Documentof The WorldBank FOR OFFICIAL USEONLY ReportNo. 30538-TO COUNTRY RE-ENGAGEMENT NOTE A JOINT FRAMEWORK FOR STRENGTHENING INTERNATIONAL ASSISTANCE FOR THE REPUBLIC OF TOGO November11,2004 The WorldBankGroup UnitedNationsDevelopmentProgram-Togo AfricaRegion CountryDepartment13 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bankauthorization. REPUBLICOFTOGO COUNTRY RE-ENGAGEMENTNOTE A JOINT FRAMEWORKFOR STRENGTHENINGINTERNATIONAL ASSISTANCE CURRENCYEQUIVALENTS US$1.O = 545 CFA Franc (October 21,2004) GOVERWENT FISCALYEAR January 1-December 31 ABBREVIATIONSAND ACRONYMS AAA Analytical and Advisory Assistance CAS Country Assistance Strategy CFAA Country FinancialAccountability Assessment CPAR Country Procurement Assessment Review CPIA Country Policy and InstitutionalAssessment CRN Country ReengagementNote CSAT Civil Society Assessment Tool DSA Debt Sustainability Analysis EPPR Emergency Program for Poverty Reduction ESW Economic and Sector Work EU European Union HIPC Heavily IndebtedPoor Counties Initiative IDA International DevelopmentAssociation IFAD International Fundfor Agricultural Development IFG International Fertilizer Group IGR Institutional and Governance Review IMF International Monetary Fund JSAN Joint StaffAdvisory Note LICUS Low-Income Country Under Stress MDG MillenniumDevelopment Goal NGO Non-Governmental Organization OED Operations EvaluationDepartment PER Public ExpendituresReview PRSP Poverty Reduction Strategy Paper PSD Private Sector Development S M P Staff-Monitored Program SMT Security Management Team TF Trust Fund UNDP UnitedNations Development Program WorldBankGroup UNDP Vice President: Gobind T. Nankani Director o f Regional Bureau Country Director: Pedro Alba for Africa: Abdoulie Janneh Country Manager: Jean-Michel Happi ResidentRepresentative: Fidele Sarassoro RE COUNTRYRE-ENGAGEMENTNOTE A JOINT FRAMEWORKFORSTRENGTHENINGINTERNATIONAL.ASSISTANCE TABLE OF CONTENTS Executive Summary Introduction 1 Part I Country Context :Mixed Economic Performance and Rising Poverty - 2 A. Economic Performance 3 B. Poverty Situation 6 C. The Poverty Reduction Strategy & Millennium Development Goal Processes 8 D. Donors' Involvement 9 Part I1 - Engagement under the LICUS Framework 10 A. The LICUS Initiative: Principles, Windows of Change and Opportunities 10 B. Planning Scenarios 11 C. StrengtheningDonor Coordination 12 D. Strategic EntryPoints 12 e BuildingMomentumfor Sociopolitical Change 12 e Preparingthe Ground for Economic Recovery andInternational Re-engagement 13 0 EmergencyAssistance for Social Services Delivery 16 E. Resources, Results, andRisks 17 0 Partnerships andFinancing 17 0 Monitoringand Evaluation 18 0 RisksandMitigation 19 ANNEXES Annex 1: Results Framework andMonitoring Annex 2: KeyEconomic Indicators, 1990-2003 Annex 3: Summaryo fDonors' Activities inTogo Annex 4: IDA Commitments, Disbursements,andNet Transfers (1984-2003) Annex 5: World Bank's Economic and Sector Work Proposals on Togo Annex 6: Togo's Progresstowards the MillenniumDevelopment Goals Annex 7: Togo at a Glance Annex 8: OED Review ofthe Togo Program: Lessons from Past Experience and Recommendations Annex 9: Map o fTogo BOXES Box 1: SecuringDebtRelief for Togo Box 2: Road Map for Resuming IDA'SLending Box 3: Zero-Generation Reforms TABLES Table 1: Incidence o fPovertyinTogo by Region Table 2: Summary of CRNActivities for Togo (FYO5-FYO6) Table 3: Sources andUse o fResources REPUBLICOFTOGO A JOINT FRAMEWORKFORSTRENGTHENINGINTERNATIONAL ASSISTANCE EXECUTIVESUMMARY 1. Togo presents the essential elements o f a low-income country under stress (LICUS). Inthe 1980'~~was once a good performer interms of economic managementandpoverty it reduction. However, since the early 1 9 9 0 ' ~its development prospects have been adversely ~ affected by protracted political crisis and govemance failures that have levied a heavy toll on the economy. The Government's policy and institutional performances have weakened, especially with respect to the managementof economic policy, deliveryo f social services, and efficacy o f government. .. 11. At the same time, major donors, in particular the European Union (EU), cut off budgetary support in the early 1990's because of concems regarding human rights and govemance in Togo, and have yet to resume full financial cooperation. These donors continue to stress the need to improve the country's democratic system in order to resume their assistance. In the absence of such aid, Togo will be unable to clear its arrears and service its debts to its creditors, particularly multilateral institutions, and would therefore remain cut off from their much needed assistance. Togo has been innon-accrual status with IDA sinceMay2002. iii. TheConsultationsbetweenGovernmentandtheEU,underArticle96oftheCotonou Partnership Agreement, held in April-July 2004, and their follow-up process currently underway, have created an important opportunity for change. Within this framework, the Government committed to specific actions which, if implemented satisfactorily, would help address the root causes of the country's sociopolitical crisis, notably the need to improve respect for democratic institutions, human rights, and the rule of law. As the Government implements these actions, the European Commission is expected to resume financial assistance gradually. iv. In this context, the Country Reengagement Note (CRN) for Togo provides a joint strategy for the Bank and UNDP reengagement, and a framework for strengthening donor assistance, over the next two years. The CRNproposes three entry points o f action to support the country's priorities of overcoming the political crisis, preparing the conditions for economic recovery, andimproving social indicators: Building a momentum for sociopolitical change. The re-engagement strategy will build upon the recent momentum with activities to help improve the sociopolitical situation. While the EUand other bilateral donors will lead the political dialogue and related activities on democratization andhumanrights, the Bank and UNDP will focus on governance and civil society engagement, on the basis o f their mandates and relative comparative advantages. Preparing the ground for economic recovery and international reengagement. The reengagement strategy includes activities to help the authorities address fundamental economic management issues which are necessary to resume external financial assistance, notably from multilateral creditors. These activities broadly fit into six categories: (i) strengthening poverty diagnosis, information systems, and statistical capacities; (ii) supporting the PRSPMDG processes; (iii) strengtheninginstitutional capacity inkey ministries; (iv) debt sustainability and arrears analysis; (v) advising on the implementation o f an IMF-supported program and HIPC initiative; and (vi) fiduciary assessments and strengthening. Emergency assistancefor social services delivery. The proposed strategy comprises an emergency program which aims at reducing extreme poverty and improving access to basic social services for men, women, and children living under severe deprivation inurbanandrural areas. Thiswouldbe achievedthrough the implementation of small scale and locally-driven initiatives addressing extreme poverty, urgent needs, and priority services in the fields of basic education, primary health care, HIV/AIDS, social protection andbasic infrastructure. iv. The scope and speed o f reengagement under the CRN would depend on the Government's progress towards the resolution o f the country's crisis. The planning scenarios are thus basedon the political andinstitutionalsituation, and on potentialprogress achieved in the normalization of Togo's relations with its major donors, notably in the context of the Article 96 Consultations with the EU. Conversely, substantial worsening of the sociopolitical situation, due to unsuccessful in-country dialogue prolonging the crisis and increasing the risks of social instability and conflict, would lead to scaling down the proposed activities. v. The major risks involved in the Togo LICUS initiative are political. Indeed, the Government's commitments under the Article 96 Consultations are key to address the root causes o f the crisis and, therefore, are essential conditions for resumption o f foreign aid. The proposed reengagement strategy aims precisely at reducing the odds o f renewed crisis by supporting implementation o f selected commitments, and by preparing the ground for socioeconomic recovery and resumption o f external assistance. In addition, there is the risk that Government may fail to establish a track record o f policy performance due to uneven implementation o f economic reform. This could delay the reengagementprocess, notably the establishment o f the Fund-supported program. Moreover, difficulties in resources mobilization, notably from bilateral donors, could delay the arrears clearance process. To mitigate these risks, the Bank would monitor the Government's program through continued policy dialogue, together with the IMF and other partners. The Bank and other partners will also assist in preparing a credible plan o f arrears clearance to be discussed and agreed upon with the mainmultilateralcreditors. REPUBLICOF TOGO COUNTRYRE-ENGAGEMENTNOTE A JOINTFRAMEWORKFOR STRENGTHENINGINTERNATIONALASSISTANCE INTRODUCTION 1. Over the last decade, Togo has been trapped in a vicious cycle of socio-political impasse, economic decline, rising poverty, and donor disengagement. Untilthe late 1 9 8 0 ' ~ ~ Togo was ruledunder a one-party system, but in 1991the country was among the first African states to hold a national conference to introduce a democratic system of government. However, the political process deteriorated into street riots, mass civil disturbances, human rights violations, and an eight-month general strike. Since then, the opposition has boycotted several general elections, and expressed serious concems about the integrity of all legislative and presidential elections. Most recently, the Parliament adopted amendments to the 1992 Constitution, includingthe abolition of the two-term limit and the reinforcement of the power of the President o f the Republic. This opened the way for President Eyadema to run again, and indeed be reelected for a third term in June 2003. The opposition participated inthese elections, but once again denounced their outcome, charging fraud. Overall, the elections were perceived bymany stakeholders to lack adequatefaimess and transparency, and failed to facilitate national reconciliation. Major donors, inparticular the European Union (EU), which had cut off budgetary support inthe early 1990's because o f concems regardinghumanrights and govemance in Togo, have yet to resume full financial cooperation. These donors continue to stress the need to improve the country's democratic system in order to resume their assistance. 2. Inthe absence ofsuch aid, Togo willbeunable to clear its arrears andserviceits debts to its creditors, particularly multilateral institutions, and would therefore remain cut off fkom their much needed assistance. Togo hasbeen innon-accrual status with IDA since May 2002. Arrears to IDA amounted to US$53.6 million as of October 15,2004. Throughout this period, the Bank has remained engaged through analytical and advisory services under the LICUS Initiative. A few partners, notably UNDP and UN specialized agencies, have also remained involved through limited programs, but most bilateral aid programs have been stagnant or scaled down. There has not beenany IMF-supported programsince 1998. 3. The launching inApril 2004 of Consultations between Government andthe EU, under Article 96 of the Cotonou Partnership Agreement, has dramatically improvedthe outlook over the medium term.' These consultations represent an important opportunity for Togo to resolve its protracted political crisis andbuildthe foundations for a sustainable socioeconomic recovery through the follow-up process currently underway with the EU. Within this framework, the Government committed to specific actions which, if implemented satisfactorily, would help address the root causes of the country's sociopolitical crisis, notably the need to improve respect for democratic institutions, human rights, and the rule of law. 'TheCotonou ~~ Partnership Agreement governs relations betweenthe EUandAfr-ica, Caribbean and Pacific (ACP) countries. -I- These actions included, inter alia, political dialogue with opposition parties and civil society, political freedom, free and fair elections, freedom o f press, release of political prisoners, and reform o f the judiciary. The EU i s monitoring these actions and i s expected to normalize relations in stages as Government implements these commitments. The European Commission is scheduled to issue a report on the outcome of the initial 60-day consultation period inNovember. 4. The Government i s well aware o f the importance o f this process. In the absence of extemal assistance, and despite the Government's recent moderate macroeconomic policies, public finances have remainedunsustainable and the Government has been unable to meet its financial obligations and has continued to accumulate arrears to both domestic and external creditors. Extra-budgetary sources o f funding, including the phosphate sector and public banks, have also become tighter. At the same time, poverty has been on the rise. Access and quality o f basic services have deteriorated despite the efforts by local communities, NGOs and the private sector to compensate for the failures of public sector to deliver essential services. Given this situation, the Govemment seized the window o f opportunity opened up by the EU Consultations to re-engage with the donor community, including the Bretton Woods institutions. 5. This Country Re-engagement Note (CRN) aims at defining a strategic framework for Bank and UNDP re-engagements in Togo over the next 12 to 18 months. The CRN was designed on the basis o f recent political developments and the current socioeconomic and poverty situation. It benefitedfrom extensive consultations with key stakeholders, including government, civil society and donors, and a participatory approach during its formulation process. We will consult further with all parties as we field missions to help the Government formulate its economic reform program. The CRN also builds upon the Bank and UNDP experiencesinLICUS countries, ando fcourse inTogo.2 6. The report i s organized as follows. Part Idescribes the country context, including recent economic developments, the poverty situation, and an overview o f donors' involvement to date. Part I1outlines a road map for hrther engagement under the LICUS Framework, notably the proposed strategic entry points, supporting instruments, expected results, andpotential risks, including specific challenges to resume IDA'Sfinancing. PARTI COUNTRY CONTEXT :MIXEDECONOMICPERFORMANCE - AND RISINGPOVERTY 7. Togo is a low-income country located on the Gulf of Guinea in Western Africa. The population is estimated at 4.8 million in2002 and is growing at the rapidrate o f 2.8 percent a year. In2002 it had an estimated per capita income o f US$270 and a gross domestic product o f US$1.4 billion. The economy has traditionally depended on primary production and services. Agricultural production is mainly rain-fed and small-scale, with concentrations in staple food crops, cotton, coffee, and cocoa. See "Review of the TogoProgram",April 21,2004, Operations Evaluation Department. - 2 - 8. Togo i s an open economy, whose exports, mainly comprised of phosphates, cement, coffee, cocoa andcotton, accountedfor 28 percent o fthe GNP in2002. This export share was far below the average of 45 percent that prevailed in the eighties. The economic base i s fragile as it relies heavily on subsistence agriculture, which is exposed to the vagaries of weather. Volatility inproduction and world prices, in turn, make export earnings extremely variable and exposes farmers to income insecurity. This volatility can have a large impact on poverty, since over 70 percent o f the labor force is employed inthe agriculture sector. Trade taxes represent a large portion o f government revenues; in 2002, customs taxes alone represented 51 percent of tax revenue. Thus, volatility in the extemal sector translates directly into shortfalls ingovernment revenues. 9. Togo depends on external aid for the financing o f fixed capital fo'rmation through the public investment program. Traditionally, over 70 percent o f the total investment was public and 80 percent of that public investment was externally financed by grants or loans on concessional terms. Due to the suspension of donor support, the level of public investment dropped from 13.8 percent of GDP in 1990 to 1.4 percent of GDP in 2002. This situation eroded the country's capital stock and slowed down economic growth. Per capita income declined from $430 to $310 in constant dollars between 1990 and 2003, and poverty has deepened andbroadenedthroughout the country. A. ECONOMICPERFORMANCE 10. Over the last decade, Togo's economic performance has been uneven. Periods of growth (1994-97) correspond closely to improvedpolitical conditions, better macroeconomic management, and the partial resumption of extemal aid. Conversely, periods o f economic decline (1991-93, and 1998-2001) were correlated with political disruption, poor economic management, and the suspensionof donors' assistance. (Annex 2) 11. Debt. Togo's debt burden has remained high. The stock o f external debt was estimated at $1.32 billion at end-2003, o f which two thirds were owed to multilateral creditors. Extemal debt rose from about 70 percent o f GDP at end-1992 to 104.2 percent at end-2003. External payment arrears to official creditors at end-1996 were cleared in 1997, andTogo's last Paris Club rescheduling was in 1998. However, with the withdrawal of most donors from budgetary assistance, arrears to extemal creditors began to accumulate again duringthe second half o f 1998 and reached US$ 360 million at end January 2004 (about 20 percent o f GDP), including US$ 69.5 million due to multilateral institutions (including IDA, ADB, EIB, FAD,BOAD, OPEC-Fund, BADEA, IDB, IslamicBank). The authorities are in the process o f reconciling debt data with creditors, with UNDP support. This would provide key inputs to a forthcoming debt sustainability analysis (DSA) to be preparedwith donors' assistance. Domestic arrears have also become a burden to both private sector and the bankingsystem, with a stock ofdomestic arrears estimated at 7 percent of GDP at end-2003. 12. Togo is eligible for assistance under the enhanced HIPC initiative, but has yet to establish the requiredtrack record under a Fund-supportedprogram. Laying the foundations for such a program will require that Government demonstrate satisfactory performance under - 3 - a staff-monitored program (SMP), develop a strategy for the clearance o f arrears to multilateral creditors, andmobilize adequatefinancing assurances (Box 1). 13. Recent Economic Performance. Over the last two to three years, economic performance has improved, with GDP real growth rate estimated at 2.7 percent in2003, after a record 4.2 percent in 2002. This growth was sustained in large part by improved performance o f the agricultural sector as the result of favorable climatic conditions, and increased cotton production. Cement production and exports were also robust, as were the production and export o f phosphates following the rehabilitation agreement o f the phosphate company (OTP) concluded with a private investor (IFG) in 2002. The services sector, sustained by transport activities, also grew moderately, continuing a rising trend which began three years ago, spurred by increased traffic to landlocked countries following the Cote d'Ivoire crisis. 14. This uptick ineconomic growth inpart may reflect improvements ineconomic policy. First, Government has also strengthened its fiscal position during this period, tightening expenditures while sustaining revenue mobilization efforts, notably through improved tax collection from large tax payers and the fight against tax evasion. The overall budget (on commitment basis and excluding grants) recorded a surplus estimated at 0.8 percent of GDP in2003, compared with a deficit of the same magnitude in2002. However, inview of the continued suspension o f external budgetary aid, this was accompanied by further accumulation o f external payment arrears. Management of government expenditures, notably budget execution and monitoring, also weakened in recent years, adversely affecting transparency and efficiency, andthe quality ofpublic finance data. 15. Second, as for structural reforms, progress was achieved over the last few years, notably continued trade liberalization in the context of WAEiMU regional integration; liberalization o f the telecommunications sector; and a few privatizations, including an insurance company, two banks, hotels, power distribution, port container-handling activities, and IFG/OTPmanagementcontract. 16. The Reform Agenda. Notwithstanding these achievements, a more ambitious reform agenda is key to accelerate economic growth and reduce poverty significantly, and can only be convincingly implemented and ultimately successful if private sector confidence is fully restored through the settlement of Togo's political disputes and the resumption o f donor financial assistance. With a return of political stability, Government will need to build a stronger track record o f policy performance. The restoration of a sound and stable macroeconomic framework should be the starting point. This will require further strengthening fiscal management, while essential expenditures in health, education, agriculture support services, and infrastructure are secured to rehabilitate the country's productive capacity. Fiscal management would entail reforms aimed at increasing tax revenue, improvingthe budgetary process, and cashmanagement. - 4 - Box 1:Securiw DebtRelief for Togo potentially eligible for C' debt relief. Reducing its debt burden suing much needed economic and social reforms. If `Togo is lo the, suftkicienl pragress needs to be made towards meeting the o meets the requirements of low indebted (Le. NlV ofdebt above govef.mnxnt revenues aRer siiiiul ParisClub stoak-of ctnirparabIe treatmeat by other era1 and commercial beconfimied ihrouglia loan-by-loan DSA. A track record of mrcraeconomic perform e, Currently, `logo does not have a nmroecwnom clearaim with IDA and other creditors). to be reviewed by a Joint Staff 17. Government will also need to take prompt actions to improve the investment climate. First, the banking system has lost its ability to finance economic activity due to declining profitability, the burdenof non-performing loans (NPLs) which represented over 17 percent o f total credit in2003, and weaknesses inthe judicial framework that hamper the recovery o f NPLs and the realization of collaterals. These factors have also hamperedthe development o f microfinance services. To help address this situation, key reforms should aim at enforcing prudential regulations, increasing competition and product diversification, and improving the legal and judicial system. Secondlv, Government would need to step up its privatization program. Inparticular, the authorities need to seek an agreement with prospective investors inmajorbanks(e.g., SNI, BTD,BTCI) andfindthe resourcesto finance advisory servicesfor privatization o f the telecommunications company. Inadequate transparency in transaction procedures as well as inappropriate corporate governance post-privatization have also hampered the program's credibility. Thirdly, to improve the quality and access o f utility services, and reverse the steady deterioration o f infrastructures from a decade of inadequate maintenance and investment, institutionalreforms will be necessaryinorder to strengthen the regulatory framework o f port, telecommunications, water and electricity sectors, where private operators already play an increasing role, and to fwther promote private participation inother sectors. - 5 - 18. Turning agriculture into an engine for economic growth will also be key to Togo's poverty reduction strategy. This i s particularly the case for cotton, the major agricultural contributor to the economy and the main source of monetary income in rural areas. Cotton traditionally accounts for over 60 percent of total agricultural exports. While some progress was achieved with the partial liberalization of the sector over the last decade, it i s still dominatedby a state-ownedcompany (SOTOCO) and suffers from inadequate sector policies. The reforms needed to rehabilitate SOTOCO andthe sector have been delayed due to lack of commitment by the authorities. Inaddition, the authorities should stimulate other sources of growth, notably the phosphate industry. This would entail clarifylng the corporate governance of the new joint venture company by resolving the disagreements between the Government andthe private investors. 19. GovernanceIssues. Over the last decades, Togo has labored under poor governance due to the lack of political commitment and weak capacity to implement relevant reforms. Governance factors cut across sectors as indicated in the Country Policy and Institutional Assessments (CPIA). Major shortcomings included, inter alia: (a) poor political governance, due to lack of respect for democratic institutions and the rule of law; (b) poor empowerment o f local governments, due to failed decentralization and lack o f local elections; (c) deficient legal andjudiciary system, weakened by interferences, corruption, and lack of resources; (d) lack of transparent budgetprocess and execution, absence of control mechanisms, such as an Auditor General's Office or a Court o f Accounts; and (e) weak and often politicized civil service. It is expected that successfd implementation o f Government's commitments under the Article 96 Consultations would help improve the political governance systems. However, Government will need sustained efforts and commitment to overhaul the judiciary system, improve public sector management, implement a sound decentralization process, and carry out a comprehensive civil service reform, in order to tackle governance issues in a more holistic fashion. B. POVERTY SITUATION 20. With a per capita income of $310 in2003, Togo is amongthe poorest countries inthe world. The political crisis and economic decline have had a devastating impact on poverty over the last decade. Duringthe 1988-98 decade, the GDP per capita inrealterms declined at an average annual rate o f 0.3 percent. A cumulative decline o f three percent for the decade matched the overall decline inhousehold income suggestingthat poverty has been on the rise. According to the UNDP's 2003 HumanDevelopment Report, the HumanPoverty Index (HPI- 1)for Togo was 38.5 percent andthe HumanDevelopment Index (HDI)was 0.501, rankingas number 141 out of 173 countries. The two indexes showed that large parts of the Togolese population lived in precarious conditions, with little access to social services and low life expectancy. 21. The Government's draft InterimPoverty Reduction Strategy Paper (I-PRSP) estimated that 72.2 percent of the population lived below the poverty line and 57.4 percent lived under 3 For a discussion onpoverty inTogo, see: "Togo: Overcomingthe Crisis, OvercomingPoverty", A World Bank Poverty Assessment, 1996, still a very thoughtful anduseful analysis of the matter. - 6 - extreme poverty in 2000, based on annual incomes of CFA Franc 100,800 and CFA Franc 78,400 respectively (about $200 and $150).4 But, the incidence of poverty suggested a more complex picture according to the region, gender and social sectors. Poverty was especially widespread in rural areas, with the worst incidence in the northern and central regions of Savane and Centrale, respectively (Table 1). 22. Social Indicators :The collapse of living conditions and abject poverty affecting the large majority o fpeople caused irretrievable damages to the society. This i s illustrated bythe deterioration o f key social indicators, notably ineducation, health andnutrition, access to and quality o fwater, sanitation andother basic services, andHIV/AIDSprevalence and spread, all with gender-based and regional disparities. Social vulnerability is also on the rise and child trafficking still persist despite efforts to tackle these issues. The lack of resources forced the Governmentto limit its expendituresto priority sectors. Government provisionofbasic social services was severely hampered by both capacity and resource constraints and by inappropriate intra-sectoral allocations. Table 1: Incidence of Poverty inT o ~ by Regiion o 68.0 62.9 63.9 60.8 73.2 Sources: Togo-Draft I-PRSP,June 2004 23. Inthe educationsector, per capitapublic expendituresdroppedby45 percent (in 1990 prices) from FCFA 7,000 a year in 1991 to FCFA 3,880 in 2000. Over 75 percent o f the allocated budget was used to pay salaries, with the balance going to capital investment and operational expenses. Inthis context, improvement in access to education was due, in large part, to greater involvement of local communities and the private sector which created and financed their own schools as a response to the inadequacy of public education services. Nation-wide, net enrollment inprimary school dropped from 71 percent in 1980 to 60 percent in 1994, to then pick up again to 92 percent in 2000. Female primary net enrollment increased from 49 percent in 1985 to 58 percent in 1990 and 82 percent in 2001, indicating that recent efforts to bring girls to school have produced results. However the quality o f education has remained low throughout the country and inequities in access persist for girls and students inrural areas, and girl drop-out rates remainhigh. Average completion rate was 63 percent (but only 53 percent of eligible girls finished primary school, compared with 73 percent o f eligible boys). Recent and reliable information on poverty inTogo is unavailable, the latest census and household data being over 10 to 20 years old. To remedy this situation, Government plansto strengthen its poverty indicators, monitoring and evaluation capacity, and overall statistical system inthe context o f the MDGFRSPprocesses. - 7 - 24. Inthe health sector, current indicators place Togo among the most disadvantaged countries in Sub-SaharanAfrica. Government has cut public spending on infrastructure and equipment. Per capita public expenditures fell by over 7 percent (in 1995prices) from FCFA 2,336 p.a. in 1995 to FCFA 2,167 in 2002. Service delivery i s also constrained by poor capacity to plan and monitor sector operations and by shortages of medical personnel. Weak health systems and poor service provision have led to high morbidity and mortality from infectious and parasitic diseases, most o f which could be prevented or treated at a low cost. The 1998Demographic andHealth Survey (DHS) found that malnutrition affected one infour children under five years, andthe child mortality rate was 146per thousand. Only 31percent o f the children were fully immunized, and 16 percent were reported to never have received any immunization at all. Togo's life expectancy was estimated at 49 years, down from 55 years in 1989. Regional and urbdrural differences are large with the Kara region for example havingindicators that are considerably below the average for Togo. Indeed, access to health services is unequally distributedwith 70 percent of the health personnel working in the Maritimearea (50 percent inLomk) serving 35 percent ofthe population. 25. HIV/AIDS. The burgeoning incidence of HIV/AIDS threatens to overwhelm Togo's health infrastructure, to destroy its human capital, and to blight future development. With an estimated 6 percent prevalence rate (9 percent in Lome), Togo was already at the higher end o fthe spectrum inthe sub-region in2001. Inadequatesupport bythe donor community would place the country at a high risk o f undermining the entire region's efforts to stop the AIDS epidemic, given its locationat a cross-roads o ftransit traffic movingboth east-west andnorth- south. Since 2002, the Government has stepped up the implementation o f its strategy with support of over $50million grants from the GlobalFundto FightHIV/AIDS. C. THEPOVERTYREDUCTION STRATEGY & MILLENNIUM DEVELOPMENT GOAL PROCESSES 26. MDG Report. By adopting the MillenniumDeclaration at the UNGeneral Assembly o f September 2000, Togo has committed to achieving its Millennium Development Goals (MDGs). An MDG country report was preparedand validated during a national seminar in October 2003 and adopted by the Government inMarch 2004 to inform the wider public and policy-makers of progress towards poverty reduction. The report showed that, unless special efforts were undertaken in terms o f country investments and donor engagement, Togo was unlikelyto achieve any ofthe MDGsbythe horizonof2005-2015 (Annex 6). 27. I-PRSP Process. The Government issued a draft interim poverty reduction strategy paper (I-PRSP) in November 2002 on which donors' feedback was sought. In March 2004, the I-PRSP was presented and discussed in the Council o f Ministers and a communique` was issued. The final I-PRSP was validated in a national seminar in June 2004, and will be subsequently adopted by the government. The report provides an analysis o f strategies and policies to reduce poverty. It reviews key policy measures for sustained growth, public programs to assist the poor, and mechanisms for monitoring and evaluating the strategy. It outlines gaps in poverty data and analysis, and indicated steps to fill these gaps. It also calls for several sectoral studies and identifies areas o f technical assistance to complete a full PRSP within 18 months, including organizing household surveys, improving the quality o f data - 8 - neededto deepen poverty social impact analysis, and the development o f a monitoring system for social indicators. 28. However, the draft I-PRSP also had shortcomings, inter alia, lack of a credible macroeconomic framework, poor analysis of Togo's crisis and its socioeconomic impacts, poor mechanisms to evaluatethe poverty impact of government programs, weak institutional arrangements for fiduciary accountability of public resources, and lack of a financing planfor the PRSP preparation. The authorities plan to addressthese issues inthe final I-PRSP. Once completed, the report would also provide detailed cost implications for preparation of the full PRSP, for which Government plansto seek donor support andfunding. D. DONORS' INVOLVEMENT 29. As discussed above, the flow of external assistance to Togo has been declining since the early 1990s. Over the last decade, multilateralandbilateraldonors accounted for about 60 percent and 32 percent of Togo's external assistance, respectively, and international NGO contributed for the remaining 8 percent on average. Overseasdevelopment assistance(ODA) to Togo fell by three quarters, from $212 million in 1990 to $53.9 million in 2001. This translated into ina 80 percent drop o f the level of ODA per capita from $53.3 to $11.4 during this period. 30. The major development partners of Togo included, inter alia: IDA, IMF, UNDP, the EU, ADB, France, Germany, the United States, and UN specialized agencies (WHO, UNICEF, FAO, UNFPA, UNAIDS). These partners have been active in various aspects of socio-economic development, and some have playedkey roles insupporting the promotion of democracy andhumanrights. To date, there i s a small and well coordinated donor group that regularly shares information on the sociopolitical situation and collaborates closely on economic and sector work in the field. Development partners in the field have also set up thematic groups to facilitate inter-agency cooperation within key sectors (e.g., health, education, HIV/AIDS, agriculture and rural development, community-driven development initiatives, etc). A summary o f their programs i s presentedinAnnex 3. 31. Despite the suspension o f budgetary assistance, many donors have continued project support, increasingly through non-government entities and local communities, with emphasis on the social sectors. However, there is a pressing need to further develop the capacity o f these organizations. Coordination of donors' interventions also needs strengthening, most particularly when they are channeled outside government; and better alignments o f these interventions with the country's poverty reduction programs and priorities are necessary. In this context, the Government's capacity for donor coordination also needs to be enhanced. The PRSPprocesswould provide an integratedframework to achieve these objectives. - 9 - PART I1 ENGAGEMENTUNDERTHE LICUSFRAMEWORK - E LIcUsINITIATIVE: PRINCI LES, WINDOWS OF CHANGE AND OPPORTUNITIES 32. Togo presents the essential elements o f a LICUS. Its policy and institutional performances are exceptionally weak, especially with respect to the managementof economic policy, delivery of social services, and efficacy of government. This is illustrated by the CPIA ratings. Over the last three years, Togo's ratings were inthe fifth quintile, among the worst performing countries in Sub-Saharan Africa. This poor performance resulted fkom, inter alia, the protracted sociopolitical crisis, social inequities and exclusion, poor governance, andeconomic mismanagement. 33. The strategy proposed inthis CRNis articulated around four pivotal principle^:^ 0 Uppont Risk Assessment: The strategy recognizes the very high political risks associated with Government's compliance with its commitments under the Article 96 Consultations. This i s the most important factor, but also the most uncertain, to resolve the country's protracted crisis. Inaddition, extreme poverty and low access to public social services, notably in the rural areas, are potential sources of frustration that could lead to unrest, especially for young people in a situation with limitedvoice or outlooks for improvements. 0 Selectivity: The strategy i s selective and focuses on key actions which promise to have the largest pay-off with regard to breaking the cycle o f political impasse, economic decline, and poverty. It i s knowledge-intensive and reaches out to both Government andcivil society for capacity buildingandknowledgesharing. It also supports limited grant-fundingfor basic social services delivery directly to the poorest communities. By focusing on areas inwhich the Bank andUNDP have comparative advantages, the proposed strategy aims to complement activities plannedor underway by other donors or local stakeholders. Results-based: The strategy is based on results (Annex 1). The scope and extent of assistanceto beprovidedwill dependon tangible achievementson the ground. ConsensusBuilding: The re-engagementstrategy formulation and implementation will be based on a continued process of consensus building. The proposed CRN is ajoint UNDP/World Bank undertaking, and the ADB i s preparinga re-engagement strategy with similar analysis and entry points. It also has been extensively discussed with the other key donors. Finally, the strategy was formulated in close collaboration with Government authorities and benefited from consultations with representatives of civil society organizations, the business community, and other stakeholders. These principles also draw from the Lessons of PastExperiences and Recommendations from the OED Review ofthe Togo Program(Annex 8). - 10 - 34. On the basis of the above principles, the re-engagement strategy intends to seize the following windows of opportunity: 0 A Momentum for Sociopolitical Change. The Article 96 Consultations have created a unique window of opportunity for change. Inthis context, given the Government's specific commitments to address the root causes of the crisis, a main thrust of the donor partnerships will be to help the authorities implement these commitments, in order to improve the political and governance situation inthe country. Donors would provide relevant support according to their mandates, with the EU and bilateral partners assuming key roles on political issues, and other development agencies supporting them on the economic governance agenda (notably UNDP and, to some extent, IDAthrough selectedAAA and civil society engagements). 0 Andfor Full International Reengagement. Timely access to economic opportunities and basic social services are essential elements to consolidate political transitions. Only a full resumption o f donor aid could provide the amounts of resources necessary to both expand access and quality of services ina sustainable fashion, andto stimulate economic recovery. The proposed strategy therefore stresses the need for preparing the ground for full international reengagement, as a priority for both Government and donors. This will require satisfactory progress in Article 96 Consultations and a comprehensive policy dialogue to help Togo build a track record o f economic performance, eventually under a Fund-supported program; develop a strategy for the clearanceo f arrearsto creditors; andmobilize adequateexternal financingresources. 0 Emergency Social Services. The LICUS Initiativereflects a shared assessment by the authorities and donors o f the disquieting situation inthe social sectors. Inthe face of growing urgency, waiting for resumption o f financial assistance to Government will be socially very costly and there is a strong case for supporting non-governmental or community-based social service deliverystructures. To this end, key donors agreedto help the authorities and other stakeholdersprepare a relevant emergency program for social services delivery. Program preparation is now underway, led by the Bank and UNDP, in close collaboration with the EU, FAO, France, Germany, the USA, and other partners. B. PLANNINGSCENARIOS 35. Given current circumstances and uncertainties, the scope of reengagement would dependon Government's progress towards the resolution of the country's crisis. This would enable donors to expand or reduce their assistance accordingly. The planning scenarios are thusbasedonthepoliticalandinstitutionalsituation, andonpotential progress achieved inthe normalizationo f Togo's relations with its major donors, notably in the context o f the Article 96 Consultations with the EU. 0 Transition Scenario: Government makes progress towards the resolution o f the crisis, as reflected inthe outcomes o f Consultations with the EU. This would pave the way for normalization o f Togo's relations with its major donors. The range and - 11- timing of our assistanceactivities, and eventually the resumption of external financial assistance, will depend on the scope and speed of improvement in the sociopolitical situation. 0 Worst Case Scenario: Substantial worsening o f the sociopolitical situation, due to failure o f the Article 96 Consultations or unsuccessful in-country dialogue prolonging the crisis and increasingthe risks of social instability and conflicts. Inthis context, the prospect for resumptionof donors' financial aid will remain weak. 36. The implications of each scenario in the reengagement process are discussed in SectionD.below. C. STRENGTHENING DONOR COORDINATION 37. Under the LICUS initiative, donors will aim at enhancing the effectiveness of their assistance programs through closer cooperation and coordination. By the same token, they will help strengthen Government's capacities in this area. The proposed strategy offers further opportunities to achieve these goals. It would enable donors to plan their reengagement processes within an integrated framework, taking account o f the countries' priorities in the short to medium term. Eventually, upon satisfactory progress towards the normalization o f Togo's relations with its major partners, a joint multi-donor assessment mission would be organized, followed by an informal donor meeting to discuss Togo's financing needs (e.g., "Meeting o f Friends o f Togo"). Later, a donors' forum on resource mobilization would also beplannedwith Government (e.g., RoundTable Meeting). D. STRATEGIC ENTRY POINTS 38. The Bank and UNDP havejointly identifiedthree strategic entry points for action, on the basis o f the country priorities o f overcoming the political crisis, preparing the conditions for economic recovery, and stabilizing social indicators particularly for the poorest people. These entry points provide a common framework for both institutions' engagement, and a platform for strengthening collaboration with other partners inthe short to medium-term. The entry points are: 0 Buildingthe momentumfor changeinthe country 0 Preparingthe conditions for full international reengagement 0 Emergency social services deliveryto the poorest people inunderservedareas Strategic Entry Point # 1 :Building Momentumfor Sociopolitical Change 39. Objective. The EU Consultations have created an important opportunity for change. The re-engagement strategy will build upon this momentum with activities to help improve the sociopolitical situation. In this context, the strategy aims to support Government in implementingits specific commitments to address democratic institutions, respect for human rights, andthe rule o f law, which are the root causes ofTogo's stress to date. Itwill also help - 12 - strengthen civil society engagement and accountability with a view to promote good governance. 40. Partnership Approach. The EU and bilateral donors will lead the political dialogue andrelated activities on democratization andhumanlights inthe context ofthe Consultations. The Bank, UNDP, and others will lendassistance as appropriate, focusing on governance and civil society engagement, on the basis oftheir mandates and relative comparative advantages. 41. Activities. Buildingon the ongoing efforts o f UNDP, EU, and other agencies, donors will help Government review and prepare a modemization plan of the judiciary system, includingtraining and capacity strengthening. This i s intendedto support the implementation of Government's commitment to improve the rule o f law and human rights. UNDP will continue to play a key role in this regard. Together with other partners, it will also provide analytical and advisory support to decentralization. This would follow-on the recommendations o f a national seminar on decentralization sponsored by the UNDP and EU in March 2004, which brought together all stakeholders concerned and resulted in a draft master plan on decentralization. The proposed assistance i s intendedto help the authorities carry out their commitment to implement an effective decentralization program, including local elections, within 12months. 42. Inaddition, the BankandUNDPwill stepup their institutionalsupport to civil society organizations (CSOs). UNDP will finalize the electronic directory of these organizations, and the Bank will complete the on-going civil society assessment tools (CSAT) and civic accountability mechanisms. These tools aim at strengthening and building CSO capacity to demand and monitor accountability in the use of public resources, good governance, and services delivery. These activities will help the civil society become a more effective partner and agent of changes and public advocacy, particularly during crisis periods. Moreover, the Bank will seek WBI's help for training leadership inmanaging reform processes, inorder to strengthen the country leaders' capacity to managethe socioeconomic transition. 43. Underthe Worst Case Scenario, the proposedsupportto decentralization andjudiciary sector reforms, and the above leadership program would be scaled down. The main risks of this component are political and refer to Government's compliance with its commitments underArticle 96 Consultations. Strategic Entry Point # 2 :Preparingthe Ground for Economic Recovery and International Reengagement 44. Objectives. The strategy includes activities to help the authorities address fundamental economic management issues which are necessary to resume external financial assistance, notably from multilateral creditors. The strategy also proposes ESW and T A activities to help strengthen institutionalcapacity andthe knowledge base on Togo. 45. Partnership Approach. The component will be implemented in coordination with donors involved inpoverty reduction and economic management (e.g. IDA, IMF, UNDP, EU, ADB, France). It will also involve other multilateral creditors concerned with the arrears - 13 - clearance process. The Togolese counterparts will include the ministries in charge of economy and finance, social sectors, and private sector development; and the PRSPMDG stakeholders. Activities. The proposed activities would broadly fit into six categories: Strengthening Poverty Diagnosis, Information Svstems, and Statistical Capacities. The proposed ESW aims to strengthen and update poverty diagnosis to inform the PRSPMDG process. Data on poverty and social sectors are outdated, with latest available census and household data being over 10 to 20 years old. The LICUS initiativeoffered a good opportunity to update them. Preparation of a census i s planned, with funding from UNFPA, UNDP, the EU and others. Work is also underway to conduct a household survey. The Bank and UNDP sought financing for a Core Welfare Indicators Questionnaire (CWIQ), a survey instrument that could provide new data in relatively short time span, and for strengthening the poverty monitoring capabilities of the national.statistica1office. Supporting the PRSPMDG Processes. The proposed ESW will support Government in preparing the full PRSP, and finalizing on-going sector development strategies (e.g., education, health). Assistance will also be provided to hold broad-based'regional consultations andto enhance the quality o f the participatory process, within and outside Government. Strengthening Institutional Capacity. UNDP will work closely with the African Capacity Building Foundation (ACBF) and other partners, including the Bank, to help the authorities carry out a national capacity assessment, leading to a national strategy and action plan for capacity building. Initial assessments will focus on specific activities, includingbasic services delivery andeconomic management. Debt Sustainability Analysis and Arrears Clearance Process. The Bank will complete a debt work-out and sustainability analysis, inclose coordination with the IMF and other creditors. This work would analyze the amounts and trends o f debt built up over the past ten years, identify major creditors, assess debt service affordability, and prepare an evaluation o f the possible timing as to when the arrears could be cleared under different aid flow scenarios. This will be a key input to helping the Government prepare a credible plano f arrears clearance. IMF-supported Program and HIPC Initiative. IfTogo i s to receive debt reliefunder the HLPC initiative, the Government would need to establish a track record o f macroeconomic performance through the preparation and six-month implementation of an IMF supportedprogram. As a first step, the I-PRSP would needto be reviewedina JSAN anddiscussedbythe BankandFundBoards. Inthis context, the strategy includes activities to help the authorities identify and carry out the zero-generation reforms that would set inmotionthe above process. - 14 - Fiduciaw Assessments and StvenEtheninq. A key element o f the proposed strategy i s to conduct and help implement core fiduciary analysis to improve effectiveness and transparency in the use o f public resources. On the basis o f the Update o f the CPAR carried out in 2003, the Bank together with ADB and other partners will help Government strengthen its procurement functions and capacity. A combined public expenditure review (PER) and financial accountability assessment (CFAA) will also be carried out. It will focus on accountability, transparency, conformity with rules, and sound budgetary processes, and will specifically address critical governance issues which hampered the delivery o f basic services. Over time, to further promote good governance, the Bank and UNDP will collaborate with others to prepare an Institutional and Govemance Review (IGR). Under the Worst Case Scenario, only the activities listed under (i), (iii), (ii), andthe core fiduciary reports in(vi) would be carried out. Box 2 :RoadMap for ResumingIDA'SLending %e resumption o f I l I A ' s leiiding would broadly follow three phases: step -1 coi~espondingto tile : u ~ ~ e nnon-acciual status; step 2 fbcusing on pie-arrears clearance; and step 3 leading to t iomialization of operations and new lending. 9TEP I: No itiiriiediate resuniption of full financial assistance by the Eiuropean IInion and iiiajor later a1 donors. Togo reii~ainsin iion-accrual status. This con.es]~ondsto present conditions. At this stage, the Bank will continue its cui~entactivities aiining at ~nipi+oving socio-econoniic situation the [Iirouglipolicy dialogue and analytical and advisory services. 0 I r h e I s,tt Next Step. `l'he 1-11reaches agreement on tlie resumption of financial cooperatiori following progress 011 (ioven~nient'scortiniitiiients made clui-iiigthe Article 96 C`onsultations. Step 1 would last untilthe conditioiis for resuniption of I X J financial aid are met. STEP 2: V i e 137 prowdes assurances of financial assistance. Inthis context, Cioveuiinent would seek agreement with the IMF on a (6-montlt) staff-monitored program. (ioveiiinieiil ~.anIdalso seek an-angenients for clearance of arrears tv niultilateral creditors. In response, tlie Rank would provide AAA to help Cioveiiinierit build a track record of policy perforniance. It would also help the ( ~ o ~ e t i m i eprepare a credihle plan o f arrears clearance to be agreed ulxm and supported by the niain n t inteiiiatioiial creditors. In addition, the Bank will accelerate tlie groundwork needed to resuiiie financing, n~cludmpreparing priority developnient policy and sector investment lending. g 'llzggeez to Next Step. Ilxtetnal financing needs and f~indmgplans have been identified. A new IMF 111-ogrami s in place. K e y assuniptions of this phase relate to the pace of an-ears clear ance. Tlns would depend 011 the pace 01' HI1 funds release and on (3ovemment's capacity to iiiobilize adequate resources fi-om other donors in a timely fashion. It IS assumed that, once the ElJ has provided assurance of financing, it would take about SIX months lo work out the an`ears clearance process and complete Step 2. STEP 3: A satisfactoiy ittacroecono~iiicfianiework IS in place. C3oveinnienl has cleared its arrears to I11.4 A t this stage, the Bank would resume new leiidiiig 111suppol? o f PKSPpriorities to be reflected in an llpclated CRN or a new (`AS. KIA assistance levels would depend on (3~eiiinient'spolicy and nistitutio~ialuerfonnance as measured bv the (`PIA. - 15 - Strategic Entry Point # 3 :Emergency Assistance for Social Services Delivery 48. Objective. The proposed LICUS Initiative includes an Emergency Program for Poverty Reduction (EPPR). This programintends to reduce extreme poverty and to improve fair access to basic social services for poor men, women, and children living under severe deprivation in urban and rural areas. This would be achieved through the implementation o f small scale and locally-driven initiatives addressing extreme poverty, urgent needs, and priority services in the fields o f basic education, primary health care, HIV/AIDS, social protection andbasic infrastructure. 49. Partnership Approach. Preparations for the EPPR are underway inclose cooperation with Government authorities andother stakeholders. The World Bank andUNDPhave ledthe initial preparations, and other partners have been invited to join subsequent work. It is envisaged that the EPPR will be financed through donor pooled funding (e.g., a multi-donor trust fund), with adequate fiduciary and safeguards to ensure that the proposed funds are efficiently used for well-targeted poverty reduction interventions. Program preparations and appraisal are scheduled to be completed in FY05, and a first round of resource mobilization will follow the CRN presentation to the Bank Board in December 2004. Fundmg will be sought from the UNDP, the World Bank's LICUS Trust Fund, IFAD,and other donors. 50. The project would fund sub-projects at the village level aimed at strengthening community infrastructure and social service delivery inthe fields o f basic education, primary health care, HIV/AIDS and social protection. The EPPR is primarily intended to strengthen service delivery through channels outside government, bearing in mind the need not to undermine the role o f the state in the longer term, and it would include building capacity o f communities and contractors. The project would also include institutional capacity buildingof government at the local level, when donors agree that progress inthe decentralization process makes this possible. In this context, assistance would be provided to help the authorities finalize and implement key sector policies, regulations, and contracting procedures that are necessary to ensure adequate Government oversight and to guide the collaboration between the State, local communities, and CSOs in basic services deliveries, notably in health and education. The project would aim for quick and visible results by building on project opportunities emerging from already existing village planning activities, donor experience, andprevious programs ingrassroots and community-driven development (e.g., CDD projects funded by UNDP, IDA and EU respectively; French-sponsored community-driven school initiatives; and FAO-supported pilot projects on food security and income-generating activities). 51. Under a Low Case Scenario, the EPPR would still proceed on the basis o f existing potential funding sources. An eventual deterioration o f country conditions would require adequate ring-fencing mechanisms to ensure that project resources continue to be channeled to beneficiaries. Given the limited amount o f money that could be mobilized from the above sources, the program would face considerable uncertainty and funding constraints in the absence o f external financial support by major donors. These and other project-specific risks - 1 6 - will be assessed and adequate mitigating measures recommended during the EPPR preparation. Table 2 :Summarv of CRNActivities for Top0 (FYO5-FYO6) Strategic Entry Core Tasks I Activities Planned under a Transition Scenario Points )wingactivities) Substantiveprogress, leading to good Drospectsfor full resumption of external assistance. 1.Building - Institutional and momentum for governance review sociopolitical changes - Leadership programs 2. Preparing the - Strengthening poverty -- AAA ondecentralization Debt sustainability - Supportingarrears ground for diagnosis and statistical assessment clearanceprocess economic capacities recovery and - AAA for buildingtrack - Policy advice on international - SupportingPRSPiMDG recordof economic SIVP reengagement process , performance - PreparingnewIDA - Fiduciary strengthening - PreparingHIPC decision lending(to be (CPAR, PER, CFAA) point approved after arrears clearance) 3. Emergency - EPPRprogram assistance for - Capacity strengthening o f - ScalingupEPPR social services - Projectson HIV,TB, local services providers delivery malaria (GFHTM) E. RESOURCES, RESULTS, AND RISKS (i) PartnershipsandFinancing 52. There is a consensus among key development partners that engagement shouldbe very selective and knowledge-intensive in the transitional period. Finance would be limited to grants, until donors resume budgetary support, Government mobilizes adequate financing assurances to clear its arrears, and multilateral creditors are able to resume lending again. (Table 3) 53. The Bank will seek to mobilize funding from the Bank-wide LICUS Trust Fund to support key activities, including the proposed EPPR and related technical assistance. Initial funding requirements are estimated at about $2.5 million for FY05-06. The Bank will also seek seed money to cany out selected capacity building and community outreach activities (e.g., PRSP and CSAT trust fimds). When the suspension i s ultimately lifted, the Bank would resume new lending as would be described in a new Country Assistance Strategy (CAS). -17- Subject to the findings of this new CAS, the lending program could include an emergency economic recovery credit, an HIV/AIDS project, and selected sector operations in support of PRSPpriorities . 54. Similarly, UNDP has endorsedthe proposed CRN as its interim assistanceframework to Togo, and plans to deploy its aid instruments accordingly. These would include relevant policy advice, technical assistance, economic and sector work, and poverty reduction interventions, notably the proposed EPPR. These activities are consistent with the priorities spelled out inthe joint UnitedNations Development Assistance Framework (UNDAF)for the period 2002-2006, and its mid-termreview report dated May 2004. 55. The International Fundfor Agriculture Development (IFAD),together with FAO, has committed over $1.2 million to support specific investments under the EPPR aiming at improving nutrition, fightingHIV/AIDS, and alleviating extreme poverty. Additional support will alsobe sought from other donors, as appropriate. Table3 :SourcesandUse ofResources (US$ million) EntryPoint#l EntryPoint#2 EntryPoint#3 Total I WorldBank II 0.5 II 1.o II 2.5 II 4.0 II UNDP 0.5 0.5 3.O 4.0 IFAD ... ... 1.2 1.2 IIBeneficiaries 0.1 0.2 0.3 0.6 Others II 0.2 II ... II ... II 0.2 II I TOTAL I 1.3 I 1.7 I 7.0 I 10.0 I (ii) MonitoringandEvaluation 56. Managingfor Results. The re-engagement strategy proposes to assess performance against a set o f indicators aimed at measuringprogress towards intendedoutcomes andresults on the ground. Such indicators should be simple, measurable, and easy to monitor, taking account o f the relative weaknesses of existing statistical and information systems. A framework for the proposed results-basedcountry reengagementi s enclosedinAnnex 1. 57. Implementation o f the strategy will be monitored on an on-going basis, through regular consultations with Government authorities, key Togolese stakeholders, and donors. A participatory mid-termreview will be carried after one year to re-visit the strategy design and make any mid-course corrections and modifications. This flexible approach would allow for revisions to the proposed activities if the sociopolitical situation improve and Government make tangibleprogress towards normalization of relations with its major donors. 58. It is expected that at the end o f the CRN period, donors would have helped Government, inter alia: (a) establish a track record o f policy performance, eventually under a Fund-supported program; (b) build-up sector knowledge to underpin the PRSP process and - 18- future lending; (c) prepare an enabling fiduciary framework for fast-disbursing loans; and (d) improve basic services delivery to the poorest and most vulnerable people through community-driven development approac es. These activities would be carried out under the proposed CRN. However, the subsequent steps, notably donors' funding for arrears clearance purpose and new lending in support o f PRSP priorities, would be reflected in an Updated CRN or anew CAS. 59. Key indicators of donor engagementinthe LICUS framework will include, inter alia: (i)sociopolitical indicators, reporting progress on the resolution of the crisis, with a focus on governance, rule of law, andprogress on decentralization andjudiciary reforms; (ii) economic indicators, reporting progress on Government's growth and poverty reduction strategy under the PRSP process; arrears clearance plan; and financing assurances mobilization to support a credible macroeconomic framework; and (iii) social indicators, evaluating improvements in access and quality ofbasic services from the EPPR, as measuredthrough baseline studies. Box 3 :Zero-Generation Reforms A highly focused reform agenda would be identified with ~ o v ~ m e key~ stakeholders, and n , min doncxs, including the XMF, to track Govermment's economic perfoiiiiance, These reforms slrould be selective, effective to establish a track record of policy performance, feasible in s, and likely tu result inmpid a d substantial payoffs. For instance, on the basis of the weakest areas of the 2002 CPIA, the following agenda could be cimsidered. It also comprises the most pressing refonns of the Gowmnient's policy agenda for sustained growth andpovertyreduction (&ail X-PKSP): mhility: managing fiscal 1status due to debt serv gthening expenditures management lo enhance effectiveness andtransparency inthe use ofpublic resources; s and impacts, and strengthening ngand the PKSPprocess; and orting economic growth would be gram would be preparedclosely with the IMFand other keypartners. (iii) RisksandMitigation 60. The major risks involved in the TogoLICUS initiative arepolitical. Political factors present the most important opportunities and threats to a full utilization of the LlCUS potential. Indeed, satisfactory compliance of Government's commitments under the Article 96 Consultations are key to address the root causes o f the crisis and, therefore, are essential conditions for resumption o f foreign aid. Modest compliance i s likely to delay the normalization of donors' relations, and failure to act decisively would prolong the political impasse and could trigger a renewed wave o f turmoil and civil unrest. These risks would be monitoredinthe context o f the overall country situation and relations with the EUand major donors. The proposed support aims precisely to help efforts inreducing the odds o f renewed -19- crisis, by supporting implementation o f selected commitments (e.g., efforts towards decentralization and judiciary reforms), and by preparing the ground for socioeconomic recovery andresumption o f external assistance. 61. Difficulties on the reform path. Government may fail to establish a track record o f policy performance in a timely fashion due to uneven implementation of its economic reforms. This could delay the reengagement process, notably the establishment of the Fund- supported program. Moreover, difficulties inresources mobilization, notably from bilateral donors, could delay the arrears clearance process. To mitigate these risks, the Bank would monitor the Government's program through continued policy dialogue, together with the IMF and other partners. TheBank andother partnerswill also assist inpreparinga credible planof arrears clearance to be discussed and agreed upon with the main multilateral creditors. Finally, the reform program will be consistent with the LICUS principles and take into account the socio-political environment andthe technical capacity o f Government (Box 3). -20 - Annex 1:ResultsFrameworkandMonitoring Strategic Entry Point # 1: Building Momentumfor Sociopolitical Changes Outcome:Improvedgovernance andrespect for rule of law, through more effective decentralization policies and reviewo fthe legal andjudiciary system. Progress inresolving the sociopolitical crisis and implementingGovernment's commitments underthe Article 96 Consultations. ~ (a) Donors: EU, UNDP, World Bank, France, others; (b) Government authorities, notably ministries incharge ofjustice, decentralization, humanrights, and law enforcement; and (c) parliament, civil society organizations (CSO) involvedinpolicy advocacy and the promotionof good governance, and media responsible for outward communicationand feedback to policy makers. outputs Indicators Inputs - Report Budget Estimate onthe # (persoddays) o f dialogue judiciary system, with modernizationo f magistrates and law -- Policy Consultancies a view to improve judiciary system enforcement officers - Technical assistance respect for human trained innew system - Training rightsandthe rule o f - Establishment of codes -...................... Publications law o f conduct for law Client and user enforcement officers, satisfaction surveys of @ $1.3 million withrespectto human judiciary services rightsandrule oflaw Newdecentralization, - Draft decentralization Capacity assessment of law i s enacted, law and implementing local administrations and transferring effective decrees training o frelevant authority and institutions resources to local - IGlUDecentralization governments. study # (person/days)of training programs - Training programs for local governments' capacity building Enhanced capacity o f e-database # CSO capacity CSOs and medias in -- UpdatedCSO Baseline data on service strengthened through policy advocacy and providers inruralareas CSAT andsupport to social accountability, and their capacity. umbrella organizations, leading to citizen as measuredby baseline empowerment, better - Researchreports :"Top- evaluations. services delivery, and down assessment" o f improved governance CSOs and "Bottom-up" Client and user beneficiary assessment satisfaction surveys of CSO services Enhanced leadership capacity to manage Training program on crisis # (persoddays) o f leaders sociopolitical recovery and conflict andpolicy-makers transitions and crisis management trained. -21 - I Strategic Entry Point # 2 : Preparing the Groundfor Economic Recovery and InternationalReengagement Outcome: Broad-based consensuson a growth andpoverty reduction strategy, eventually supported by a credible policy framework, with financial assistancefrom malor donors. Impacts: Improvedeconomic managementandtrack record ofpolicyperformance. Other impacts would eventually include establishment of an IMF-supportedprogram, mobilization of adequate financing assurances, plan for arrears clearance, and access to HIPC. Partners: (i) Donors: WB, IMF,ADB, EU, UNDP, UNspecialized agencies, France, etc; (ii) Government 1authorities, notably Ministryof Economy and Finance, and sector ministriesconcerned with poverty reductionprograms; and (iii) PRSP/MDG stakeholders. outputs Indicators Inputs BudgetEstimate - Householdsurveys Updatedpoverty data - Policy dialogue information system, - Developmento f - Consultancies and statistical monitoring system for National capacity to carry - TA capacities have been social indicators out adequatepoverty strengthened -- Training I Capacity enhancement in diagnosis and analysis ESW poverty social impact analysis MISinstalledat Statistics @ $1.7 million - Capacity buildingof Office Statistics Office of which Government has - InterimPRSP Joint Staff Assessment @ $0.5 million for adopted its interim - MDGprogress report (JAS) of I-PRSP poverty analysis and PRSP, and has - Action plan for broad- capacity building; prepared a full PRSP basedparticipation and MDGprogress @ $0.7 to support the report PRSPprocess; und - Govemment has - Debt sustainability Assessment of @ $0.5 millionfor other implementedan lMF- assessment (DSA) Government's track AAA and corefiduciary supported program - Plan for arrears record ofpolicy assessments. (SMP) - SMP Program clearance performance Qualification for HIPC Decision Point Fiduciary systems are - Public expenditure CPAR short-term action inplaceto enhance review PEW CFAA plan implemented transparency and - Action plan, andgradual effectiveness inuse o f andpragmatic Mechanisms o f public resources recommendations, for accountability and short and medium-term conformity withrules are implementation inplacefor delivery of basic social services A nationalstrategy - Strategy and action plan Capacity assessment of and action planfor for capacity building, 314 keyministries, (e.g., capacity buildinghave startingwith a few key health, education, PSD, beenprepared institutions. finance) - 22 - Strategic EntryPoint # 3 : Emergency Assistance for Social Services Delivery Outcome:Improvedaccess and quality ofbasic social services for poor men, women, and children living under severe deprivation inurbanandrural areas; and capacity strengthening oflocal service providers. Impacts:Addressing extreme poverty, urgentneeds, andpriority services inthe fields ofbasic education, primary healthcare, HIVIAIDS, social protection andbasic infrastructure. This will be achieved through the implementation of small scale and locally-driven initiatives. Partners: (i) WB, UNDP, EU, IFAD, FAO,UNAIDS, WHO, UNICEF, SCAC, GTZ, etc.; (ii) Donors: Government authorities, notably ministries concemed withpoverty reductionprograms; and (iii) local communities and services providers. To enhance partnership andleverage resources, the proposed activities would be financed through donor pooled fundingmechanisms (e.g., multi-donor trust fund). Results outputs Indicators Inputs Improvement of living - Community sub- Budget Estimate Selectedbenchmarks for standards ofpoor projects completed :ducation, health, HIV/AIDS, Emergency men, women and nutrition, and sanitation program for children benefiting outcomes. poverty reduction from the program, (EPPR) through demand- # sub-projects benefiting from ___________-______-__ driven deliveryof EPPR financing @ $7.0 million services inthe fields for initialproject ofbasic education, # improved access to quality costs. primary healthcare, basic social services inpoor HIV/AIDS, social areas; protection and basic infrastructure # b k i n gwater facilities installedthroughout the program Capacity of services - Capacity o f Capacity buildingof: providers, including communities, CSOs local communities, and local government a) Communities CSOs, and local intargeted areas *financial records document governments, have increased, as measured sound resourcesmanagement; been strengthened through baseline *community services studies infrastructureoperating and well maintained; *at least 50% o f the community level people trained are women. b) CSOs & local government # (persoddays) o f stafftrained as trainers andor TA providers *% ofbeneficiary communities satisfied with the quality of training and TA received. -23 - I- Annex 3 :Summaryof Donors' Activities inTogo 1. Below i s a summary of activities of the main donors in Togo, inter .alia: EU, UNDP, World Bank, IMF, France, Germany, the UnitedStates, and UNspecialized agencies. 2. European Union.The EUi s Togo's most important donor. It suspendedbudgetary assistance in 1993 due to major human rights and democratization issues. However, the EUhas continued to provide project and community-based assistance to help alleviate poverty. Its current portfolio amounts to over 92 million euros. This includes, inter alia, micro-projects for income-generating activities and community-driven development, and other projects inthe education, health, HIV/AIDS, social protection, environment, rural development, and basic infrastructure sectors. These activities were financed out of STABEX compensation funds and remaining resources from the 6" and 7" European DevelopmentFund(EDF). To date however, these resources are fully committed. Togo did not benefit from the 8" EDF which was negotiated while the country was under suspension. Consultations for the 9" EDF would begin if and when the EU normalizes its relations with Togo. The country's allocations under the 9" EDF could reach over 45 million euros. Inaddition, it would benefit from over 25 million euros from the STABEXcompensation funds. 3. UNDP. The UNDP portfolio currently comprises four major operations totaling $6.1 million and addressing: (a) capacity building and the promotion of good governance; (b) poverty reduction interventions; (c) community-driven, and micro and small enterprise development; and (d) social infrastructureprojects aiming to strengthen the capacity o f NGOs and local government agencies. To help alleviate poverty, UNDP supported grassroots communities around grounding actions such as socio-collective infrastructure constructions. These initiatives have permittedto promote dialogue with local communitiesthrough the U N V ' s and to carry out about 50 "Village Action Plans". With regard to economic governance, UNDP helped strengthen the capacities of institutions responsible for economic management, such as the economics, statistics, and national accounts departments at the MinistryofFinance. In2003, UNDPwas designatedas executing agency ofthe three grantsprovided to Togo by the Global Funds against HIV/AIDS, TB, and Malaria (GFHTB) [in the amounts o f $20 million, $5.O million, and $3.O million], respectively. 4. WorldBank Activities. The Bank provided substantial project assistance to Togo during the past decade despite unfavorable policy environment (Annex 4). The last Country Assistance Strategy (CAS) for Togo was presented to the Board in 1995. It was updated twice through CAS Progress Reports in 1997 and 2000, respectively. The CAS'S main objective was to promote sustainable economic growth and poverty reduction, addressing both short-term emergency needs and longer-term development objectives. This strategy was reinforced in2000, through a poverty focus of the existing portfolio, addressing the HIV/AIDS pandemic and supporting the PRSP process. However, implementation of the strategy was severely hampered by several prolonged periods of suspension, due to an accumulation of payment arrears to IDA since mid-1998. Portfolio implementation deteriorated during this period and became unsatisfactory. The last project in the portfolio closed down in March 2003. The last suspension has been in effect since January 2002 and the non-accrual status since May 2002. Arrears to IDA amounted to US$ 53.6 million as o f October 15, 2004,. During the current non-accrual period, the Bank has continued to provide analytical and advisory assistance (AAA) on key aspects o f socio-economic development. A list of AAA, fiduciary assessments, and capacity building initiatives completed, underway or planned i s enclosed (Annex 5). Together with other partners, the Bank also supported the Government's efforts to prepare its I-PRSP and development strategies in key sectors, such as health, education, agriculture and rural development, HIV/AIDS. A roadmap for resuming IDA lendingis summarized inBox 3 above. 25 5. Throughout this period, the Government authorities have continued to participate in all regional projects, as appropriate, in order to enable the country to fully benefit from these operations when the Government clears its arrears to IDA. These included, inter alia, West African Capital Market Development Project, West Africa Gas and Power Pool Project, Abidjan-Lagos Corridor Project to FightHIV/AIDS. Disbursements to Togo were suspended from Bank-funded projects, due to the non-accrual status. However, the Bank granted an exception to t h s rule for the HIV/AIDS Corridor Projectwhich is now implementedinTogo as well as other countries inthe corridor. 6. Relations with the IMF. Togo has no arrears towards the IMF. The last enhanced Staff- Monitored Program (SMP) covered the period April-December 2001. In the context of the 2003 Article IV consultations, the IMF carried out a mission to Togo in November 2003. It laid out a priority reformagenda to stabilize the economy, stimulate economic growth, and reduce poverty. The Government's 2004 approved Budget adhered to the principles of this program. The "Staff Report for the 2003 Article IV Consultation" was discussed at the IMFBoard on April 28, 2004, concluding the 2003 Article IV Consultation. 7. France resumed normal cooperation with Togo since 1999. The current portfolio of the French Cooperation Service (Service de coophation et d'action culturelle - SCAC) comprises six projects totaling 6.8 million euros, active ineducation, health, community-dnven activities, and micro and small enterprise development. Inaddition, the FrenchDevelopment Agency (Agencefranqaise de ddveloppement- AFD) recently approved three projects aiming at basic services delivery inthe social sectors, that were consistent with the proposed "Strategic Entry Point # 2" o f the re-engagement strategy. These projects would be implemented within the LICUS framework, in close cooperation with the proposed EPPR. They included: (a) a 6.3 million euros grant approved inJuly 2003 to co- finance an education project inthe northernregion of Kara. This operation would also help integrate the system of community-driven schools (Ecole d'Initiative Locale - EDIL) into the national education system, by promoting a contracting process between the State and local communities; (b) a 5.5 million euros grant approved in August 2002 to fund basic health services inthe middle region o f Plateaux; and (c) a 1.4 million euros project to support rural hydraulic development and related capacity building of local communities. In addition, AFD has remained active in other infrastructure projects, including road, electricity, water and sanitation. 8. Germany has maintained humanitarian assistance but has discontinued budgetary support to Togo over the last decade. Inthis context, the German development agency (GTZ) is implementing a 2.4 million euros project to support health services and the fight against HIV/AIDS in Lomk and the Central Region (Projet d'Appui au dbveloppement du systBme de s a d -PADESS). The Geman Embassy runs a small grant program (about 90,000 euros per year) which i s channeled through NGOs for micro projects, income-generating activities, and community-driven development. 9. USA assistanceto Togo amounted to about $10 million inFY03. Itfocused on the promotion of democracy and good governance. It also supported selected programs in the areas of HIV/AIDS, childprotection, and micro-projects for income-generation and community-driven development. These resources were channeled through civil society organizations (e.g., Peace Corps, Population Services International-PSITogo, NGOs). 10. African Development Bank. ADB's disbursements to Togo have been suspended since August 2001, due to Govemment's default ondebt service payment. Arrears to the Bank amounted to about US$ 7.3 million as o f June 30, 2004. Despite this situation, the Bank has remained involved through policy dialogue and selected economic and sector work. Workmg closely with IDA and UNDP, the ADB i s preparing a re-engagement strategy with similar analysis and strategic entry points as the proposed CRN. 26 11. Other United Nations Agencies (WHO, UNICEF, FAO, UNFPA, UNAIDS, etc.) remain active intheir areas of specialty. Their priorities are outlined inthe W A F (2002-2006) and include, inter alia, good govemance, human rights, human development, and poverty reduction. Together with UNDP, these agencies launched ajoint HIV/AIDS project inthe amount of $3.1 million inSeptember 2002. 27 Annex 4 :IDA Commitments,Disbursements,andNetTransfers (1984-2003) (inmillionsofUS$as ofNovember 14,2003) Gross Gross Net Net Fiscal Year Commitments Disbursements Disbursements* Transfers** 1984stock 215.8 112.7 111.8 107.7 1985 46.4 25.0 24.6 23.4 1986 16.9 34.4 33.9 32.2 1987 27.6 49.0 48.3 46.5 1988 111.6 28.9 27.9 25.1 1989 26.1 38.5 37.5 35.3 1990 0.2 45.5 44.1 41.3 1991 93.4 53.8 52.2 49.6 1992 2.8 28.6 27.2 23.7 1993 _ _ 20.2 18.6 15.1 1994 26.2 9.1 7.2 4.2 1995 36.6 28.1 25.O 20.9 1996 50.0 58.6 55.1 51.3 1997 __ 19.3 15.6 11.6 1998 106.2 39.2 33.7 29.3 1999 5.0 30.2 23.5 19.0 2000 -- 14.1 7.1 2.7 2001 _ _ 9.5 4.7 1.8 2002 -- 16.0 9.0 5.7 2003 _ _ -0.05 -0.05 -0.05 EndingStock 764.7 660.6 607.1 546.3 Source: Worid Bank *Net Disbursementsare GrossDisbursementsminusPrincipalRepayments **NetTransfersareNetDisbursementsminusInterestAnd Fees 28 Annex 5 :World Bank's Economic and Sector Work Proposals on Togo Product Business Completion Objective Process Year DevelopmentPolicyreview ESW FY03 KG, PD, PS I Agriculture &RuralDevelopmentStrategyNote I ESW I FY03 I KG, PS HealthSector StrategyNote ESW FY04 KG, PS ESW FY04 KG, PS I CountryProcurement FPSIStrategy Note Assessment Review I ESW 1 FY04 I KG,PD,PS I OED ReviewofTogo Program ESW FY04 KG, PD, PS I nprocess CountryRe-engagementNote Strategy FY05 KG, PD, PS EmergencyProgramfor PovertyReduction Grant FY05 FL,CB EducationSector Strategy Note ESW FY05 KG, PD, PS Analysis 1 ESW I FY05 1 KG,PD,PS I Civil Society Assessment Tool TA FY05 CB, PS Support to I-PRSPProcess TA FY05 CB, PD 1 Public ExpenditureReview/CFAA I ESW 1 FY05 I KG,PD,PS I Planned 1 CountryAssistance Strategy I Strategy I FY06 I KG,PD,PS I JSANonPRSP Strategy FY06 Institutionaland GovernanceReview ESW FY06 KG, PS F z o f G r o w t hStudy ESW FY06 KG,PD,PS 1 EconomicRecoveryCredit II LEN II FY06 II FL 1I [ HIV/AIDS MAP Project LEN FY06 FL 29 Annex 6 :Togo's Progress towards the Millennium Development Goals (1990 -2015) -- MDGs 1990 1995 2000 2001 2015 2001 2002 Target Goal 1:Eradicate extreme povertv and hunper Target1:Halve, between 1990and 2015, the proportion o fpeople whose income i s less than a dollar a day 1. Populationbelow $1.O dollar a day (percent) .... .... .... .... .... 2. Poverty gap ratio a day .... .*.. .... .... .... 3. Shareo fincome or consumption heldbypoorest 20 .... .... .... .... .... percent (percent) Target2: Halve, between 1990 and 2015,the proportion o fpeople sufferingfrom hunger 4. Prevalence of childmalnutrition (percent o f 24.6 19.0 25 .... [12.3] children under 5) 5. Populationbelow minimumlevel of dietary energy 28.0 .... 23.0 .... 114.01 consumption (percent) Goal 2: Achieve universal primary education Target3: Ensure, by 2015, children will be able to complete a full course ofprimaryschooling 6. Net primary enrollment ratio (% of age group) 74.7 85.0 92.3 .... [loo1 7. Percentageo f cohort reachmg grade 5 38.7 28.3 59.1 .... .... 8. Youth literacy rate (percent ages 15-24) 63.3 69.6 74.0 .... .... Goal 3: Promote gender equality and empower women Target4: Eliminate gender disparity inprimary and secondary education, preferablyby 2005, and inall levels of education by 2015 9. Ratio of girls to boys inprimary education (%) - insecondary 65.O 69.0 80.0 82.0 education -2"* degree 41.O 43.O 50.0 52.0 -- inhighereducation secondary education -3d degree 20.0 21.0 27.0 27.0 .... in 11.0 17.0 21.0 20.0 10. Ratio o fyoung literate females to males (percent 60.1 66.9 76.0 .... .... ages 15-24) 11. Share o fwomen employedinthe on-agricultural .... .... .... .... .... sector (percent) 12. Proportionof seats heldby women inthe national 4 1 6 6 parliament 30 -. MDGs(contd.) 1990 1995 2000 2001 2015 2001 2002 Target Goal4: ReduceChildmortalitv Target5: Reducebytwo-thirds, between 1990and 2015, the under-fivemortalityrate 13. Under-5 mortality rate (per 1,000) 152 146 146* 140 14. Infant mortality rate (per 1,000 live births) 88 83 80* 78 POI.... 15. Immunization against measles (percent of children 64.6 53 58 .... .... under 12months) Goal5: ImDrovematernalhealth Target 6: Reduceby three-fourths, between 1990 and 2015, the maternal mortality ratio 16. Maternalmortality ratio (per 100,000 livebirths) .... 980 478* .... .... 17. Proportionofbirthsattendedby skilledhealth 31.3 .... 49* .... .... personnel -- Goal6: Combat HIV/AIDS, malaria,and other communicable diseases Target 7: Haltby2015, andbeginto reverse, the spread of HIV/AIDS 18. HIV prevalence among females )(percent ages 15- I.o .... 6.0 .... .... 24) 19. Contraceptive prevalence rate (percent of women 34.0 .... .... .... .... ages 15-49) 20. Number of children orphaned by HIV/AIDS .... .... 61,000 .... .... Target8: Haltby 2015, andbeginto reverse, the incidence of malaria and other major diseases 21. Prevalence of death associatedwith malaria .... .... 7.2 ... .. 22. Share ofpopulationinmalariarisk areas using .... .... .... ... ... effective prevention and treatment 23. Incidence of tuberculosis (per 100,000 people) .... .... 32.2 ... ... 24. Tuberculosis cases detectedunder DOTS (percent) .... 20.0 27.5 ... ... * Datafor 1998 31 II - - 2001 2015 ~ MDGs(contd.) 1990 1995 2000 2001 2002 Target Goal 7: Ensure environmental sustainabilitv I Target9: Integrate the principles of sustainable development into policies and programs. Reverse the loss o f environmentalresources. 25. Forest are (percent of total land area) 6.2 4.5 2.8 .... .... 26. Nationally protectedareas (percent oftotal land area) .... 7.9 7.9 7.9 .... 27. GDP per unit of energy use (CFAF/ kcal) 0.15 0.21 0.23 .... .... 28. C02 emissions (metric tons per capita) 0.40 0.60 0.90 .... .... 29. Proportion of populationusingsolid fuels .... .... .... .... .... Target10: Halveby 2015 the proportion o fpeople without access to safe hnkingwater 30. Access to improved water source (percent of 51.0 55.0 48.0 .... [75.5] population) Target11:Achieve by 2020 significant improvementfor at least 100 slum dwellers 31. Access to improved sanitation (percent of population) 37.0 41.O 40.0 .... .... 32. Access to secure tenure (percent ofpopulation) .... .... .... .... .... Goal 8: Develop a global partnershipfor development Target16: Develop and implement strategiesfor productive work for youth 45. Unemployeddate of population ages (15-24 (total) .... .... .... .... .... Target17: Provide access to affordable essentialdrugs 46. Proportion ofpopulation with access to affordable .... .... .... .... ... essential drugs Target 18: Make available new technologes, especially informationand communication 47. Fixed-line and mobile telephones (per 1,000 people) .... 6.5 30.7 .... ... 48. Personal computers (per 1,000 people) .... 3.t 21.5 .... ... ISource: Premier Rapport sur le Suivi des Object$ du Mil iairepour le i veloppement, Ministkre de l'Economie, des Finances et des Privatisations. PNUD. Targets 12-15 and Indicators 33-44 were excluded becausethey cannot be measured on a country- specific basis. They relate to official development assistance(ODA), market access, and the HPC Initiative. 32 Annex 7 : Togo at a Glance 8/26/04 Sub POVERTYand SWlAL Saharan LOW- Two Africa lnwme Developmentdiamond. 2003 Populatiori,mid-year (meons) 4 9 703 2,310 Lifeexpectancy GNI per capita (Atiasmethod US$) 310 490 450 i GNI (Atlasmethod, US$ht//im) 15 347 Iu3e Averageannual growth, 199f-03 Population (%J 2 9 2 3 l 9 Iaborforce (%I 3 1 24 2 3 GNI Gross per 2 . d pnmary Mostrecent estimate[latest ye%ravailable, 199743) +-- capita enrollment Poverly 1%of pcpufaHonbebw netlonaipow@/in@) LJrbanpopulation i% MP Walpopulebonj 34 36 30 Lifeexpectancya1btFtii lyearsi 50 46 58 1 Infanfmonakly rpei ?,ow)bv@bRtbs] 87 103 82 ChildnialnutiitiQn (% nfchifdm tinder 5j 25 44 Accessto improvedwater source cess to an iinpfovedwater aouw (% of population] 54 58 75 eracy (56 ofpnpulatmage 154) 39 35 39 Gross pilmaryenrollment {% of srhod agepopulabon) 124 87 92 Male 136 94 99 ___a Togo Low-incomegroup Female 112 80 85 KEY ECONOMICRATIOSand LONO-TERMWENDS 1983 1993 2002 2003 Economlcratlos' GUP (US$ bi/ims) 0 73 1 2 1 5 1 7 Gross dmestic tnvestmeatic;nP 8 1 185 189 Exportsof goadsend servrcesiODP 45 5 24 4 338 33 8 Trade Gross dmesbc saviitgeiGDP 193 04 0 6 5 3 Grossnationalsa\nn$stGWP 182 1 5 4 3 7 3 Curenlaccount baiamefGDP -324 "67 -14 3 -117 Interestpeyments/GDP 3 5 0 6 0 0 1 2 Total debffGDP 1197 1049 1068 Total debt sennce/axpolts 183 7 8 2 2 PresentVdlue of debDGRP Presentvalueof debffexpofis Indebtedness 1983%3 f99393 2002 2003 200347 (averageannualgmwfb) GUP 1 2 4 3 4 1 2 7 2 9 GDP pei capita -1 7 13 I 9 0 6 --_x_ Togo Low-incomegroup Eqortsofgoucls andseiuces 4 9 3 3 3 6 6 6 4 9 STRUCTUREof the ECONOMY 1983 1993 2002 2003 (% of GDP) Growthof lnvesfmentand GDP (9 Agriculture 34.5 44.1 38.1 40.8 30 T Industry 21.4 20.7 18.5 22.2 Manufactunng 6.8 9.1 9.1 9.3 Services 44.1 35.2 36.3 37.1 Pnvateconswnptioo 63.4 83.5 91.0 84.8 General governmentconsumption 17.2 16.1 8.4 9.8 Importsof goods and SeNices 46.7 32.1 51.7 47.4 1983-93 199393 2o02 1 (average annualgrowth) Growthof exports and Imports ("h) I Agnculture 4.6 3.1 7 0 Industry 1.3 4.3 Manufactunng 3.7 7.1 106 SeMces -1.5 3.3 -13 -83 Pnmte consumption 3.1 5.1 6 9 -1 7 -5 Generalgovernment consumption -0.3 1.7 -142 171 i-10 Gross domesbc inwtment -4.4 10.2 7.7 5.0 1 Exports .-oIImports Importsof goods andsemces -0.7 - a " _ 5.9 5.0 2 9 Note 2003 data are preliminaryestimate 'Thediamondsshowfourkeyindicatorsinthecountry(inbold)comparedwithitsincome-groupaverage Ifdataaremissing.thediamondwill be incomplete 33 Togo PRICES and GOVERNMENT FINANCE 1983 1993 2002 2003 Domesticprices (% change) Consumer prices 9.4 -0.1 3.1 4.9 ImplicitGDPdeflator 14.3 -8.2 1.5 3.2 Governmentfinance (% of GDP, includescurrentgrants) Currentrevenue 27.5 10.7 12.6 15.8 Currentbudgetbalance 1.5 -13.6 0.9 2.6 1 Overallsumlusldeficit I -6.5 -15.8 -0.5 1.4 --I_ GDP deflator CPI TRADE 1983 1993 2002 2003 /US$ millions) Exportand importlevels (US$ mill.) Total exports(fob) 242 215 415 568 1.000 T Phosphates 74 53 43 68 Cotton 17 46 68 77 Manufactures 59 75 112 Ia4 Total imports(cif) 340 291 724 914 Food 109 82 276 339 Fuelandenergy 27 26 129 151 I Capitalgoods 45 58 8a 103 Exportpriceindex (1995=?00) 42 71 92 07 98 89 W 01 02 Importprice index (1995=100) 48 97 121 DExports Bllmpwts Terms of trade /1995=100) a7 74 76 BALANCEof PAYMENTS 1983 1993 2002 2003 /US$ millions) Currentaccountbalanceto GDP (%) 1 Exportsof goodsand services 311 301 500 655 0 Importsof goods and services 406 396 766 954 2 Resourcebalance -96 -95 -266 -299 4 4 Net income -43 -28 -20 -9 8 Net currenttransfers 45 41 75 97 -10 -12 Currentaccountbalance -95 -82 -211 -210 Financingitems(net) -22 232 230 Changes in net reserves N/A 104 -20 -20 1-201 I Memo: Reservesincludinggold /US$ millions) 178 156 205 Conversionrate (DEC, locaVUS$) 381.1 283.2 694.8 593.7 EXTERNAL DEBTand RESOURCEFLOWS I 1983 1993 2002 2003 (US$ miilions) Compositlonof 2002 debt(US$ mill.) Total debtoutstandingand disbursed 917 1,294 1,581 IBRD 3 0 0 IDA 101 469 632 G:192 Total debt service 59 27 13 IBRD 1 0 0 IDA 1 6 0 B 632 Compositionof net resourceRows Official grants E 514 Officialcreditors 54 14 12 Privatecreditors -4 0 0 Foreigndirect investment 1 -12 75 Portfolioequity 0 0 0 World Bank program Commitments 80 0 0 E Bilateral - Disbursements 40 9 7 Principalrepayments 0 2 0 Netflows 40 7 7 Interestpayments 1 4 0 Nettransfers 39 3 7 DeveloDment Economics 8/26/04 34 Annex 8 :OEDReview of the Togo Program LessonsfromPast Experienceand - Recommendations 1. The World Bank Country Department (AFC13) asked the Operations Evaluation Department (OED) to conduct a review of the Togo program in order to draw lessons for the Bank'spossible re- engagementinTogo. Below i s an abstract of the main Findingsand Recommendations. Findings 2. The Bank's program in the past fared poorly. Only 34 percent of the value of projects that have closed and been evaluated since 1991 had a satisfactory outcome, with sustainability rated likely inonly 3 percent. Thiscomparesnegativelywith Bank-wideoutcomeratings (82 percent satisfactory) or results for the Afi-ica Region (73 percent satisfactory). Evenmore striking, the Bank's performance wasjudged to be unsatisfactory inover halfof the projects by value. 3. Issues o f poor governance, weak performance o f the implementing agencies, and lack o f counterpart funds have emerged in nearly all of the projects in the portfolio. These project-generic issues are major factors and might have led-even without the lack of disbursements due to the Non- accrual situation-to the same negative outcome and the lack of sustainability. 4. One difficulty in Togo i s the absence of able regronal-level and district"unicipa1 level institutions. The NGOs that operate within Togo function outside o f the governmental agencies, which i s necessary for the implementation of their projects, but it has not helped to buildinstitutional capacity in the line ministries6. OED's interviews with country team management and staff revealed substantial frustration regardingthe weak implementation capacity inthe Government. 5. Political unrest and vested interests within the Government fiequently undermined reform progress. However, the positive outcomes of the Road Transport and LomC Urban Development Projects show that it i s possible to successfully safeguard against these risks by involving early on a broadrange o f stakeholders and focusing on "non-controversial" areas of reform. 6. The Bank's performance in Togo has had problems o f its own, which contributed to the overall negative outcome. The projects were frequently too complex, did not take into account the weak implementation capacity in Togo and lacked a realistic assessment o f the political feasibility. Furthermore, project officers seem to have been unaware of the experiences and outcomes of other projects inTogo. 7. One o f the major omissions of the Bank's past work has been the failure to safeguard against Togo's looming debt problem. Despite having recognized a fragile budgetary situation in early 1995, the Bank didnot set sufficiently specific triggers, either inthe 1995 CAS or inthe 1997 and 2000 CAS Updates, to enable Management to manage risks and to stop or review lending in the case o f further deterioration. The Bankshould have been more ready to cancel or drop projects under the prevailing political and economic environment, which made project implementation extremely difficult. Recommendations 8. The Bank i s moving to results-based Country Assistance Strategies with specific outcome indicators, and these could serve as a useful guide for the specification o f the Togo work. OED's 6As long as the institutional capacity in the line ministries remains weak, the Bank will likelyneedto rely onthe NGOs for assistanceinproject implementation. 35 findings inthis review indicate that there needsto be a clear linkage between the CAS,ESW activities, and project implementation pe$ormance. The design o f specific triggers in the planned Re- engagement Note and in the next CAS will be needed-triggers that will allow the Bank to manage risks more closely. One key riskto guardagainst would be arecurrence of the non-accrual status. 9. Ifthe Bankre-engages fully with Togo, there is a substantial risk that the pattern of the past could be repeated. In the absence of decentralized government structures, making it difficult to decentralize responsibilities to municipal and local entities, and the lack of a transparent budgetary process, reforms in the various sectors will likely continue to be difficult to achieve. A substantial strengthening of public expenditure management is therefore ~arranted.~ 10. To safeguard against vested interests and political instability, beneficiaries and key stakeholders should be more actively involved in building a broad and sustainable consensusfor reform. Such participatory efforts should be started as early as possible in the reformprocess and in project design. The Community-Driven Development (CDD) approach should be actively considered for Togo.' 11. A central part of Togo's problems over the last few years has been the absence of a stable political compromise between the main players? A way for the Bank to move forward would be to focus attention on non-contentious issues (for example, not on major privatizations given the record of the past), where various parties could come together with Government and work on concrete objectives. 12. As regards sectoral re-engagement, the regional management might want to consider two or three projects out of the following sectors. Given the deteriorating social indicators in the country, OED recommends involvement in the social sectors, such as meeting primary education goals, providing basic health services, and addressing the population 's highfertility rate. Access to water services is important to achieving the Millennium Development Goals, which would argue for a greater Bank program in this sub-sector than it has had in the past. Furthermore, projects in transportation and power could help consolidate earlier achievements, thus helping to buildownership for more far-reaching reforms in other sectors. Although private sector development (particularly privatization) and reforms in the agricultural sector remain important, they appear to be politically difficult to achieve and shouldtherefore be postponed. 13. Evenifthe EUresumesits financial assistance and Togo starts again to service IDA debt, the financial situation o f Togo needs to be closely monitored. Projects should include measures toprotect against the possibility of renewed periods of Non-accrual and suspended disbursements. Grant funding, alongside loan funds, hasbeenusedinsome of the projectsinthe past. Where possible, grant Various donors as well as the Bank have pointed to the needto strengthen public expenditure management and revenue collection. The CDD approach has been classified into four categories: measures that helpthe enabhng environment (policy and institutional reforms oriented toward increased control o f decisions andresources bycommunities); those that embody community control and management of investment funds; those that embody community control without giving them management o f investment finds; and those that use local governments, usually where there are elected local governments that make decisions onplanning and implementation. See "Community DrivenDevelopment: Lessons from the Sahel," OED Working Paper, 2003 byNalini Kumar, page 5. The unsatisfactoryoutcome ofthe national elections inmid-2003 were contestedbythe Opposition. Local elections which were planned for early 2004 didnot occur. 36 fundingsources shouldbe sought inthe future, using formal co-financing arrangements. This has two benefits: it lowers the average costs of funds, and it could potentially enable greater flexibility in implementation." Further reliance on semi-autonomous institutions operating in the country with a secure financial situation (such as the Road Fund or Social Funds with a localkommunity focus) should also be considered. 14. Although not lending, the Bank i s resuming its role in donor coordination. The Bank i s currently engaged with other donors intwo main areas: firstly inthe AAA work and support to the I- PRSP, as well as in the context of discussions on the proposed Emergency Program for Poverty Reduction (EPPR); and secondly, the Bank "leads" a number o f sectordthemes such as poverty and economic management, while other donors play similar roles elsewhere (e.g., French Development Agency in the field education, WHO in health, UNDP in governance, EU in community-driven development, etc.) However, the Bank needs to sharpen its ESWfocus and completepriority tasks and not be distracted by tasks that may be interesting, but are not urgent." This review suggests that the following five ESW topics/tasks, some o f which are already underway, are of highestpriority: ... A Public Expenditure Management Study and an Institutional and Governance Review; these could be separate or combinedtasks. a targeted study to identify those civil society groups (NGOs, community groups, etc.) with whom the Bank could work closely under a LICUS Framework (underway); an updatedPoverty Assessment, linking inwith the PRSP (underway) a Debt Work-out and Sustainability Analysis -this work would need to be closely coordinated withthe IMF;and an Education Strategy Note (recently completed). 15. Analyses for the first three topics should focus on identifying key problems inthe delivery of public services, the political feasibility of suggestedreforms, and the identification of possible social and community groups through which support could best be channeled, in addition to, or instead of, Government agencies. A national capacity assessment, leading to a national strategy and action plan for capacity building, could form part of the first two priority tasks listed in para. 14. The debt workout study should be done jointly by the country economist and selected project officers so that macroeconomic constraints can be more clearly taken into account in the future when designing counterpart funding requirements on projects. The study should also involve the HIPC Unit. The discussion o f the Education Strategy Note with the Government should help to restore the dialogue which had deteriorated after the unsuccessful outcome of the previous project. OED supports the approach o f the Country Department to make the ESWprogram the center of the Bank's dialogue, especially in this LICUSperiod. 16. The Government did not implement the recommendations made in the Bank's Country Procurement Assessment Report of 1997. Meanwhile, the Bank has completed an Update of the CPAR. The Bank should ask the Government to explain what steps it is taking to improve its procurementfunctions and capacity, given that two CPARs have been done and little action has been lo Under parallel co-financing arrangements the implementation o fbilateral aid might still be able to proceed while World Bankdisbursements are blockeddue to a Non-accrual status. 11 For example, the Gender EqualityStudy (one o fthe Region's proposed studies), w h c h addressesa long-term problem, where a lot o f material already exists on other countries that canbe readily disseminated to officials in Togo. The Regionnotes that they are reviewing their ESW plans with a view to focusing on the most immediate priorities. 37 taken by the Government. This issue goes to the heart of IDA being able to resume any project funding. 17. Dissemination of findings from other countries (e.g. Best Practices) should become a key element of the Bank's strategy in Togo. For the dialogue, the Bank might consider a shift from pressuring what is clearly a reluctant Government to helping build more consensus across interest groups inthe country, inorder to develop a broad-basedcoalition for reform. 18. The bulk o f staffwho used to work on Togo have been deployed on other countries. The Bank continues to keep its field office open in LomC, with about a dozen staff. The Country Team should re-assess the functions for the field ofice under various scenarios -- re-engagement or non-re- engagement, clearance of arrears (and timetable), or non-clearance of arrears in the short to medium term. In the short term, during this LICUS phase, the Resident Mission continues to be involved in mappingout a possible program. Theofice should use this opportunity tofoster a closer dialogue with Togolese civil society. Depending on what theprospects arefor re-engagement, the Africa Region may wish to review the cost-benefits of keeping an ofice open in Lome, and assess whether the program could infact be managed out of the Benin ofice instead. 19. Overall, the Bank needs to achieve greater eficiencies in its work. This will require a careful sequencing o f tasks and propitious use of the administrative budget. This review recommends greater selectivity. Clear benchmarks o f performance will need to be designed that are mutually acceptedby all of the stakeholders. The Country Team should devise ways of achieving closer working synergies between country and sector staff. n e tendency among various teams to work "in silos" needs to be addressed. Furthermore, the Bank should strengthen its review of the Financial Management Systems (FMS) in project work, if project lendingis to resume. If re-engagement occurs, a tight review of project supervisioni s warranted, especially onproject ratings, outcomes, and institutionalimpact. 20. In the past, the stop-and-go involvement that has resulted from the various periods of suspension and from the shifts inBank policies has ledto pronounced disappointments. Mobilization o f support from key stakeholders could leadto greater frustration if their efforts are not translated into concrete results. Close collaboration between the Bank and donors is therefore warranted. Togo's LICUSstatus indeed makes thispossible 38 MAP SECTION