Document of The World Bank FOR OFFICIAL USE ONLY Report No. 43222-TG TOGO JOINT IDA-IMF STAFF ADVISORY NOTE ON THE INTERIM POVERTY REDUCTION STRATEGY PAPER April 17,2008 Poverty Reduction and Economic Management 4 Country Department AFCF2 Africa Region This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World I N T E R N A T I O N A L MONETARY FUND AND INTERNATIONAL DEVELOPMENT ASSOCIATION REPUBLIC OF TOGO Joint Staff Advisory Note on the Interim Poverty Reduction Strategy Paper Prepared by the Staffs o f the International Monetary Fund (IMF) and the International Development Association (IDA) Approved by Robert Sharer and Adnan Mazarei (IMF) and Obiageli K. Ezekwesili (IDA) April 17,2008 I. OVERVIEW 1. This Joint Staff Advisory Note (JSAN) reviews the Interim Poverty Reduction Strategy Paper (I-PRSP) prepared by the Government of Togo. The I-PRSP sets out an ambitious three-year program to strengthen political and economic governance, support economic recovery and reduce poverty. I t was adopted by the Government o f Togo on March 7,2008 and submitted to IDA and the IMF on March 19,2008. 2. Work on the I-PRSP began in 2001, but was interrupted by political tensions in 2005. The process resumed in August 2006 and was concluded in March 2008. In both phases, the preparation o f the I-PRSP was inclusive and involved both government and civil society organizations (unions, religious organizations, private sector and NGOs). Donors engaged at the beginning o f the second phase and have since played an important role advising the authorities and helping to carry out a number o f quantitative and qualitative poverty surveys. 3. I n the second phase o f preparing the I-PRSP, emphasis was placed on priority measures, notably in the areas of public finance management and governance of key public enterprises and banks. The authorities have started implementing these priority measures supported by an IMF Staff-Monitored Program, paving the way for a Poverty Reduction and Growth Facility (PRGF), for IMF Board consideration in April 2008; a development policy operation to support economic governance reforms for consideration by the World Bank Board in M a y 2008; an operation to clear arrears to the African Development Fund; resumption o f EU financial support; and increased interest by other donors in resuming normal relations with Togo after a decade and a h a l f o f modest activity. 4. The I-PRSP sets out an ambitious poverty reduction strategy (PRS) to revive economic growth and improve basic living conditions along three strategic axes: (i) 2 strengthening political and economic governance, with a focus on institutional reform and fiscal governance; (ii) promoting economic recovery and sustainable development, with measures to reform state-owned enterprises and financial institutions, improve the business environment, strengthen regional integration and trade, revive agricultural production, rehabilitate infrastructure, and improve management o f natural resource and the environment; and (iii) developing social sectors, human resources and employment, with a focus on improving access to and the quality o f basic education and health services. The I- PRSP presents the ongoing policy reforms, which remain a priority in the near term, and outlines an expanded reform agenda going forward. 5. The staffs note that the I-PRSP contains most of the elements typically contained in a full PRSP and agree with the thrust of its macroeconomic policy scenarios and economic and social objectives. The I-PRSP provides an in-depth poverty diagnosis and presents the macroeconomic framework, sectoral plans, reform policy measures, costing, and a policy matrix for 2008-10. I t also outlines the institutional framework for the I-PRSP implementation, monitoring and evaluation, and planned timeline and participatory process for the preparation o f the full PRSP. 6. The JSAN provides feedback from the staffs o f the IMF and IDA on the I-PRSP with a view toward the preparation of the full PRSP. The JSAN presents the staffs’ views on priority areas for strengthening the full PRSP, which the Government plans to complete by early 2009. In particular, the JSAN comments on: (i) the poverty diagnosis; (ii) sector policies and reform priorities; and ( iii)the strategy’s implementation and monitoring and evaluation framework, and implementation risks. AND DIAGNOSIS 11. POVERTY TRENDS 7. The I-PRSP provides an adequate analysis of basic living conditions and poverty, drawing on the comprehensive household survey conducted in 2006 and several sector surveys carried out between 2000 and 2006. According to the 2006 household survey, about 62 percent o f the population lives below the poverty line, with rural areas accounting for the majority o f the poor (74 percent versus 37 percent in urban areas). Wide disparities in poverty between regions also exist. 8. As a result of the political situation and the weak economic performance, Togo’s Human Development Index, as measured by the UNDP, failed to improve in recent years, in contrast with a gradual increase experienced in sub-Saharan Africa. Indeed, the I - PRSP notes that, because o f the socio-political crisis, Togo has not been able to design and implement programs for moving toward the Millennium Development Goals (MDGs), although considerable efforts have been made in education, maternal health and HIV/AIDS. Also, although a difference in methodology between the 2006 household survey and the previous 1995 survey prevents a comparative analysis o f poverty over time, the 2006 household survey revealed that respondents perceived a worsening o f living conditions between 2000 and 2006, mainly due to economic difficulties and health problems. Public spending o n basic services was constrained and favored urban rather than rural areas; infrastructure investment in the rural areas was limited; and high unemployment has persisted in the urban areas. 9. While the determinants o f poverty outcomes are adequately identified in the I - PRSP, staffs recommend that growth and the distributional impacts o f sectoral programs and expenditures be better assessed as part o f the preparation of the full PRSP. The staffs encourage the Government to adopt a coding to track pro-poor expenditures in the budgetary nomenclature, monitor closely the execution o f the budget and publish regular reports o n the expenditures in the priority sectors. The staffs urge the authorities to also deepen the analysis on the links between growth policies and sectoral programs and expenditures, and their impact on poverty reduction. I t i s recommended that this analysis include food security considerations and be reflected in the policies formulated in the fill poverty reduction strategy. 111. SECTOR POLICIES AND REFORM PRIORITIES 10. The I-PRSP macroeconomic framework projects an increase in real GDP growth to 4 percent (about 2 percent per capita) during 2008-10 which staffs believe i s realistic given the l o w capacity level at which the economy i s operating and the reform policies planned by the Government. The macroeconomic framework is also based on prudent projections on tax revenue growth and assumes that Togo’s external financing will reach the regional average. The medium-term budget framework i s well-developed, targeting a modest primary fiscal adjustment combined with an increase in external assistance and H P C debt relief, which would allow a significant increase in spending on infrastructure and basic social services. The authorities have identified non-priority spending which could be reduced in the event o f a shortfall in revenue or external financing, to safeguard the social sectors and public infrastructures. The I-PRSP also provides a clear link between the programs under the strategic axes and the medium-term budget, with most spending going toward health, education and infrastructure. Despite the projected significant increase in external assistance and spending, the resources would still be insufficient for Togo to meet the MDGs. 11. Given Togo’s relatively limited institutional capacity and the complexity of the reforms, the time frame envisaged for several reforms contained in the policy matrix appears ambitious and frontloaded. The staffs recommend that the authorities sequence fiture reforms appropriately and set realistic deadlines. For example, some o f the public finance management measures are critical in the short term to ensure that the additional resources from reengagement with donors and debt relief are spent in a transparent and effective manner, and are channeled to priority areas aimed at raising growth and reducing poverty. Similarly, efforts to strengthen governance and halt the decline o f fragile state banks and key public enterprises are both urgent and critical for strengthening the foundations o f 4 Togo’s nascent economic recovery. Other reforms, including deeper structural reforms to strengthen performance o f public enterprises and promote private sector growth, will require more time to implement and yield results, given the need for adequate analytical underpinnings and complex implementation issues. The staffs recommend that the PRSP outline a growth agenda based on Togo’s regional connection, notably by exploiting i t s transit corridor and deep port facilities at Lomt, leveraging its past reputation as a strong regional financial center, and promoting the services sectors. 12. The staffs agree that the scope and direction of the I-PRSP policy measures are broadly consistent with the stated objectives. They recommend that the full PRSP provide additional specificity on the key elements o f the more complex reforms, in particular in: 0 Cotton sector. Since finalization o f the I-PRSP, the Government has decided, based on recent financial, institutional and strategic audits, to liquidate the loss-making cotton company and create a new company partly owned by producers as an interim step toward investment o f a strategic private partner. Additional clarity o n the specific steps planned by the Government to strengthen governance and performance o f the cotton company, as well as looking at the social impact o f the reforms, would be useful, including management, accounting and financial control systems. Clarity would also be useful on sector reform measures, including o n farmer productivity enhancement measures, input credit and supply mechanisms, pricing issues, rural infrastructure, and transition issues until entry o f a strategic partner. 0 Phosphates. The staffs recommend that, further to the investment program to modernize phosphate sector equipment, the PRSP set out more clearly the strategic vision for the sector and, thereby, the implications for the future sector reform agenda. In view o f the currently l o w level o f capacity utilization, the staffs recommend that the sector strategic vision clearly specify the critical role o f the investment program for restoring and boosting the sector’s production capacity in the medium term. The staffs also encourage the Government to pursue the process toward membership in the Extractive Industries Transparency Initiative (EITI). 0 Financial sector. While confidentiality issues prevent too detailed a discussion, i t would be useful to elaborate both on the near term restructuring plan o f banks with negative net worth and the long-term strategic objective o f the financial sector, inclusive o f microfinance and non-bank financial institutions (e.g., social security, insurance companies). In addition, staffs recommend that the PRSP outline measures to secure a stable pension system and strengthen the financial sector so as to restore i t s prior role as an important regional financial center. 0 Energy. The region-wide energy crisis is a complex problem and Togo as an importer o f most o f its electricity consumption has limited options, particularly in a non- regional context. In view o f the sector’s critical l i n k s to Togo’s growth prospects, 5 staffs urge the authorities to articulate in the full PRSP an integrated strategy for the development o f the energy sector that reflects a better balance between national and regional solutions to energy generation. The strategy would also need to clearly distinguish between near-term steps to improve energy supply as w e l l as the key elements o f a long-term strategy comprising, among others, investments, new sources o f electricity imports, pricing and demand management, and institutional questions related to the partnership with Benin. The strategy could also clearly articulate a linkage with the West Africa regional power pool. e Education sector. The staffs recommend that, in preparing the full PRSP, the results o f recently completed analytical work prepared under the Country Status Report o n Education are fully considered. This should lead to the preparation and adoption o f a credible and financially viable education sector plan, which would be the basis for Togo to apply to the Education For All - Fast Track Initiative. The Initiative is expected to become the major multilateral financial mechanism to support primary education in Togo. 0 Health sector. The staffs note that overall the strategic goals for the health sector in the I-PRSP are relevant and respond to the serious human development crisis affecting Togo. However, the strategy’s objective o f achieving the MDGs by 2015 i s very ambitious, and the staffs recommend listing these as overall programmatic goals rather than specific targets. In terms o f policies, the staffs recommend that the full Poverty Reduction Strategy Paper put emphasis on the development o f pro-poor health policies: these may include the transfer o f substantial financial and human resources to rural remote areas, the promotion o f access to primary health care centers, and the strengthening o f decentralized health services to ensure quality. e Community development. The staffs note that the I-PRSP gives appropriate emphasis to the role that civil society organizations may play in education, training, health and other basic services, and welcome the Government’s approach to facilitating development activities at the community level. In this context, the staffs recommend that the authorities identify development partners that could support specific community programs in addition to those discussed under the Millennium Village initiative, and in particular programs that will support community development as part o f the on-going decentralization process. 13. The I-PRSP provides a clear and consistent linkage between the reform agenda and the medium-term budget at the aggregate level. Staffs recommend that these estimates be regularly updated as specific reforms and projects take shape and enter the implementation phase. In addition, staffs urge the authorities to elaborate in the full PRSP the costs o f key sector programs through sector medium term expenditure frameworks that are consistent with the medium-term budget framework. 6 14. With respect to external assistance, the staffs urge the authorities to identify, where possible, the development partners that could support specific reforms identified in the I-PRSP, given the need for both technical and financial assistance in many areas. I t would also be helpful to prioritize the investment program and specify mechanisms for coordination with development partners to ensure that donor financing and technical assistance i s aligned with the Government’s PRS priorities. The staffs recommend that the full PRSP emphasize the importance o f maintaining debt sustainability after debt relief by relying on highly concessional financing (mainly grants) and improving external debt management. I t should also provide an estimate o f how much external assistance would be required beyond 2010. 15. The staffs note that in some areas more analysis i s needed to develop the details of the required policies. In particular, this would be helpful in (i) the energy sector, to review the strategic role o f Togo’s energy development in the context o f the regional power pool; (ii) agriculture, to reassess selected sub-sector support or reform programs in the context o f options for enhancing competitiveness o f the product supply chains; ( iii) phosphate sector, a financial and strategic audit would provide elements for articulating a vision and reform program for the sector; (iv) trade, notably a diagnostic trade integrated study (DTIS) as contribution to the growth and diversification agenda; (v) health sector, primarily to identify the demand for health services, the public and private health services supply capacity and existing gaps; (vi) transport and telecommunications, notably a strategic review o f the port’s future in a regional integration context to assess strategic links o f the transport and sector programs; and (vii) microfinance and pensions, primarily to conduct actuarial reviews to enable articulation o f pension reform measures. Iv. AND EVALUATION IMPLEMENTATION, MONITORING 16. The institutional mechanism to be established for PRS monitoring and evaluation comprises several components involving representatives o f all branches o f government and non-government stakeholders. The lead entity will be the National Council for the PSRP Monitoring chaired by the Prime Minister and with representatives from the legislative branch, civil society and the private sector, charged with coordinating the implementation o f the poverty reduction strategy. Other existing entities include an inter- ministerial committee, technical steering committee, permanent technical secretariat and sectoral committees. The Government aims to establish local and regional participatory monitoring committees subsequent to installation o f local elected officials. A Government- Donor committee i s also envisioned once the priority national entities are in place and consolidated. While acknowledging the inclusive nature o f this institutional framework, the staffs note the current limited capacity o f civil society to filly engage in national policy discussions. In this regard, the staffs encourage the Togolese authorities to explore, with the donor community, options for strengthening civil society capacity. 7 17. The I-PRSP includes a set o f economic and social indicators to track progress, and notes that the information system for monitoring the PRSP and MDGs will be based partly on existing sectoral information systems, particularly those in health, education, HIV/AIDS, finance and rural development. The staffs concur with the I-PRSP’s view o f the need to strengthen the national statistics system as regards both the production and the use o f statistical information. 18. While the economic and poverty data are adequate for preparing a full PRSP, there will still be a need to build statistical capacity in key economic sectors, notably agriculture and services, to inform policymakers as they implement the strategy. The monitoring system relies o n relatively comprehensive indicators and staffs recommend that the authorities focus it on a limited number o f indicators to facilitate global monitoring o f PRS implementation progress. For the full PRSP, the staffs encourage the authorities to elaborate the program for strengthening the statistical information system and a practical monitoring and evaluation framework that takes full account o f existing systems and capacity levels. 19. Capacity constraints, political tensions, and adverse economic shocks are key risks that could slow down implementation of the PRS. To mitigate these risks, i t will be important to: (i) continue reaching out to local stakeholders, in particular in preparing the full PRSP; (ii) coordinate closely with donors to ensure sufficient technical and financial assistance i s forthcoming for the country’s identified priority needs; ( iii)incorporate analysis and measures to strengthen social protection, including food security and disaster risk management considerations; and (iv) maintain sound fiscal policies and continue and deepen governance reforms to increase the efficiency, effectiveness and transparency o f public resource use. In addition, the full PRSP could further develop the scenario analysis by assessing the potential impact o f lower (and higher) external assistance and o f economic shocks, including impact o f further o i l and food price increases. v. FOR DISCUSSION ISSUES BY THE EXECUTIVE DIRECTORS 20. The I-PRSP clearly identifies the major obstacles to poverty reduction in Togo and outlines a reasonable framework for implementing the Government’s growth and poverty reduction agenda over the period 2008-10. I t recognizes the considerable challenges to achieve the MDGs and the risks to i t s implementation. I t also adequately outlines the institutional framework for the I-PRSP implementation, monitoring and evaluation, and planned timeline and participatory process for the preparation o f the full PRSP. 8 2 1. I n considering the authorities’ I-PRSP and associated JSAN, Executive Directors’ views are sought o n whether they agree with the main areas identified by staffs as priorities for strengthening the PRS and i t s implementation. Director’s views are also sought on whether they concur with the areas identified by staffs (i.e. public financial management, financial sector, cotton, phosphate and energy) where additional specificity could be added for the preparation o f the full PRSP and the key implementation risks, notably capacity constraints, political tensions and adverse economic shocks. TOGOLESE REPUBLIC INTERIM POVERTY REDUCTION STRATEGY Official Version' M a r c h 2008 ' Version approved by the Council o f Ministers. - - DMSDRlS-#3563174-~2-Togo 2008 I-PRSP (ENG).DOC April 1,2008 (10:27 AM) Contents Page ACRONYMS AND ABBREVIATIONS ............................................................................... i11 EXECUTIVE SUMMARY .................................................................................................... VI INTRODUCTION ..................................................................................................................... 1 CHAPTER 1: RECENT DEVELOPMENTS AND CONTEXT OF THE INTERIM POVERTY REDUCTION STRATEGY PAPER ......................................................................................... 3 1.1 SUMMARY OF RECENT POLITICAL DEVELOPMENTS.......................... 3 1.2 ECONOMIC SITUATION ................................................................................ 3 1.3 ROLE PLAYED B Y CIVIL SOCIETY IN RECENT SOCIOPOLITICAL AND ECONOMIC DEVELOPMENT.................................................................................... 5 1.4 PARTICIPATORY PROCESS FOR PREPARINGTHE INTERIM POVERTY REDUCTION STRATEGY PAPER ............................................................................. 6 CHAPTER 2: THE DIMENSIONS OF POVERTY IN TOGO ................................................ 7 2.1. THE QUANTITATIVE APPROACH TO POVERTY .......................................... 7 2.1.1. The monetary approach to poverty .......................................................... 7 2.1.2. The profile of monetary poverty in Togo ................................................ 9 2.1.3 Poverty and inequality ............................................................................ 11 2.1.4 Poverty and vulnerability ........................................................................ 11 2.1.5 Poverty and household socio-demographic characteristics .................... 12 2.2. THE QUALITATIVE APPROACH TO POVERTY........................................... 12 2.2.1 People's perceptionof poverty ................................................................ 13 2.2.2 The causes o f poverty, as people see it ................................................... 13 2.2.3 People's expectations .............................................................................. 13 2.3. DETERMINANTS OF POVERTY...................................................................... 15 2.4. POVERTY AND HUMAN DEVELOPMENT IN TOGO .................................. 16 2.4.1 Human capital .......................................................................................... 16 2.4.2 Basic socioeconomic infrastructure ........................................................ 21 2.4.3 Employment and incomes....................................................................... 23 2.5. MDG STATUS AND CHALLENGES TO 2015 ................................................. 23 2.5.1 Togo's MDG status ................................................................................. 23 2.5.2 Challenges to achieving the MDG in Togo ............................................ 28 CHAPTER 3: POVERTY REDUCTION AND GROWTH STRATEGY.............................. 29 3.1 STRATEGIC OBJECTIVE 1: IMPROVEMENT OF POLITICAL AND ECONOMIC GOVERNANCE.......................................................................................................... 29 3.1.1 Improvement of political governance .................................................. 29 3.1.1 Implementation of institutional reforms .............................................. 31 3.1.3. Fiscal stabilization and efforts to combat corruption.......................... 33 3.1.4 Sound and effective management of aid flows .................................... 36 3.2 STRATEGIC OBJECTIVE 2: CONSOLIDATION OF ECONOMIC REVIVAL AND PROMOTION OF SUSTAINABLE DEVELOPMENT ............................................. 36 3.2.1. Strengtheningstructural reforms......................................................... 36 3.2.2 Strengtheningregional integration and trade promotion........................ 40 3.2.3 Revival of the agricultural and rural economy .................................... 40 3.2.4 Development of infrastructure to support economic growth ..............43 3.2.5. Effective management of natural resources and the environment ......45 i 3.3 STRATEGIC OBJECTIVE 3: DEVELOPMENT OF THE SOCIAL SECTORS. HUMAN RESOURCES AND EMPLOYMENT........................................................ 46 3.3.1. Promotion of the educational and training system.............................. 47 3.3.2. Development of the health system and health care ............................. 48 3.3.3. Improving the nutritional status of the population.............................. 50 3.3.4. Improving access to drinking water and sanitation infrastructure ......51 3.3.5. Promotiono f gender equity, employment, social protection and community development ..................................................................................................... 51 CHAPTER 4: MACROECONOMIC FRAMEWORK AND COST OF THE INTERIM POVERTY REDUCTION STRATEGY..................................................................................................... 54 4.1 MACROECONOMIC FRAMEWORK AND SCENARIOS.......................... 55 4.1.1 Baseline scenario ................................................................................. 55 4.1.2 Low alternative scenario ...................................................................... 59 4.1.3 High alternative scenario ..................................................................... 59 4.2 COST ESTIMATE FOR THE INTERIM POVERTY REDUCTION STRATEGY61 4.2.1 Total cost of the strategy ...................................................................... 61 4.2.2 Breakdown of the total cost by strategic objective .............................. 62 4.2.3 Breakdown of the total cost by specific program ................................ 62 CHAPTER 5: INSTITUTIONAL FRAMEWORK AND IMPLEMENTATION, MONITORING AND ASSESSMENT MECHANISMS ............................................................................................ 65 5.1 Institutional framework for implementation, monitoring and evaluation of the strategy ................................................................................................................... 65 5.2 Information system for monitoring and evaluation of the strategy ..................68 5.2.1 Structure o f the system......................................................................... 69 5.2.2 Improved production and disseminationof statistical information .....70 5.3 CAPACITY BUILDING ................................................................................. 70 5.4 OUTLOOK FOR PREPARATION OF THE FULL PRSP............................. 71 5.4.1 Indicative timetable and broad process outlines .................................. 71 5.4.2 Participatory preparation of the full PRSP........................................... 72 Annexes 1. Indicative List of Surveys and Studies to be Performed...................................................... 75 2. Poverty Monitoring Indicators............................................................................................. 76 3 . Overall Cost of the Interim Strategy by Type of Financing ................................................ 78 4 . Cost of the Interim Strategy (in percentage of GDP) .......................................................... 80 5. Fiscal Reporting Table: Projections for 2008-10 (in billions of CFA francs) .................... 81 6. Institutional Framework for Implementingand Monitoring/Assessing ............................... 82 7. Matrix of measures ............................................................................................................. -83 11 ACRONYMS AND ABBREVIATIONS Appui BudgCtaire pour l a RCduction de la PauvretC [Fiscal Support for ABRP Poverty Reduction] ACP Africa, Caribbean, and the Pacific AfDB African Development Bank AGR ActivitC GCnCratrice de Revenu [Income Generating Activity] AlDS/HlV Acquired Immune Deficiency SyndromelHuman Immunodeficiency Virus ALC Aide extCrieure Like au Commerce [Trade-Related Foreign Aid] APE Economic Partnership Agreement BCEAO Central Bank o f West African States BTCI Banque Togolaise pour l e Commerce et 1’Industrie BWI Bretton Woods Initiative CFAF CFA Franc COGES Management Committee CPAR Country Procurement Assessment Report CPI Consumer Price Index cso Civil society organization cu Customs Union DAC-OECD OECD Development Assistance Committee DC Developingcountries DEC Delegation o f the European Commission DGSCN Directorate General o f Statistics and National Accounts DSA Debt Sustainability Analysis EBC Enquete Budget Consommation [Consumption Budget Survey] EBID ECOWAS Bank for Investment and Development EC European Commission ECA Economic Commission for Africa ECOWAS Economic Community of West African States EDF European Development Fund EIB European Investment Bank EU European Union FA0 UN Food and Agriculture Organization FDI Foreign Direct Investment F-PRSP Full Poverty Reduction Strategy Paper FSSA Financial System Stability Assessment FTA Free Trade Agreement FTZ Free Trade Zone GDP Gross Domestic Product GNI Gross National Income HDI Human Development lndicator HIPC Initiativ r e Heavily Indebted Poor Countries Initiative HPI Human Poverty Indicator ICT Information and Communications Technologies IDA InternationalDevelopment Association IDB Islamic Development Bank iii IMF International Monetary Fund I-PRSP Interim Poverty Reduction Strategy Paper LDC Less Developed Countries MAEP Ministry o f Agriculture, Livestock, and Fisheries MDAT Ministry of Development and Regional Planning MDG Millennium Development Goals MDRI Multilateral Debt Relief Initiative MEF Ministry of Economy and Finance MEPS Ministry of Primary and Secondary Education MERF Ministry of Environment and Forest Resources MFI Microfinance Institution MTEF Medium-Term Expenditure Framework MTFF Medium-Term Fiscal Framework NEER Nominal Effective Exchange Rate NEPAD New Partnership for Africa’s Development NGO Nongovernmental organization ODA Official Development Assistance OECD Organization for Economic Cooperation and Development OHADA Organizationfor the Harmonizationo f Business Law in Africa OTPAFG Office Togolais des PhosphatesAnternational Fertilizer Group PARIS 21 Partnership in Statistics for Development in the 2 1st Century Projet d’ Appui a l a RCglementation des Mutuelles d’Epargne et de CrCdit PARMEC [Support Project for the Regulation o f Credit Unions] PEFA Public Expenditure and Financial Accountability PER Public Expenditures Review PFM Public Financial Management PIP Public Investment Program Programme National de Modernisationde l a Justice [National Program for PNMJ the Modernizationof Justice] Planification, Programmation, BudgCtisation et Suivi (des Investissements PPBS (IP) Publics) [Planning, Programming, Budgeting and Monitoring (of Public Investment)] PRGF Poverty Reduction and Growth Facility PRS Poverty Reduction Strategy PSA Partenariat StratCgique avec 1’Afrique [Strategic Partnership with Africa] Questionnaire UnifiC des Indicateurs de Base du Bien-Stre [Standardized QUIBB Questionnaire on the Basic Indicators o f Wellbeing] REER Real Effective Exchange Rate SMP Staff-MonitoredProgram (IMF) SNA System o f National Accounts SNPT SociCtC Nouvelle des Phosphates du Togo SOTOCO SociCtC Togolaise de Coton SSA Sub-Saharan Africa SWAP Sector-Wide Approach TA Technical AssistantlAssistance TEC Common External Tariff TOFE Tableau des Optrations Financikres de 1’Etat [Fiscal Reporting Table] UNDP United Nations Development Program UNICEF United Nations Children’s Fund iv USP UnitC de SantC Primaire [Primary Health Care Unit] WAEMU West African Economic and Monetary Union WB World Bank WFP World Food Program WTO World Trade Organization V EXECUTIVE SUMMARY Togo has been engaged in the process of preparing its PRSP since February 2001. In spite of the adoption of the Interim PRSP by the government in November 2004, the measures envisaged for this purpose have been implemented only to a very limited extent, largely as a result of the social and political crisis that has affected Togo in recent years, resulting in a slowdown in economic activity and the absence of major progress in social indicators. To overcome this crisis, the government since 2005 has been engaged in key reforms intendedto restore harmony to the political climate. Thanks to the Comprehensive Political Agreement [Accord Politique Global (APG)], reached by the political community, the government has been focused on restoring financial aid. Against this backdrop, a staff- monitored program covering the period October 2006-June 2007 was entered into with the IMF, thereby leadingthe way to negotiations regarding a Poverty and Growth ReductionFacility (PRGF). Since then, the government has been actively committed to updating the I-PRSP with the aim of offering a platform o f key agenda items for dialogue with the Bretton Woods Institutions and the full range of technical and financial partners. The measures contained in this interim strategy-which will be consolidated in the context of the comprehensive strategy-lay the groundwork for improving the public policies/programs required to make progress toward achieving the Millennium Development Goals (MDGs). The requisite policymaking efforts and the performance of the underlying diagnostic assessment were the end- product of a broadly participatory exercise bringing together representatives of all segments of the economic and social l i f e of the country. Participatory process The principle of dialogue that has guided the process thus far, has remained unchanged in spite of the interruptionfollowing the adoption in 2004 of the initial version of the I-PRSP. The initial phase, carried out between February 200 1 and November 2004, was predicated upon a consultative exercise involving the civil service, civil society, and other groups, to wit: NGOs, trade unions, religious denominations, the private sector, etc. This initial phase began with a methodologicalseminar intendedto define the conduct of the process for the I-PRSP. Over 70 percent of the participants at the seminar were not from the civil service. Following the seminar, seven (7) thematic groups were established. Each group numbered around 20 participants, including 5 or 6 representatives from civil society. The efforts of the thematic groups made it possible to prepare a draft interimpaper which was validated during a workshop at which civil society was heavily represented (accounting for over half of the participants). Furthermore, the phase devoted to updating the I-PRSP was characterized by the qualitative survey on poverty assisted by the World Bank. This survey strengthened the participatory dimension of the process, insofar as it made it possible to engage in discussions with the communities regardingtheir perceptions o f poverty, and on that basis, to develop a clearer idea of their concerns on the subject. Diagnostic assessment of poverty According to the various surveys, over 60 percent of the Togolese populationlives below the poverty line. The incidence of poverty i s very high in rural areas where three households out of four are poor, as opposed to two out o f vie in urban areas. The regions hardest hit by poverty are the RCgion des Savanes (90.5 percent), the RCgion Centrale (77.7 percent) and the RCgion de Kara (75 percent) with a vi strong prevalence in rural areas. Furthermore, poverty i s strongly correlated with undernutrition to the extent that 64.2 percent o f the poor community i s undernourished. Monetary inequalities are relatively low in all regions o f Togo. Conversely, monetary inequalities are pronounced between rural areas and urban settings. Poor people are clearly disadvantaged in terms o f their access to education, health, electricity, and safe water. If we take into account the vulnerability factor, some years from now, if now action i s taken to improve the living conditions o f the general public, 4 Togolese out o f 5 w i l l be poor. The qualitative survey on poverty conducted in 2006 indicates that at the national level, 3 Togolese out o f 4 may be regarded as poor. According to the communities questioned in the survey, the low income levels o f farmers, the relatively poor levels o f financing for education and health, social and political unrest, and constraints in access to water are the major causes o f poverty in Togo. Households having a large number o f children or elderly members have a higher likelihood o f being in poverty. The same i s true o f those households where the heads o f household have less education. The MDG situation i s fairly critical in Togo. Thanks to the efforts that have been made, the following three goals may be achievable, namely, ensuring universal primary education, improving maternal health, and combating HIV/AIDS. Conversely, it i s unlikely that the following four goals will be achieved by 20 15: eliminating extreme poverty, promoting gender equity, reducing infant mortality, and ensuring a sustainable environment. Themes o f the Interim Poverty Reduction Strategy The preparation o f the interim strategy reflects the determination o f the senior authorities and people o f Togo t o overcome the social and economic instability that has repeatedly undermined the foundations needed to ensure the orderly, balanced, and sustainable development o f the country. In this respect, the present strategy relies on the long-term national development strategy as well as on any existing relevant policy documents available to Togo with a view to achieving significant progress in the quest to achieve the MDGs. Through this interim strategy, the Togolese authorities intend to achieve sustainable and meaningful improvements in the living conditions o f the general public by focusing on the causes o f poverty. This accounts for the authorities’ decision to build the interim strategy on three main areas, namely: (i) achieving improvements in political and economic governance; (ii) strengthening the process o f achieving economic recovery and promoting sustainable development; and (iii) developing the social sectors, human resources, and employment. Area I : Achieving improvements in political and economic governance In the context o f efforts to be made in this area, the government intends to take further steps to promote good political and economic governance, building upon the actions that have been taken since 2005. The government intends to achieve this result through four specific programs: (1) achieving improvements in political governance; (2) implementing institutional reforms; (3) achieving fiscal consolidation and combating corruption; and (4) ensuring the sound and efficient management o f aid flows. Area 2: Strengthening the process of achieving economic recovery andpromoting sustainable development vii In this Strategic objective, the government proposes t o pursue structural reforms in order to revitalize the economy through stronger liberalization focused on regional integration and W T O multilateralist policies. This theme i s also intended to ensure that domestic economic development i s closely linked to equity and to promote pro-poor growth that reduces inequalities and yields sustainable development. For this purpose, this theme encompasses six specific programs: (1) strengthening the structural reforms; (2) strengthening regional integration and promoting trade; (3) revitalizing the agricultural and rural economy; (4) developing infrastructures to support economic growth; and (6) ensuring the effective management o f natural resources and the environment. Area 3: Developing the social sectors, human resources and employment In this area, the government intends to promote harmonious and rapid development o f human capital, a prerequisite for ensuring the emergence o f sustainable economic growth, that achieves substantial reductions in poverty and in human and social vulnerability. For this purpose, this Strategic objective encompasses five specific programs: (1) promoting the education and training system; (2) developing the health system and health services; (3) improving the nutritional level o f the general public; (4) improving access t o safe water and to sanitation infrastructure facilities; and (5) promoting gender equity, employment, social protection, and grass-roots community development. Macroeconomic Framework for the Interim Poverty Reduction Strategy The macroeconomic framework for the interim strategy i s predicated upon the basic framework adopted with Fund staff. This framework envisages a medium-term reform strategy for gradually increasing the rate o f economic growth and laying the groundwork for fiscal viability and a favorable external reserves position. Thus, the baseline scenario for the I-PRSP focuses on achieving fiscal consolidation and implementing the structural reforms required to reinvigorate economic growth and enhance external competitiveness in the context o f the WAEMU’s fixed exchange rate regime. The effective implementation o f the strategy points to a growth rate o f 3.0 percent in 2008 as opposed to the figure o f 2.1 percent estimated for end-2007. In order o f contributions, this growth i s predicated on the tertiary sector (1.5 percent) and the primary sector (1.3 percent). However, in order for this to occur, it will be necessary for the government to bring about an increase within the economy o f approximately two points in the total investment rate as a percentage o f GDP over the course o f 2008. In order to achieve further increases in capital expenditures and raise their returns on growth, an alternative scenario has been envisaged that takes account o f the estimated costs o f the MDGs. Incorporating a reasonable proportion o f these estimated costs leads to a deficit o f 9 percent, Le., a bit more than 3 points above the deficit indicated in the baseline scenario. This will intensive negotiations with the donor community to secure the mobilization o f the resources required to meet the additional financing needs. T o take account o f the risks associated with the efficient implementation o f the envisaged reforms, provision has been made for a third l o w scenario, which leads to a rate o f growth o f 1.7 percent through 2010 as opposed to a little over 4 percent under the baseline scenario. Cost and financing o f the interim strategy The total cost o f the strategy i s evaluated o n the basis o f the components o f the macroeconomic framework and the costs o f the MDGs estimated for the period 2008-2010. This cost represents the full set o f priority expenditures which the government i s undertaking to implement over the next three years in order to promote economic growth and reduce poverty. The implementation o f the interim strategy costs a little more than 514 billion, Le., approximately 47 percent o f the overall budget envelope for the macroeconomic framework. 53 percent o f this cost will be domestically financed, ... VI11 35 percent w i l l be externally financed, and the remaining resources have yet t o be identified. By 2008, 27 percent o f the total cost-Le., about 140 billion-will be required in order t o finance the measures envisaged for that particular year. Over the period 2008-2010, the theme pertaining to “Developing the social sectors, human resources, and employment” amounts to 55 percent o f the total cost and the themes pertaining to “Strengthening the process o f economic recovery and promoting sustainable development” and “Achieving improvements in political and economic governance” respectively account for 3 1 percent and 11 percent o f the total cost. The remainder o f the total cost-Le., 3 percent-is earmarked for monitoring and evaluating the strategy. O f the 14 specific programs envisaged for implementing the strategy, the programs that cost the most over the period in question are three in number, namely: “Promoting the education and training system” (24 percent); “Developing the health system and health services” (21 percent), and “Developing infrastructures to support economic growth” (19 percent). This fully reflects the government’s determination to make major strides toward achieving the MDGs. Monitoring and evaluating the strategy The efficient implementation o f the interim strategy calls for the timely establishment o f a new institutional framework, but also makes it necessary to perform capacity-building at the main agencies. The new institutional framework will be comprised o f seven (07) entities organized to perform WAEMU monitoring through to centralized supervision. These entities are as follows: (i) the local participatory monitoring committees chaired by the future Mayors; (ii) the Regional Monitoring Committees chaired by the Regional Governors; (iii) the Sectoral PRSP Committees established within each line ministry and chaired by the chiefs o f staff or general secretaries; (iv) the Permanent Technical Secretariat for the PRSPMDGs which w i l l represent the merger o f the PRSP Coordination Unit and the MDG Monitoring Unit; (v) the Technical P R S P M D G Steering Committee chaired by the Secretary General o f the Ministry responsible for Finance; (vi) the Government-Donor Committee co- chaired by the Minister Responsible for Finance and the Coordinator o f the Technical and Financial Partners; and (vii) the Interministerial Committee Responsible for Poverty Reduction Strategies (CILSP), chaired by the Minister in Charge o f Finance and Economy, and the National Council o f Development and Poverty Reduction Policies (CNPDLP), chaired by the Prime Minister. In order to ensure that the Poverty Reduction Strategy i s monitored in a consistent fashion, five roles have been delegated to these various committees and their members, namely: (i) production o f data and information; (ii) analysis o f the results generated by these data and information; (iii)preparation and maintenance o f registries and survey databases; (iv) dissemination o f analyses in the form o f reports; and (v) coordination o f the entire system. The objectives o f this system are as follows: (1) Systemic production o f indicators and/or basic information required for each o f the priority sectors identified in the PRSP or needed to attain the MDGs; (2) production o f the information required to monitor poverty reduction projects and programs; and (3) production o f the information required to assess the impacts o f policies, programs, and projects. In the context o f efforts to monitor and assess the interim strategy, it i s essential to ensure the rebuilding o f a modern and effective civil service. Until such time as this reform strategy fully materializes and delivers the expected results, the government will focus o n revitalizing certain key government functions with the aim o f overseeing the implementation o f the reforms and development programs. The goal i s to establish-if not to restore-institutional and human capacities in areas where their absence or deficiencies are liable to do irreparable harm to the implementation o f the ix macroeconomic stabilization programs as well as the efforts to reconstruct various vital sectors such as infrastructure, health, education, and agriculture. X INTRODUCTION Since the early 1990s, Togo has been experiencing a political crisis which has severely hampered i t s efforts to achieve development, and which has brought about a massive reduction in foreign aid. The Human Development Indicator f e l l from 0.510 in 1995 to 0.495 in 2004, in a departure from the rising trend observed in the preceding decade. Overall, the political crisis has had an adverse impact on the economic situation, and economic growth has been well below the natural increase in the population. This has also had repercussions on social conditions and has worsened poverty. In fact, according to the QUIBB survey conducted in 2006,61.7 percent o f Togolese are currently living below the poverty line. The situation i s even more difficult in rural areas where the incidence o f poverty i s 74.3 percent. The political and economic instability has had an unfavorable impact on socially-oriented public expenditure, leading to insufficient progress in social indicators, particularly those related to education, health, and safe water, etc. This situation, unless rapidly brought under control, i s liable to handicap efforts to attain the Millennium Development Goals (MDGs) in the sectors concerned. Since the turn o f the century, Togo has embraced international efforts to make poverty the key focus o f economic and social policy. The government inter alia subscribes to the conclusions o f the Libreville Summit o f African heads o f state and government in January 2000 on the topic o f “Growth and Poverty Reduction, Agenda for Africa at the Threshold o f the 3‘‘ Millennium,” and endorses the findings o f the Millennium Summit (New York, September 2000) which resulted in the MDGs. Against this backdrop, since February 2001 the government has been engaged in efforts to prepare i t s Poverty Reduction Strategy Paper, not only in order t o meet the requirements for gaining access to the Heavily Indebted Poor Countries Initiative (HIPC), but also in order to turn the PRSP into the benchmark document serving as a touchstone for all actions implemented by the government authorities and all other development stakeholders such as foreign technical and financial partners, NGOs, and the national private sector. This process led to the government’s adoption in November 2004 o f the Interim PRSP which-in light o f the social, political, and economic conditions which Togo has faced--could not be implemented. Furthermore, the paper contained shortcomings, chief among which: 0 The data that had been used to prepare the poverty profile were superseded as they had been taken from a consumption budget survey dating from the years 1987-1989; 0 The medium-term outlook was unilluminating in view o f the suspension o f cooperation with the main foreign partners, which resulted in constraints in the macroeconomic framework characterized by poor transparency with respect to external financing arrangements. T o overcome the political, economic, and social crisis, the government since 2005 has embarked upon major reforms designed to restore harmony to the political climate. This framework resulted in the August 2006 signing o f the Comprehensive Political Agreement [Accord Politique Global (APG)] which made it possible to take significant steps forward (establishment o f a government o f national unity, introduction o f an independent electoral commission to prepare free and transparent legislative elections, as well as measures focusing on security and protection o f human rights). In 2006, the opportunity arose to have access to new data on household living conditions, in particular through the QUIBB and M I C S (Multiple Indicator Cluster) Surveys. This information basis has enabled Togo to prepare i t s Long-Term Development Strategy focused on the MDGs. These efforts led to a review o f the main sectors (agriculture and the warm on hunger, gender issues, education, health, water and sanitation, rural roads and highways, access to energy services, etc.), and resulted in 1 action to assess the requirements and costs associated with MDG compliance and to propose strategies for each o f these sectors. Furthermore, the adoption with the IMF o f a staff-monitored program covering the period October 2006-June 2007, has led to the prospect o f negotiations for a Poverty Reduction and Growth Facility with the IMF. Thus it i s imperative for Togo to have a medium-term poverty reduction and growth strategy. The present interim strategy i s a revised version o f the 2004 text and i s intended t o remedy i t s deficiencies and to readjust national priorities and actions to reflect the needs o f the hour. This i s the framework paper that: 0 Expresses the government’s determination to turn poverty reduction efforts into the primary focus o f macroeconomic and sectoral policies; 0 Takes stock o f the poverty situation; 0 Presents the government’s vision as well as the measures to be implemented prior t o the finalization and approval o f the Full PRSP and the attainment o f the completion point under the HIPC Initiative; 0 Lays the groundwork for a participatory framework bringing together all societal stakeholders; 0 Indicates a timetable for preparation o f the Full PRSP. The measures contained in this interim strategy, which will be consolidated in the context o f the full poverty reduction strategy, set the stage for improvements in the public programs and policies required to make progress toward achieving the MDGs. Accordingly, the requirements and costs presented in the MDG-focused National Development Strategy give an indication o f the investments that need to be made in order to achieve MDG compliance. The operational implementation o f the strategic options contained in the National Development Strategy will be achieved through the poverty reduction strategies that w i l l be prepared and put into practice through 2015. The present interim strategy encompasses five chapters: 0 Recent developments and context for the Interim PRSP; 0 Characteristics o f poverty in Togo; 0 Poverty reduction and growth strategy; 0 Macroeconomic framework and cost o f the interim poverty reduction strategy; 0 Institutional framework and mechanisms for implementation, monitoring and assessment. 2 CHAPTER 1: RECENT DEVELOPMENTS AND CONTEXT OF THE INTERIM POVERTY REDUCTION STRATEGY PAPER 1.1 SUMMARY OF RECENT POLITICAL DEVELOPMENTS Since the early 1990s, the democratization process has been marked by sociopolitical unrest that culminated, in 1992-93, in a nine-month general strike. This led to a deterioration o f the economy, which was exacerbated by the suspension o f cooperation by the European Union and other development partners. T o eliminate the economic constraints linked to political red tape, the government held consultations with the European Union, and this led, in April 2004, to the signing o f 22 commitments for the establishment o f peacehl democracy in Togo. M u c h progress had been achieved in the implementation o f those commitments, when the death o f the Head o f State triggered serious sociopolitical turmoil. After the presidential election o f April 24, 2005, the new authorities undertook to complete the implementation o f Togo’s 22 commitments to the European Union. A political dialogue thus took place with the participation o f nationals from all walks o f life, leading to the signing o f a comprehensive political agreement (Accord Politique Global-APG) on August 20,2006 and the formation o f a government o f national unity, the main task o f which was to organize transparent legislative elections acceptable to all Togolese. 1.2 ECONOMIC SITUATION Togo i s a coastal country and a member o f the West African Economic and Monetary Union (WAEMU) and the Economic Community o f West African States (ECOWAS). I t s currency has defacto convertibility, being anchored to the euro. I t s economy i s traditionally dependent on the primary sector, which accounts for about 40 percent o f GDP and employs over 70 percent o f the labor force. The secondary and tertiary sectors respectively represented about 23 percent and 36 percent o f GDP in 2004. Agricultural production i s primarily dependent on the vagaries o f the weather, and small farms are its dominant feature. Togo has an open economy, with exports-mainly phosphates, cotton, cement, coffee, and cocoa-accounting annually for 34 percent o f GDP, on average, between 2002 and 2005,2 that is, well below the average o f 45 percent that prevailed in the 1980s. Before the sociopolitical crisis that peaked in 1993, the Togolese economy went through three periods: (i)the positive economic environment o f the 1960s and 197Os, (ii) the decline that started from the mid-l970s, and (iii) economic recovery in the second half o f the 1980s. Indeed, the country benefited from the positive impact o f the encouraging international environment o f the 1960s and 1970s, which was marked by rising global production; strong demand for commodities, which were favorably priced; and the availability o f external resources for investment (e.g., petrodollars). Between 1980 and 1983, the Togolese economy was adversely affected by a drought in the subregion and by repercussions o f the economic difficulties plaguing i t s neighbors. Togo was thus thrown far o f f i t s path to growth (-2 percent in 1980, -5 percent in 1981, -5.5 percent in 1982, and -6.5 percent in 1983). The recovery in the second half o f the 1980s was possible only because o f the considerable adjustment efforts made between 1983 and 1990 that facilitated a return to growth (1.3 percent in 1984, Source: World Bank, World Development Indicators, 2006. 3 14.8 percent in 1985, 1.6 percent in 1986,0.5 percent in 1987,6.2 percent in 1988, and 4.1 percent in 1989).' From 1990 to 2005, which was the period of sociopolitical crisis, further problems were added to those o f the previous period, namely, unrest, work stoppages, and other events-such as the devaluation o f the CFA franc-that hampered economic activity. According to the World Bank (Atlas Method), in 2005 Togo had a gross national income per capita o f US$350 in current dollars (compared with US$310 in 2004 and US$270 in 2003).4 This put it in the category o f Least Developed Countries (LDCs). Moreover, the UNDP's Human Development Report 2006 put the human development index (HDI) for Togo at 0.495 and ranked it 147'h in the world out o f 177 countries (the 2003 Report put the HDI of Togo at 0.510 and ranked it 141" in the world out o f 173 countries). The Report placed the human poverty index (HPI-1) of Togo at 39.2 percent, ranking it 72"d in the world out of 102 developing countries (in 2003, the HPI-1 was 38.5 percent). The political crisis o f these past 16 years has had a huge impact on the economic situation; indeed, GDP at constant prices grew only 1.1 percent a year, on average, since 1991, which i s well below the natural annual population increase, estimated at 2.4 percent. This situation, coupled with an unequal distribution of the fruits o f growth, has not at a l l resulted in improved levels of per capita real income for the poorest segments of the population. This crisis should not be allowed to mask the main problems that have undermined growth during the period. These include governance issues, the unsustainable level o f debt, and the difficulties faced by the public enterprises and the key sectors (e.g., cotton, phosphates, coffee, cocoa, energy). Togo relies on foreign assistance to finance a large part o f i t s Public Investment Program (PIP). External resources, consisting of grants and loans on concessional terms, traditionally go toward financing 80 percent o f all public investment. Because o f the suspension o f donor support since the early 1990s, the volume of public investment declined from 13.8 percent o f GDP in 1990 to 3.3 percent o f GDP in 2005, with a low representing 1.1 percent o f GDP in 2003. This downturn in public investment reduced the country's production capacity and slowed economic growth. This i s one o f the key factors that have marked economic conditions over the past three years. Since 2004, economic activity in Togo has been increasingly slow. Growth has been seriously eroded to less than 2 percent over the past three years. This i s attributable to the primary sector, given its loss of vitality, and to the secondary sector, in light of the difficulties experienced in the phosphates subsector. Inflation stood at less than 3 percent over the period, apart from in 2006 when rising food and fuel prices pushed it up to 6.8 percent. Public finances, for their part, are now constantly in deficit because o f insufficient revenue mobilization and poor expenditure control. On the revenue side, it i s noteworthy that the tax ratio i s s t i l l below 14 percent o f GDP, compared with a standard set at 17 percent by the WAEMU multilateral surveillance mechanism. This situation i s mainly the result o f major tax evasion and tax fraud, tax and customs exemptions, inefficiency o f tax audits resulting especially from human resource issues in the revenue-collecting institutions, the inadequacy o f incentives to match objectives, and the lack o f government control over nontax revenue collection. In 2006, revenue totaled Basic document for the December 2005 national seminar on Togo's economic recovery. This trend in GNI per capita can probably be explained by the movements in the U.S. dol1ar:euro exchange rate. In any case, it cannot be interpreted as a reduction in the monetary poverty of poor Togolese during the period 2003-05. 4 CFAF 195.9 billion, compared with CFAF 174.9 billion in 2005, against current expenditure o f CFAF 196.8 billion. The narrow fiscal balance was thus equivalent to -0.6 percent o f GDP. This fiscal balance situation should not, however, mask the improvements achieved in the area o f budget execution in 2006, particularly in the second half o f the year, coinciding with Togo’s entry into a staff monitored program (SMP) with the IMF between October 2006 and June 2007. For the first time in a long while, the government: (1) has not accumulated new domestic payment arrears, thus meeting one o f the quantitative benchmarks under the SMP; (2) curtailed, again in the second h a l f o f the year, the use o f discretionary spending procedures; and (3) put an end to the practice o f causing strong fiscal distortions by committing expenditure for which payment orders have not been issued (de‘penses enguge‘es non ordonnance‘es-DENOs) when closing o f f expenditure commitments and payment authorizations at end-2006. Thus, several “domestic” fiscal quantitative benchmarks under the SMP were met. At the same time, observance i s also confirmed, half-way through the SMP, o f the “external” fiscal quantitative benchmarks, as the government did not contract any new nonconcessional debt. Relations with the rest o f the world show a current balance structurally in deficit during the period, caused especially by the high marginal propensity t o import, the weakness o f the marginal propensity to export, continuous deterioration o f the terms o f trade, and the low level o f inward services and income transfers. Despite capital account surpluses, the authorities did not manage to use the capital account t o offset the current account deficit, except in 2006 when coverage o f the current account with capital account surpluses led to an overall surplus balance o f CFAF 73.4 billion. The monetary survey i s characterized primarily by an improvement in the net government position. This resulted from the consolidation o f monetary assistance and its steady repayment, which i s a sign o f the government’s gradual and sensitive divestiture from the banking system. The latter lost i t s ability to finance economic activity because o f the decline in profitability, the burden o f nonperforming claims accounting for over 30 percent o f total credit in 2004-05, and deficiencies in the legal framework that hinder the collection o f those claims and the enforcement o f collateral. In addition, most banks do not comply with the prudential rules. The sector also suffers from a lack o f diversification o f financial products and from factors that distort competition. There i s a problem regarding the sustainability o f government debt, with i t s servicing becoming increasingly unbearable for the government budget. Indeed, the ratio o f debt service to total revenue more than tripled between 2000 and 2005, from 11.2 percent to 36.2 percent. Also, the burden o f total debt in relation to GDP went from nearly 70 percent in 1992 to 96 percent in 2006. The stock o f external debt has changed little over the past three years. Estimated at CFAF 781 billion in 2004, it rose to CFAF 820 billion in 2005 before settling at C F A F 783 billion in 2006. Nearly one-third o f that stock represents an accumulation o f payment arrears. The stock o f domestic debt, for i t s part, stood at CFAF 276 billion in 2004, CFAF 278 billion in 2005, and CFAF 3 11 million in 2006. 1.3 ROLE PLAYED BY CIVIL SOCIETY IN RECENT SOCIOPOLITICAL AND ECONOMIC DEVELOPMENT The reasons for the emergence o f Togolese civil society and i t s strong involvement in sociopolitical and economic affairs in recent years include: new visions o f and approaches to development, the social impacts o f structural adjustment programs (SAPS), the trend toward the decentralization o f development assistance, and, more particularly, the process o f democratization o f Togo’s political, economic, and social affairs since 1990. 5 The activities and contribution o f civil society in all i t s components over the past few years have been concentrated primarily in four areas: poverty reduction, environmental conservation, good governance, and the advancement o f women. The very active participation o f civil society in sociopolitical and economic affairs has mitigated the negative impacts o f Togo’s protracted crisis. The performances achieved through the actions o f civil society and the results obtained in the fields o f health, education and training, social and community infrastructures, the promotion o f income-generating activities, microfinance, governance, and the advancement o f women are generally appreciated by the government and i t s development partners. But it i s worth noting that in the area o f governance, only a few NGOs, associations, and trade unions are involved in actions relating to the defense and promotion o f human rights, workers’ rights, and the strengthening o f democracy. It has become clear, however, that despite the potential o f the social and cultural organizations, they are faced with institutional, organizational, material, and financial constraints that hamper or limit their actions in the field.5 1.4 PARTICIPATORY PROCESS FOR PREPARING THE INTERIM POVERTY REDUCTION STRATEGY PAPER The interim Poverty Reduction and Strategy Paper (I-PRSP) was prepared in two phases. The first, between October 2001 and November 2004, occurred in three key steps, namely: the seminar o n methodology, the work o f groups on specific topics, and the drafting and validation o f the paper. The document produced through this process was not used as the basis for establishing, with the development partners, relevant poverty reduction programs; this state o f affairs was attributable inter alia to the difficult political situation in the first half o f 2005. Following the signing o f the APG in August 2006 and the negotiation o f a SMP with the IMF in October 2006, the government initiated the process o f updating the I-PRSP. The first phase o f preparation began with a methodological seminar, held in October 2001, to define the process. There were 73 participants at the seminar, including 32 from civil society, five resource persons, and 27 representatives o f organized groups (NGOs, trade unions, religious groups, the private sector, etc.). This event paved the way for, among other things: Taking cognizance o f the poverty situation in Togo and o f previous poverty reduction policies; Proposing the broad outline o f a strategy to be formulated; Proposing a plan for participation by the people in the process and for consultations with the development partners; Discussing the various components o f an appropriate mechanism for monitoring and assessing implementation o f the strategy; and Proposing an indicative timetable for the formulation o f an I-PRSP and a full PRSP, as well as a l i s t o f the surveys and studies needed for successful completion o f the entire process. That i s why various actions have been launched by the government and by civil society itself to respond to the recommendation formulated by the ACP Civil Society Forum in Brussels, stressing the need for each ACP member state to have a structured, democratically organized, responsible, and transparent civil society. 6 Following the methodological seminar, seven groups, each addressing a specific topic, were formed to develop the I-PRSP. In each o f these groups, there were about 20 participants, including five or six representatives o f civil society. The work o f the groups served as the basis for the drafting o f an interim paper, which was validated at a workshop held from June 29 t o July 1, 2004 in Kara. Representatives o f civil society participated in large numbers in this validation; indeed, o f the 67 national participants, 33 represented civil society. As part o f the exercise to update the I-PRSP, the Togolese government (with World Bank support) carried out a qualitative survey o f poverty. This survey reinforced the participatory dimension o f the process, insofar as it fostered discussions with population groups about their perceptions o f poverty and clarified their concerns. This was, indeed, an opportunity especially t o organize group discussions and individual interviews throughout the national territory. In all, 25 groups o f 15-25 persons were formed, on the basis o f the socioprofessional categories and ages o f participants. The discussions and interviews, generally involving more than 600 people in all, enabled participants to express their perception o f poverty and assess the ongoing initiatives or to suggest future anti-poverty initiatives. These were opportunities for the authorities to listen to the people, particularly those from the most vulnerable segments o f the population, so as to be able to take account o f their concerns (priorities, approaches, etc.) when formulating public poverty reduction policies. In addition, the process o f finalizing the revised paper was carried out by two technical workshops and a national validation workshop, in which all players in the development process, including civil society, took part. I t should also be noted that the preparation o f the National Strategy for L o n g Term Development structured around the Millennium Development Goals (MDGs), has made it possible to pursue the dialogue on public poverty reduction policies with representatives o f civil society. Indeed, the process o f updating the I-PRSP has benefited from the work o f the groups set up within this framework to address specific topics. There has been a high level o f participation in these groups by all the actors in the various phases o f the process. This participatory process will be strengthened and institutionalized during the phase o f preparation o f the full PRSP. CHAPTER 2: THE DIMENSIONS OF POVERTY IN TOGO There are many dimensions to the phenomena o f poverty, and it does not lend itself to any single definition. In Togo, the measurement and study o f poverty are based on two approaches, the monetary approach and the approach based on people's perception o f poverty. The data presented in this chapter derive from a number o f surveys, the most important ones o f which are: 0 The 2006 Core Welfare Indicators Questionnaire (CWIQ) household survey 0 The 2006 Multiple Indicator Cluster Survey (MICS) The 2006 Qualitative Poverty Survey 0 Several other sectoral studies conducted between 2000 and 2006 2.1. THE QUANTITATIVE APPROACH TO POVERTY 2.1.1. The monetary approach to poverty 7 The quantitative assessment o f poverty was conducted in Togo in 1995, on the basis o f results from the 1987-89 consumer budget survey (EBC). Because those figures were out o f date, a CWIQ-type survey was conducted in July and August 2006, using a sample o f 7500 households (or nearly 1 percent o f all Togolese households). However, the methodologies and the designs o f those two surveys were different, and a comparative analysis o f the data i s not possible. Thus, the results from the 2006 CWIQ survey were taken as the reference point for this analysis o f poverty in Togo. Poverty thresholds were calculated for five regions o f Togo and for the capital, LomC, using methods based on food needs (2400 Kcal per adult equivalent per day) and nonfood needs (as a proportion o f the food component). These thresholds vary between CFAF 154,853 and CFAF 179,813 per adult equivalent per year for the administrative regions, compared to CFAF 242,094 in LomC and i t s surroundings. 8 Lome Maritime6 Plateaux Centrale Kara Savanes National7 Poverty threshold per adult equivalent per year 242,094 156,115 154,853 179,813 155,026 157,294 242,094 in CFAF Regional price disparities explain the poverty threshold discrepancies among regions. 2.1.2. The profile o f monetary poverty in Togo According to the CWIQ survey, the incidence o f poverty i s estimated at 61.7 percent o f the population, or 3,242,257 individuals distributed among 545,486 households. Poverty i s essentially rural: in the countryside, the incidence i s 74.3 percent, accounting for 79.9 percent o f the total poor population. In urban areas, the incidence o f poverty i s 36.8 percent, representing 20.1 percent o f the total poor population. Generally speaking, the Savanes region i s the poorest in the country, with an incidence o f 90.5 percent, followed by the Centrale region (70.7 percent), Kara (75.0 percent), Maritime (69.4 percent), Plateaux (56.2 percent), and finally LomC (24.5 percent). I t should be noted that, given their demographic weight, the Maritime and Plateaux regions alone account for 44.6 percent o f the poor population. Lome Maritime Plateaux Centrale Kara Savanes Urban Rural National % o f population 19.9 21.0 23.0 10.3 13.3 12.5 33.7 66.3 100 Incidence of poverty (%) 24.5 69.4 56.2 77.7 75.0 90.5 36.8 74.3 61.7 Contnbubon to poverty 79 237 20 9 129 162 184 201 79 9 100 Rural poverty i s very pronounced in the Savanes, Centrale and Kara regions, where the incidences are 92.5 percent, 84.0 percent and 80.0 percent, respectively. I t i s relatively moderate in the Plateaux region, with an incidence o f 60.2 percent, and in the Maritime region, where 71.1 percent o f the rural population i s poor. Urban poverty i s much less severe in LomC, where the incidence i s 24.5 percent, and in the Plateaux region (36.5 percent). These two regions stand out as quite different from the other regions, where at least 50 percent o f the urban population i s poor, and particularly the Savanes region, where 76.8 percent o f the urban population i s poor. Table 3. Incidence of monetary poverty by place of residence, by region (in YO) / Maritime Region excluding LomC. ’/ The L o m t threshold i s taken as the national poverty threshold. However, the incidence o f poverty nationwide i s not calculateddirectly from this threshold, but rather from the regional thresholds, determining the number o f poor people in each region and, by aggregation, the number o f poor people nationwide, which i s then compared with the total population. 9 LomC Maritime Plateaux Centrale Kara Savanes Urban 24.5 54.3 36.5 60.2 60.9 76.8 Rural 71.1 60.2 84.0 80.0 92.4 Total 24.5 69.4 56.2 77.7 75.0 90.5 Chart 1. Poverty map of Togo, showing the incidence of poverty in each region in 2006 10 2.1.3 Poverty and inequality Monetary inequality The Gini index, based on CWIQ results, was 33.5 percent in 2006. This index, calculated on the basis o f consumption expenditure, seems relatively low in comparison to other countries o f West Africa. Thus, inequalities are nearly the same in urban and rural areas: the Gini indices are respectively 31.1 percent and 29.8 percent. Nevertheless, inequalities between urban and rural areas are fairly high, and account for more than 53 percent o f inequality at the national level. On an interregional basis, inequality rates do not differ greatly from one region to another. Nevertheless, LomC and the Plateaux region have relatively higher inequality rates, with Gini indices o f around 30 percent. Conversely, the Centrale region has the lowest inequality indicator (Gini index 26 percent). Inequality of access When it comes to education, the distribution o f subsidies i s not pro-poor. The poorest 20 percent currently receives the equivalent o f CFAF 5,607 in education subsidies per capita, while the wealthiest 20 percent receive CFAF 10,376, or double the amount per capita. Similarly, the distribution o f health subsidies i s not pro-poor. The poorest 50 percent receives only 20 percent o f subsidies to the C H U (university hospital centers), and 30 percent o f subsidies to the hospitals and health centers. In rural areas, where around 80 percent o f the poor population lives, health services are provided through dispensaries or health posts. The health posts do not receive government subsidies. An analysis o f electricity services in Togo shows, first, that the poor have n o access: only 11.1 percent o f poor people have access to electricity, versus 42.9 percent o f the nonpoor. When it comes to drinking water, the gap between the poor and the nonpoor i s relatively low: more than 39 percent o f the poor have access to drinking water, versus 53.5 percent o f the nonpoor. 2.1.4 Poverty and vulnerability The poverty profile reflects the situation at the time o f the survey, and does not show the poverty trend over the medium and long term. Consequently, individuals were questioned as to their perception o f the risk o f "becoming poor" or o f "remaining in poverty". This analysis, based on the notion o f vulnerability, defines the present probability o f remaining poor or o f becoming poor in the future, regardless o f the current situation. This simultaneous analysis o f poverty and vulnerability can be used to distinguish: i) The long-term poor: these are poor people with a probability higher than 0.5 o f "remaining poor" in the future. ii) The short-term poor. These are poor people with a probability lower than 0.5 o f "remaining poor" in the future. iii) The vulnerable nonpoor: these are nonpoor people with a probability higher than 0.5 o f "falling into poverty" in the future. iv) The nonvulnerable nonpoor: these are nonpoor people with a probability lower than 0.5 o f "falling into poverty" in the future. 11 Using this classification, the poverty and vulnerability rate emerging from the CWIQ survey i s 81.8 percent, distributed among the long-term poor (39.6 percent), the transitory poor (22.0 percent), and the vulnerable nonpoor (20.2 percent). This implies that, if no action i s taken to improve living conditions in Togo, the poverty incidence could reach 81.8 percent. The vulnerability rate i s higher in rural areas (87.4 percent) than in the cities (71.0 percent). However, it i s the urban nonpoor who are most vulnerable, with a rate o f 34.2 percent versus only 13.0 percent in the countryside. Thus, the low rate o f actual urban poverty must be viewed in light o f this greater vulnerability among the urban nonpoor. 2.1.5 Poverty and household socio-demographic characteristics Household poverty i s directly related to household size. More than 90 percent o f households with over 10 members are poor, compared to only 24.5 percent o f households with three members. The less educated the head o f the household, the more likely the household i s to be poor. 63.9 percent o f households where the head has no schooling are poor, whereas the rate i s 44.9 percent among households where the head has completed primary school, 20 percent where the head has completed secondary school, and only 8.5 percent where the head has pursued post secondary studies. An analysis o f poverty by occupational category shows that people living in households headed by independent farmers are most likely to be poor, with a poverty incidence o f 78.8 percent, followed by people living in households where the head i s "inactive or unemployed" (with a poverty incidence o f 55.2 percent) and households with "other independent" heads (44.4 percent). The persons least likely to be poor are wage-earning or salaried employees in the public and private sectors (with poverty rates o f 38 percent and 37 percent, respectively). The poverty incidence i s higher among households headed by men than among those headed by women: 51 percent o f the former are poor, compared to 34.8 percent o f the latter. Households with younger heads are less likely to be poor than those headed by older persons. The poverty incidence i s 27.7 percent among households where the head i s aged 15-30 years, versus 49.8 percent where the head i s in the 3 1-55 age bracket, and 56.6 percent where the head i s over 55. This may be explained by household size, which i s lower in the first case. Households where the head i s polygamous have the highest poverty rate, at 63.9 percent, followed by monogamous households (49.9 percent), and those headed by a widow or widower (42.2 percent). Households headed by a separated or divorced person and those where the head has never married have a lower poverty incidence, at 23.4 percent and 12.6 percent respectively. 2.2. THE QUALITATIVE APPROACH TO POVERTY Monetary poverty does not take account o f all the dimensions o f a complex phenomenon that can be difficult to interpret. People's perception o f poverty, the causes o f the poverty, and their priority needs can contribute to a better understanding o f the phenomenon. This analysis derives from a qualitative survey conducted in December 2006 among a representative population sample.' ~~~ ~ 'The qualitative survey was conducted by the Population Research Unit (URD), with World Bank funding. 12 2.2.1 People's perception of poverty I t emerges from the individual interviews that 74.6 percent o f respondents consider themselves poor, and that they have their own definition o f poverty. Generally speaking, the meaning o f poverty i s defined in a contextual framework (condition o f the dwelling, size o f fields), but there i s in all these perceptions, group and individual alike, a common denominator, which i s the lack o f basic necessities. The people interviewed were virtually unanimous in considering themselves poor, because they could not meet very specific needs, such as schooling for their children, health care, clothing, housing and food. As these people put it, "You can tell apoorperson, first, by his looks: he's not dressed well, he has nothing to eat, his children are hungry, and they cry all the time because they have no food. A poor man always looks pensive. When he is sick, he can't work in the fields, and he has no money". A poor person i s one ''who must live offother people, and has lost his self-esteem". Many people felt that their lives had deteriorated a great deal between 2000 and 2006. The perception o f poverty that emerges from the interviews, then, can be summarized as follows: "Poverty is the inability ofpeople to meet their essential needs for food, health, education, water, clothing and housing. I n collective terms, poverty is defined by such factors as lack of basic infiastructure (schools, dispensaries, drinkable water, a market) and poor transportation facilities" 2.2.2 The causes o f poverty, as people see it The people interviewed gave several reasons for the deterioration in living conditions, including low incomes from farming, lack o f working capital, wages that are too low and sporadic, and unemployment among school graduates. In short, determinants o f poverty, as they emerged from the interviews, can be summarized as follows: 0 Low incomes from farming. 0 Lack o f financing in education and health. 0 Social and political problems. Lack o f access to water. 2.2.3 People's expectations People were very clear in identifying the causes o f poverty, and they had many suggestions for improving their lives. Their expectations can be summarized under three points: Social support (education, health, drinking water, basic supplies). For rural people, reducing poverty means providing drinking water and access to basic goods. I t i s true that these people carry a heavy burden in the form o f disease, early death, and inability to work, because o f diseases caused by the water they drink. In the towns, people mentioned (in addition to drinking water) the importance o f building schools and health centers as a way to help them reduce poverty. Employment (jobs for young people, income generating activities, access to credit). Urban households emphasized in particular the problem o f youth unemployment, while rural people were more likely to stress the need for income generating activities. Unemployment among urban youth i s a 13 real problem for parents who, having supported their children's education and training, must continue t o meet their basic needs. Good governance. People defined this indirectly as the guarantee that everyone w i l l be rewarded for his effort. Good governance means a peaceful political life, more justice, and less corruption. Box 1. Perceptions of the state o f democracy and governance in Togo A study on "Governance, Democracy and Poverty in Togo: the viewpoint o f people in the capital" was conducted in 2005 by the Statistics and National Accounts Department (DGSCB), in cooperation with AFRISTAT, Paris 21 and DIAL, using results from the 1-2-3 survey that was used t o measure poverty and urban governance in LomC. The main lessons from the study may be summarized as follows: 0 I n the area of governance The great majority o f LomC residents believe that the public administration operates poorly and ineffectively. 80 percent o f those surveyed rated government administration as poor, and 50 o f percent as very poor. The direct consequence o f this unfavorable public opinion o f government administration i s the low level o f trust in public institutions. About two out o f three persons interviewed had no confidence in government. Confidence ratings were lowest for the judicial system (18 percent), social security (22 percent), the tax administration (23 percent) and the Army (24 percent). Nearly 90% had no confidence in their parliament. In the view o f these people, the ineffectiveness o f public administration could be measured by record corruption levels, sharp politicization, and failure to address the challenges o f government in a modem and effective way. Chart 2. Perceptions o f key problems in government [column headings, left to right:] 100 80 60 40 20 0 Absenteeism. Corruption. Politicization. Incompetence. Inappropriate regulations ................................... 0 I n the area of democracy While majority o f people in LomC are fully committed to democracy (90 percent), rather than to any other political system, this does not mean they are satisfied with the way democracy has worked so far in their country. The interviews revealed a great majority (90 percent) who think that elections are not 14 free and transparent, and a similar proportion who think that individuals are not equal before the law. In the view o f these people, only religious freedom i s reasonably respected. Moreover, only 18 percent o f persons surveyed think that human rights are respected in the country, and 10 percent would agree that the political class reflects the concerns o f the popuIation/is attuned to the needs o f the general public. Chart 3. Perception o f the main problems with democracy [column headings, left to right:] I20 96 On 94.8 95.1 94,8 94.6 94.3 100 80 60 40 20 0 Lahbbcrtidc Llibertedc LlibcrtC La hbertC L'CgalitC devunt Ler i l c c t i o n s rehgion voyager politique d'expressianet 11 l o i librer et dc la presse tiansparentcs - Fondamontalc Respectee Freedom o f religion. Freedom to travel. Political freedom. Freedom o f expression and the press. Equality before the law. Free and transparent elections. Essential. Respected ........................... [End o f box] 2.3. DETERMINANTS OF POVERTY Data from the C WIQ survey were used to identify the determinants o f poverty through an econometric model. The determinants or explanatory factors for poverty as revealed in the study are the following: The spatial dimension o f poverty indicates that rural families are more likely to be poor than are urban families. Household makeup has an impact on poverty. Families with many teenage children or elderly members are more likely to be poor. On the other hand, families with more adults have a better chance o f escaping poverty. In other words, poverty rises with the dependency ratio (the number o f dependents for each employed person). The level o f education o f the household head, and especially o f the wife, i s directly related to living standards. Moreover, the effect o f education on household poverty i s more pronounced in rural than in urban areas. A rural family where the head has completed primary school i s half as likely to be poor as an urban family where the head has the same level o f education. The state of health or working capacity o f household members, in particular that o f the head o f the household, has an influence on poverty. In LomC, a household where the head i s incapacitated i s 17.2 percent more likely to be poor than a household with an able-bodied head. 15 0 Households' factors o f production, such as the size o f their farm or the number o f livestock they own, have a significant impact on rural poverty. Household poverty i s inversely related to the size o f the farm. Moreover, agricultural productivity and fluctuating prices for agricultural products also have an impact on poverty. 0 Access t o education, health and transport facilities, as well as t o markets for agricultural products, have a strong influence on household poverty, especially in rural areas. Chart 4. Reasons given by people to explain the deterioration o f their living conditions between 2000 and 2006 [line headings1 Economic problems. Health problems. Governance problems (political and economic). Family size. Family problems. Other reasons. No reasons given Second reason. First reason Source: Qualitative survey: Study of the perceptions ofpoverty in Togo, Universite' de Lome'/ URD- 2006 .................................. 2.4. POVERTY AND HUMAN DEVELOPMENT IN TOGO 2.4.1 Human capital Education and training 16 As with other sectors, the education and training sector has suffered greatly from the prolonged social and political crises that the country has experienced since the 1990s. The upheavals unleashed by the crisis have prevented the effective renewal and upgrading o f the teaching profession and the renovation or construction o f education facilities at a pace sufficient to meet constantly growing needs for education and training at all levels. The shortcomings are reflected in performance that falls short o f what would normally be expected. Moreover, with the decline in government investment in education, the private sector has outstripped the public sector, especially in the towns. Between 1990 and 2000, the proportion o f students enrolled in private institutions rose from 27 percent to 3 1 percent at the primary school level, from 13 percent to 17 percent at the secondary level, and from 30 percent to 46 percent in technical and vocational education. Rural areas have also seen the emergence o f other types o f private institutions known as "Local Initiative Schools" (EDIL). The growing importance o f these institutions, which rely entirely on local community financing and family support, i s placing an increasing financial burden on poor families, and constitutes an obstacle to reducing rural poverty. For example, more than 40 percent o f schools in the Savanes, the poorest region, are o f the EDIL type. In the absence o f external funding, the education system has been financed in recent years entirely by the State. Yet capital spending in education represents barely 3 percent o f the 2007 Public Investment Program. This goes part way to explaining why the quality o f education continues to decline. At the preschool level, enrollment rates are s t i l l very low, although more and more families have begun to enroll their children in recent years. Thus, from 2000 to 2006, the proportion o f children aged 36 to 59 months enrolled in schools ofthis kind rose from 8.6 percent to 15.7 percent. This rate conceals sharp differences according to place o f residence. In 2006,3 1.6 percent o f urban children were registered in kindergarten, versus 5.3 percent in the countryside. This difference reflects in part a shortage o f facilities and their unequal distribution within the country, as well as discrepancies in the willingness o f parents to enroll their children. From another angle, girls are more likely to be enrolled in kindergarten than are boys (17.8 percent versus 13.5 percent in 2006). In primary school, despite the problems noted above, the country s t i l l boasts high enrollment levels in comparison with most other West African countries. The net primary school enrollment rate for children aged 6-1 1 years rose from 63.0 percent in 2000 to 73.4 percent in 2006. At the same time, the gross rate for the same age group rose from 103 percent to 115.3 percent. The main problem facing basic education in Togo' i s the performance o f the system itself. The system i s characterized by high repeater and dropout rates in the sixth year, particularly among girls. In 2006, only 17 percent o f 11-year-olds (who should be finishing the first cycle) were actually in the last year o f that cycle. The primary cycle completion rate was 78.1 percent in 2005.'O The literacy rate among persons 15 years and older was 56.9 percent in 2006 (CWIQ), with sharp differences between males and females: 70.3 percent versus 44.4 percent. 'In Togo, basic education includes primary school and the first cycle o f secondary school. loThis completion rate refers to all children completing primary school. 17 Health Health facilities are in no condition to meet the growing needs posed by the country's demographic trends. This lack o f capacity can be seen in the shortage o f human resources, the l o w technical quality of care and diagnostic tools, outmoded infrastructure, and inadequate financing. In geographic terms, accessibility i s fairly satisfactory: 88 percent o f the population lives no more than 5 km (an hour's walk) from a health facility. The population living within 2.5 km (30 minutes walk), at 62 percent, i s again acceptable (MICS3,2006). I t should be possible to identify and correct the remaining inadequacies in the distribution o f health facilities, using the health services map that was prepared in 2007. In terms o f financial accessibility, primary health care services are much more affordable than hospital care. The 2006 MICS3 survey showed that 73.8 percent o f people stay away from modern health facilities for economic reasons. There are great challenges with regard to the quality o f care. The MICS3 survey showed that only 9 percent o f people are satisfied with the current quality o f care offered in the modern health services. This situation in the national health system has a strong impact on the state o f public health. When it comes to maternal health, 83.8 percent o f pregnant women receive prenatal consultations, and 62.9 percent o f babies are born in a qualified health facility. However, the maternal mortality rate remains high, at 478 deaths per 100,000 live births (EDSRII, 1998). Between 1993 and 1998,80 o f every 1000 children born alive died before their first birthday. The mortality rate to age five was estimated at 146 per thousand. In 2006, the figures showed a slight improvement in child health, although the country i s far from meeting the MDG target in this respect. The two mortality rates stand today at 77 and 123 per thousand, respectively. Infant and child mortality rates are much lower in urban areas (49 and 73 per thousand, respectively) than in the countryside (89 and 143 per thousand respectively). These differences can be explained in part by better sanitary conditions and more accessible health services in the towns. As well, the infant mortality rate varies sharply by region. The Savanes region fares worst, with a rate well above 100 deaths per thousand, followed by the Centrale Region, with 86 per thousand. Infant mortality rates for the other regions are as follows: Lome 37 per thousand, Maritime 78, Plateaux 79, and Kara 77 per thousand. According to the 2006 MICS3 data, 49.2 percent o f children were receiving all eight doses under the Expanded Program on Immunization (EPI) before their first birthday. This average rate o f vaccination coverage, however, conceals fairly significant disparities, by sex and by location. For some time now, with the assistance o f donors, Togo has been making a major effort to combat malaria, particularly through distribution o f treated mosquito nets to pregnant women. Between 2000 and 2006, the number o f children under five years o f age sleeping with a mosquito net rose from 15 percent to 41 percent. This expanded use o f treated mosquito nets i s the likely explanation for the declining prevalence o f the disease, which dropped from 36 percent among children under five in 2000 to only 19 percent in 2006. A 2003 analysis o f the reproductive health situation in Togo showed that 11.3 percent o f women o f childbearing age were using modern contraceptive methods, compared to only 8 percent in the 1998 18 Demographic and Health Survey in Togo (EDST 11). However, unmet family-planning needs persist, even if they declined from 35 percent to 25 percent between 1998 and 2003. People are fairly well informed about HIV/AIDS, i t s modes o f transmission, and i t s means o f prevention (the awareness rate i s over 96 percent for women and 98 percent for men, according to EDST 11). However, behavior i s slow to change and consequently the prevalence o f HIV in the population at large declined only moderately from 6 percent in 2000 to 3.2 percent in 2005. It should be noted that the 2000 rate was based exclusively on urban data, while the 2006 rate includes data from rural areas. Because o f this, the decline in HIV/AIDS prevalence may reflect the change in the database rather then any actual halt or reversal o f the disease. Nutrition Because o f the economic crisis and rising poverty, the country's nutritional status has not improved. From 2000 to 2006 there was in fact a slight deterioration in the nutritional status o f children: in 2000, 21.7 percent o f children under 5 years were suffering from malnutrition as measured by retarded growth, and 7 percent were severely malnourished, while these proportions were respectively 23.7 percent and 10 percent in 2006. These levels are respectively 10 and 70 times higher than would be expected in a population where children are healthy. In 2006, rural children showed much greater malnutrition than urban children (28 percent versus 17 percent, see chart below). A breakdown o f this indicator by region shows that Kara fares worst in terms o f nutrition: around 37 percent o f children under 3 show retarded growth. The rates for other regions are respectively: Lome 14 percent, Maritime 20 percent, Plateaux 26 percent, Centrale region 24 percent, and Savanes 33 percent. Underweight Retarded growth Emaciation (weighuage) (heighuage) (weightheight) LomC ..... Total According to the 2006 CWIQ survey, 42.1 percent o f people are undernourished (with a daily caloric intake below the F A 0 standard o f 2400 Kcal per adult equivalent). This under-nourishment i s strongly correlated with monetary poverty: 64.2 percent o f the poor population nationwide i s undernourished. Moreover, 6.4 percent o f the nonpoor are also undernourished. Nutritional poverty, like monetary poverty, i s much more prevalent in rural than in urban areas. However, the gap between the urban and rural food poverty incidence i s narrow, compared to the monetary poverty gap. In rural areas, 47.1 percent o f people are undernourished, compared to 32.2 percent in the towns. On the other hand, the correlation between monetary poverty and food poverty i s stronger in urban than in rural areas: 69.3 percent o f the urban poor are undernourished, compared to 62.9 percent o f the rural poor. Moreover, 10.6 percent o f the urban nonpoor are undernourished, compared to only 1.3 percent o f the rural nonpoor. The Plateaux region suffers least from food poverty, with an incidence o f 25.3 percent, followed by LomC (30.1 percent), the Maritime region (38.6 percent), Kara (48.6 percent), the Centrale region (63.9 percent), and the Savanes (72.9 percent). The correlation between poverty and undernourishment i s strongest in LomC, where 85.2 percent o f the poor population i s undernourished. This correlation i s 19 also very high in the Centrale region and in the Savanes region, where 78.9 percent and 79.5 percent o f poor people, respectively, are undernourished. 20 E3.T erty and ndernoi LomC Maritime 'lateaux Vational Monetary poverty 36.8 74.3 24.5 69.4 56.2 61.7 Food poverty 47.1 32.2 30.1 38.6 25.3 42.1 Percentage o f poor who are 62.9 69.3 85.2 55.2 45.0 64.2 undernourished Percentage o f nonpoor who are undernourished 1 1 1.3 10.6 12.3 0.9 Source: based on data from ie 201 ' QUIBB survey 0.0 6.4 Breast-feeding and vitamin A supplements The proportion o f infants who are exclusively breast-fed to the age o f three months rose from 23 percent in 2000 to 35 percent in 2006. This improvement has unfortunately not been accompanied by any enhancement o f child nutrition status. The explanation may l i e in the fact that it i s not always easy to move from exclusive breast-feeding to the addition o f food supplements. For example, the proportion o f children aged 6 to 59 months receiving vitamin A supplements rose from 16 percent in 2000 to 39 percent in 2006. The improvements by region were 38 percent in LomC, 42 percent in the Maritime region, 46 percent in the Plateaux region, 27 percent in the Centrale region, 38 percent in Kara, and 39 percent in the Savanes. 2.4.2 Basic socioeconomic infrastructure Drinking water The shortage o f water and sanitation facilities and their accessibility are major problems, especially in rural areas. Drinking water, o f course, i s a prerequisite for good health, while water that i s unsafe i s an important factor for such diseases as trachoma, cholera, typhoid fever, and schistosomiasis. Drinking water may be contaminated as well by chemical products, or by physical and radiological materials that are harmful to human health. According to MICS2 and MICS3 data, the proportion o f Togolese 21 households using safe drinking water rose from 53 percent in 2000 to 57.1 percent in 2006 (88 percent in urban areas and 40 percent in the countryside). The drinking water supply situation i s best in the capital city o f LomC (92 percent), followed by the Kara region (62 percent), the Centrale region (61 percent), the Savanes (50 percent) and the Plateaux (41 percent). While coverage has improved in all these regions, this cannot be said for the Maritime region, where the proportion o f families using safe drinking water was unchanged, at 49 percent, from 2000 to 2006. Box 2. The drinking water situation, according to the Water Ministry There are three zones o f intervention in relation to drinking water supply: rural areas, semiurban areas, and urban areas. The drinking water supply situation i s o f concern nationwide, regardless o f the zone. According to the D G E N A F D inventory conducted in 2006, the water supply ratio i s 30 percent in rural areas, and 29 percent in semiurban areas. As to urban areas, the rate i s 39 percent in the prefecture and subprefecture seats, and 44 percent in LomC. The drinking water infrastructure deficit i s considerable in both rural and urban areas. As a result, a large portion o f the population i s exposed to waterborne diseases. In addition, people (and women in particular) must devote a great deal o f time to carrying water. This i s one o f the main factors behind the low rate o f school enrollment for girls, and the low proportion o f women engaged in income generating activities. Hygiene and sanitation The inadequate elimination o f human wastes and household garbage, and shortcomings in personal hygiene, can be cited as causes o f a range o f illnesses, notably diarrhea and polio. In 2000,40 percent o f the population lived in households with an adequate sewage disposal system. This indicator declined somewhat over the following five years, and stood at 32 percent in 2006. The rate i s estimated at 67 percent in the towns, but only 10 percent in the countryside. According to data from 2006 CWIQ survey, nearly half (47.9 percent: rural 64.6 percent and urban 19.4 percent) o f households had no home toilet. Only 21.8 percent had covered latrines, and 11.2 percent uncovered latrines. According to the same survey, 69.3 percent o f households were dumping their wastewater directly into the environment. This practice i s especially noticeable in rural areas (91.3 percent). In the towns, wastewater i s most likely to be dumped in the streets (54.6 percent). Energy Electricity supply falls short o f people's needs. There i s much to be done to enhance the quality o f service and to reduce connection costs. Moreover, the country has been in the grip o f a severe energy crisis since 2006, and this has had an enormous impact on the national economy, and in particular on the subsistence activities o f the poor. In 2006,28 percent o f Togolese households had access to electricity, with sharp variations depending on place o f residence: 43 percent in urban areas, and only 4 percent in rural areas. As well, the poor are less likely to have access to electricity (1 1 percent) than the nonpoor (43 percent). 22 Transportation There are parts o f the country with high agricultural potential that are s t i l l severely isolated. Almost 83.5 percent o f roads are unpaved. Many urban and rural roads are poorly maintained, and are sometimes impassable during the rainy season. This situation poses obstacles to the freedom o f movement o f goods and people, and acts as a damper on socioeconomic activities. Communications Telephone coverage in Togo i s 4.8 percent, meaning that 95.2 percent o f the population has no telephone access (and telephone coverage i s particularly poor in rural areas). As to the Internet, 96.3 percent o f people have no access. For the sake o f i t s development, the country needs proper interregional and international communications, and a modem communication system. 2.4.3 Employment and incomes Overall, Togo had fairly high unemployment and underemployment rates in 2006, at 32.9 percent o f the active population (which i s 83 percent o f the total). Men and women are affected by unemployment and underemployment to different degrees: 34.9 percent for men, versus 3 1.2 percent for women. The distribution o f the unemployed population reveals discrepancies by place o f residence. While 27.4 percent o f the active rural population i s unemployed, the figure rises to 36.6 percent in the towns. Moreover, the unemployed say that the main factor explaining their status i s the sluggishness o f the job market (no work available). Households derive their incomes from a number o f sources that are not mutually exclusive. Thus, 36.8 percent draw earnings from wages and salaries, 61.8 percent from farming, 29.2 percent from livestock raising, 1.6 percent from fishing, 78.9 percent from property, and 42.2 percent from transfers (4.1 percent from the public sector and 40.1 percent from the private sector). This distribution o f income sources varies sharply by place o f residence and between the poor and nonpoor: while 25.9 percent o f rural households earn wages and salaries, the figure i s 55.9 percent for urban households. On the other hand, more rural families earn income from agriculture (86.4 percent) than do urban families (19.9 percent). 2.5. MDG STATUS AND C H A L L E N G E S TO 2015 2.5.1 Togo's MDG status At the United Nations General Assembly session o f September 2005, devoted to tracking progress in relation to the MDG, the Togolese authorities reaffirmed their commitment to implementing the policies needed to combat poverty and hunger, illiteracy, discrimination against women, H I V / A I D S and other diseases, as well as degradation o f the environment. This commitment i s o f great importance, for Togo's current socioeconomic situation (cf. Table 5) suggests that at the current rate o f progress the country i s unlikely t o achieve the MDG targets by 2015. 23 The conclusions from the first national MDG monitoring report approved in October 2003 showed that, at the current pace, none o f the millennium development goals was likely to be achieved. With sustained effort, three o f the goals could be within reach: "Achieve universal primary education," "Improve maternal health," and "Combat HIV/AIDS." On the other hand, the country i s unlikely to achieve four other objectives by 2015: "Eradicate extreme poverty," "Promote gender equality," "Reduce child mortality," and "Ensure environmental sustainability ." 24 Table 5. MDG indicators in Togo Available Available Target MDG data 1990 to data for 2015 2002 2006 ~ Goal 1: Eradicate extreme povertv and hunger Target 1: Halve, between 1990 and 2015, the proportion of Teople whose income is less than $1 a day 1.Proportion o f population living below the poverty threshold (incidence o f poverty) (national ... 61.7% 30.9% threshold)* ................................. (2006)a Target 2: Halve, between 1990 and 2015, the proportion of people who sufferfiom hunger 1. Proportion o f underweight children.. .......... .., 26.0% 13% (2006) Goal 2: Achieve universal primarv education Target 3: Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling 1. N e t enrollment rate in primary education (6-1 1 years 109.4% 74.6% 100% ) .............. (1990) (2006) 2. Primary school completion rate ... 78.1% 100% ......................................... (2006) 3. Literacy rate o f 15-24-year-olds ..................... 69.6% (1995) 76.4% 100% (2006) 4. Literacy rate o f persons aged 15 and older* ............... ... 56.9% 100% Goal 3: Promote gender eaualitv and empower women Taraet 4: Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels o f education no later than 2015 1. Ratio o f girls to boys in primary school 100% 80% (2000) 90% (2006) ...................... 2. Ratio o f girls to boys and secondary school 100% 50% (2000) 80% (2006) .................... 3. Literacy rate o f women aged 15-24.. .... ... ... ... 4. Ratio o f literate women to literate man, 15-24 years old * .............................................. 67% (1 995) 67.9% 100% (2006) 25 Available Available Target MDG data 1990 to data for 2015 2002 2006 Goal 4: Reduce child mortalitv Target 5: Reduce by two-thirds, between 1990 and 2015, the under-Jive mortality rate 1. Under-five mortality rate per 1000 live births ................................................ ... 123%0 41%0 (2006) 2. Infant mortality rate 77% 80%0(1998) 26.6%0 ............................................. (2006) 3. Proportion o f children immunized against measles 63.1% 58% (2000) 100% .................... (2006) Goal 5: Imurove maternal health Target 6: Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio 1. Proportion o f births attended by skilled health personnel ........................................................................ 49% (1998) 62.9% 12.25% (2006) 2. Maternal mortality rate per 100,000 live births.. .... 478 (1998) 478 (1998) 119 Goal 6: Combat HIV/AIDS, malaria and othe communicable diseases Taraet 7: Have halted by 2015 and begun to reverse the spread of HIV/AIDS 1. HIV prevalence rate among the sexually active population (15-49 years) ...................................... 6% (1999)b 3.2% 0.0% (2005) 2. Ratio o f school attendance o f orphanshon-orphans ....... ... 0.9 (2006) 3. Contraceptive prevalence rate ... 16.8% .................................. (2006) 4. Condom use with casual partners. ....... ... 49.9% (2006) 5. General knowledge o f HIV prevention among young ... 12.6% people.. . (2006) Target 8: Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases 1. Intermittent preventive treatment for malaria among pregnant women 18.1% 100% 26 ~ Available Available Target MDG data 1990 to data for 2015 2002 2006 .................................................................. :2006) 2. Percentage of under-five children sleeping under a treated mosquito net 15% (2000) 41% (2006) 100% ................................................................ 3. Percentage of under-five children appropriately treated for malaria ... 37.5% 100% .............................................................. (2006) Goal 7: Ensure environmental sustainabilitv Target 9: Integrate the principles of sustainable development into country policies and programs and reverse the loss of environmental resources. Target 10: Halve, by 2015, the proportion ofpeople without sustainable access to safe drinking water and basic sanitation 1. Proportionof population using an improved drinking source .............................................................. 48% (2000) 57.1% 74% (2006) Target 1 1: Have achieved by 2020 a significant improvement in the lives of at least 100 million slum dwellers 1. Proportionof population with access to improved sanitation 40% (2000) 3 1.7% 100% ............................................................... (2006) 2. Proportionof population living in shacks ................ ... 76.4% (2006) Goal 8: DeveloD a Plobal DartnerShiD for develoDment Target 16: Develop and implement strategies for decent and productive work for youth Target 17:Provide access to affordable essential drugs Target 18: Make available the benefits of new technologies, especially information and communications technologies. 1. Telephone lines and cellular subscribers per 100 population*** l8%0 (2003) 100% .................................................................. 2. Internet users per 1000 population** ...................... 37%0(2004) 100% 27 Sources: MICS 3; * QUIBB (CWIQ); ** EDST 1998; *** W D I 2006 (World Bank) a - in the absence o f data for the previous decade, the 2006 incidence i s the reference point for the 2015 target b - Prevalence in 1999 refers to the entire population. 2.5.2 Challenges to achieving the MDG in Togo Because o f the crisis, Togo has not been in a position to entering toward programs with i t s development partners for moving toward the Millennium Development Goals (MDG). According to the current outlook, while considerable efforts have been made in such fields as education, maternal health and HIV/AIDS, it w i l l be 2008 before decisive actions can be taken in this direction, with the gradual return o f donors. Togo has thus lagged well behind other countries, and this compounds the challenges that must be met to achieve appreciable results by 20 15. Moreover, in the course o f preparing the long-term development strategy based on the MDG, studies evaluating needs and costs for achieving the MDG by 2015 have shown that the State will have to invest resources in MDG- related sectors in amounts 1 1/2 times greater than the country's total budget. Given this major need for resources, three broad challenges have been identified for achieving the MDG: mobilizing domestic and external resources, achieving efficiency in public expenditure, and building institutional and human capacities. Mobilizing domestic and external resources. The government faces the problem o f expanding the tax base in a situation where a significant portion o f the economy (agriculture, accounting for around 30 percent o f GDP) i s not taxed, and where the informal economy has gained rapidly in importance in recent years. In addition, tax evasion as well as tax and customs exemptions constrain the performance o f the revenue system. This situation i s accentuated by the ineffectiveness o f tax audits, due primarily to human resource problems in tax administration and the inadequacy o f measures to encourage tax compliance. Consequently, the average tax pressure rate o f recent years has been 14 percent, compared to a minimum o f 17 percent called for in the W A E M U context, and this i s not producing the revenues needed to meet priority needs. On the external front, cooperation with the country's main partners has been frozen for more than a decade, and this has greatly reduced external financial assistance. Traditionally, nearly 80 percent o f government capital spending was financed by external resources, and the drying up o f those resources has jeopardized achievement o f the MDG. The political crisis seems to be the main factor behind the suspension, even if the halt in multilateral aid disbursements has more to do with the buildup o f arrears. Efficiency of public spending. A recent review o f government expenditure showed that a great many operations are executed using exceptional procedures, thereby increasing the risk that a significant portion o f funds w i l l be allocated to nonpriority sectors. Moreover, the lack o f transparency in procurement procedures and weaknesses in expenditure monitoring and control have meant that investments do not always produce the expected effects Institutional and human capacities. In terms o f resource absorption capacity, the prolonged sociopolitical crisis in Togo has led t o a marked deterioration in the institutional and human capacities needed to manage development properly. While the financial resources available to the State are low, the absorption rate i s also very low. This i s primarily attributable to the shortage o f physical resources, and the failure to follow donor-mandated procedures, which in turn reflects the lack o f training among government officials, and depletion o f their ranks through retirement. The scarcity o f budgetary resources and the freeze on recruitment in the public service have produced considerable capacity 28 constraints, particularly in key ministries responsible for the economy, finance, health and education. There was an overall decline in the public service staff complement from 34,736 in 1994 to 23,256 in 2005. Forecast retirement figures for the next five years are alarming: nearly 50 percent o f current public servants are slated to retire by the end o f 2009. B y 2010, if nothing i s done to rebuild the public service, ministries w i l l have a combined staff o f only 9000. CHAPTER 3: POVERTY REDUCTIONAND GROWTH STRATEGY The ultimate goal o f the interim poverty reduction strategy that the government expects to pursue with the participation o f all stakeholders and the beneficiary population i s to achieve a sustainable and effective improvement o f living conditions by addressing the principal causes o f poverty outlined above. Accordingly, the government intends to implement a policy o f strong and sustained economic growth compatible with the Millennium Development Goals (MDGs) to which it i s committed. The country’s overall long-term approach i s geared t o meeting the MDGs. To that end, and in line with the commitments undertaken at the United Nations General Assembly o f September 2005, which was devoted to monitoring progress with the MDGs, the government embarked in July 2006 on the preparation o f the long-term National Development Strategy (NDS) geared to the MDGs. Adopted in September 2007, this overall strategy serves as a benchmark paper for drawing up cooperation frameworks, including, in particular, the PRSP and the technical assistance programs. Thus, the interim poverty reduction strategy paper attempts to provide an operational framework for implementation o f the NDS. Furthermore, the interim PRSP i s the government’s frame o f reference in i t s dialogue with technical and financial partners. The same w i l l be true o f the full PRSP. This poverty reduction and growth strategy i s built around three major strategic objectives, namely: 0 Strategic objective 1 : Enhancement o f political and economic governance; 0 Strategic objective 2 : Consolidation o f the economic revival and promotion o f sustainable development; and 0 Strategic objective 3: Development o f the social sectors, human resources, and employment. Each o f these objectives involves clear directions that the government w i l l periodically adjust in line with economic and social developments, the availability o f resources, and progress made with implementation. 3.1 STRATEGIC OBJECTIVE 1: IMPROVEMENT OF POLITICAL AND ECONOMIC GOVERNANCE In i t s pursuit o f strategic objective 1, the government intends to continue the actions to promote good political and economic governance undertaken since 2005. Four specific programs are involved: (1) Improvement o f political governance; (2) Implementation o f institutional reforms; (3) Fiscal stabilization and efforts to combat corruption; and (4) Sound and effective management o f aid flows. 3.1.1 Improvement of political governance 29 Analysis o f Togo’s political, economic, and social situation shows that, for the past 15 years, governance problems have been by far the most important bottleneck for the country’s development. Indeed, by triggering unprecedented social and political unrest, the democratization process that began in the early 1990s has destabilized the national economy and exacerbated the poverty o f the population. As a result o f that destabilization, moreover, the European Union and Togo’s principal development partners suspended their cooperation with the country, thereby depriving the national economy o f i t s principal sources o f financing for public investments. The quest for peace, stability and security through dialogue and consensus-building, rather than confrontation, therefore appears to be one o f the core prerequisites for the country’s recovery. I t was with that in mind that inter-Togolese political dialogue got underway and led to the Comprehensive Political Agreement (Accord Politique Global-APG) o f August 20,2006. The APG provided for the establishment o f a new National Assembly, in accordance with a transparent, fair and democratic electoral process; measures to address security, human rights, refugee and displaced persons issues; and the pursuit o f the constitutional and institutional reforms needed to consolidate democracy, the rule o f law, good governance, and the formation o f a government o f national unity. Togo’s strategy for promoting good governance i s based on the principle that the participation o f the population in the establishment o f political, social, and economic priorities i s a prerequisite for the success o f any development strategy. That i s why the government has embarked on promotion o f democratic governance, transparency and accountability at the same time as reaffirming i t s commitment to the basic tenets o f liberal economics. That commitment should lead to a broad consensus in Togolese society that the aspirations o f the least privileged are taken into account in the allocation o f the resources needed for development. Improving political and economic governance presupposes a continuation o f efforts to achieve national reconciliation and political reforms, strengthening the rule o f law and the security o f persons and property, reform o f the administration and o f the justice system, decentralization and town and country planning, reorganization o f the fiscal management system, and reform o f the government procurement system. As regards political reforms, the government’s goal i s t o strengthen democratic institutions by effectively putting in place all the institutions contemplated in the Constitution o f October 14, 1992, observance o f the principle o f the separation o f powers provided for in the Constitution, strengthening o f the judicial system, the State’s subordination to the rule o f law, and regularly and routinely operational democratic institutions aimed at protecting individual freedoms. Within the national reconciliation framework, the priority today i s to achieve consensual implementation o f the APG and, especially, to hold free and transparent legislative elections, the return o f the refugees onto national territory, the provision o f care and shelter for them, their reincorporation into society, and stronger security for persons and property. Finally, with respect to improvement o f political governance, there will be a major effort to involve civil society in training activities and in campaigns to raise awareness among all members o f society regarding the principles o f good governance and the promotion and protection o f human rights and public freedoms. To accomplish this, CSOs already active in this field will have their organizational, material and financial capacities strengthened in a way that will highlight their work and make it more effective. 30 - Continuation of the national reconciliation and political reform process The national reconciliation process must be continued by, among other things, organizing free and transparent legislative, communal, and presidential elections. Respect for human rights and fundamental freedoms will also help boost national reconciliation. That w i l l require strong political will and monitoring o f the extent to which all members o f society are represented in political and social dialogue. - Strengthening of the rule of law and of security for persons andproperty A sound and equitable justice system, made accessible for all thanks to the reform currently under way; more robust promotion and protection o f human rights, and actual enforcement o f laws and regulations, w i l l help establish credible institutions capable o f guaranteeing security for people and property. For that to materialize, the political and administrative authorities and the population need to be informed as t o their rights and duties and made aware o f the importance o f human rights for a country's harmonious development. 3.1.1 Implementation o f institutional reforms - Streamlining the Administration A number o f studies and assessments o f public administration in Togo have highlighted inefficiencies and other shortcomings in the management o f institutions and in the human capacities needed for development. Overall, the Administration i s perceived as lacking (or failing to abide by) standardized working procedures and methods and as suffering from insufficient capacity and a concentration o f decision-making powers detrimental to transparent management o f public resources. These operational shortcomings in Togo's public administration have been exacerbated by the suspension o f civil service recruiting, which has led to major shortages o f skilled staff in key development sectors. I t i s projected that 50 percent o f today's civil servants w i l l be retiring between now and 2009. The social sectors (education, health) will be particularly hard hit. To address these shortages the government, with the support o f i t s partners, launched the Public Administration Reform Process by organizing the Estates General o f Public Administration (ktats Ge'ne'raux de I 'Administration Publique - EGAP) in December 2006. I t s principal recommendations concern: rationalization o f the j o b and staffing structures o f the ministries and government services; human resource development and the crafting o f human resource training programs; the computerization and automation o f administrative procedures; and the promotion o f ICTs. The government's plan to implement a specific Administration Reform Program i s based on the Estates General and the recommendations they gave rise to. It aims to bring about a genuine modernization o f the Togolese Administration, making it more effective and efficient. In this connection-and with respect to the strengthening o f human capital in the civil service- particular heed w i l l be paid to joint implementation o f two interrelated components. One, qualitative, component has to do with enhancing the technical skills o f senior civil servants, while the other, quantitative, component has to do with preventing the risks o f trained and qualified civil servants leaving the service. 31 The first component requires the development o f appropriate training and professional skills improvement programs. The second requires improving motivation among civil servants in the performance o f their duties. I t i s principally a question therefore o f reassessing the ways in which civil service wages and salaries are determined and making them competitive with other branches o f public administration (the Central Bank, the National Social Security Fund, and so on), and, naturally, with the private sector, too. As the first component goes hand in hand with the second, striking a correct balance between the two o f them should enable human capital in the civil service to accomplish the missions that the country w i l l entrust to civil servants as they endeavor to implement the national poverty reduction strategy. One o f the essential ingredients o f the full PRSP will therefore be t o consider the prerequisites for achieving that balance with the help o f a custom-tailored capacity-building plan. - Justice system reform An in-depth diagnostic assessment o f the justice system in Togo was conducted in 2004 and forms the basis for the National Modernization o f Justice Program (PNMJ). This i s a six-pronged program involving: (i)strengthening justice administration capacities; (ii) modernizing legislation; (iii) boosting the independence o f the bench based o n a code o f ethics and courts with specific jurisdictions; (iv) capacity building for judges and justice auxiliaries; (v) jurisdictional control o f administrative activities; and (vi) improving the public’s access to law. Considerable progress has been made with the implementation o f this program, with, for instance, an awareness and information campaign o n the contents o f the program; establishment o f the Commission to review and/or draft laws and regulations; the start o f hearings by the administrative chambers o f the Court o f Appeals in LomC and o f the Supreme Court; development o f the legislative database, and so on. The government intends to continue implementing the P N M J and to build upon the results already achieved under the program. - Human rights T o promote human rights and honor i t s commitments to the Togolese people and the international community, in May 2007 the government adopted a four-year National Program to Promote and Protect Human Rights (PNPPDH). The overall objective o f this program i s to improve the human rights situation, as a prerequisite for sustainable human development. The five principal courses o f action under the program are: (i) to seek ongoing improvement o f the legal/regulatory, institutional and operational framework for human rights; (ii) to persuade the authorities to be more respectful o f human rights; (iii) to increase the effectiveness o f other stakeholders; (iv) to lay the foundations for a genuine culture o f human rights at every level; and (v) to establish a human rights documentation and information center. - Decentralization and regional development The partly autonomous regions (collectivitis territoriales), in partnership with the technical ministries directly involved in the poverty reduction strategy (health, education, water resources, public facilities, environment, and so on), are called upon to play a fundamental part in that strategy, given their importance in establishing and helping to run the grassroots facilities needed to attain the MDGs. Given that the regional governments contribute t o the development o f the local economy and thereby provide the rural population with opportunities to engage in poverty-reducing activities, it is important 32 (i) to promote the decentralization o f government activities and (2) to strengthen regional governments in terms o f both their responsibilities and their financial resources. Thus, t o make this approach operational, within the framework o f L a w No. 2007-01 1 o f March 13,2007 on decentralization, the government intends to deepen the decentralization process by, above all: organizing local elections, strengthening the legal framework, and putting into place a strategy designed to raise awareness o f decentralization. I t also intends to promote community development through all the participants involved, particularly civil society organizations, which w i l l be strengthened at every level. Regional planning policy pursues the same rationale as decentralization. The partly autonomous regions w i l l therefore be closely associated with the preparation and implementation o f the national strategy for regional development. At the same time, the government’s Declaration o f National Policy for Regional Development (DEPONAT), which takes into account the provisions o f the policy framework paper on regional development o f the West African Economic and Monetary Union (WAEMU), will be the formal and legal framework for implementation o f the regional development process. The national regional development strategy will primarily seek to mitigate the effects o f the gravitational pull o f the capital, LomC, by giving the country’s other regions and towns their o w n development opportunities, especially by continuing construction o f major road networks. In the same vein, a policy will be pursued that encourages the installation o f structuring administrative and social facilities (hospitals, schools, and so on) and basic infrastructure to facilitate craftwork and small and medium-sized industry. In the short-term, the government plans to emphasize the following priorities: (i)preparation o f a regional development strategy and policy that should give rise to regional development instruments; (ii) recruitment o f personnel with appropriate regional development qualifications; and (iii) training for all those involved in regional development. 3.1.3. Fiscal stabilization and efforts to combat corruption Fiscal stabilization There i s a broad consensus among all public and private economic transactors that effective fiscal management institutions and systems are essential for implementing economic policies in support o f the national poverty reduction strategy. T o that end, the government has set i t s e l f the goal o f continuing i t s efforts to stabilize public finances, gradually raising fiscal revenue to over 17.8 percent o f GDP by 2010 and to achieve a primary fiscal surplus o f at least 1.5 percent o f GDP by the same year. Within that framework, all necessary reforms will be undertaken to ensure improved resource mobilization and better fiscal management. Parallel to those endeavors, priority will be given to optimal medium-term allocation o f public funds directed toward priority poverty-reduction sectors. Several layers o f government intervention are planned. As regards the mobilization o f domestic resources, the strategy o f broadening the tax base remains relevant and should translate into enhanced revenue collection, the simplification and rationalization o f tax and customs codes, and the implementation o f tax audits based o n risk assessment and a plan to reduce tax and customs duty exemptions. In that framework, the government already began, in 2006, a process o f streamlining the tax and customs administrations, which envisages, for instance, computerizing tax returns and accounting, and the introduction o f A S Y C U D A W software. 33 Simultaneously, the government will continue reforms aimed at achieving credible and realistic budget programmingand proper budget execution, to wit, non-accumulationof domestic arrears; control and monitoring of expenditure aimed at making it more effective; a stronger accounting and registration information system; and, finally, surveillance and external verification of public finance. Measures to achieve all this will include, in particular: (1) implementationof WAEMU directives and BCEAO rules regarding fiscal management; (2) improved ex ante control over fiscal expenditure; (3) the elimination of exceptional procedures; (4) improved control over budget execution to allow real-time monitoring of expenditureby item; (5) making the Treasury the sole entity responsiblefor managing Government cash flow; and (6) making the Audit Office function properly in respect of i t s responsibility for drawing up the annual budget outturn laws (Lois de Rgglement) ,which are then debated by Parliament. To the same end, the public accounting system will be revampedso that it produces reliable accounts within a reasonable period of time that will make it possible to monitor cash flow and give a renderingof government accounts. The government will also take steps to avoid accumulating domestic arrears. A plan will be drawn up for getting rid of the current backlog. In general, taking as a basis the various diagnostic assessments conducted of government financial management,” the government will prepare an action plan for improving the public financial management system. That action plan will contain a calendar for implementationand monitoring of related technical assistance, capacity-buildingand logistical support needs. For the government, a vigorous return to public investmentwill be one of the pre-conditionsfor implementationof the poverty reduction strategy and hence for achievement of the MDGs. With that in mind, considerationwill be given to a number of principles that are likely to ensure an effective and efficient revival of public investment. This interim PRSP advocates the following principles for a revival of public investment: (1) Care to ensure that financial programmingo f public investment i s consistent with a prudent and credible macroeconomic framework”; (2) Alignment of public investment financing with the public financial management reforms so that the investments are properly budgeted, monitored, and audited; and (3) Proper adjustment of the supply of public investmentprojects to private demand for project execution, via a transparent and financially fair procurement system capable o f ensuring “value for money” in public expenditure. ’ ~ the procurement system, the government intends to be guided by As regards government o r d e r ~and the updated version of the analytical report on procurement procedures in Togo.I4 The updating of that report will be effected as part of the preparation of the Full PRSP and in conjunction with preparation of the Specific Action Programto strengthen the Public Investment Program (PIP). With respect to the allocation of resources to the priority sectors, the chief concern will be to prepare a Medium-Term Expenditure Framework (MTEF) geared to this strategy’s priorities. The MTEF will be “Republic of Togo - Review of Public Expenditure and Government Financial Management,” World Bank (AFTFM), African Development Bank, UNDP, and French Cooperation, June 2006; and “Togo - Public Expenditure Management,” IMF, July 2007. The macroeconomic parameters of the I-PRSP are addressed in Chapter 4 o f this paper. l3It i s worth recalling that government procurement orders accounted for 12 percent o f GDP in 2002. l4World Bank and African Development Bank; “Report of the Analytical Review of the Procurement System -Togo,” Vol. 1, October 2003. 34 drawn up by stages, depending above all on capabilities and the progress made with implementing the public financial management reforms. I t s core ingredients will involve: (1) establishing the amounts o f resources and outlays based on the macroeconomic parameters; (2) reviewing and defining sectoral programs; (3) setting ceiling guidelines for each sector; (4) preparing medium-term sector frameworks; (5) integrating the MTEF with the budget law; and ( 6 ) parliamentary adoption o f the budget law. The government i s prepared to strengthen public finances and improve the effectiveness and efficiency o f public financial management. The government also believes that it w i l l be in a position to evaluate and measure progress made in respect o f performance goals for the national public financial management system. In that capacity, it will be actively involved in the standardized international program known as “Public Expenditures and Financial Accountability” (PEFA),” which aims to provide an integrated and homogeneous framework for measuring, over time, the performance o f national public financial management systems. T o that end, an initial PEFADPRF i s planned for 2008 and it would appear to be essential to launch it in connection with the preparation o f the Full PRSP. The government will pay attention to this Program because o f what it enables it to deliver: a joint platform o f dialogue and evaluation o f progress made, aimed at ensuring that reforms are sustainable by simultaneously emphasizing national “ownership” o f the reform process; harmonization and alignment o f development partners’ interventions with the country’s strategy; follow-up; and results. T o implement, coordinate, and monitor all the above-mentioned activities, the government w i l l seek the establishment o f a Group to Coordinate and Harmonize Public Financial Management Reforms comprising all national financial and fiscal authorities and those o f the development partners directly involved in this process. This Group’s chief responsibility will be to steer, manage, monitor and evaluate the action plans, programs, technical and logistical support and institutional capacity-building activities related t o fiscal reform. I t w i l l also coordinate and harmonize the fiscal support furnished by the various creditors and donors and development partners in order to finance the national poverty reduction strategy. I t will also be in charge o f follow-up activities to the Paris Declaration on Aid Effectiveness.16 Efforts to combat corruption The government considers that the direct effect o f coherent and swift implementation o f the public financial management reforms w i l l be a markedly lower risk o f corruption in the handling o f public funds. The aforementioned actions will be supplemented by the establishment o f a transparency framework covering all spheres o f public life in order to make it possible for public resources to be used to produce, in sufficient quantity and quality, public services that are fairly distributed among the population. In this perspective, efforts w i l l focus in the medium-term on: - drawing up a national anti-corruption strategy; - establishing an institutional framework that f i t s in with existing structures; and - adopting an action plan geared to preventing corruption and ensuring fair and transparent treatment o f corruption cases by the competent courts. l5Referredto in French as “Depenses Publiques et Responsabilitk Financikre” (DPRF). l6See, below, 0 3.1.4, “Sound and effective management o f aid flows.” 35 Furthermore, to underscore the Togolese State’s determination to combat money laundering and the financing o f terrorism, the National Assembly has just passed the uniform law o n money laundering. The government w i l l do everything in i t s power to ensure strict enforcement o f that law. In particular, it will set up the National Financial Information Processing Task Force (Cellule Nationale de Traitement des Informations Financibres - CENTIF). 3.1.4 Sound and effective management o f aid flows With a view to the provision o f aid and reforming it in such a way as t o render it most effective for achieving the MDGs and poverty reduction, a High-Level Forum was held in Paris in March 2005. I t s purpose was to institute a partnership commitment between donors and development partner countries that would set targets and measure progress toward them. I t gave rise to a declaration, known as the Paris Declaration on Aid Effectiveness.” Having subscribed t o that Declaration, Togo intends to play its part locally and honor i t s commitments with respect to improving the management and efficiency o f overseas aid flows aimed at reducing poverty and inequality and pursuing the MDGs. To start with, it will prepare to meet the next international deadline for following up on the Paris Declaration at the Accra Summit Meeting in 2008. The government w i l l also prepare a report on the status o f the indicators related t o commitments undertaken in connection with the Paris Declaration. I t is, in addition, essential to improve debt management capabilities in order to avoid new arrears and to qualify for the HIPC Initiative. At the same time, the government intends to apply the W A E M U regulation establishing that only the Minister o f Finance i s authorized to contract or guarantee external debt on behalf o f the State. Furthermore, a national indebtedness strategy will be adopted that will include the implementation o f appropriate coordination mechanisms to ensure the management and monitoring required to make Togo’s debt viable. 3.2 STRATEGIC OMECTIVE 2: CONSOLIDATION OF ECONOMIC REVIVAL AND PROMOTION OF SUSTAINABLE DEVELOPMENT In this part o f i t s strategy, the government plans to continue and to establish specific programs: (1) Strengthening structural reforms; (2) Strengthening regional integration and trade promotion; (3) Reviving agriculture and the rural economy; (4) Developing infrastructure to support economic growth; and, finally, (5) Effective management o f natural resources and the environment. 3.2.1. Strengthening structural reforms These reforms focus primarily on public enterprises, the financial system, and the business environment. The government attaches particular importance in i t s economic policy to the implementation and culmination o f these reforms. ” More than 100 countries subscribed to the Paris Declaration(including, in West Africa: Benin, Burkina Faso, Gambia, Ghana, Guinea, Mali, Mauritania, Niger, Senegal and Togo), along with over 25 ODA organizations, including the OECD, the World Bank, UNDP, the African DevelopmentBank, the European Community, the IMF, the Economic Commission for Africa (ECA), the European InvestmentBank (EIB), and so on; the bilateral aid agencies of Germany, France, Denmark, China, Japan, and others; and, finally, numerous internationally acclaimed NGOs. 36 - Public enterprises T o galvanize the national economy, the government has, since the early 1980s and in the context o f structural adjustment efforts, been engaged in the reform o f the public enterprise sector, in particular by restructuring the legal and institutional framework and by withdrawing from State involvement in the productive sector in favor o f private national and international operators. Backed by Togo’s development partners, these actions have permitted the liquidation o f several unprofitable enterprises and the privatization o f a number o f others that were not deemed to hold strategic importance. That policy w i l l be continued under the present strategy with a focus on certain key enterprises, such as SOTOCO (the Togolese Cotton Company) and OTP/IFG (Office Togolais des Phosphateshnternational Fertilizers Group), given their importance for economic growth and poverty reduction. As regards SOTOCO, the company will undergo extensive reform following recent financial, strategic and operational audits. The findings o f those audits will help, in the near future, to identify practical measures that could lead either to the company being taken on by a strategic partner or to i t s dissolution, in order to make room for a new enterprise. Pending such a restructuring, the enterprise will be kept under tight management control in order to avoid further deterioration in i t s financial position. In the case o f the OTP/IFG, a decision to dissolve the enterprise was taken recently and steps are currently being taken to liquidate it, which include settlement o f i t s dispute with former partner IFG, for which an agreement has been signed by the two parties. In i t s stead, a Government enterprise, SociCtC Nouvelle des Phosphates du Togo (SNPT), was established on M a y 14 2007. Negotiations between the government and the Islamic Development Bank (IDB) led to the signing, o n September 28,2007, o f a loan agreement in the amount o f EUR 45.11 million (CFCA 30 billion) to finance part o f the cost o f the project for reviving production o f Togo phosphates (that i s to say, 74.6 percent o f EUR 60.5 million, which i s the total cost o f the project excluding taxes). The remaining costs will be covered by the Togolese Government with the participation o f the Investment and Development Bank (BIDC) o f the Economic Community o f West African States (ECOWAS). Negotiations with the bank are currently under way. In addition, a strategic development plan for the phosphates sector w i l l be formulated and put into effect with a view to increasing the sector’s contribution to economic growth. In general, in order to boost the performance o f the other public enterprises, the government considers that additional analysis and auditing are needed to refine the diagnostic assessment o f their situation and to detect possible operating flaws and both financial and logistical imbalances, as well as shortcomings in effective provision o f services. Based on these elements, the government will proceed to examine recommendations with a view to compiling an action plan o f reforms t o be undertaken, particularly as regards the institutional framework and the way the enterprises are run, as well as outside auditing o f their financial management. - Financial system The financial system comprises the banking and microfinance sectors. Banking sector 37 The banking system, which i s the predominant sector in Togo’s financial system,I8 has been troubled for many years now. Notable features o f the national banking system include i t s small size, a large State presence and only minor foreign bank participation, heavy concentration (at end-2005, the largest bank accounted for 26 percent of bank assets, 29.4 percent o f deposits, and 39.5 percent o f total loans), and, finally, very limited diversification o f products available to customers (essentially short- term loans and deposits, for lack o f long-term resources). In addition, banking sector performance has been such that it i s in poor shape, not to say in near critical position, in terms o f both solvency and liquidity. For the most part, this i s attributable to serious governance issues in certain large government enterprises as well as the major banks. Thus, there i s a high level o f nonperforming loans (30 percent o f total loans in 2004-2005, most o f them being loans to SOTOCO and OTPDFG) and clearly insufficient provisioning against those nonperforming loans (barely 41.6 percent, for instance, in one bank with a gross nonperforming loan ratio o f 69.1 percent). Furthermore, for several years bank liquidity has been below prudential standards, except at end-2005, a year in which five o f the six banks for which data were available met the liquidity ratio requirements. However, most Togolese banks have, in recent years, had serious difficulties meeting the other prudential ratios established by the Banking Commission. In 2005, there were numerous violations o f prudential standards in a majority o f banks and low profitability o f the national banking sector as a whole, with, for instance, average operating ratios (coeficients d’expbitation) s t i l l above 55 percent. So it i s obvious that the banking system has lost its capacity to finance economic activities. Hence the importance o f creating the conditions for easier and more profitable access to credit and diversified financial services for the private sector, in order to better meet i t s expectations and improve the conditions needed for it to develop. To that end, the authorities intend to adopt the following measures contemplated, for the most part, in community provisions and W A E M U prudential regulations: (1) implement the restructuring and rehabilitation measures identified by the recent BCEAO, W A E M U Banking Commission and IMF mission in i t s roadmap document (feuille de route) regarding the BTCI, UTB, and BIA; (2) develop a local Treasury bill market to enable the banks to diversify their assets while improving their liquidity management; (3) substantially improve banking supervision, particularly as regards the frequency o f on-site inspections, risk assessment, and capacity to carry out office audits; and, finally (4) abide by the structural benchmark o f the 2006-2007 Reference Program, which envisages a comprehensive rehabilitation plan for the BTCI and the UTB and the establishment o f a schedule for implementing it. Microfinance sector With average annual outstanding loans per client ranging from CFCA 62,300 and CFCA 80,100 between 2000 and 2004, the microfinance sector i s directed above all at the poorest segments o f the Togolese population. In recent years, this sector has achieved some growth. Indeed, between 2000 and 2004, the number o f active customers grew 17 percent; total deposits were up 76 percent; outstanding loans 50 percent; and l8At December 3 1, 2004, the Togolese financial system was structured as follows, in terms of the distribution of total assets: 62.14 percent for the banks; 27.19 percent for insurance companies and pension funds; and 10.67 for other financial institutions (including 5.97 percent for licensed microfinance institutions). Total assets of the financial system accounted for 51 percent of GDP (bank assets 32 percent, insurance company and pensionfund assets 14 percent, and other financial institutions 5 percent). Consequently, given that the banking sector dominates the Togolese financial system, while the microfinance sector i s crucial for implementation o f a national poverty reduction strategy, this I-PRSP obviously focuses on both. 38 average deposit per customer, 50 percent. The microfinance sector is, moreover, dominated by cooperative institutions and savings and loan associations, which operate in networks. There are six such networks, which, at end-2004, accounted for approximately 87 percent o f the licensed institutions, 77 percent o f customers, 81 percent o f deposits, and 71 percent o f outstanding loans. An analysis o f the sector’s financial performance, based on the five most active microfinance institutions, shows that: (i)overall the portfolio quality and viability o f Togolese MFIs i s rather satisfactory; (ii) nonperforming loans are below the international threshold o f five percent in at least three o f the five largest MFIs. Furthermore, most MFIs observe the majority o f the prudential standards decreed in the PARMEC law. They are, however, below international standards. Nevertheless, it i s important to point out that the microfinance sector has several shortcomings, including insufficient human resources and organizational problems. Moreover, the perverse effects for poverty reduction o f the high interest rate charged by the MFIs have yet to be studied. T o address those shortcomings, the government’s strategy pursues the following general objectives: (i) extend access to microfinance services to the majority o f poor households and micro-entrepreneurs; (ii)integrate the viable MFIs more closely with the national banking network; (iii) diversify the sector’s financial products and services so that they can respond better to customers’ needs; (iv) strengthen the institutional capacities o f the MFIs, their inclusion in networks, and their supervision mechanism; and, finally, (v) ensure that beneficiaries are trained and organized. - Business environment According to several international surveys, the business environment for development o f the private sector in Togo i s one o f the least attractive in the subregion.’’ The business climate in the subregion as a whole i s already weak by international standards. This state o f affairs, which i s to a large extent related to the country’s social and political crisis and to the constraints in the regulatory and institutional framework for the private sector, constitutes a serious obstacle to the development o f the national private sector and to the promotion o f foreign direct investment (FDI), two indispensable factors for a sustainable upsurge in economic growth. The government intends to remedy this state o f affairs by taking several steps designed to improve the business environment for development o f the Togolese private sector, while at the same time making the country more attractive to foreign investors. The following emergency measures w i l l be taken to enhance the regulatory framework: (i) reducing bureaucratic red tape by improving the operations o f the one-stop shop for the administrative procedures involved in establishing an enterprise and by expediting the establishment o f a one-stop shop for customs clearance; (ii) streamlining and simplifying tax, customs, and land ownership codes; (iii) amending the law on the status o f the Free Trade Area; (iv) promoting a new business practices code based on O H A D A rules as well as an investment code that guarantees property rights, the remittance o f capital and dividends, the freedom for private enterprise. As for the institutional framework, the government intends to promote the establishment o f an agency to develop the private sector and enterprise, and to strengthen the capacities o f the ministerial departments responsible for SMEs and SMIs. In the World Bank report Doing Business in 2007, in a ranking of business regulations in 175 countries (starting a business, dealing with licenses, employing workers, enforcing contracts, closing a business), Togo i s No. 151 in terms o f business facilities. 39 Furthermore, in order to achieve a sustainable improvement in private sector competitiveness, i t will be advisable to identify profitable market niches and, in particular, those in which Togo has comparative advantages within the subregion, to invest in basic infrastructure, and to undertake specific actions in the priority productive sectors. Thus, in i t s efforts to discover profitable niches, the government will conduct studies o f the agricultural, manufacturing and services sectors with a view t o supporting activities in the various growth areas and targeting, in particular, those closest to the poor. T o that end, it will be necessary to restructure the informal sector which i s a major part o f the national economy, accounting for 24 percent o f nonagricultural employment. While waiting for those studies, target actions are planned in the tourism, artisan and services sectors. 3.2.2 Strengthening regional integration and trade promotion As a member o f W A E M U and CEDEAO, has room to expand i t s markets and deepen opportunities for investment, both o f which are essential to revive i t s economy and put it o n the path to sustainable and sustained economic growth. I t s membership in these two blocs places Togo at a distinct advantage with respect to moving toward a globalization o f i t s economy via the strengthening and deepening o f regional integration. In that connection, there i s a pressing need for the pilot units for monitoring the free circulation o f goods and persons to become operational and for harmonization o f national regulations with those o f the community. The government i s also going to continue a trade policy geared to: (i) implementing the action plan for developing and promoting trade; (ii) improving the institutional and regulatory environment in such a way as to establish a private sector-friendly environment that encourages investment and promotion o f trade and exports; (iii)enhancing the productive capacity and competitiveness o f enterprises; (iv) strengthening and improving human and institutional management and trade promotion capacities, with a view to achieving more pro-active integration into the liberalization mechanisms currently being developed; and (v) stepping up the country’s active participation in the international organizations concerned with world trade. The Economic Partnership Agreement (EPA) between the EU and CEDEA02’ also opens up prospects for Togo’s economic development. In the economic and trade integration framework, Togo i s keen to receive stronger technical assistance from the WTO and to benefit from the Joint Integrated Technical Assistance Program (JITAP), from the integrated framework and from other programs run by international organizations in the field. 3.2.3 Revival of the agricultural and rural economy 2o Since January 1,2001 (when Mauritania l e f t it), CEDEAO/ECOWAS comprises 15 countries. Officially, it has been a free-trade zone since January 1,2000, but that Free Trade Agreement (FTA) has not yet been implementedin a meaningful way. Tariff and nontariff barriers still hamper the development of intra-regional flows of goods, services, people, and capital. These obstacles explain, in part, the low volume of official intraregional trade, which accounted for 13 percent of total DEDEAO trade in 2001, up from 11 percent in 1996, whereby a substantial share of those intra-CEDEAO official trade figures refer to intra-WAEMU trade. As for the prospects of a customs union, CEDEAO agreed, in December 2000, to take WAEMU’s four-rate common external tariff (CET) as the basis for its own TEC. Finally, we emphasize that the negotiationsof the West Africa-EU economic partnership agreement are being conducted by all CEDEAO countries, except the Cape Verde islands, which decided to leave it in September 2006, but including Mauritania. 40 The agricultural sector i s a major factor for Togo’s economic recovery. It plays a dominant part in the Togolese economy, since it has accounted for approximately 38 percent o f GDP over the past decade (1995-2005) and for more than 20 percent o f export revenue, with cotton traditionally occupying second or third place in Togo’s exports, after cement and/or phosphates, depending on the year. In addition, the agricultural sector employs approximately two-thirds o f the economically active population. Within the sector, subsistence crops account for about two-thirds o f output and have done so more or less consistently for the past 10 years. Furthermore, over the same period, agricultural GDP has grown faster than total GDP. Unfortunately, public spending on agriculture collapsed as a result o f Togo’s social and political crisis. At the same time, there are s t i l l major constraints on the development o f the agricultural sector. Essentially, these have to do with an inappropriate land ownership regime and degradation o f the soil; insufficient financing for agriculture; insufficient control over water resources; the absence o f structural organization in the rural environment; and capacity constraints among agricultural partners. Given the importance o f agriculture in Togo’s economy, the government intends to revive it on a sustainable basis as part o f its poverty reduction strategy, particularly since f m i n g i s done in rural areas, which are home to 79.7 percent o f the poor population. Thus, it has set itself the goal o f raising farmers’ incomes and contributing to an improvement o f the living standards o f the rural population within a sustainable development perspective and with particular attention to the poorest and most vulnerable segments, especially women and young people. The measures needed to attain this objective w i l l be geared to: (i) strengthening the legal and institutional framework; (ii)building economic and social structures in rural areas and professionalizing farming activities; and (iii) achieving sustainable improvements in access to productive resources and markets. A number o f emergency programs are scheduled to come on stream in 2008. These include the Institutional Review, the National Food Security Program, the Program to Combat Avian Influenza, and the Program for Opening Up Rural Areas with strong farming potential. As regards strengthening the legal and institutionalfiamework, the strategic actions that the government proposes to undertake have to do with: (i) completion o f the liberalization o f the agricultural sector and harmonization o f regulatory provisions with those o f WAEMU and CEDEAO; (ii)improved quality control o f agricultural products and inputs; (iii) capacity-building for central and regional units o f the Ministry o f Agriculture; (iv) improving the regulatory framework for entrepreneurship in rural areas; (v) enhancing information and communication systems; and (vi) improving the supply o f agricultural services. The strategic actions planned by the government to enhance the structural organization o f rural areas and make agricultural activities more professional w i l l involve: (i)supporting the emergence or strengthening o f village associations or communities; (ii) strengthening farmers’ professional organizations (OPA) and regional farmers’ associations; (iii) strengthening all the professions making up the agricultural sector; and (iv) helping to usher in a new generation o f farmers. With respect to achieving sustainable improvements in access to productive resources and markets, the government w i l l take the following strategic actions: (i)improve access to land ownership and the use o f land as collateral (se‘curisationfoncidre); (ii)enhance soil fertility; (iii) improve access to financing for agricultural and other rural activities; (iv) promote water resource management; (v) tailor research and advisory and support service programs to producers’ needs; (vi) boost access to improved seeds; (vii) improve access to storage, processing, and marketing infrastructure and to markets for agricultural products; and (vii) develop agricultural and rural infrastructure and facilities. 41 In addition, the government i s planningt o take specific steps to boost coffee-cocoa and cotton growing, as well as livestock breeding and fishing. In the coffee-cocoa sectors, the drastic drop in output over the past ten years (57 percent in the case o f coffee and 67 percent for cocoa) i s related to: the lack o f supporting measures since the liberalization o f this secto?; the lack o f financing for these crops; the low extension services for farmers ratio (30 percent); the ageing o f the plantations and impoverishment o f the soil; and the resurgence o f diseases and pests due to the change o f biotope in farming areas and inadequate maintenance work on the plantations. The government intends to embark on the following actions in an effort to revive these crops: (i) conduct a diagnostic assessment o f the subsector accompanied by a revival strategy; (ii) establish a small-scale entity responsible for advisory support t o farmers; (iii)wage a well-coordinated attack on pests and diseases; (iv) support research aimed at finding varieties that tolerate cocoa bush swollen shoot and necrotic wilting (de'pe'rissementne'crotique) in coffee trees; (v) provide improved plant material; (vi) establish an effective credit system; and (vii) support implementation o f sector- wide activities (une interprofession). Analysis o f the current situation o f cotton farming points to high production costs22and indicates that the goal o f achieving more intensive farming has not been met because of: (i) poor previous management in SOTOCO; (ii) overheads that are too high in relation to the current volume o f business; small farmer reallocation o f some cotton inputs to subsistence crops; and (iv) obsolete infrastructure and machinery. Measures to revive the cotton industry have to do with: (i) improving SOTOCO management; (ii) steps to reduce production costs at every level; (iii)introducing analytical accounting at the SOTOCO level; (iv) setting up a transparent and negotiated mechanism for establishing the price o f cottonseed; (v) strengthening o f farmers' associations and the consolidation o f their umbrella organization; (vi) financing research, the rehabilitation o f cotton tracts, cotton storage warehouses, and ginning mills; and (vii) in the medium term, supporting the establishment and operation o f sector association activities. As regards livestock farming (especially small animal farming), it i s s t i l l basically traditional, despite efforts to upgrade it. The principal constraints o n i t s development are: poor performance o f stud animals; lack o f extension work (encadrement) and o f animal health controls; poor use o f available fodder, and limited access to credit. Actions that the government intends to promote include: (i)stepping up dissemination o f technical itineraries for improving livestock farming techniques; (ii)promoting the integration o f livestock farming and agriculture; (iii) reinstating vaccination campaigns to combat the major epidemic diseases; and (iv) establishing a credit system tailored to the animal husbandry cycle. Finally, in the case o f fishing, the principal constraints on i t s development are: the inadequacy of, and failure to abide by, the regulations in force; the narrowness o f the continental shelf; over-fishing o f scarce fishing resources; pollution o f the sea; the high cost o f fish catch and conservation facilities; the nonexistence o f an appropriate credit system; the lack o f organization among artisanal fishermen on matters having to do with water resources, and the lack o f conservation infrastructure. The government's efforts to address these limitations w i l l entail: (i) organizing and training fishermen and With the exception of the project in support of coffee and cocoa farmer's associations (PAOP), conducted from 1999 to June 2005, with French DevelopmentAgency [FDA] financing. In 2004-2005, the production cost o f cotton fiber CFCA 25kg higher than the average cost in Mali, Burkina Faso, and 22 Cameroon. 42 fish farmers; (ii) strengthening the health controls system; (iii)enforcing fishing regulations; (iv) promoting thermally insulated containers for marketing fresh fish; (v) making an inventory of, and rehabilitating, fish farming and fish stocking infrastructure; (vi) credit services; and (vii) strengthening the statistics system. Overall, efforts to develop fisheries must cover small-scale maritime fishing, inland fishing near dams, and aquaculture. 3.2.4 Development of infrastructure to support economic growth Togo i s short on the basic infrastructure needed to support growth, especially in the energy, transportation and telecommunication sectors. Regional disparities mean that some areas are practically devoid o f such infrastructure because o f regional imbalances in investment. With respect to energy, the evident lack o f national energy infrastructure and resources amounts to a major handicap for economic activity. Indeed, Togo depends too heavily on neighboring countries for i t s electric energy supply, which, moreover, fails to satisfy domestic demand. As a result, there are frequent power cuts affecting all branches o f the national economy. Togo pays a high price for the shortage o f road and railway transportation infrastructure. In fact, certain areas o f the national territory are cut o f f from the rest for lack o f highways and access roads, and this poses a problem for the distribution and sale o f agricultural products. In addition, urban congestion, especially in the capital, poses road quality and maintenance problems. Furthermore, the virtual disappearance o f the railways deprives economic agents o f an inexpensive form o f transport for goods both nationwide and for the countries in the hinterland. The disappearance o f the railways also further complicates efforts to achieve the profitable development o f certain mineral deposits. With respect to port infrastructure, the Autonomous Port o f LomC appears to be under-utilized, considering its strategic position in the West African subregion. I t s services could also be improved. In the telecommunication sector, despite encouraging development o f information and communication technologies in recent years, much s t i l l needs to be done to make this factor o f production accessible to all parts o f the country and to lower i t s cost. Thus, mindful o f these shortcomings that increase production costs and slow down economic growth, the government has resolved to breathe a new dynamism into the aforementioned sectors. The goal i s to promote the development o f energy resources, overland and maritime transportation infrastructure, and telecommunications, while taking environmental concerns into account. - Development of energy resources The overall objective being pursued by the government i s to satisfy the energy needs o f bother households and enterprises. More specifically, an effort will be made to manage energy more efficiently by reducing losses and waste; to put an institutional and legal framework in place that facilitates the development o f the sector; and implementing a plan to develop promising alternative sources o f energy, taking environmental considerations into account and promoting private sector involvement. Government intervention w i l l focus on the following aspects o f each subsector: 43 Electricity: (i) in the short term, reactivation o f dormant energy sources to deal with the current crisis; (ii)in the medium term, boosting electric energy output by using gas turbines and potential hydroelectric sites and by installing mini-hydroelectric plants in the country’s more economically active regions; and (iii) institutional and technical support for the Directorate General o f Energy. These measures could be integrated into an electric power policy compatible with subregional policies in this sector. As for electric energy distribution, the government w i l l embark on a reform aimed at making the Electric Energy Company o f Togo (CEET) financially viable by means o f transparent management practices and a balanced rates policy.u Biomass energy: (i) establishment o f a suitable legal, regulatory and institutional framework that will facilitate household access to sources o f energy other than wood energy; and (ii) implementation o f measures aimed at increasing sustainable energy output. Renewable sources of energy: (i) promotion and popularization o f micro hydroelectric plants, solar energy and biofuels; (ii) tax exemptions for renewable energy devices and equipment. Cross-cutting government measures w i l l focus principally on: (i) strengthening private sector participation in the development o f energy production; (ii) boosting subregional cooperation in the production, purchase, sale and transmission o f energy; (iii) promoting and popularizing domestic gas use (LPG); (iv) establishing a rural areas electrification fund; (v) implementing a financing mechanism, with the participation o f donors and creditors and the national financial system; and (vi) running awareness campaigns on the rational use o f all forms o f energy. - Development of overland and maritime transportation infrastructure For the overland transportation sector, the government’s objectives are to: (i) enhance the competitiveness o f Togolese products on domestic and external markets by lowering transportation costs and improving the quality o f services provided; (ii)facilitate the movement o f goods and persons; and (iii) contribute to poverty reduction in urban and rural areas by opening up remote regions, providing access to basic services, providing transportation services in production zones, and generating employment, directly and indirectly. T o enable the road transport sector to play i t s full part in the country’s development, the authorities have developed-specifically for road infrastructure-a transport sector strategy which i s currently being implemented. The government envisages: (i) building, rehabilitating, strengthening, and maintaining rural and farm roads, urban roads, bridges, national highways and national highways linking up with neighboring countries’ networks; (ii)expanding or splitting sections o f the major roads to the capital; (iii) improving road network structures; and (iv) supporting the organization o f private mass transportation systems in order to improve the circulation o f both freight and passengers. Accompanying this strategy, institutional and capacity-building steps will be taken to strengthen the Directorate General o f Public Works and all other stakeholders in this sector. Those measures will aim to enhance the quality o f management and the sector’s ability to execute projects and make good use 23 The task will be to establish a rates schedule that will yield a return on CEET investments, while at the same time guaranteeing users a steady supply o f electricity at a reasonable cost. 44 o f loans. They w i l l also seek to strengthen the statistical data system and improve sector coordination and governance. As for the railroad network, rehabilitation and extension o f the central North-South axis w i l l make it easier to move freight within the country and also to the borders o f neighboring countries in Togo’s hinterland: a major factor in market integration. With respect to maritime transportation, the focus w i l l be on enhancing the competitiveness o f the autonomous Port o f LomC. T o that end and in order to offer all i t s clients quality services, the Autonomous Port o f LomC has drawn up a port development program which envisages, among other things, construction o f a third dock, development o f several parking areas, the construction o f an inland dry port, and, in the near future, the establishment o f a one-stop shop designed above all to expedite formalities. As the ideal transit port for shipping merchandise to the Sahel countries, the Autonomous Port o f LomC embarked in 1994 on i t s “maritime solidarity” operation, which consists o f shipping freight swiftly and safely, and at special reduced rates, t o the countries o f the hinterland. The idea i s to strengthen this operation in the coming years. With a view t o boosting the security, speed, and efficiency o f port operations, the port community has also formed an association called “Partnership for the Promotion o f the Port o f LomC” (A2PL), the chief purpose o f which i s to provide a consultation and cooperation framework for all stakeholders in the maritime transportation chain in Togo. - Development of telecommunications In the area o f telecommunications, efforts w i l l be made to encourage investments aimed at achieving coverage o f the whole country. For that, the government plans to open up the capital o f the national telecommunications company to the private sector, allowing it to lay the groundwork for raising the necessary financial resources on the regional and international financial market. The government also aims to expedite development o f information and communication technologies, especially mobile telephony and Internet access, and to make them accessible for a larger share o f the population. providing Togo with a reliable, high-speed and less expensive Internet Specific actions w i l l include: (i) connection; and (ii) embarking on a dialogue between Togo TClCcom, users and I C T operators aimed at adopting suitable measures to remove obstacles to the development o f telecommunication services. 3.2.5. Effective management of natural resources and the environment There i s a correlation between poverty and environmental and natural resource degradation. For that reason, a poverty reduction strategy needs to mainstream environmental considerations in i t s preparation and in implementation. With that in mind, the government has formulated an environmental policy geared to promoting comprehensive and rational management o f the environment so as to improve the context and living conditions o f the population in a sustainable economic and social development framework. T o achieve that, the government intends to take the following steps: (i) reduce pressure on natural resources; (ii)promote integrated management o f the coastal areas; (iii) strengthen subregional and international cooperation in the area o f environmental management; and (iv) enhancing national environmental management capabilities. CSOs w i l l be invited to participate in the implementation of these measures, so as to tap their contributions in certain areas o f natural resource and environmental management. 45 - Reducing pressure on natural resources Here it w i l l be a question o f rationalizing the management o f natural resources by using tools and techniques that are suitable for furthering sustainable economic and social development. The government’s strategic actions will be grouped together in three program areas: conservation and promotion o f biodiversity; efforts to combat desertification and soil degradation; and decreasing greenhouse gas emissions and other sources o f pollution. - Promoting integrated management of coastal areas The goal here i s to promote integrated development compatible with the survival o f coastal ecosystems. T o achieve that, the government has planned to: assign a special sustainable environmental management framework for coastal areas; and bring coastal erosion under control. - Strengthening national environmental management capabilities In strengthening national environmental management capabilities, the government seeks to provide the country with tools for managing the environment and natural resources, with stakeholder participation, to ensure sustainable and decentralized management o f both. Governmental intervention will focus o n three areas: mainstreaming environmental issues in development policies, strategies, plans and programs; strengthening legal, institutional, technical and financial environmental management capacities in the different branches o f activity and among all categories o f persons involved in development; and raising ecological awareness in the population. - Preventing and combating pollution and other forms of environmental nuisance Here the focus i s on pursuing the following objectives: (i) rational ecological management o f the different categories o f waste material; (ii) rational management o f chemical substances; (iii)keeping urban and rural living environments free o f all forms o f pollution and nuisance. - Disaster prevention and management The objective i s to provide the country with adequate tools for preventing and managing natural and technological disasters. The strategic actions consist o f (i)improving the political and institutional frameworks for disaster prevention and management; (ii) technical and human capacity-building with respect to planning, monitoring, and early warning systems; and (iii) the introduction o f budget line in the government’s general budget for these types o f disasters. 3.3 STRATEGIC OBJECTIVE 3: DEVELOPMENT OF THE SOCIAL SECTORS, HUMAN RESOURCES AND EMPLOYMENT In the context o f this strategic objective, the government intends to promote harmonious and swift development o f human capital: a core ingredient for the sustainable economic growth needed to sharply reduce poverty and human and social vulnerability. T o that end, this strategic objective comprises five specific programs: (1) Promotion o f the educational and training system; (2) Development o f the health system and health care; (3) Improvement o f the nutritional status o f the population; (4) Improved access to drinking water and sanitation infrastructure; and (5) Promotion o f gender equity, employment, social protection and community development. 46 Moreover, given i t s recognition o f the major part played by CSOs in the social sectors, especially education, literacy, training and health as well as in gender issues and income-generating activities (IGA), the government regards their effective participation in implementation o f the various programs associated with this strategic objective as indispensable. With that in mind, appropriate actions and measures are being taken by both the government and the CSOs to remove the various bottlenecks hampering their work in the communities. In addition, steps are to be taken to establish a trusting and lasting partnership between CSOs and the government. 3.3.1. Promotion o f the educational and training system Education for all as the basis for equal opportunities and for combating poverty over the long t e r m i s a key ingredient in the government’s development strategy. I t i s recognized nowadays that a higher level o f education and training i s particularly important for boosting a country’s social and economic development and that investment in education has a direct impact on labor productivity and hence on j o b opportunities. I t therefore constitutes a necessary complement to investment in productive infrastructure. In the political sphere, democracy i s only sustainable if the electorate i s educated and informed. Education also helps narrow income distribution gaps, facilitates social mobility, and i s particularly important for women, for whom the illiteracy rate i s approximately 65.6 percent, compared to 29.7 percent for men, according to the QUIBB Survey o f 2006. Now, the Togolese educational system suffers from a number o f shortcomings, including: (i) tack o f teaching staff and insufficient training o f local teachers; (ii) insufficient and obsolete infrastructure and facilities, and shortage o f textbooks (one math book for every eight pupils; one reader for every five) and o f teaching materials; (iii) weak teaching support services and weak centralized management; and (iv) a mismatch between study programs and the realities o f the labor market. Because o f the importance o f education and aware o f the constraints in the Togolese context, the government has made primary education one o f i t s top priorities, with a goal o f reaching primary education for all by 2015, as envisaged in the Millennium Development Goals. T o capitalize o n the high returns on investment in primary education, the government has included the first four years o f secondary school among its priorities. For this determination to materialize, there will have to be ambitious educational and training policies, sustained by optimal budget appropriations. Following are the strategic goals pursued for each level o f education. Pre-school education. The goals include, but are not restricted to: (i) promoting pre-school education and encouraging community-based initiatives aimed at developing it, so as to prepare children for subsequent learning activities; and (ii)achieving quantitative and qualitative improvements in the pre- school education available by rehabilitating existing infrastructure, constructing new classrooms, training teacher trainers, and improving the training that educators receive. The government w i l l take care to ensure equitable coverage o f rural and urban areas through a communication plan and by encouraging pertinent educational initiatives by nongovernmental organizations (Plan Togo, Aide et Action, and so on), by the private sector, and by communities on behalf o f pre-school children and above all those promoting school education for girls. Primary and Secondary Education. The government w i l l make a special effort to achieve a quantitative and qualitative improvement in educational services, while lowering the repeater rate and enhancing equity. T o that end, it has been decided: (i) to improve the pupil reception framework, with particular emphasis on quality and equity at all levels, by building new hnctional classrooms with 47 latrines, rehabilitating old classrooms, providing schools with benches; (ii) improve conditions for supervising pupils by recruiting teachers and providing them with the requisite training and refresher courses; (iii)make more textbooks and materials available to pupils; (iv) introduce sub-cycles in order to lower the repeater rate, once the reception environment, supervision, and provision o f textbooks and materials have been raised to satisfactory levels; (v) raise enrolment and retention rates among pupils, with a view to setting Togo on the path toward universal education by 2015, by - on the supply side - providing certain schools with canteens and - on the demand side - subsidizing poorer parents, in cooperation with partners for development (UNICEF, FAO, WFP, and NGOs, and so on, particularly in less-favored areas); and (vi) carry out a study o f the feasibility o f providing cost-free primary school education, including in that study - given the dire budgetary consequences - some thoughts on alternative ways o f providing educational services for the very young in a strategy that would strike a balance between reasonable Government support and a contribution by the parents. Technical education and professional training. The government plans to: (i) improve facilities for taking in students by constructing classrooms and workshops and providing tables, benches and textbooks; (ii)improve conditions for supervision and promoting equity in technical education and professional training by recruiting, training and recycling teacherdtrainers. Higher education. The government intends to continue supporting the training o f high-level executives capable o f driving development. This support will take the form of: (i) improved management and steering o f higher education; (ii) more emphasis on quality and the promotion o f gender equity in higher education; and (iii)strengthening facilities (adequate buildings and materials) in order to cater to the fast-growing number o f students enrolled in the country’s universities. However, inasmuch as (i) the modern-sector j o b market appears to be saturated and can only absorb a small proportion o f graduates, (ii) teaching conditions are deteriorating (the resources cannot keep up with the growth in students), and (iii)the share o f the budget allocated to higher education (18 percent in 2005) already seems very high, pupil flow management measures will have to be taken throughout the system, but especially as regards the transition from the first four years to the last three years o f secondary school and from there to higher education. This, o f necessity, entails technical education and vocational training in order to avoid inconsistency between the measures taken to reduce repeater rates in primary and secondary school and control over the flow o f students into higher education. Literacy campaigns. The government will seek to expedite the process o f working out a national literacy policy, review the contents o f programs (functional literacy programs), and create an environment that enables illiterate adults, especially women and young people who have dropped out o f school, to have access to an education that will allow them to be better integrated in their milieu and to embark on income-generating activities. 3.3.2. Development o f the health system and health care With regard to health, the government has adopted five strategic goals, geared to the health-related Millennium Development Goals, namely: (i) strengthen the national health system; (ii) place maternal child care at the center o f concerns; (iii) facilitate access to HIV/AIDS prevention, treatment, care, and support services; (iv) boost prevention and treatment activities to make significant progress against malaria; and (v) strengthen screening for and treatment o f tuberculosis through the Directly Observed Therapy Short-Course (DOTS) strategy. 48 Strengtheningthe national health system. In this area, the government intends to pursue national health system reforms aimed at making it capable o f achieving the Millennium Development health goals by 2015. The actions to be undertaken are: (i) institution-building, to be achieved by the National Assembly’s adoption o f a public health code and i t s enforcement; (ii) reform o f the State- community co-management system through the Management Committees (COGES), which w i l l clarify the latter’s juridical status; (iii) effective participation by the COGES, representatives o f civil society, and (national and international) NGOs involved in community health and support for the COGES, in every area in the health sector that deals with right-to-health issues; (iv) more precise definition o f the prerogatives and responsibilities o f the different levels in the system (central, regional, district, and primary health care units-USP) and actual enforcement o f both; (v) strengthening human resources by organizing health officer recruitment campaigns and drawing up a national human resource policy and health worker management plan that would include capacity- building for currently employed personnel; (vi) reform o f the resource mobilization and utilization system and strengthening o f infrastructure and facilities; and (vii) organization o f partner-for- development support for the formulation and implementation o f a medium- and long-term human resource development plan. Priority needs to be given to ensuring that whatever already exists functions properly by rehabilitating and equipping existing infrastructure, the drawing up o f a health map to show what areas o f the country are under-covered, and the construction o f new infrastructure based on the needs shown in the health map. Promotion of maternal-child health care. The government’s objective i s to provide accessible and affordable maternal-child health care services in order to bring down, by any means whatsoever, the number o f deaths o f mothers and o f children under five years o f age. The actions envisaged to achieve that are: (i) increasing the availability and affordability o f preventive and health care services for children under five by implementing a complete long-term plan o f the Expanded Vaccination Program, the provision o f infant and neonatal primary health care, and hospital health care; and (ii) increasing the availability and affordability o f preventive and curative care for mothers by promoting family planning, pre-natal examinations, and the prevention o f obstetrical complications, improving maternal-child health care, preventing malaria during pregnancy, the provision o f care for childbirth and post-natal complications, and prevention o f sexually transmitted diseases. Prevention and treatment o f HIV/AIDS. The government intends to continue efforts underway that successfully brought down the prevalence rate from 6 percent in 2000 to 3.2 percent according to the last estimates in 2005. The aim i s to make the whole range o f preventive, curative and support care available and affordable so as turn HIV/AIDS into what could be called a chronic illness. The actions chosen w i l l involve: (i) expediting or strengthening preventive measures by focusing interventions on young people , sex workers and their clients; on the supply, distribution and social marketing o f condoms; on blood security; o n the prevention o f HIV transmission from mother to child; and on counseling regarding voluntary and anonymous testing; (ii) strengthening care capacities; (iii) strengthening support measures that principally target orphans and children rendered vulnerable as a result o f HIV/AIDS; and (iv) boosting coordination, monitoring/evaluation and research. Prevention and treatment of malaria. The government’s aim i s to increase the availability and use o f mosquito nets impregnated with insecticide (MI), effectively prevent malaria during pregnancy, and ensure that malaria treatment policy i s actually applied. Public interventions w i l l entail: (i) strengthening prevention measures by supplying and distributingMII, and putting into effect a social marketingplan on the use o f MI1and intermittent preventive care for pregnant women; and (ii) implementing malaria treatment policy by providing anti-malarial (CTA and other) drugs and edibleldrinkable medicines (consommables), conducting diagnostic tests to confirm malaria, providing 49 correct care for cases o f simple malaria in health care units or at home, delivered by community health workers, and correct care at health centers for cases o f severe or complicated malaria. Strengthening screening and treatment for tuberculosis. The government i s anxious to improve tuberculosis screening and treatment, using the D O T S strategy. I t s interventions will aim to increase capacity to detect new cases o f pulmonary tuberculosis with positive microscopy (TPM+), improve therapy by using the DOTS strategy, and introducing a monitoring and evaluation mechanism. 3.3.3. Improving the nutritional status of the population Nutritional surveys show that there has been no trend toward improved macronutrients since 1988 and the relevant indicators have, overall, remained stable since then. At that pace, macronutrient indicator goals (underweight, wasting, and stunting) w i l l not be met by 2015, as envisaged in MDG commitments. In 2006, according to the findings o f the MICS3 survey, 26 percent o f children under the age o f five are underweight and nearly 24 percent o f them suffer from stunted growth. However, micronutrient indicators (iron, iodine and Vitamin A) clearly improved during the period under review. Generally speaking, the northern regions, and the swamp areas, in particular, are the most prone to malnutrition. The undernourishment rate i s higher in rural areas than in urban areas and there i s often a positive correlation between the educational level o f the mother and improved nutrition indicators in children. Given the fact that a person’s nutritional status i s generally reflected in his or her state o f health, above all in the mother-child case, the government intends to improve the nutritional status o f the vulnerable segments o f the population by: (i) making existing programs more effective and establishing new programs to combat undernourishment and meet other mother-child health needs; (ii) increasing awareness among the vulnerable population o f the impact o f a proper diet o n i t s state o f health; and (iii)improving the institutional framework with respect to nutrition and diet. Making existing programs more effective and establishing new programs to combat nutritional deficiencies. This will be done by implementingthe Accelerated Child Survival and Development Strategy, promoting foods rich in micronutrients, and enriching/fortifying foods. In addition, the national strategy for feeding new-born babies and infants, in the HIV context, will be implemented as a matter o f urgency, as will the establishment o f school canteens for pre-school and primary school children in vulnerable areas. The government w i l l also provide, o n the one hand, for the implementation o f a nutrition program for adolescent girls and pregnant and breast-feeding women and, on the other, for the establishment o f an animal and plant health, food and nutrition surveillance mechanism. Finally, specific programs to provide food for vulnerable persons (the elderly, those infected with HIV/AIDS, mothers and children suffering from severe nutritional deficiencies) will be started and implemented by the government. As for increasingawareness among the vulnerable segments of the population regarding the impact o f a proper diet on a person’s state o f health, there will be information, awareness, and educational campaigns for all public officials and civil society on the importance o f a health diet. Improvement o f the institutional framework. This w i l l take the form o f measures to strengthen institutional capacity and the policy framework for promoting a proper diet and nutrition; improving the legal framework for promoting a proper diet and nutrition; and improvement o f information and data-gathering systems in the food and nutrition sector. 50 3.3.4. Improving access to drinking water and sanitation infrastructure Providing access to drinking water and sanitation infrastructure i s one o f the government’s top priorities. According to the findings o f the 2006 MICS survey, 57.1 percent o f the Togolese population uses improved drinking water sources. According to the same survey, the ratio for overall access to sanitation systems remains low: 3 1.7 percent o f the population uses improved sanitation installations (66.6 percent in urban areas, compared with only 10 percent in rural areas). These figures indicate that much remains to be done to achieve a sustainable improvement in the population’s access to drinking water and sanitation. To meet those challenges, the government has set i t s e l f four strategic goals, namely to: (i) improve the water resource management system by adopting the Integrated Water Resource Management (GIRE) approach; (ii) improve the population’s access to drinking water in rural, semi-urban, and urban areas; (iii) improve the extent o f access to sanitation services by promoting appropriate infrastructure; and (iv) raise awareness in the population o f the impact o f proper hygiene and sanitation on individuals’ state o f health. Improving the water resource management system by adopting the GIRE approach. The government will proceed to: (i) adopt and put into effect the GIRE national policy and strategy paper as well as the water code law; (ii)implement a GIRE priority actions program (data collection, awareness raising, capacity building); (iii)establishing the GIRE institutions and issuing the required regulations; and (iv) operating a pilot scheme application o f GIRE principles in the Zio-Lake Togo basin. Improving the population’s access to drinking water in rural, semi-urban, and urban areas. Here it will be a matter of: (i) implementing the Supply o f Drinking Water and Sanitation Policy in rural and semi-urban areas, so that the population takes responsibility for looking after and maintaining the installations; (ii) supplying drinking water to rural populations above all in areas where there i s currently very l i t t l e coverage and with special emphasis on those semi-urban centers with the lowest coverage rates; and (iii) in urban areas, providing towns that s t i l l lack them with piped drinking water systems, and strengthening those systems in Lome and Kara. Improving the extent of access to sanitation services by promoting appropriate infrastructure. Actions to be undertaken in this respect include: (i) facilitating household access to decentralized sanitation systems by adopting a subsidization policy; (ii) carrying out emergency work on LomC’s rain water sanitation system, along with a sustainable maintenance system; and (iii) preparing master plans for sanitation systems in towns other than LomC. Raising awareness in the population o f the impact o f proper hygiene and sanitation on individuals’ state of health. Actions planned here include: (i) raising awareness in households o f the benefits o f using sanitary facilities for sewage and waste water disposal; and (ii) raising awareness in and organizing sewage disposal associations to ensure that sewage and waste water are disposed o f in suitable sites. 3.3.5. Promotion of gender equity, employment, social protection and community development Promotion o f gender equity and the empowerment o f women. The government i s convinced that women are vehicles for spreading social and economic well-being in a society, N o human development strategy can be viable unless women have a key role to play in it. Therefore, the 51 government regards women’s participation in the development process as a determining factor in i t s development strategy. T o that end, the following areas o f intervention have been chosen to promote gender equality and strengthen women’s participation in the development process, thereby reducing gender inequalities: (i) promotion o f education and training for girls and women; (ii) promoting women’s health and special health care needs; (iii) empowerment and respect for the legal and social status o f women within a human rights perspective; and (iv) promotion and appreciation o f women’s work and o f their participation in decision-making. Promotion of decent work. The employment situation in Togo i s increasingly precarious. I t i s characterized by a sharp contraction o f the job market, the increasingly informal nature o f employment, and an unemployment rate (including under-employment) estimated at over 30 percent in 2006. This translates into explosive growth o f the informal sector, which, if you include the agricultural sector, employs more than 80 percent o f the economically active population. Against that backdrop, the young lack any sense of a future and only weak mechanisms exist to support and facilitate j o b and income-generating initiatives. Thus the government’s key objective i s t o create the legal, institutional and economic conditions for employment generation and higher incomes. Thus, raising the quantity and quality o f j o b opportunities for the Togolese in the different branches o f the economy by ensuring training and sufficient resources, and the promotion and development o f labor- intensive sectors with real potential for growth constitute an important part o f the government’s poverty reduction strategy. With that in mind, an Employment and Poverty Reduction Policy Framework Paper was drafted in 2004. The government’s priority actions, with the support o f i t s development partners involve: (i) strengthening and improving the legal and institutional framework by bringing o n stream the National Agency for Employment Promotion, which would contain an Employment Observatory, to respond better to the public’s expectations on employment promotion and social exclusion issues; (ii) the development o f self-employment through women’s access to more and higher quality jobs, access by young people and vulnerable groups to decent jobs, and improvement o f informal sector activities; (iii) strengthening micro-credit and micro-insurance mechanisms, in order to transform them in a veritable financing system for the informal sector and income-generating activities; and (iv) strengthening qualifying training programs, with emphasis on capacity to analyze the j o b market and the training system as well as on boosting the National Fund for Professional Apprenticeship, Training, and Improvement. The revitalization o f the National Agency for Promoting and Guaranteeing Financing (ANPGF) for SMEs and SMIs and o f the Support Fund for Young People’s Initiatives (FAIEJ) will likewise contribute to the attainment o f these objectives. These actions w i l l be accompanied by important measures designed to make them sustainable over time, such as: (i) the promotion o f an entrepreneurial culture and i t s integration into training curricula; and (ii)efforts to strengthen the social dialogue. Social protection. The importance o f social protection lies in the fact that the dramatic outbreak o f poverty i s a also a result o f the population not being able to handle unforeseen contingencies, such as the loss o f a job, illness, poor harvests because o f vulnerable farming methods, and so on, all o f which have a more devastating impact when there i s no social safety net. The government’s general objective here i s to improve social protection for poor and vulnerable segments o f the population, especially the elderly and the disabled. The government w i l l therefore opt for a social protection policy geared principally to: (i)developing new strategies for caring for the abovementioned groups, as a way o f mitigating the demise o f family solidarity by putting in place new mechanisms and structures; (ii) raising the capacity o f existing facilities for caring for the vulnerable, 52 in this case, the National Solidarity Agency; (iii) supporting the establishment o f social protection and social security measures for informal sector workers and artisans; and (iv) improving forecasting and management o f vulnerability to different kinds o f shocks and disasters. As regards the disabled, it w i l l especially be a matter of: (i) providing education and professional training for disabled persons, as well as help with finding a job; and (ii) updating sectoral policies with a view to ensuring that they take disabled persons’ particular conditions into account. As for the elderly, a study i s currently underway with a view to the formulation o f a national policy to protect seniors. Protectingchildren. T o achieve protection-of-children goals, it i s essential to target the right beneficiaries, who are, first and foremost, the child, the mother-child pair, and the family. Strategically, a communication process to induce changes in behavior should be at the forefront o f our concerns. The principal areas o f intervention are: (i) formulation and implementation o f a national policy to protect and promote childhood; (ii) the adoption o f an appropriate legal and institutional framework for protecting children in general and the orphans and other children rendered vulnerable as a result o f HIV/AIDS; (iii) organization and training o f the population to play an active, ongoing part in endogenous and self-sustained development; (iv) planning, coordination, and monitoring o f programs for the protection and promotion o f distressed children and youth; and (v) support for the least privileged segments o f society to provide a shield against all forces bringing about the breakdown o f the family structure and to combat the trafficking and exploitation o f children. Community development. In implementing i t s grassroots development policy, Togo has opted for micro-achievement projects and programs funded by both internal and external resources. That option has made it possible to respond on the ground to the particular needs expressed at the grassroots level and thereby t o bring about a marked improvement in their standard o f living. Thus, some 20 years ago, the government embarked on a Local and Participatory Development Program focusing on local-initiative micro-achievement. The Program has triggered renewed interest in the social and political crisis that Togo has been going through for approximately 15 years, during which time the State’s ability to intervene in local development has dwindled. In fact, several micro- projects in health, education, village water resource management, and income-generating activities, and so on, were started and executed directly by communities at the grassroots level or with the support o f local or foreign partners (NGOs, associations, development assistance institutions, and others). These achievements on a small scale have in recent years had a beneficial social and economic impact. They are now a true means o f reducing poverty, along with many others, and a way o f ensuring the participation o f local authorities and beneficiaries in the grassroots development process. Given the key part placed by local organizations, especially NGOs, in promoting community development over the past few years, the government intends to boost their organizational, physical and financial capacities in order provide more effective outreach to grassroots communities. In order t o support and expand the community development process, the government, with United Nations system support, plans to implement the “Millennium Villages” initiative in the most disadvantaged parts o f the country. This initiative consists o f endowing targeted areas with all the infrastructure and resources they need to achieve the MillenniumDevelopment Goals. Box 3: Millennium Village 53 The “Millennium Village” project was born in 2005 o f a partnership between the University o f Columbia in the United States and the United Nations, in the framework o f efforts to achieve the eight Millennium Development Goals. It seeks t o show the 8 MDGs can be achieved in rural Africa through the rural population’s access to technologies that can boost farm productivity and improve their health, education, and access to markets. In the case o f Togo, a pilot phase i s scheduled to test this experiment in 10 villages. These villages will be chosen basically because o f their agro-ecological nature and critical poverty -- (i)severe famine; (ii) widespread disease; (iii) lack o f access t o education and medical care; (iv) severely deficient infrastructure -- to reflect batches o f challenges in agriculture, education, health, water, energy, and transportation. Other criteria, such as proximity to research centers, partnership possibilities, and democratic forms o f organization, also play a part. Actions rely, in particular, o n multifunctional platforms, the planned agricultural development areas (ZAAP), and technical packages. In addition, the “Millennium Village” Program i s a community development program in that sense that the actions aimed at lifting the villages out o f extreme poverty w i l l be undertaken by the communities themselves, in cooperation with the government and NGOs. The United Nations system will be responsible for coordination. CHAPTER 4: MACROECONOMIC FRAMEWORK AND COST OF THE INTERIM POVERTY REDUCTIONSTRATEGY The framework for the Interim Poverty Reduction Strategy was prepared taking the strategic options described in Chapter 3 into account. They are intentionally conservative and seek first and foremost to be credible and realistic. For the time being, the current structural and business situation o f the Togolese economy makes accelerations or substantial increases in the real GDP growth rate an impossibility for Togo, as these could hover around 7.5 percent. This i s the level that i s generally acknowledged to be necessary to achieve the MDG with respect to reducing monetary poverty. The framework also strives to be a catalyst for macroeconomic stability, a prerequisite for properly implementing the PRS. Finally, it i s designed to be a transparent and intelligible framework in order to facilitate proper monitoring in particular. I t consists o f three scenarios: a baseline scenario, a high alternative scenario and a low alternative scenario. The I-PRSP baseline scenario focuses on the correction in fiscal policy and the implementation o f structural reforms to revive economic growth and external competitiveness under the WAEMU fixed exchange rate regime. Based principally on a correction in fiscal policy, it does not sufficiently incorporate the requirements in terms o f the MDGs. Although the GDP rises by two points between 2007 and 2010, total expenditures and investment expenditures in particular grow less than in 2005, 2006 and 2007. Under these conditions, by 2010, a GDP growth rate o f roughly 4 percent i s expected, with a budget deficit o f less than 6 percent o f GDP. The high alternative scenario includes the estimate o f MDG costs. Full incorporation leads to unsustainable deficits o f roughly 20 percent o f GDP. Consequently, it was necessary t o set a target for the public deficit, increasing it by an average o f three points above the baseline scenario deficit, reaching about 9 percent with a 7 percent real growth rate in 2010. Estimating the costs o f the specific programs for the Interim PRSP necessitates inter-sectoral tradeoffs. I t also presupposes vigorous 54 negotiations with the donor community to mobilize resources in order to deal with the additional financing requirements. T o take the constraints and risks related to the proper implementation o f the proposed reforms (the foundation o f the baseline scenario) into account, as well as the highly rigid output, the l o w alternative scenario i s contemplated, which results in a growth rate o f around 1.7 percent by 2010 and a public deficit o f over 6 percent. 4.1 MACROECONOMIC FRAMEWORK AND SCENARIOS 4.1.1 Baseline scenario The baseline scenario relies on a basic framework adopted with IMF staff during their missions o f March 2007 and December 2007.24I t i s based on a medium-term strategy to gradually increase the economic growth rate and lay the groundwork for a viable budget and a good external reserves position. The assessment o f Togo’s economy that was prepared indicates that the main economic challenges Togo w i l l have to face in the short and medium term are: (i) mitigating macroeconomic risks related to a tenuous fiscal situation; and (ii) the sustainable establishment o f stronger economic growth after a period o f 25 years marked by the decline in per capita income. This should result in (i) a stronger fiscal policy and budgetary governance; (ii) an improvement in agricultural sector productivity; (iii) infrastructure renovations (particularly in the energy sector); (iv) an increase in resources allocated to health and education; (v) financial sector development; (vi) a lower current account deficit to avoid dependence on short-term capital flows and to decrease the risks o f potential external crises; and (vii) an improvement in the business climate. As a result, the government i s counting on a correction in fiscal policy and structural reforms to boost economic growth and external competitiveness under the current foreign exchange regime. An increase in the primary budgetary balance becomes a goal to obtain a surplus o f at least 1.5 percent in GDP by 2010 to avoid accumulating new arrears and to reduce the necessity o f resorting to new loans. Likewise, the strategy to reform the Togolese economy i s counting on an increase in foreign aid and an overall easing o f the debt under the HIPC initiative. The macroeconomic framework for the baseline scenario that underlies this approach yields the following results: Table 6: Principal macroeconomic framework indicators 24 This second mission, which was in Togo from November 28 to December 12,2007, i s a joint InternationalMonetary Fundworld BarWAfricanDevelopment Bank mission. 55 Principal indicators 2007 2008 2009 2010 Real GDP growth rate 2.1 3.0 3.5 4.2 Investment rate 14.1 16.5 18.7 19.3 Primary budgetary balance (as a percentage o f GDP) -1.8 0.2 0.9 1.5 Budgetary balance excluding grants (as a percentageo f GDP) -4.1 -4.6 -5.4 -5.6 Source: MEF There i s strong output o f more than one additional point per year during the period, rising from 2.1 percent in 2007 to 4.2 percent in 2010. Cotton and phosphate output would rise from 65.0 thousand metric tons and 0.7 million metric tons in 2007 to 101.4 thousand metric tons and 1.0 million metric tons in 2010 respectively. On the demand side, the investment rate has been rising steadily during the period. From 14.1 percent in 2007, it will be 19.3 percent o f GDP in 2010. A consistent level of savings due to aid flows and other transfers, expected to derive from the new economic context, results in an improved savings - investment balance over the period, falling from 6.8 percent in 2007 to 3.5 percent in 2010. TABLE 7: PRINCIPAL OUTPUT GROWTH RATES, 2007-2010 2007 2008 2009 2010 Cotton output 54.7 6.0 35.0 10.0 Phosnhate outmt -38.4 2.9 24.7 14.3 Source: MEF Price stability: Despite the increase in domestic demand, which would be caused primarily by the higher government spending necessary to finance the basic socioeconomic infrastructures, domestic price stability should be an objective for the period assuming no crises occur abroad. The goal will be to maintain price stability and to bring down the inflation rate to within the WAEMU limit, which i s no more than 3.0 percent. This result would be obtained through a strong increase in output and an effective community monetary policy. Stronger fiscal policy: The budgetary policy and overall budget levels are consistent with the government’s option to rely on the correction o f fiscal policy to revive economic growth and external competitiveness. Thus, the tax pressure rate will improve, rising from 16.5 percent in 2007 to 16.8 percent by 2010. The increase in tax revenue would be promoted by the simplification of administrative procedures related to the payment o f taxes and other fees by the institutional units. This would stem from the implementation o f the one-stop shop, without neglecting economic growth per se. I t would support the increase in budgetary revenue, which would rise from the equivalent o f 17.1 percent o f GDP in 2007 to 17.8 percent in 2010. On the other hand, operating expenses were lower than past trends, since the government chose the option o f emphasizing financing for socioeconomic infrastructures. Thus, current expenditures would 56 decline from the equivalent o f 18.9 percent of GDP in 2007 to 16.3 percent in 2010, and capital expenditures over the same period would rise from 2.4 percent to 7.1 percent o f GDP. Table 8: Fiscal Reporting Table (TOFE), 2008-2010, Source: MEF Baseline Scenario Government 2007 2008 2009 2010 (as o percentage of GDP) REVENUE AND GRANTS 18.7 19.5 21.2 22.1 RE- 17.1 17.2 17.5 17.8 GRANTS 1.6 2.3 3.7 4.3 TOTAL EXPENDITURES 21.3 21.7 22.9 23.4 CURRFNT EXPENDITURES 18.9 16.9 16.6 16.3 Domestic current primary expenditures 15.5 15.2 14.9 14.7 Interest on the public debt 2.1 1.3 0.9 0.8 Current expenditures using external financing 1.3 0.4 0.8 0.8 INVESTMENT EXPENDITURES 2.4 4.8 6.3 7.1 Domestic contribution 1.6 1.9 2.0 2.0 External sources 0.7 2.9 4.3 5.1 Primary balance (baseline domestic current) 0.0 0.0 0.6 1.1 Primary current balance -1.8 0.2 0.9 1.5 Total balance based on payment order excluding grants -4.1 -4.6 -5.4 -5.6 Total balance based on payment order -2.6 -2.3 -1.7 -1.3 Change in arrears 1.2 0.4 -0.4 -0.7 Total balance (cash basis) -1.4 -1.8 -2.1 -2.0 Financing 1.4 1.8 2.1 2.0 Domestic financing 0.9 -0.4 -0.6 -0.7 External financing 0.5 0.5 1.1 1.4 Consists o f Drawings 0.7 1.0 1.4 1.6 Debt retirement -1.7 -1.8 -1.8 -1.7 Settlement o f the debt and arrears 0.0 -28.7 0.0 -21.6 Reschedulings obtained 0.0 19.5 0.0 0.0 Debt cancellation 0.0 9.2 0.0 21.6 57 In this context, the budget deficit (excluding grants based on payment orders) remains at an average o f roughly 5 percent o f GDP throughout the period. This i s quite sustainable, because based on available information about financing likely to be mobilized, the residual financing requirement to be raised for the TOFE i s only about 22.1 billion CFAF in 2008,20.3 billion in 2009, and 18.7 billion CFAF in 2010. A greater commitment o f the international financial community alongside the government o f Togo to support i t s socioeconomic recovery efforts w i l l be necessary to cover this financing gap between 2008 and 2010. TABLE 9: TOTAL BUDGET AND F I N A N C I N G OF THE PRS (IN B I L L I O N S OF CFAF) 2008 2009 2010 Estimated public expenditures 271.8 303.3 329.9 Domestic resources* 214.7 218.9 231.4 External resources** 35.0 64.2 79.9 Financing gap 22.1 20.3 18.7 * total revenue + domestic financing+ - change in arrears * * external financing + grants A sustainable external payments deficit: In conjunction with an improvement in the terms o f trade, export growth and the increase in transfers, the average shortfall o f current external payments over the period should stand at roughly 4 percent o f GDP versus 6 percent, due to an increase in imports consistent with domestic demand. However, gross international reserves stabilize at around three months o f imports. Stabilized money supply: Over these last years, the money supply in Togo has risen considerably and reached 22 percent in twelve months as o f end-December 2006, despite the persistent problems different banks are experiencing. Through the reforms carried out in the sector, it i s expected that the money supply will be controlled during the PRS period. In accordance with the common monetary policy in the WAEMU countries, the priority i s price stability and a conservative lendingpolicy in the economy. To achieve the above results the government will implement policies that help to ensure: (i) the stability o f the macroeconomic framework, and controlling inflation, price relatives and the real effective foreign exchange rate; (ii) agriculture sector reform; (iii) better access to health and education; (iv) overhaul o f public infrastructures; and (v) strengthening the architecture of the financial system (strengthening bank surveillance and compliance with the prudential framework, diversity in the supply o f financial services and at lower costs). The government i s well aware o f the fact that the achievement o f the above-mentioned goals could be jeopardized unless a certain number o f key conditions are met. These conditions include the rigorous implementation o f the principal political and economic reforms and sector reforms more particularly, such as public finance and public enterprises. I t i s also clear that a return to a situation o f lasting security and peace by implementing the APG Agreement i s a prerequisite for bringing about a more buoyant economic atmosphere. Consequently, the government will continue i t s efforts to minimize 58 these risks, mainly by establishing the conditions for a full resumption o f international development cooperation. 4.1.2 Low alternative scenario Consideration i s also given to a low alternative scenario that primarily reflects the heavy constraints in the implementation o f the reforms, and hence would entail the mobilization o f domestic and external resources. These constraints have a direct impact on the volume o f public investments and on allocations o f resources to sectoral priorities. There are also direct consequences that affect growth as well as the pace at which the MDGs are achieved. In addition, there are the likely constraints linked to the supply sector, primarily a result o f the uncertainties in the agriculture sector. Thus, growth i s just over 1.8 percent in 2010, the investment rate hovers around 12 percent, and the shortfall in the savings-investment balance deepens further due to lower public savings. This shortfall reaches 7.7 percent at the end o f the period. The budget deficit stands at more than 6 percent o f GDP in 2010. This profile o f government spending makes it completely impossible to move toward achieving the Millennium Development Goals. 4.1.3 High alternative scenario Over the last decade donor disengagement has weakened the government’s institutional capacities, interfered with the provision o f education and health services, and has seriously eroded the quality o f public infrastructures. The scenario above places emphasis on structural reforms, which are essential for reenergizing the economy, and it even uses highly optimistic assumptions as a base. Thus, achieving the MDGs under this scenario will require much greater international assistance than the baseline scenario. That i s why a more bold and ambitious scenario i s proposed for public investment. The introduction o f the results from the costing for eight sectors brought about an increase in the volume o f expenditures o f over 40 billion CFAF per year compared to the baseline situation. This brought the average investment rate for the period to above 20 percent, versus 18 percent in the baseline scenario. This results in a higher GDP growth rate, which reaches 4.5 percent in 2008,6.0 percent in 2009, and 7.0 percent in 2010, but the budget deficit i s higher, at 9.7 percent in 2008, 9.3 percent in 2009, and 9.0 percent in 2010. The residual financing requirement in the TOFE i s therefore 80.0 billion CFAF in 2008, falling to 56.1 billion CFAF in 2010. 59 TABLE 10: CHANGE IN THE PRINCIPAL AGGREGATES B Y SCENARIO Altem Altem Altem Altem Investment rate Base S baseline scenano, Altem Base S alternative baseline scenano, Altem H S Alternative high scenario 60 4.2 COST ESTIMATE FOR THE INTERIM POVERTY REDUCTION STRATEGY 4.2.1 Total cost o f the strategy The total cost o f the I-PRSP includes all o f the priority expenditures that the government agrees to execute over the next three years to foster economic growth and reduce poverty. The ultimate objective o f the I-PRSP i s to advance Togo’s development process toward the Millennium Development Goals (MDG). The total cost o f the strategy i s evaluated based on the components o f macroeconomic framework and the estimated costs o f the MDGs for the period from 2008 to 2010. The assumptions used to evaluate it are as follows: - The cost o f the strategy amounts to 57 percent o f total expenditures under the guidance for the 2008-2010 period. I t will evolve gradually during the period and amount to 52 percent, 57 percent, and 62 percent o f projected annual expenditures in the macroeconomic framework in 2008, 2009, and 2010 respectively. - The average cost o f the strategy i s 12.9 percent o f GDP during the period; 11.2 percent in 2008, 13.0 percent in 2009, and 14.4 percent in 2010. - The allocation o f the strategic objectives through the specific programs i s consistent with the breakdown o f the MDGs and estimates o f economic and political governance requirements for the period from 2008 to 2010. TABLE 11: TOTAL COST OF THE INTERIM POVERTY REDUCTION STRATEGY (IN BILLIONS OF CFAF) 2008 - 2010 Total guidance budget 905.0 Cost o f the Poverty Reduction Strategy 514.2 Domestic financing portion 274.2 External financing portion 179.0 Portion o f financing to be raised 61.0 Percentage o f GDP 12.9% During the PRS implementation period (2008 to 2010), expenditures by specific programs to revive growth and support the social sectors will account for 86 percent o f the total cost o f the PRS, versus 14 percent for the programs specific to good political and economic governance and the monitoring- evaluation o f the strategy. For the next three years (2008 to 2010), the government plans to concentrate i t s human and financial efforts, and to focus the efforts o f i t s development partners on the implementation o f specific programs identified in the Interim PRSP. The fourteen (14) specific programs o f the I-PRSP will be funded using domestic and external resources, some o f which have already been mobilized, while others must be raised. The total cost o f the interim strategy i s estimated at 514.2 billion CFAF for the period from 2008 to 2010 and i s broken down as follows: 274.2 billion CFAF financed from domestic resources, 61 179.0 billion CFAF financed from external resources, primarily as grants (budget support for poverty reduction), and there may be highly concessional loans; and 61.O billion CFAF in additional financing requirements (for details, see Annex 3). 4.2.2 Breakdown of the total cost by strategic objective The breakdown o f the cost o f the strategy among the strategic objectives took into account the recent studies on the evaluation o f MDG costs broken down by sector as well as rough estimates o f the cost o f governance and macroeconomic consolidation programs. This breakdown in the table below shows that objectives 1,2 and 3 account for 11 percent, 31 percent and 55 percent o f total financing respectively; the rest (3 percent) i s allocated t o the “PRSP Monitoring and Assessment” Special Program. Table 12: Cost of the I-PRS by strategic objective (in millions of CFAF) I 2008 1 2009 I 2010 I 2008-2010 I expressedas Po*ion I STRATEGIC OBJECTIVE 1: Improvementsin 17,664.2 19,716.7 21,445.1 58,826.0 11% economic and political governance STRATEGIC OBJECTIVE 2: Consolidation o f economic revival and promotion o f sustainable 42,236.8 52,567.3 65,516.4 160,320.5 31% STRATEGIC OBJECTIVE 3: Development ofthe social 75,977,3 94,549,9 10,993,4 281,520,6 55% sectors, human resources and employment I Special program: Monitoring and evaluation o f the I-PRS I 4,076.3 I 4,550.0 I 4,948.9 I 13,575.2 I I Total Cost of the I-PRS 1 139,954.6 I 171,384.0 1 202,903.8 I 514,242.4 I 100% 1 4.2.3 Breakdown of the total cost by specific program The financing required by strategic objective and by specific PRSP program i s broken down as follows: Stratepic obiective 1: “Improvementsin economic andpolitical governance. ” The estimated cost o f this axis for the 2008-2010 period i s 58.2 billion CFAF, divided into the following four annual programs : 62 Table 13: Cost of programs specific to strategic objective 1 (in millions of CFAF) 2008 - 2008 I 2009 2010 2008-2010 Program 1: Improve political governance I 10,870.3 I 12,133.4 13,197.0 36,200.6 STRATEGIC OBJECTIVE 1: Improvements in Program 2: Implement institutional reforms I 1,358.8 I 1,516.7 1,649.6 4,525.1 economic and Program 3: Carry out fiscal political governance 1,516.7 effectively and soundly I TOTAL STRATEGIC OBJECTIVE1 II 17,664.2 II 19,716.7 63 Strategic objective 2: “Consolidation o f economic revival andpromotion o f sustainable development. The estimated cost o f this strategic objective for the 2008-2010 period i s CFAF ” 160.3 billion, divided into the following six annual programs: Table 14: Cost of programs specific to strategic objective 2 (in millions of CFAF) 2008 I 2009 2010 2008- 2010 Program 5: Strengthen structural 6,793.9 7,583.4 8,248.1 22,625.4 reforms STRATEGIC + OBJECTIVE 2: Program 6: Strengthen regional 2,717.6 3,033.3 3,299.2 9,050.2 Consolidation of integration and promote trade the economic revival and promotion o f Program 7: Revive the rural and amicultural economv 4,959.6 I 6,076.9 7,8 18.2 18,854.6 sustainable Program 8: Develop infrastructures 24,245.3 3 1,284.3 4 1,2 16.6 96,746.2 development that support economic growth Program 9: Effectively manage natural resources and the 3,520.4 4,589.4 4,934.3 13,044.1 environment TOTAL STRATEGIC 42,236.8 52,567.3 65,516.4 160,320.5 OBJECTIVE 2 Strategic obiective 3: “Development o f the social sectors, human resources and employment.” The estimated cost o f this strategic objective for the 2008-2010 period i s 281.5 billion CFAF, divided into the following five annual programs: Table 15: Cost of programs specific to strategic objective 3 (in millions of CFAF) 2008 2009 2010 2008-2010 Program 10: Promote the education and 32,623.1 39,972.2 51,426.2 training system Program 11: Develop the health system and 27,967,7 34,416.2 44,579.9 106,963.8 health services STRATEGIC Program 12: Improve the people’s nutrition OBJECTIVE 3: 2,100.5 2,424.4 3,045.5 level Development o f the social sectors, Program 13: Improve access to drinking water human resources 38,439.9 and sanitation infrastructures and employment Program 14: Promote gender equality, employment, social protection and community 1,358.8 1,516.7 1,649.6 4,525.1 development TOTAL STRATEGIC 75,977.3 94,549.9 110,993.4 281,520.6 64 CHAPTER 5: INSTITUTIONAL FRAMEWORK AND IMPLEMENTATION, MONITORING AND ASSESSMENT MECHANISMS The monitoringlevaluation mechanism makes it possible not only t o learn more about the population’s living conditions, but also to gauge the results and impacts o f policy measures on the phenomenon o f poverty. The government therefore intends to establish a coherent and effective system t o document the implementation o f poverty reduction projects and programs. Implementation o f the interim strategy depends o n the fulfillment o f three essential conditions, namely: prompt set-up o f the new institutional framework; preparation o f a quantitative priority action plan that i s to be an integral part o f the interim paper; and capacity-building within the main agencies. Thus, implementation o f the interim PRS and i t s monitoringlevaluationmechanism i s based upon six (6) key principles: Consolidation o f past accomplishments and o f currently available assets; Promotion o f the participatory approach to ensure national ownership; Progressive adoption o f ‘results-based management’ at the national and sectoral levels; Empowerment o f line ministries, regions, prefectures and local governments to implement and monitor the various priority interventions for which they are responsible; The critical importance o f further enhancement and strengthening o f the array o f statistical tools at the central, sectoral and decentralized levels. Indeed, the monitoring/evaluation mechanism requires a public information policy aimed at improving transparency in public administration; Involvement o f all non-governmental stakeholders, and especially o f civil society, in the monitoringlevaluation process, so as to enhance collaboration o n the preparation and implementation o f public development policies, and also to gradually put in place a functional system o f citizen oversight. T o attain these objectives, the mechanism will be based upon a revamped institutional framework for implementation and on a coherent information system allowing for more effective efforts to monitor implementation o f the PRS and MDGs. 5.1 institutional framework for implementation, monitoring and evaluation o f the strategy The various stakeholders (central and local governments, civil society, private sector, and donors) w i l l be responsible for ensuring that the program actually reaches the target populations. It i s therefore necessary to create networks o f key participants and representatives o f the target populations, including, among others, employees o f regionalized departments and representatives o f local governments, leaders o f community organizations such as Village Development Committees (CVDs) and Neighborhood Development Committees (CDQs), women’s organizations, youth groups, professional associations and, more generally, civil society organizations. The success o f the Poverty Reduction Strategy (PRS) depends to a great extent on the relevance, functionality and effective implementation o f the institutional mechanism for PRS 65 monitoringlevaluation (See Annex 6). The institutional mechanism w i l l consist o f the following components: National Council on Development Policy and Poverty Reduction (Conseil national des politiques de de'veloppement et de lutte contre la pauvrete', CNPDLP): Under the Chairmanship o f the Prime Minister, the CNPDLP i s made up o f representatives o f all branches o f Government and o f non-governmental stakeholders, Le., civil society organizations, unions, the Economic and Social Council (to be established), leaders o f religious denominations, and the technical and financial partners. The CNPDLP i s the lead agency for policy guidance in the area o f poverty reduction, and for development policy in general. I t s general mandate i s the assessment o f the government's public policy. More specifically, it i s charged with evaluating progress made under the PRSP and all economic and financial p r ~ g r a m s ? ~ through development policy reviews. - Interministerial Committee on Poverty Reduction Strategies (Comite' interministe'riel charge' des strate'gies de lutte contre lapauvrete', CISLP): This committee sets out the broad themes o f the PRSP and o f i t s successive action plants, oversees implementation o f the national strategy, and handles the political validation o f PRSP-related documents (e.g., action plant, annual implementation progress report, etc.). It i s also charged with monitoring the Millennium Development Goals and the Paris Declaration at the national level. The CISLP w i l l consist of: the Minister o f Economy and Finance (Chairman); the Minister o f Cooperation, Development and Regional Planning (Vice-chairman); the Minister o f Health; the Minister o f Primary and Secondary Education, Technical and Vocational Training and Literacy; the Minister o f Public Works, Transportation, Urban Planning and Housing; the Minister o f Mines, Energy and Water; the Minister o f Agriculture, Livestock and Fisheries; the Minister o f Environment, Tourism and Forestry; the Minister o f Territorial Administration, Decentralization and Local Governments; the Minister o f Civil Service, Administrative Reform and Relations with Institutions o f the Republic; the Minister o f Trade, Industry, Handicrafts and Small and Medium Enterprises; the Minister o f Justice; the Minister o f Social Welfare, Women's Affairs, and Protection o f Children and the Elderly; the Minister o f Higher Education and Research; the Minister o f Postal and Telecommunications Services and Technical Innovation; the Minister o f Communication, Culture and Civic Education; the Minister o f Youth, Sports and Recreation; and the Minister o f Labor and Social Security. The Permanent Technical Secretary w i l l perform secretarial functions for the meetings o f the Interministerial Committee. - PRSP Technical Steering Committee (Comite' technique de pilotage des activite's du DSRF'): This committee handles technical coordination o f projects based on periodic reports and performance charts submitted to it, and closely monitors all priority PRSP operations, and especially macro-economic stabilization measures and sectoral or cross-cutting reforms introduced under the PRSP and/or cooperative programs with international institutions. The Technical Steering Committee includes - in addition to the General Secretaries (or Cabinet Directors, as the case may be) o f ministries participating in the CISLP - the National Director o f the BCEAO. 25 Le., those signed by the government with technical and financial partners. 66 In accordance with i t s mandate to coordinate reform, the Committee will work closely with any national Committee involved in economic and social reform (e.g., the Permanent Secretariat o f the National Council for the Prevention o f H I V / A I D S and STDs). The Technical Steering Committee i s organized around a Coordination Secretariat, a role performed by the Permanent Technical Secretariat and four (4) Technical Sub-Committees (SCTs): SCT 1 on Macroeconomic Policy; SCT 2 o n Economic Infrastructure; STC 3 on Social Sectors; and SCT 4 on Governance. Specialists working for the Permanent Technical Secretariat o f the PRSP w i l l serve as secretaries o f the Technical Sub-Committees. Permanent Technical Secretariat of the PRSP: This secretariat has been created to meet the need for a lasting structure equipped with substantial permanent expertise and capable o f coordinating all technical activities associated with the development, implementation, monitoring and evaluation o f the PRSP. The Permanent Technical Secretariat o f the PRSP i s thus the keystone o f the entire PRSP institutional framework. I t i s led by a Permanent Technical Secretary, who i s assisted by local specialists. The Permanent Technical Secretariat o f the PRSP i s a permanent agency for technical oversight o f monitoring and evaluation o f the national poverty reduction strategy, for monitoring o f the MDGs and the Paris Declaration, and for monitoring o f all economic and financial programs concluded with bilateral and multilateral partners. Sectoral PRSP Committees: These exist within each line ministry and are chaired by the General Secretaries o f the line ministries (or by their chiefs o f staff, as the case may be), with the Directors o f Studies and Programming serving as recorders with the assistance o f the specialists working for the Permanent Technical Secretariat o f the PRSP. Other members include one representative per technical directorate, coordinators/directors o f programs or projects in the relevant sector, one representative per subsidiary agency and/or oversight entity, representatives o f civil society and the private sector involved in the sector, and representatives o f the technical and financial partners. Regional Participatory Monitoring Committees (Cornit& rdgionaux de suiviparticipati4 CRSP): These committees carry out participatory monitoring and evaluation o f projects and programs at the regional level. These entities are independent and autonomous vis-&vis the national structures, but are the latter’s counterparts. These regional committees will work closely with prefectural administrations and local civil society organizations to monitor and implement the PRSP in their regions. Local Participatory Monitoring Committees (Cornit& focaux de suivi participati4 CLSP): At the local level, these may be put in place after local elections. These committees, chaired by the future mayors, will be responsible for collecting statistical data pertaining to their communes and for monitoring interventions within the framework o f the PRSP in their communes. The government w i l l endeavor to put in place and ensure the effective operation o f the CRSPs and CLSPs, as soon as local elected officials are in place subsequent to local elections. Once the priority monitoring mechanisms are in place and consolidated, the creation o f a Government/Donor Committee i s planned. This would be the preferred agency for dialogue between the Togolese Government and i t s technical and financial partners. A specific mechanism for monitoring and consultation on PRSP matters, to be managed at the initiative o f non-governmental stakeholders and intended to ensure concurrent monitoring and evaluation by civil society organizations, i s also envisaged. 67 5.2 INFORMATION SYSTEM FOR MONITORING AND EVALUATION OF THE STRATEGY In the interest o f ensuring that the PRS i s monitored in a consistent fashion, the various stakeholders mentioned above will coalesce around a PRSP monitoring and evaluation information system. These various stakeholders will have five essential roles to play: (i) production o f data and information; (ii) analysis o f results derived from this data and information; (iii) creation and maintenance o f databases and survey bases; (iv) dissemination o f analyses in the form o f reports; and (v) system-wide coordination. The purposes o f this information system will be: - systematic production o f basic indicators and/or information for each priority sector identified under the PRSP and in connection with the MDGs; - production o f information for monitoring o f poverty reduction programs and projects; - production o f information for assessment o f the impact o f policies, programs and projects. 68 5.2.1 Structure o f the system The information system for monitoring the PRSP and MDGs w i l l be partly based on sectoral information systems already existing, particularly in the areas o f health care (SNIS), education, HIV/AIDS, finance, and rural development. The system consists o f three components, or sub-systems, which complement each other and are thoroughly interlinked. These components are: Sub-system for “Monitoring of Household Living Conditions” The purpose o f this sub-system i s t o systematically produce and manage indicators concerning household living conditions and/or basic information for each priority sector identified under the PRSP or in connection with the MDGs. These will essentially be results indicators or global impact indicators based o n the ‘monetary poverty,’ ‘basic needs poverty,’ ‘capacity or opportunity poverty,’ and ‘social exclusion poverty’ approaches. These indicators are regularly updated on the basis o f national accounts, statistical surveys and administrative statements. The system will be under the authority o f the Permanent Technical Secretariat o f the PRSP (PTS-PRSP), with the DGSCN handling technical coordination. A l i s t o f 32 results and impact indicators i s appended to this document. I t covers the various PRSP areas identified: macroeconomics, poverty, governance, security, participation, private sector, energy, transportation and infrastructure, telecommunications, agriculture, education, health, HIV/AIDS, sanitation, water, employment, nutrition, and the environment. Sub-system for “Monitoring of Programs and Projects” The purpose o f this sub-system i s to monitor the financial and physical execution o f poverty reduction programs and projects. I t s indicators involve inputs and outputs. Input monitoring refers to the monitoring o f the level o f resources allocated to services and programs. I t also includes the monitoring o f available human and physical resources. Monitoring o f outputs generated by the implementation o f project and program activities refers to the monitoring o f the output o f poverty-reducing services (e.g., construction o f schools, health centers, hydraulic infrastructures, roads, etc.). This monitoring helps determine the existence and status o f investments planned under poverty reduction programs and projects. Most o f the data required for this purpose i s derived from the administrative files o f program and project agencies, and from the internal statistics o f the oversight ministries. In order to function properly, this sub-system requires the establishment o f Medium Term Expenditure Frameworks (MTEFs) as frameworks for budget planning and execution. Coordination will be handled by the General Directorate for Development, while secretarial functions will be the responsibility o f the General Budget Directorate. Sub-system for “Impact Assessment” Impact assessment makes it possible to identify those changes in the wellbeing o f individuals in a specific population group that can be ascribed to a particular program or policy. Impact assessment involves studies o f a specific project, program or policy and o f a well-defined population. The results o f these assessments are used to guide decisions regarding the continuation, modification or elimination o f a policy, program or project, and to rank public interventions by order o f priority. It i s a tool to aid decision-making, and also has the advantage o f enhancing the visibility o f programs vis-& vis the population as a whole. This sub-system i s controlled by the Permanent Technical Secretariat o f the PRSP. 69 5.2.2 Improved production and dissemination of statistical information In order to re-energize the national statistics system, the government will need to elevate the D G S C N to the status o f National Statistics Institute. Improved monitoring o f MDGs and the PRS requires reorganization and strengthening o f the national statistics system, which has been dysfunctional and poorly coordinated for several years. The efficacy and efficiency o f the national system o f poverty statistics depend on the existence o f functional relationships between the structures that produce the statistics and those that use them. Mechanisms to generate collaboration and synergy among the primary sources o f statistical data collection and processing - such as the relevant departments o f line ministries, regional statistical bureaus, and other data-generating entities-will therefore be developed. Such collaboration must obviously be part o f an effort to better coordinate and improve the data-collection framework and methodology. T o this end, the government pledges to: 0 Improve the operation o f the DGSCN by: (i) increasing i t s staff for its internal needs and for purposes o f availability to other administrations; (ii) developing the National Strategy on Statistics Development (Strate'gie nationale pour le de'veloppement de la statistique, SNDS); and (iii) strengthening and re-invigorating the regional statistics bureaus. 0 Make the National Statistics Council (Conseil national de la statistique, CNS) a reality by (i) drawing up legal texts on the composition, mandate and operation o f the CNS; and (ii) preparing enabling decrees for the laws. 0 Develop a capacity building program for the various ministries in the area o f sectoral statistics. In this connection, activities w i l l include: (i) creatiodstrengthening o f statistics units within ministries; (ii)the definition o f statistics production activities in the relevant ministries; (iii) assignment o f the required staff through redeployments, as necessary; (iv) technical assistance dispensed by DGSCN, as necessary, to establish or improve statistical work (methodologies for data collection, processing and publication); and (v) the provision o f computer equipment and operational resources to the relevant departments. 5.3 CAPACITY BUILDING The profound crisis that Togo has experienced for the past sixteen years has had significant repercussions on the Public Administration. The system i s currently having difficulty functioning because i t s employees, while qualified, sometimes have poor morale. The Public Administration i s also characterized by an aging corps o f civil servants and a shortage o f operating resources. Current trends indicate that the civil service may lose nearly two-thirds o f i t s personnel over the 1994 - 2009 period. If the strategic objectives o f the Interim PRSP are implemented and the full PRSP prepared relying on the Public Administration in i t s current state, the impact o f these measures may be compromised. Indeed, successful implementation o f this program requires, over the long term, the reconstruction o f a modem State based on a well-organized public administration staffed with youthful, qualified and motivated employees. I t i s in this context that the States General o f the Public Administration (Etats 70 Ge'ne'raux de 1 'Administration Publique) were held in December 2006, the first stage o f an in-depth reform that w i l l take several years to produce the desired results. This reconstruction o f a modem and effective public administration i s expected to improve the provision o f the public services (e.g., health, education, safe water, sanitation, etc.) expected by the population. It i s expected to be based on a publidprivate partnership for the provision o f certain public services. Finally, while simultaneously building public sector capacities, this program i s t o be based on the principles o f the rule o f law, transparency, participation, and accountability. Until such time as this reform takes shape and produces the desired results, certain key functions (and structures) o f the administration will be reactivated so that they can steer the implementation o f reforms and development programs. One goal i s to improve the policy-making leading t o the full PRSP and the provision o f public services. The impact sought through the re-start o f essential program execution and reform implementation functions within the administration i s to create, or restore, institutional and human capacities in areas where their absence or weakness may irreparably compromise macroeconomic stabilization programs and the reconstruction o f such vital sectors as infrastructures, health, education and agriculture. The short-term goal i s to establish the conditions under which internationally supported reconstruction programs can be implemented effectively, and to draw up the full PRSP. The more specific points deserving attention are the following: - Coordination o f government actions, to ensure more effective supervision and greater consistency o f reforms and investment programs by placing them within a more coherent framework (including macroeconomic balances, global and sectoral objectives, reduction o f regional disparities, creation o f an environment conducive to the private sector, etc.); - Consolidation o f the process o f public finance reorganization, through budget preparation and execution, and consolidation o f public accounts and internal and external controls; - Implementation o f development programs in the aforementioned ministries (education, health, agriculture, infrastructure, etc.); - Finalization o f the Poverty Reduction Strategy Paper, particularly through capacity building in the area o f development policy formulation (macroeconomic framework, reactivation o f sectoral policies, formulation o f an action program in the form o f a revamped Public Investment Program). A review o f the main points mentioned above indicates the importance o f strengthening the coordination o f government activities and o f establishing a framework for operational collaboration between the government and i t s development partners. Indeed, substantial assistance from the international community will be needed to meet the various challenges enumerated above. Restoration o f this minimal capacity will improve the planning o f this external assistance and boost the absorption o f the financial resources mobilized. This minimal capacity must also include the establishment o f a functional mechanism for coordinating the interventions o f the development partners. 5.4 OUTLOOK FOR PREPARATION OF THE FULL PRSP 5.4.1 Indicativetimetable and broad process outlines The government plans to draw up the full PRSP on the basis o f the initial results o f the interim PRSP. An indicative timeframe o f one year has been set for the production o f the first draft o f the full PRSP. This timeframe comprises three main sequences o f events, namely: (i) start-up o f the process o f producing a full PRSP; (ii)a diagnostic phase ranging from an initial status inventory to the definition 71 o f the characteristics o f poverty; and (iii) formulation o f the strategy and o f the tools for i t s implementation and monitoringlevaluation. - First sequence: Start-up of thefull PRSPprocess This sequence calls for the government to: (i) develop and adopt the definitive road map for preparation o f the full PRSP using a participatory approach; (ii)mobilize all development stakeholders around the process thus outlined; and (iii) launch the studies and specific surveys needed in connection with the process. This first sequence will occupy the last four months o f 2007 - Second sequence: Diagnostic During the first phase o f this sequence, most o f which will occur over the first quarter o f 2008, the government w i l l establish thematic groups responsible for producing a complete diagnostic assessment o f each sector, based on the results o f the studies and surveys carried out. Solutions w i l l be envisioned on the basis o f this diagnostic assessment. The second phase will be devoted to an estimate o f the cost o f the proposed measures. - Third sequence: Formulation of the strategy This sequence covers the second and third quarters o f 2008 and includes the preparation o f the draft full PRSP and i t s subsequent finalization. Concerning the preparation o f the draft version, the government plans for the time being to define PRSP themes on the basis o f the medium- and long-term development strategies that the country has set for itself. In other words, the full PRSP must be in keeping with the existing medium- and long- t e r m strategies. Once these themes have been defined, preparation o f a draft version o f the full PRSP will begin. This exercise w i l l receive external assistance, and all local skills within the Public Administration, civil society and the private sector will also be deployed. The final phase o f preparation o f the full PRSP w i l l include, in addition to refinement o f i t s thematic content, work on implementation and monitoringlevaluation instruments, such as framing, the monitoringlevaluation system, the matrix o f measures, the priority action plan, etc. Given the particular importance that the government attaches to indebtedness, the finalization tasks will also include a debt sustainability analysis, in order to help the country avoid falling into another cycle o f excessive debt, and thereby reassure the financial community that the HIPC and MDRI resources sought by the Togolese Government w i l l be used rationally. 5.4.2 Participatory preparation o f the full PRSP Improvement o f the participatory process began with the qualitative survey carried out by the Research Unit (URD) with technical and financial assistance from the World Bank. The process o f developing a full PRSP will entail enhanced participation at all levels. Indeed, as soon as Togo agrees to i t s PRGF program, the process w i l l continue with supplemental studiesYz6 after which the work o f 26 See annexes for indicative list o f these studies. 72 the thematic groups will resume. In this connection, efforts will be made to ensure that participants in this work are drawn, to the extent possible, from all o f the country’s regions and from all economic and social milieus. The work o f the thematic groups will be followed by preparation o f the first draft o f the full document. At this stage, the drafting team will be broadened to include resource persons, including certain representatives o f civil society and the private sector. The first draft will then be widely distributed to enable as many people as possible to examine it and make suggestions. These contributions will be formulated by organized groups, as well as through regional workshops held throughout the country, in order to better incorporate the concerns o f all segments o f the population, and particularly those o f the poor. In a final phase, the document will be presented at a validation workshop prior to i t s approval by the government. A l l partners will be consulted at the various stages o f the process in the interest o f harmonization, as well as to lay the groundwork for budgetary support. 73 ANNEXES 74 1. Indicative List of Surveys and Studies to be Performed 1. General Population and Housing Census (PM) 2. Integral Consumption Budget Survey (PM) 3. QUIBB Survey 4. 123 Survey on Employment and the Informal Sector 5. Population and Health Survey with HIV/AIDS Module 6. Serological Survey on the Prevalence of HIV/AIDS 7. Sources of GrowtWGrowth-bearingSectors 8. Business Climate 9. Review of Agricultural Policy and Overview o f Water Control Works for Agricultural Production 10. Assessment of Policy on Safe Water, Sanitation, and Hygiene 11. Study on the Contribution o f NGOs and Religious Associations and Denominationsto Development and Poverty Reduction 12. Study-Overview o f Government Actions to Combat Poverty 13. Assessment of the Interim Poverty Reduction Strategy 14. Report on the Situation with Respect to the Paris Declaration Indicators 15. PEFA Public Expenditure Review 16. Feasibility Study on Free Primary Education 17. Study on Means of Transportation 75 2. Poverty Monitoring Indicators Data Initial Target value Area Indicators Source value (PRSP (Reference implementation) year: 2006) 2010 2015 Macroeconomic framework and poverty DGSCN/ 1. Real economic growth rate 1.9% 4.1% 4.0% dacro- DE 2. Investment ratio (private and DGSCN conomic 17.6% 20.0% 25.0% ramework Public) /DE 3. Inflation ratio DGSCN 2.2% 2.0% 2.0% 4. Poverty ratio DGSCN 61.7% 58.6% 53.4% 5. Share o f the poorest fifth o f 'overty the population in national DGSCN 7.8% 10.0% 10.0% consumption xonomic Strategic objective 2: Consolidationof economic recovery and promotion of sustainable develc Iment 'rivate sector 10. Industrial production index hergy 11. Number o f new electrified 10 villages 'ransporta- 12. Length o f upgraded paved ionand 16.5% roads nfrastructure 13. Number o f telephone 'elecom subscribers (land and portable) Telecom 100 per 1.OOO inhabitants ARTP 14. Maize production DSID 538.4 640.6 833.5 (thousands o f tonnes) 15. Cassava production DSID 767.4 913.1 1187.5 Lural (thousands o f tonnes) .evelopment 16. Cotton production (millions CCFCC 45.3 87.9 114.2 o f CFA francs) 17. Coffee production (millions CCFCC 6.8 7.2 7.6 o f CFA francs) Environ- 18. Share o f protected hvironment ment 7% 10% 10% ecosystem areas Directorate - 76 Data Initial Target value Area Indicators Source value (PRSP year: 2006) 19. Percentage o f households DGSCN 96.1% 93 % 90% using solid fuels (wood, coal) Strategic objective 3: Development of the social sectors, human resources, and emplc rment DPPE/ 20. Gross enrollment ratio at the primary level MEN I 115.3% I 100.0% I 100.0% {ducation DGSCN 2 1. Literacy rate DGSCN 56.9% 70.0% 100.0% 22. Primary level completion rate lealth 23. Rate o f immunization coverage, by antigen type (measles, DTC, polio, BCG), o f children 0-1 1 months old EPI DGSCN I 49.2% I 70.0% I 100.0% 24. Rate o f infant and juvenile mortality 25. Proportion o f births assisted DISER/ by health personnel DGSCN 26. Prevalence rate o f UV/AIDS HIV/AIDS in persons 15-24 1.5% 0.0% years old ;anitation 27. Proportion o f the population DGSCN with access to a better I 1 1 sanitation system Nater 28. Proportion o f the population DGSCN with access to a better water 57.1% 65.0% 74.0% source 29. Underemployment rate {mployment 30. Percentage o f female wage- earners in the female labor 3.5% 5.0% 8.0% force Jutrition 3 1. Percentage o f underweight DGSCN children under five vears old I 26.0% I 20.0 I 13.0% 77 m 2 I N '0 2 2 m I 00 2 a m I p. x ; N Do 2 N cn x - N 9 vi ? * 0 3 w 2 0 0 2 K * 3 - L s x 0 VI 0 L 3 Ln g N 0 0 2 2 0 N 0 0 s s 0 N 0 2 s e s VI 9 8 0 s -s i Y f . 5 8 - s r- 0 3 g s 0 8 2 g - f 0' x 5 g x 8 s s m 0 0 0 0 g s N I? 8 0 - z e 0 6 x 6 6 0 9 0 0 s N p 8 8 s X s X 0 9 2 s s VI 0 0 0 0 - - ; > t 0 s e, 5 f 8 - I k 5 V 8 - 5 P s - B j .- 2 ti 3 d L e, a $ .c - 0 M 5 - 5. Fiscal Reporting Table: Projections for 2008-10 (in billions of CFA francs) Government Baseline scenario 2007 2008 2009 2010 (In billions of CFA+ancs) REVENUE AND GRANTS 223.4 243.6 28 1.2 311.6 REVENUE 204.5 214.6 232.1 251.1 GRANTS 18.9 29.0 49.1 60.5 TOTAL EXPENDITURE 254.0 271.8 303.3 329.9 CURRENT EXPENDITURE 225.4 21 1.9 220.3 230.0 Domestic primary current spending 184.8 190.6 197.7 206.9 Interest on public debt 24.8 16.2 12.1 11.9 Externally financed current expenditure 15.8 5.0 10.6 11.3 CAPITAL EXPENDITURE 28.6 59.9 83.0 99.9 Domestic contribution 19.7 23.9 26.5 28.1 External sources 9.0 36.0 56.5 71.8 Primary current balance -.9 2.7 11.8 21.1 Domestic primary current balance 0.0 0.0 8.0 16.1 Commitment-basis overall balance, excluding grants -49.5 -57.2 -71.2 -78.8 Commitment-basis overall balance -30.6 -28.2 -22.1 -18.3 Change in arrears 13.9 5.1 -5.3 -9.9 Cash-basis overall balance -16.7 -23.0 -27.4 -28.2 Financing 16.7 23.0 27.4 28.2 Domestic financing 10.7 -5.0 -8.0 -9.9 External financing 6.1 6.0 15.1 19.4 O f which: Drawings 8.0 12.0 18.0 22.5 Debt amortization -.4 -22.7 -23.8 -24.3 Settlement o f debt and arrears 0.0 -359.2 0.0 -303.9 Rescheduling obtained 0.0 244.4 0.0 0.0 Debt cancellation 0.0 114.8 0.0 303.9 Financing gap 0.0 22.1 20.3 18.7 Source: MEF 81 n v) pl n _. 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