|1. Project Data:
|Agricultural Sector Adjustment Credit|
|Agriculture Adjustment, Agriculture|
|France, Germany, European Union, African Development Bank|
|Christopher D. Gerrard, OEDST|
|Gregory K. Ingram|
|2. Project Objectives, Financing, Costs, and Components:|
The overall objective of this credit was to reap the greatest possible benefits from the devaluation of the CFA franc in January 1994 by liberalizing agricultural marketing, reducing the public sector role in agriculture, and improving incentives for the private sector. The project provided $150 million in three tranches over a four-year period, plus a supplementary credit of $74 million under the Fifth Dimension program. France provided co-financing of $60 million, Germany of $21 million, and the African Development Bank a grant for supporting the establishment of a monitoring system. The package of reforms comprised six components:
(1) reducing export taxation of cocoa and coffee,
(2) improving the internal and external marketing of cocoa and coffee,
(3) liberalizing rice imports and reducing government intervention in the sector,
(4) removing a series of non-tariff barriers and price controls in the agricultural sector,
(5) improving the programming and execution of the agricultural public investment program,
(6) privatizing the principal agro-industries in relation to rubber, palm oil, sugar, and cotton.
|3. Achievement of Relevant Objectives:|
While there were some delays in tranche release, and the closing date was extended for one year to December 31, 1998, the credit effectively supported a series of sustainable agricultural reforms complementary to the CFA devaluation. The government has controlled inflation and maintained the competitiveness gains from the devaluation, and overall economic growth has accelerated from 2% in 1994 to 7% in 1996 and 6% in 1997. The credit has contributed to a reduction in the traditionally paternalistic and pervasive government interventions in the sector, which stifled private initiative, and has fostered a new, expanded role for the private sector, including producers' organizations. Exports grew 50% between 1994 and 1997, and private investment almost doubled between 1993 and 1997.
|4. Significant Outcomes/Impacts:|
(1) Both cocoa and coffee production have increased significantly since 1994, pan-territorial pricing has been eliminated, export taxes on both commodities have been reduced, external trade in coffee was fully liberalized in October 1998, and that for cocoa is expected by end of 1999.
(2) Both producers and consumers have benefited from the liberalization of the rice sector. Both imports and domestic production have increased, and prices have been stable.
(3) The privatization of principal agro-industries was fully implemented. The new owners have started investing in much needed rehabilitation programs, thus reversing the long process of deterioration arising from the previous lack of resources and autonomy.
|5. Significant Shortcomings (include non-compliance with safeguard features):|
(1) With respect to the agricultural public investment program, three social funds that were designed to promote exports, young farmers, and livestock, and to give subsidized credit to farmers were poorly managed, experienced low repayment rates, and were discontinued in the 1999 budget. Two programs aimed at developing turnkey plantations for young farmers and irrigated areas for rice production were insufficiently prepared and subsequently funded at reduced levels.
(2) A monitoring and evaluation system to measure the impact of the reforms was not put in place until the end of the project.
(3) The government established a Steering Committee to oversee program implementation, which included representatives from all ministries and agencies concerned, as well as producers' organizations, under the chairmanship of an advisor to the Prime Minister. However, the government made insufficient effort to disseminate information about the reforms beyond the narrow circle of membership of this committee and the small group of government technocrats involved in implementation.
|6. Ratings:||ICR||OED Review||Reason for Disagreement/Comments|
These ratings are largely equivalent.
Quality of ICR:
|7. Lessons of Broad Applicablity:|
(1) A conducive macroeconomic environment is important for the success of sector policy reform projects. In this case, the devaluation of the CFA franc, and an ongoing macroeconomic policy that has maintained the competitiveness gains arising from the devaluation, was been a key ingredient in the success of the project, particularly in comparison with the previous Agricultural Sector Adjustment Loan.
(2) It is important for the implementing agency -- in this case the Steering Committee -- to have sufficient responsibility and authority to manage policy reforms on a day-to-day basis, and to develop and maintain a consensus for the reforms among the key local stakeholders. However, the Committee should have made greater efforts to disseminate information about the reforms beyond the membership of the committee, since vested interests opposed to the reforms, both internal and external, delayed the reforms on a number of occasions.
(3) Bank supervision from the field and staff continuity on both sides contributed positively to the relatively smooth implementation of the project.
(4) Appropriate Bank flexibility during project supervision can help project success. In this case, the Bank demonstrated appropriate flexibility in agreeing to waivers for the release of both the second and third tranches, which paid off on both occasions. Timely Bank disbursements were crucial for meeting a tight debt repayment schedule and the government met the initial conditions not long after tranche release in both cases.
(5) During the privatization process, both the Bank and the borrower need to do more and better analytic work to balance the state's fiscal interests against those of producers and consumers. In this case, the government appeared to be too favorable to the interests of the buyers of the privatized companies.
|8. Audit Recommended? No|
|9. Comments on Quality of ICR:|
The ICR was satisfactory. It covered the important subjects, the analysis was sound, and the lessons learned were appropriate.