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Implementation Completion Report (ICR) Review - Tg-economic Recovery & Gov. Grant 4


  
1. Project Data:   
ICR Review Date Posted:
01/09/2013   
Country:
Togo
Is this review for a Programmatic Series?
 No
First Project ID:
P122806
Appraisal
Actual
Project Name:
Tg-economic Recovery & Gov. Grant 4
Project Costs(US $M)
 28.0  28.0
L/C Number:
Loan/Credit (US $M)
 28.0  28.0
Sector Board:
Economic Policy
Cofinancing (US $M)
   
Cofinanciers:
Board Approval Date
  04/05/2011
 
 
Closing Date
12/31/2011 12/31/2011
Sector(s):
Central government administration (50%), Crops (20%), Power (20%), Mining and other extractive (10%)
Theme(s):
Public expenditure financial management and procurement (50%) Other rural development (20%) Export development and competitiveness (15%) Other public sector governance (15%)
         
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Nestor Ntungwanayo
Nils Fostvedt Navin Girishankar IEGPS2

2. Project Objectives and Components:

a. Objectives:


    The objectives of the fourth Economic Recovery and Governance Grant (ERGG-4) were to support Government-owned reforms aimed to: (i) improve public financial management (PDO1) and (ii) restore performance in key sectors of the economy (PDO2). Specific objectives were to strengthen budget preparation, execution, and controls, and public procurement, and to increase private sector confidence through improved governance and transparency in the cotton, phosphate, and energy sectors. These ERGG-4 objectives build on similar objectives supported under the first (FY08), second (FY09) and third (FY10) Economic Recovery and Governance Grants. However, the much larger first ERGG ($164 million) was used also to facilitate the clearance of Togo's arrears to IDA, and to provide budget support.

b. If this is a single DPL operation (not part of a series), were the project objectives/key associated outcome targets revised during implementation?
No

c. Policy Areas:

Reforms supported by the ERGG-4 covered two policy areas: (a) the improvement of governance, transparency and efficiency in public financial management, and (b) the advancement of structural reforms aimed at strengthening key sectors of the economy, namely the phosphates, cotton and energy sectors. Key policy components were (i) the preparation of a 2011 budget with a Medium Term Expenditure Framework (MTEF) for the education, health and agriculture sectors, (ii) increased transparency in the country's procurement process, (iii) the launching of an Extractive Industries Transparency Initiative (EITI) program in Togo, (iv) the implementation of an analytical accounting system for the new cotton company, and (v) the adoption a new policy of adjusting energy tariffs.

d. Comments on Project Cost, Financing, Borrower Contribution, and Dates

This was a one-tranche single development policy operation, on grant terms, approved on April 05, 2011 for SDR 18 million equivalent, made effective on May 31, 2011, and fully disbursed on June 17, 2011. A small disbursement equivalent to SDR 88,111.69, deriving from a $/SDR exchange fluctuation, was released to the Government before the operation closure on schedule on December 31, 2011. Final disbursement totaled the equivalent of SDR 18,088,111.69 and was used as direct budget support to the treasury. The ICR didn't discuss the fact that the disbursed amount was larger than the amount in the Financing Agreement.


3. Relevance of Objectives & Design:

a. Relevance of Objectives:

ERGG-4 was the fourth in a series of IDA grants to Togo that the Bank approved since 2007 when the country emerged from a long period of sociopolitical instability. Togo's first Poverty Reduction Strategy adopted in July 2009 was underpinned by four pillars, two of them being (i) the strengthening of governance, and (ii) the consolidation of the bases for strong and sustained growth. ERGG-4 grant objectives were consistent with these two pillars of the country's strategy. These objectives were also in line with the content of the Bank's 2008 Interim Strategy Note (ISN) for which the two key pillars were (i) to improve economic governance and transparency, and (ii) to promote economic recovery and sustainable development. A new ISN approved in December 2011 carried over the same pillars, albeit phrased slightly differently. Since ERGG-4 objectives demonstrate continuity with past efforts and congruence with the country's and the Bank's strategies, IEG assess the relevance of objectives as high.

b. Relevance of Design:

ERGG-4 built on reforms that were under implementation since 2008, including in the areas of public financial management and the restoration of key sectors such as phosphates, cotton and energy. Building on progress made in these areas was a sound approach to design. The design was also informed by an extensive diagnostic work, including a 2008 public expenditure and financial accountabilty (PEFA) report, a 2009 public expenditure and financial accountability review (PEMFAR), and a 2010 Country Economic Memorandum (CEM). The grant results matrix in Annex 2 of the Program Document was detailed and sound. It specified the project objectives and the baseline and target indicators as well. However, the causal link between the envisaged reforms and the operation's intended outcomes could have been strengthened. In particular, harmonization of country's public finance systems to the regional ones takes time, and having an analytical accounting system in the cotton sector is a complex undertaking. Due mainly to the continuity of reforms and the soundness of the results matrix, the relevance of design of this operation is rated substantial.


4. Achievement of Objectives (Efficacy) :

PDO1: Improving public financial management (Modest). In order to achieve this objective, results were expected in five areas: (i) Harmonizing the country's PFM legal framework with the West African Economic and Monetary Union (WAEMU) countries, (ii) Enhancing budget formulation and monitoring by consolidating improvements of transparency in the public accounts, and in improving budget planning, (iii) Better monitoring of budget execution by timely informing spending units on ceilings for expenditure commitments, (iv) Enhancing external budget controls in public enterprises (cotton, power and telecoms), and finally (v) scaling up procurement controls. Achievements are discussed below:

  • Budget monitoring improved as evidenced by the publication, as programmed, of quarterly budget execution reports for 2010. Budget planning was also strengthened following the creation of a new framework for treasury management planning, and Parliament's approval of a 2010 budget along with three sectoral MTEFs (health, education and agriculture). Transparency in public procurement was enhanced through the creation of the country's procurement website, and the circulation of a procurement journal. The target for publication of procurement notices and contract awards was partially met. While all procurement notices were published either in the daily press or in specialized journals, only 37 percent of procurement awards were published.
  • Conversely, the target on budget execution was not met, as the cash ceiling committee failed to communicate ceilings on expenditure to spending units. Also, harmonization of country's public finances system with those of the West African Economic and Monetary Union has just been initiated. While there was some improvement in public finance management through increased budget planning and reporting, upgraded treasury management planning and procurement transparency, there were missed targets relating to weak coordination between treasury and expenditure departments, and to harmonization between country and regional public finance systems.

Given these missed targets, this review rates the achievement of this objective as modest.

PDO2: Restoring performance in key sectors of the economy (Substantial). The following results were expected: (i) enhancing the management of the new cotton company, (ii) improving transparency and accountability in the phosphate sector, and (iii) enhancing the financial situation of the power company. Progress towards program targets was as follows:

Costs for the new cotton company were reduced by 17%, thereby exceeding the program target of a 5% reduction, due mainly to increase in cotton production, The second target in the phosphate sector was also met, as Togo formally became an EITI candidate country on October 20, 2010. The third target was also achieved with the implementation of a tariff adjustment (10% and 20%) by the power utility, resulting in an increase into the company's turnover, and its operating profit.

With regards to key sectors of the economy, efforts were made to enhance the transparency of public enterprise operating in the cotton sector and of public utilities in charge of energy, posts and telecommunications. These institutions submitted their 2007 and 2008 financial statements to the Court of Accounts. In addition, an analytical accounting system was implemented in the newly-created cotton company, farmer leaders received training toward a better participation within the new cotton company board, and the Government completed the last requirement to become an EITI candidate country on October 20, 2010. The Government also effected an adjustment of utility tariffs in the energy sector on January 1, 2011. Taken together, reforms have yielded concrete results as intended, including cost reduction in the new cotton company, price adjustment in the power company, and EITI candidacy. However, for reforms to be institutionalized, Government commitment and coalitions among supportive interest groups will need to be strengthened.

Overall, IEG's review finds the achievement of PDO2 to be substantial.

5. Efficiency (not applicable to DPLs):

6. Outcome:

The relevance of the objectives was substantial because the reform program under this operation was consistent with the country's priorities and the Bank's strategies in Togo. Relevance stemmed principally from the continuity in the program of reforms, thereby building on progress achieved, and the experience of executing reforms.

Some implementation issues remained. While the results matrix was realistic and well-focused on a small number of targets, there was room for tightening through better benchmarking of the reform agenda and greater realism of progress indicators. Also, IEG notes difficulties in coordinating operations in the treasury and the expenditure departments, and in harmonizing the country's public finance system with regional ones.

Even still, the country's PFM systems improved, as evidenced by increased budget planning and reporting, treasury management planning and procurement transparency. The grant program also achieved cost reductions in the new cotton company, price adjustment in the power company (along with increased turnover and profit), and qualification of the country as an EITI candidate.

On balance, IEG rates the achievement of outcome as moderately satisfactory.

a. Outcome Rating: Moderately Satisfactory

7. Rationale for Risk to Development Outcome Rating:

Togo has a history of political fragility and tension mostly related to the evolution of democratic institutions. However, elections held in 2010 brought stability and triggered a domestic reconciliation process. The country has been implementing its first PRSP adopted in 2009 and a new PRSP is under preparation. The Bank has been supporting the country through two ISNs approved in 2008 and 2011 respectively, and the IMF provided an Extended Credit facility (ECF) arrangement that helped the country to reach the enhanced HIPC completion point, and to qualify for the debt relief under the multilateral debt relief initiative (MDRI).

Throughout the 2008-2012 period, the Government undertook an internal reconciliation process which underpinned the current peaceful situation. Since 2009, Togo's inclusive government has shown commitment to economic reforms, and has built a track-record that allowed the country to clear its external arrears, benefit from external debt relief, and receive support from the donor community. Togo used the four ERGGs to spearhead reforms that resulted in improvements in PFM and restoring the performance of key sectors of the economy (cotton, phosphates, and energy). Ultimately, the success of public utility reforms depend on continued commitment. In this vein, an ERGG-5 aimed to deepen reforms was approved in March 2012. On the basis of progress in re-establishing peace, as well as implementing and locking in reforms under the four ERGGs, this review rates the risk to development outcome as moderate.

a. Risk to Development Outcome Rating: Moderate

8. Assessment of Bank Performance:

a. Quality at entry:

The Bank's advice and support at entry was sound. It ensured that the operation would build on the previous ERGG operations. This approach also ensured consistency between the grant program and the Bank's ISN and the country priorities. However, as discussed under Section 3.b above, the choice of prior actions and program targets could have been more precise and the results framework more stringent to give more chances to the country to achieve identified objectives. This review rates the quality at entry as moderately satisfactory.

Quality-at-Entry Rating: Moderately Satisfactory

b. Quality of supervision:

The program supervision was smooth, with resident specialists or visiting missions monitoring the program execution and providing advice where needed. For instance, adjustments were initiated the budget and procurement reform and the production costs in the cotton sector in order to stay the course on reforms. Some delay was experienced, especially in PFM, due to the departure of the TTL and delays in finding a replacement. Overall, program supervision is rated moderately satisfactory.

Quality of Supervision Rating: Moderately Satisfactory

Overall Bank Performance Rating: Moderately Satisfactory

9. Assessment of Borrower Performance:

a. Government Performance:

Togo's public administration still suffers from limited technical capacity. Even still, the Government moved to finalize prior actions and facilitate grant approval and disbursement. It also mobilized the donor community in support of its reforms, although this is not well documented in the ICR. Generally, remedial actions was taken to correct unwanted delay although some reform fatigue was observed during ERGG-4 implementation. On balance, IEG rates Government performance as moderately satisfactory.

Government Performance Rating: Moderately Satisfactory

b. Implementing Agency Performance:

Implementing Agency Performance Rating:

Overall Borrower Performance Rating: Moderately Satisfactory

10. M&E Design, Implementation, & Utilization:

a. M&E Design:

The Program Document set out key elements of the grant monitoring and evaluation system. It identified an existing high-level team within the Ministry of Economy and Finance to oversee and coordinate overall implementation of the grant, and to monitor the results of the reform program. A Public Finance Steering Committee was entrusted with the technical responsibility to monitor PFM reforms, while sector reforms were under the supervision of technical departments in sector ministries-Agriculture and fisheries for cotton, and Mines and Energy for phosphates and energy. The Program Document comprised also a set of tables (Table 5.2) and annexes (Annexes 2 and 4) with elements of the grant results framework. The tables and annexes indicated the grant objectives, expected results, with baseline and targets indicators, and the government entities responsible for implementation of each specific program reform. However, the results matrix needed to be better benchmarked and more realistic.

b. M&E Implementation:

Each Government entity played its respective role to ensure progress towards identified target in each area of policy reform. The Government maintained good relationship and coordination with the Bank and other donors and the authorities addressed promptly implementation issues.

a. M&E Utilization:

The high-level team in charge of grant coordination used the M&E system to monitor and influence progress of the reform agenda towards identified targets. In most instances, immediate remedial action was taken swiftly, building on data and information from the M&E system. However, there were cases whereby remedial action was inappropriate or tardy. Overall, M& E design, implementation and utilization were satisfactory, despite weak spots on the design aspect. M&E performance is therefore rated substantial.

M&E Quality Rating: Substantial

11. Other Issues:

a. Safeguards:

Not applicable

b. Fiduciary Compliance:

The grant resources were disbursed in one tranche (with a second small disbursement due to $/SDR exchange rate fluctuation) and were channeled through the treasury fiduciary system. No specific concerns were raised by stakeholders, and the grant reform agenda focused on strengthening the country's PFM, and the internal controls in particular.

c. Unintended Impacts (positive or negative):

This operation didn't have unintended impacts.

d. Other:
Not applicable



12. Ratings:

ICR
IEG Review
Reason for Disagreement/Comments
Outcome:
Moderately Satisfactory
Moderately Satisfactory
 
Risk to Development Outcome:
Moderate
Moderate
 
Bank Performance:
Moderately Satisfactory
Moderately Satisfactory
 
Borrower Performance:
Moderately Satisfactory
Moderately Satisfactory
 
Quality of ICR:
 
Satisfactory
 
NOTES:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate.

13. Lessons:
  • The main lesson from this operation is that, contrary to earlier IEG findings, progress in economic governance reforms can be achieved in fragile environments if the timing and the incentives are appropriate. Performance achieved under this operation derives in part from (i) the progress made under three previous stand-alone operations which supported reforms in the same areas and (ii) the commitment of the authorities through the four consecutive policy grants.
  • Other lessons similar to those indicated in the ICR are as follows. First, in-country supervision of operations and deployment of expertise are key to achieving results when a country's technical capacity is weak and the Bank is operating under a tight operational budget. Second, the design of a DPL should pay attention to the clear definition of prior actions to ensure consensual agreement among stakeholders. Clarity on these issues can favorably impact the monitoring and achievement of results.

  • 14. Assessment Recommended?

    No

    15. Comments on Quality of ICR:


    The ICR is comprehensive and addresses the main issues relating the policy grant, including the grant objective and design, its implementation features and the M&E arrangements as well. In particular, the section on lessons learned provided a critical assessment of the grant design and implementation, the role of the Bank's management of supervision resources and in-house expertise. However, the ICR could have been more attentive to detail, for instance, the units and numbers used for the third indicator, and the grant disbursement process.

    a. Quality of ICR Rating: Satisfactory

    (ICRR-Rev6DPL-Jun-2011)
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