60 days infonnation and by variable, often exceeding fully accounting for 6 months tax expenditures Reinforce external Preparation of the public accounts for financial year 2006 and submission of Time to submit annual Less than two Less t11an control of the the prepared public accounts to the Audit Oflice (Cour des Comptes). Public Accounts to the years two years budget Cour des Comptes (in

years following end of fiscal year)-long and variable, exceeding 3 years

MITIGATING FISCAL RISKS EMANATING FROM PUBLIC OFF-BUDGET ENTITIES Limit and control (i) Submission to Parliament of a law on public sector agencies with the Number of quarterly 2 quarterly 5 agencies the financial and objective to strengthen the regulatory framework for improved oversight of agency budget execution reports over with budget budgetary risks agencies; (ii) adoption by Parliament of such law; and (iii) issuance of reports submitted to MEF 2009 for at over CFAF related to public related implementing regulations that define the condi tions of creation, under new Law- none. least 10 5 billion sector agencies. dissolution, operation and control of such entities. agencies Restore the Initiation of an action plan to restore the financial soundness of hospitals, as Number of hospital 20 HFRPs 20

31

fmancial soundness evidenced by (i) the adoption by the managers of the twenty hospitals, the financial recovery plans of hospitals. l'vtinistry of Health and the Ministry of Economy and Finance of a (HFRP) prepared and

memorandum of understanding that ensures that all twenty hospitals develop approved by authorities a financial recovery plan as a condition for state financial assistance; (ii) the (2008}-none creation of an inter-ministerial committee, including representatives from the Ministry of Health and the Ministry of Economy and Finance, responsible for the oversight of hospital recovery plans; (iii) the creation of an oversight unit for the Sesame plan of the Ministry of Health; and (iv) adoption and publication of a decree by the Council of Ministers that sets out a health map for 2008-2013.

Procurement Reinforce the Use by contracting At least 90 NA procurement authorities of bidding percent of system

Adoption by ARMP of a regulation approving the standard bidding templates consistent with contracting

documents for works, goods and consulting services and making the use of nationaJ legislation and authorities use best-practice--uneven National

such documents mandatory in public procurement operat ions. Standard Bidding Documents

PROTECT KEY DEVELOPMENTAL OBJECTIVES Forest Resources Management Mitigate the impact Adoption and publication of a ministerial ordinance by the Minister of Tonnage of quotas issued 0 in Q l 2010 NA o f the suppression Environment that confirms the abolition of the quota system for wood allowing charcoal of the butane gas cutt ing and charcoal production from January I, 20 l 0 onwards, and prohibits production- 74 ,000 tons subsidy on the wood cutting for charcoal production in non-community managed forests. environment

Road maintenance Maintain/Preserve Operationaliz.ation of the FERA through (i) the adoption of a decree by Proceeds from road user CFAF 17 CFAF 10 the road Council of Ministers establishing the f'ERA; (ii) the adoption of a decree by charge transferred to billion billion in fTastructurc the MEF creating a road user charge; (iii) the appointment of an FEAR account in 2008 October capital of the administrator for the FERA; and (iv) the opening of an account for the FERA (billions ofCFAF )- 0 2009; and country at Central Bank; and (v) the transfer to such bank account of the proceeds 45 billion in

from the road user charge collected in January and February 2009 through 20 I 0 finance the adoption by the Council of MLnisters of a supplemental budget (Loi de law Finances Rectificative) for the fiscal year 2009 rcfiecti f!g such transfer.

Decentralization Advance the Transfer of budgetary appropriations for the FDD and FECL to local Longest time to transfer Less than 3 Less than 3 deccntral ization communities for financial year 2009 by the YIEF. budget appropriation to months months process either FDD or fECL

(months, in 2008, from beg inning of fiscal year}-12 months

32