The World Bank Implementation Status & Results Report STATE OWNED ENTERPRISES RELATED FISCAL MANAGEMENT PROJECT (P160796) STATE OWNED ENTERPRISES RELATED FISCAL MANAGEMENT PROJECT (P160796) AFRICA WEST | Cabo Verde | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2018 | Seq No: 5 | ARCHIVED on 22-Dec-2020 | ISR44492 | Implementing Agencies: Ministry of Finance, Republic of Cabo Verde Key Dates Key Project Dates Bank Approval Date: 04-Jun-2018 Effectiveness Date: 22-Oct-2018 Planned Mid Term Review Date: 01-Nov-2021 Actual Mid-Term Review Date: Original Closing Date: 31-Jul-2023 Revised Closing Date: 31-Jul-2023 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project Development Objective is to strengthen SOE related fiscal management. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Component 1: Results-Based Financing:(Cost $16.00 M) Component 2: Technical Assistance:(Cost $3.50 M) Component 3: Project Management:(Cost $0.50 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Substantial Moderate Implementation Status and Key Decisions The implementation progress of the project remains Satisfactory. The objective of the Cabo Verde State-Owned Enterprises Related Fiscal Management Project is to strengthen SOE related fiscal management. The 2019 annual targets of two out of the three PDO indicators have been overachieved. Transfers from the Government budget to SOEs for their operations, including lending subsidies, capital injections, and guarantees for loans slightly deteriorated in 2020 (represented 9 percent of GDP as of August 2020) from 7 percent of GDP in 2019 but is in line with the Project expected target for 2020 of 9,57 percent of GDP. The 2019 public revenues from SOEs in tax payments, dividends, concession payments, and divestment proceeds have gone from US$348,772 to US$22.5 million. While the 2020 revenues from SOE’s sector will be available in 2021, a decline is expected since many SOE’s incomes (ASA, ELECTRA etc.) have declined as a result of the COVID-19 pandemic. In the fiscal year 2019, the number of passengers transported by CVA increased by 123%, and the company loss reduced by 10 percent. However, the operating margin of CVA did not improve. The operational cost represented -219 percent of operating revenues as reported in the 2018 annual financial statements of CVA. As of June 2020, based on the interim unaudited financial statement of CVA, the operating margin stands at -211 percent, fairly below the annual target of +100 percent, and unlikely to improve by end of the year 2020 due to the halt in the CVA operation as a result of low demand for air 12/22/2020 Page 1 of 7 The World Bank Implementation Status & Results Report STATE OWNED ENTERPRISES RELATED FISCAL MANAGEMENT PROJECT (P160796) transportation due to the COVID-19. While the 2020 actuals of the above three PDO indicators will be known in 2021, some of the SOEs operating in the market highly vulnerable to the COVID-d 19 pandemic such as CVA and ASA are likely to see a decrease in their operational and financial performance, following the global trend. As a result, in 2020, the past years' trend of the decrease of the Government transfers to SOEs and increase in public revenues generated from the SOEs could be halted or reversed. Four out of six intermediate results indicators related to Component 2 on technical assistance have also been achieved. The SOEs financial database, the debt management law, the fiscal risk report, and SOEs annual reports were realized. The Government has disclosed the pipeline of 23 companies to be restructured and/or divested and reinforced SOEs’ oversight and monitoring. As a result, the 2019 comprehensive report on the SOE portfolio (covering 2018 period) including analysis of financial and operational performance was published on the website of the Ministry of Finance and Planning (MoFP) in March 2020. The 2020 SOEs report (covering 2019) has been prepared and the draft shared with the World Bank. Two out of six intermediate results indicators are in progress, the first related to the new SOE policy is delayed partially due to COVID- 19 while the second related to citizen feedback on SOEs reform is due by end-2021. The 2020 Disbursement Linked Indicators (DLIs 3 to 4) have been achieved leading to a sharp increase of the project’s disbursement ratio from 56 percent to 81.9 percent. The Recipient submitted on March 27, 2020, the evidence of the achievement of the DLIs 3 and 4. The evidence has been verified by the Independent Verification Agent. The World Bank, based on the information available and after obtaining reasonable assurance on the achievement of the DLIs, reimbursed a total amount of US$3,085,075 on April 6, 2020. The mission noticed recent progress in the new SOE policy design and agreed on its adoption by the Council of Ministers by January 2021. Furthermore, the timely retrenchment of the remaining 47 staff of CVA and the finalization of the SOE’s 2020 annual report (covering the 2019 period) including contingent liabilities are critical to ensure the disbursement of the DLI 3 and 4 in the first Quarter of 2021. The timely upgrade of SOE financial database to facilitate exchanges of information with SOEs generate consolidated data, and the SOE annual reports shall continue. Finally, the Cabo Verde Airline (CVA) 2019 audit financial statement should be finalized by January 30, 2021, to enable the calculation of the final 2019 operating margin which is a key indicator for the results-based financing component. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance High Substantial Substantial Macroeconomic Substantial Substantial Substantial Sector Strategies and Policies Moderate Moderate Moderate Technical Design of Project or Program Moderate Moderate Moderate Institutional Capacity for Implementation and Substantial Substantial Moderate Sustainability Fiduciary Moderate Moderate Moderate Environment and Social Substantial Substantial Substantial Stakeholders Substantial Substantial Moderate Other Substantial -- -- Overall Substantial Substantial Moderate Results PDO Indicators by Objectives / Outcomes Strengthen SOE related fiscal management 12/22/2020 Page 2 of 7 The World Bank Implementation Status & Results Report STATE OWNED ENTERPRISES RELATED FISCAL MANAGEMENT PROJECT (P160796) IN00923798 ►Reduced public financing to SOEs - including transfers from the budget and capitalization (% of GDP) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 10.90 7.00 7.00 6.00 Date 29-Dec-2017 30-Nov-2019 30-Nov-2019 31-Mar-2022 IN00923799 ►Improved operating margin of TACV (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 144.00 219.00 219.00 80.00 Date 29-Dec-2017 30-Nov-2019 30-Nov-2019 31-Mar-2022 IN00923800 ►Annual public revenues from SOEs (Millions USD - in tax payments, dividends, concession payments, divestment proceeds) (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 5.00 22.00 22.00 10.00 Date 31-Dec-2017 30-Nov-2019 30-Nov-2019 20-Jul-2022 Overall Comments PDO 2020 annual target of the indicators will be available in 2021 and the result framework will be updated accordingly Intermediate Results Indicators by Components Component 2: Technical Assistance IN00923851 ►IRI1: Comprehensive SOE policy adopted (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Current (2016) SOE The government framework law outlines adopts a policy on general rules for SOEs including clear Value No policy adopted No policy adopted corporate governance of performance targets SOEs and government and transparency oversight and reporting obligations of SOEs Date 29-Dec-2017 31-Dec-2018 30-Nov-2020 31-Mar-2022 Not achieved. The delay is namely due to the impact of Covid 19 which prevents the travel of the firm providing Technical assistance to the Government. The SOE policy is now planned to be delivered in Comments: January 2021 IN00923852 12/22/2020 Page 3 of 7 The World Bank Implementation Status & Results Report STATE OWNED ENTERPRISES RELATED FISCAL MANAGEMENT PROJECT (P160796) ►IRI2: Implementation and utilization of the SOE financial database (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Database with UASE operates general complete financial and excel sheet with basic Database up and operational Value Database up and running aggregated information running performance on six (6) largest SOEs information on the entire SOE portfolio Date 29-Dec-2017 29-Mar-2019 30-Nov-2020 31-Mar-2022 Achieved Comments: IN00923853 ►IRI3: Strengthened legal framework for debt management with a greater emphasis on contingent liabilities (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target new law for debt new law for debt maangement including manangement A clear legal Fragmented debt contingent liabilities including contingent framework that is Value management legislative approved by the liabilities approved by respected by SOEs framework Parliament in December the Parliament in and Government 2018 December 2018 Date 29-Dec-2017 29-Mar-2019 30-Nov-2020 31-Mar-2022 Achieved Comments: IN00923854 ►IRI4: Review of SOE Portfolio and structuring oversight/holding of SOEs (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Some individual The government has The government has Greater clarity on performance reviews disclosed the pipeline of disclosed the pipeline SOEs that need to be Value carried out as part of 23 companies to be of 23 companies to be restructured, sold or performance agreement restructured and/or restructured and/or partially privatized preparations divested divested Date 29-Dec-2017 01-Nov-2018 30-Nov-2020 31-Mar-2022 Achieved Comments: IN00923855 ►IRI5: Fiscal risk monitoring reports on SOE portfolio published (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value Annual report on Yes - 2017 Fiscal Risk Yes - 2017 Fiscal Risk Comprehensive contingent liabilities from Report issued in June Report issued in June reports on all SOEs 6 lar 2018 2018 published on MoF’s web site including analysis of financial and operational performance (including, benchmarking) and all financial transfers with the state (including all 12/22/2020 Page 4 of 7 The World Bank Implementation Status & Results Report STATE OWNED ENTERPRISES RELATED FISCAL MANAGEMENT PROJECT (P160796) transfers, arrears, implicit subsidies, etc.) Date 31-Dec-2017 01-Nov-2018 30-Nov-2020 31-Dec-2022 Achieved. 2019 report published in March 2020 Comments: IN00923856 ►IRI6: Citizen Feedback on SOE Reform Process (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Information available on citizens' opinion on Surveys to be carried out Surveys to be carried how well government No information on citizen Value two years into the out two years into the has planned for, opinion reforms reforms communicated and implemented SOE sector reforms. Date 31-Dec-2017 01-Nov-2018 01-Nov-2018 15-Sep-2023 Not yet due Comments: Performance-Based Conditions IN00923857 ►PBC 1 TACV has adopted and announced a Retrenchment Plan acceptable to the Bank (Yes/No, Output, 3,000,000.00, 100.00%) Baseline Actual (Previous) Actual (Current) Fiscal Year 2022 Value No Yes Yes -- Date -- 18-Apr-2018 18-Apr-2018 -- IN00923858 ►PBC 2 TACV has established Grievance mechanism acceptable to the Bank (Yes/No, Process, 3,000,000.00, 100.00%) Baseline Actual (Previous) Actual (Current) Fiscal Year 2022 Value No Yes Yes -- Date -- 28-Jun-2018 28-Jun-2018 -- IN00923859 ►PBC 3 Staff targeted by the Retrenchment Plan has been retrenched (Number, Intermediate Outcome, 8,000,000.00, 77.29%) 12/22/2020 Page 5 of 7 The World Bank Implementation Status & Results Report STATE OWNED ENTERPRISES RELATED FISCAL MANAGEMENT PROJECT (P160796) Baseline Actual (Previous) Actual (Current) Fiscal Year 2022 Value 0.00 123.00 160.00 -- Date -- 29-Mar-2019 30-Nov-2020 -- Comments: 38 staff received packages and a further 74 received early retirement packages. IN00923860 ►PBC 4 Detailed annual SOE reports prepared by UASE (Number, Output, 2,000,000.00, 40.00%) Baseline Actual (Previous) Actual (Current) Fiscal Year 2022 Value 0.00 1.00 2.00 5.00 Date -- 31-Dec-2018 30-Nov-2020 -- Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P160796 IDA-62510 Effective USD 20.00 20.00 0.00 15.58 3.55 81% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P160796 IDA-62510 Effective 04-Jun-2018 22-Jun-2018 22-Oct-2018 31-Jul-2023 31-Jul-2023 Cumulative Disbursements 12/22/2020 Page 6 of 7 The World Bank Implementation Status & Results Report STATE OWNED ENTERPRISES RELATED FISCAL MANAGEMENT PROJECT (P160796) PBC Disbursement Achievement Disbursed amount in Disbursement % PBC ID PBC Type Description Coc PBC Amount Status Coc for PBC Restructuring History There has been no restructuring to date. Related Project(s) P172528-State-Owned Enterprises related Fiscal Management Project - Additional Financing 12/22/2020 Page 7 of 7