Documeot of The World Bank FOR OFICIAL USE ONLY MICROFICHE COPY Report No. P- 5819-ZIM Type: (PR) Repo NO- P-5819-ZIM RICE, ERIC/ X34412 / J11025/ AF6CO MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO SDR 109.5 MILLION TO THE REPUBLIC OF ZIMBABWE FOR AN EMERGENCY DROUGHT RECOVERY AND MITIGATION PROJECT PART I: THE MAIN REPORT JUNE 4, 1992 This document has a restricted distribution and may be used by recipients only in the perforndance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Ct1RRENCY EUV (Febray 1992) US$ '.OU = Z$ 5.05 US$ 0.20 = Z$ 1.00 ANDREV&MM AM ACRONMS AFC Agriculural Finance Corporation CA Communal Areas CMB Cotton Marketing Board CSFP Child Supplementary Feeding Program CZI Confederation of Zimbabwe Industries DDF District Development Fund DSW Department of Social Welfare ERS Export Retendon Scheme FFW Food-for-Work program GDP Gross Domestic Product GMB Grain Marketing Board GOZ Govermnent of Zimbabwe IRWSSP Integrated Rural Water Supply and Sanitation Program LSCS Large-Scale Commercial (farming) Sector LEDP Letter of Emergency Drought Policy MEWRD Ministry of Energy and Water Resources Development MFEPD Ministry of Finance, Economic Planning and Development MLARR Ministry of Lands, Agriculture and Rural Resetdement MLGRUD Ministry of Local Government, Rural and Urban Development MLMPSW Ministry of Labor, Manpower Planning and Social Welfare MOH Ministry of Health MOTNS Minisry of Transportation and Natural Supplies NAC National Action Committee NGO Non-Governental Organization NOCZIM National OR Company of Zinbabwe NRZ National Railways of Zimbabwe OGIL Open General Import License UNDP United Nations Development Program USAID United States Agency for International Development 1WEIRIC BOUIVALENTS 1 meter (m) = 3.28 feet 1 square meter (sq.m) = 10.76 square feet 1 kilometer (km) = 0.62 miles I square kilometer (sq.kn) = 0.386 square miles GOVERNMET OF ZIMBABWE FISCAL YEAR July 1 - June 30 FOR OUICIAL USE ONLY ERg(iENCY DROUGHT RECOVERY AND MITIGATION PROT Credit Sumw=r Republic of Zimbabwe Amount SDR 109.5 million equivalent Terms: Standard IlDA terms, repayable in 35 years, with a 10-year grace period. Economic Rate of Return: Not applicable. FnainagEian: Government Drought Relief and Recovery Program US$ million Government of Zimbabwe: $730 (through own resources and anticipated additional donor financing) IDA - Proposed Credit: $150 (equivalent) IBRD existg loan portfolio: $37 Bilateral Agencies (pledges): $127 Total $1044 Staff Amraisal ReM There is no separate Staff Appraisal Report. This report is based on the findings of a single Preparation and Appraisal Mission which visited Zimbabwe in March-April 1992, comprising Messrs./Ms. Eric Rice (Country Economist and mission leader), Mukami Mwiraria (Urban Planner), Paatii Ofosu-Amaah (Legal Counsel), Praful Patel (Division Chief), Edward Quicke (Agricultural Economist), David Grey (Consultant, Hydrogeologist), Robin Herbert (Consultant, Hydrogeologist), and Frank Riely (Consultant, Food Security Specilist). Contributions to the Mission were also made by Michael Hicks (Consultant, Transport Specialist), Ngoni Mudege (Water Engineer), Paul Taylor (Water Engineer), and David Sanders (Consultant, Health and Nutrition). Christiaan Poortman (Resident Representative in Zimbabwe), Michael Mils, Stephen Brushett, Caesar Chidawanyika, and ULoyd McKay of the resident mission all provided guidance to the Mission, and organized and participated in numerous meetings. Arthur Fields (AFTOS) and Chander Ohri (AFRVP) provided procurement advice. Documents were reviewed by the ad hoc advisory group, consisting of Piers Cross (INUWS), Alcira Kreimer (ENV), Paatii Ofosu-Amaah (LEGOP), Michel Pommice. (C6DOP), Andrew Spurling (AFrAG), Roger Sullivan (AFTSP), and Harry Walters (AFTSP'). This docurnent 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 Bank authorization. MEMORANDUM AND RECOMMNMATION OF THE PRESIDENT OF IWA TO THE EXECUTIE DIRtECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF ZIMBABWE FOR AN RGENCY DROUGHT RECOVERY AND MITIGATION PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed credit to the Republic of Zimbabwe for SDR 109.5 million, the equivalent of US$150 million, on standard IDA terms with a maturity of 35 years, to help finance an Emergency Drought Recovery and Mitigation Project. 2. Zimbabwe and the zest of Southern Africa are currently suffering from their most severe drought in this century. The drought comes after a decade of below-average rainfall, rendering the population and the economy particularly susceptible to its devastation. Overall agriculural production is expected to be at least 35 percent below normal in 1992. Reliable and independent sources currently esdmate that this year's harvest of maize - the country's most important staple food crop - will be less than a quarter of normal leve's. The sugar harvest has been similarly affected. The cotton harvest (with implications as a source of inputs for both textiles and vegetable oil) is anticipated to be less than half of its normal size. 3. Because of the drought, Zimbabwe will face a food shortage of unprecedented magnitude between the pnmary harvest of April 1992 through the secondary harvest of August 1993. The government estmates the total food shortfall to be 2.7 million tons. However, logical and budgetary constraints may prevent Zimbabwe from Importing its full food requirement Therefore, the UN Food and Agriculture Organization projects total food imports of 2.3 millon tons, which will result in food imports costing approximately US$464 million in 1992 and US$253 million in 1993, inclusive of extrnal transportation. 4. Even in the midst of its relief efforts, Zimbabwe must begin the arduous task of recovery In agriculture and water supply. The most far-reaching implication of the drought is its devastation of she agricultural sector. Most critically, smallholder farmers will not be able to pln for 1993 without assistance. A lack of feedstock and water will have killed many of their draft animals and wiUl have rendered the remainder too weak to plow. A large share of the seed for plandng has been destroyed in the drought. Available quantities of fertilizers, crop chemicals, and spare parts, esseal for both communal and commercW farmers, will be inadequate due to an acute shortage of foreign exchange. In order to prevent future years of massive food deficits, the agricultural sector must quicldy be restored to its former strength. Moreover, agriculture must remain viable for communal farmers to prevent massive inal migration. 5. Access to safe water-already poor in some areas - has declined in both rural and urban areas as a result of the drought. The government has identified approximately 40 percent of the country's 16,000 rural water sources as dry or nonfunctioning, and plans to repair, rehabilitate, or deepen them. In addition, the government plans to finance a localized water drilling program in the most underserved areas, exploiting both privatc and public resources. Many urban water supplies are similarly in a precarious state. At the start of the drought, the countWs reservoirs held only an estimated 20 percent of their aggregate capacity. As a result, the reservoirs that serve many of the cities are now nearly dry. 1 6. The drought also aries with it numex. undesirable secondary effects. Rationing of electicity, caused by limited hydro-electric capa.ity, has reduced the output of manufactring and mining firms. Much of agro-induatry has suspended operations, with implications for urban unemployment. HIoarding, theft, and illegal exportation of food have reportedly stripped many markets of grain and other foodstuffs. High unofficial food prices have eroded the purchasing power of consumers and exhausted their limited savings. Shortages of food a d water appear to have already sparked sporadic, angry protests from hungry consumers. 7. Past experience has demonstrated that a drought will likely accelerate the secular migration from rural to urban areas, as the rural population abandons its farmn to search for urban employment, food, and water. Although its magnitude has not yet been determined, a moderate migration appears to have commenced among smallholder farmers. Zimbabwean cities already suffer from overburdened urban infrastructure - particularly in housing, water, sanitation, and transportation. Water supply rehabilitation and increased distribution of food relief are both needed in rural areas to prevent the social dislxcations that would result from mass migrations. In addition, resources must be found to accommodate the additional strain of incremental in-migration on Zimbabwe's towns and cities, which will experience problems of homelessness, health 'azards, and transportation failures. 8. The logistical considerations regardig port and rail ransportation present an additional risk to the relief and recovery efforts. In theory, Zimbabwe, South Africa, and Mozambique can deploy sufficient port, rail, and trucking assets to service regional drought- related freight needs. However, these assets will have to be employed with a degree of efficiency and coordination never before achieved. 9. The drought comes at a time of major economic transformation in Zimbabwe, and has the potential to derail these reforms. In early 1991, the country embarked forcefilly on a medium-term program of structr adjusment aimed at acceleratng economic growth, increasing per capita income, and generating additional employment for a rapidly growing labor force. The government accelerated its program of deficit reduction and tightened monetary policy. Direct subsidies to parastatals were reduced and a program of civil service reform started. The government accelerated the real exchange rate depreciation, partially liberalized the foreign exchange system, and increased minimm tariffs. It pardally decontroUed most prices, the trading of maize, and the transport system, and began the deregulation of small business, liberalized labor law, and simplified investment approval procedures. It also created a Social Development Fund to provide financial assistance to the poor. The government remains fully commited to its program of structural adjustment, although certain targets need modification in light of the severe negative impact of the drought on the national budget and the country's external accounts. The Government's implementation of the adjustment program was commended at the Consultative Group meeting in February 1992. These new targets and other details of the next few years of the program are being worked out by the Government, the World Bank and the IMF in the context of a PFP to support the Government's ESAF program with the IMP. 10. The overaU economic impact of the drought is reflected in a large fal in GDP and in large increases in the balance of payments deficit, government expenditure on relief progms, and inflation. Real GDP is now projected to decline by about 9 percent in 1992 (with agricultural production falling by 35 percent), before rising by 6 perceut in 1993. GDP will not exceed its 1991 level until 1994. Shortages of basic foodstuffs (including maize, sugar, bread, vegetable oil, and dairy products) and the high cost of importing have caused inflation to coniue to accelerate in recent months, reaching 30 percent in the 12-month period ending February 1992. 2 Such inflationary pressures are expected to continue for the first half of 1992 and will severely strain household budgets, particularly for low-income groups. 11. TIe governmet has demonstraed prudent fiscal management, cutting its non- drought expenditures below their expected level. Nevertheless, the overall budget deficit for 1991/92 is now expected to reach about 9 percent of GDP, which exceeds moderately the 8.3 percent cefling given in the Memorandum of the President for the Structural Adjustment Program (December 1991). The government's Drought Relief and Recovery Programme will necessarily carry over into the 1992/93 budget, rendering unreasonable the government's previous fiscal deficit target of less than 6 percent of GDP. The government is attempting to minimize the overall deficit with additional savings elsewhere and, if necessary, some additional revenue measures. Ihese efforts will be detailed in the forthcoming Policy Framework Paper. 12. Drought-induced imports, coupled with a loss of expected exports, are projected to increase the current account deficit for 1992 to US$958 million (nearly 20 percent of GDP). This is far higher than the US$590 million estimated at the start of 992 and creates an urgent need for additional external financing. The reduction in expc-s and the drought-induced increase in food imports will also spill over into 1993, causing the current account deficit to be US$717 million, or 13 percent of GDP. This external imbalance can only be returned to reasonable magnitudes in 1994 and 1995. 13. To date, the following sources have committed themselves to helping Zimbabwe meet its additional, 1992 drought-related financing needs of US$400 million:l/ US$80 million of disbursements from the (US$150 million) IDA Drought Recovery and Mitigation Credit; US$17 million of accelerated disbursements on existing IBRD loans; and US$80 million of additional MP ESAP resources. Tentative indications are thatthe remaining gap will be financed by bilateral grants, concessional loans, and commercial borrowing, the composition of which will ensure the sustainability of the resulting external payments position. The precise composition of this finacing is sil evolving on the basis of international donor appeals. Credit Objetive 14. The Association's main objective in proposing this Credit is to provide the Government of Zimbabwe with timely financial resources in support of its drought relief and recovery program. This program will alleviate human suffering, both at present and in the future, by restoFing and enhancing Zimbabwe's productive capacity. It wil do so by providing agricultural iputs that are essental for the next plantng season, rehabilitating the water supply system, providing for critical inputs for the transport of goods needed for relief and recovery, and upgrading the public works programs through which drought relief is distributed. The program is designed to give special consideration to the recovery needs of agricultural smaiolders. 15. The proposed IDA Credit would also help narrow the balance of payments gap that wfll result from incremental imports and the collapse of food exports. ITis would lesen the rsk that this naural disaster might derail the government's broad-based economic structural adjustment program. Finally, the emergency Credit would assure the strengthening of short- and tIhis figure implies a US$273 million compression of other (non-drought-related) imports. 3 log- term instittional capacity in agricuture, water, and public works, to reduce the country's wlnerability to fitu exeral risks and to increase food security. It does so because it requires the gvwernmt to include a set of essental studies and technical assistance, for which bilateral assist."ce has been arnged. nuaLD QmEr onf nmet Prom 16. The Governnt of Zimbabwe has responded to the crisis by declaring it a "national disaster" and convenmg a high-level National Civil Protwcon Coordination Committee, chaired by the Vice President. The govenmment has designed a comprehensive, US$1075 million Drought Relief and Recovery Program for which it is seeling exten financing. The government's Letter of Emergency Drought Policy (imcluded in the Technical Annex) descrbes In deta the components of this program ibis Letter constitutes the government's commitment to a particular course of action in is response to the drought emergency, and forms the basis on which the Assosiation would extend the proposed Credit. 17. The largest component of the government's Progr is the purcase of 2.7 mfllion tons of foodstf over the period of April 1992 through August 1993, amounng to approximately US$454 milion. The government's program also inludes five non-food components, which respond to the remainder of Zimbabwe's most critical dro-ght-related needs: (1) a US$263 million program of agricultura recovery, consisting of (a) fiancing tillage services and the private rector distiWn of seed and crop chemicals to half of the most-affected smallholder frws, and (b) a herd of small livestock for eligible farmers who do not require or receive tilage srvices; (,) foreign exchange requirements fcr other agricultura consumables, vehicles, equipment, and spares; (2) US$217 million for drought-related railway and truck transportaion needs; (3) a US$58 million program of emergency water supply rehabilitation and private sector water drilling; (4) US$31 million for the expanded programs of Food-for-Work, public works, and Child Supplemental Feeding; and (5) an US$2.4 million program of additional iosional strengthening, aimed at improving both Zimbabwe's short-term capacity to manage the current disaster and the county's longer-tem capacity to avoid and respond to future potentW crises. 18. Table 1 in Schedule A summaizes the sectoral distibution of the govermment's non-food program and its financing. The proposed Credit is equivalent to 14 percent of the total government drought relief and recovery program (this is also equivalent to 26 percent of the foreign excnge re iremet of the program and 58 percent of foreign exchange requirement for the non-food program components). 19. Fsandg from the Existing IBRD Portfolio. Additional financing is expected to be provided by a reallocation of up to US$37 million from the existing IBRD portfolio. As much as US$25 million of uncommitted funds from the Urban II Project can be made immditely available to urban councils to respond to emergency water supply shortages and any acceleration of population influx. Uncommitted funds in the Railways II Project will be reallocated, so that up to US$5 million might be disbursed for the purchase of required locomotive spares. Up to US$4 million of unallocated funds and US$3 million of uncommitted funds within the Agriculural Credit and Export Promotion Project will be available to finance private sector procurement of tractors, farm equipment, and spares. 4 20. E nl lndng. The Credit would also gavanize further support from among the donor community. Ihe World Bank Group and otLer donors have coordinated closely to mount a concerted relief and recovery response. Bilateral donors have tntatively pledged US$60 million in grant asistnce to finan food relief imports. In addition, in parallel with the Assocaton's Credit, approximately US$7 mfllion will support segments of the NAC's rural water plan, and US$5 mfllion will finance measures aimed at strengthening the country's short-term capacity to manage th curnt disaster and its longer-term capacity to avoid and respond to fAtre potenti cses. The Government of Norway has agreed to provide cofinaing of the equivalent of US$1 miion In support of three of these measures for nstiutonal strengthening. Efforts to secure further concessional extnal finance are ongoing, with the Bank taking a leading role. The Bank Group will contue to work with the government, the IMP, and donors to closely monitor Zimbabwe's essential drought- and development- related import requirements, and to encourage any adjustment measures that will minimize the country's need to fmance these imports extenally. Lessns Leaned from Peviou Bank Grou Ivlveen 21. Desigp of this operation has been based on experience with other drought recovery and emergency operations. Five main lessons have been incorporated into Zimbabwe's program: (1) that the most effective resuts are achieved when consideration is given to short-term targets with modest objectives; (2) that high-level and broad-based government commiten to the recovery program is essential; (3) that the World Bank Group's emergency response should be part of a comprensive national response; (4) that assistance will be required with implementation and to mitigate e effects of fiture crises; and (5) that the Bank Group lending instrment should afford the govenment flexibility in responding to the crisi. 22. In designing this Credit, the Association was cogizant that disbursement has been a bottleneck in previous emergency operations. The inherently fluid nature of both emergency oprations and of donor cofinancing for such operations renders it difficult and unreliable to deflne a fixed Bank Group project. For this reason, it was determined Omathe Credit should be in the form of a quick-disbursing leding isumnt, financing a positive list of agreed imported goods. In addition, the government will engage a procurement specalist, contingent on donor financing, to ensure that procurement is timely and that procedures conform to IDA standards. 23. Although the proposed Credit is the World Bank Group's first drought recovery operation in Zimbabwe, it draws on generd operationa; experience in the sectors imvolved, to keep the governments program m line with other Bank Group activities and within the implemenation caacity of -isonal instions. For instance, the agriculture component relies on institutional strengths that have been learned and developed through years of dialogue between the sector and the Bank. Similarly, the rural water component is generally syncronized with the objectives of the Bank's Yellow Cover rural water sector report. Rationale for Banlc Crupmvlvm 24. The foremost reason for Bank Group involvement is the need to support recovery and the alleviation of poverty and human suffeing. In addiion, the Bank Group is playing a leading role in the government's adjustment program and needs to be certain that the drought does not deral the adjustment program In addition we have broad experience in the sectors most S affected by the drought, inluding agriculture, water, and transportation. Finally, the Bank has played a pivotal coordinating role in helping respond to the drought, particularly concerning tie non-food components of the government's program. Program biplementatio 25. Progrm Managemene. Program management will ce the responsibility of the Ministry of Fnance, Economic Planning and Development, under the guidance of the National Civil Protection Coordination Committee and its six sub-committees. Line ministries and agencies will undertake the actul implementation of fte various program components, as described in the Technical Appendix and the governlent's Letter of Emergency Drought Policy. In addition, lending involving on-going Bank projects will be implemented by the agencies already involved (e.g., MLARR for the agricultural spares, MLGRUD for the urban water component, and MOTNS and NRZ for rail spares). The sustainability of the program is assured by the government's careful reliance, to the extent possible, on established organizations and practices. 26. Procurement. Each executing agency has established a procurement unit to undertake procurement activities in respect of thb drought program. Their organization, key staff, and procedures are acceptable to the Association. In MLARR and MLMPSW, and NAC, 'the units will retain one or more on-bite Drocurement specialists with qualifications and terms of reference acceptable to the Association. MFEPD will coordinate their activities and will provide monthly progress reports of procurement activities to the Association. 27. To ensure flexibility and rapid disbursement, the Credit will provide foreign exchange for a range of imports required to implement the recovery components of the government's emergency relief and recovery program. The proposed Credit of US$150 million would finance 100 percent of the foreign expenditures incurred for a positive list of imports, as specified in the Technical Annex. All procurement and disbursements for goods and services to be financed under the proposed Credit shall be made in accordance with Bank Group guidelines. 28. Procurement for contracts for US$500,000 equivalent or more will be carried out on the basis of simplified international competitive bidding (ICB) procedures consistent with the Bank's Guldefinesfior Procurement of Goods and contracts will be bulked to the maximum extent possible. Procurement for contracts of less than US$500,000 equivalent will be on the basis of three quotations obtained from qualified suppliers in at least two countries. The positive list of imports consists of: (a) petroleum products (not to exceed 20% of the Credit); (b) selected motor vehicles; (c) spare parts for vehicles and agricultural equipment; (d) agricultural inputs; (e) equipment for water works (excluding borehole drilling rigs); (t) microcomputers, software and related equipment; and (g) construction materials. Detailed procurement procedures are set forth in the Technical Annex and the Development Credit Agreement. 29. Disbursements. To ensure that all funds are available when needed, a Special Account will oe established with the Reserve Bank of Zimbabwe, with an initial deposit of US$10 million, to be replenished on a monthly basis on the basis of documentary evidence suppled to IDA by the Reserve Bank. Disbursements for contracts below US$500,000 would be made against Staems of Expenditure. Up to 20 percent of the proceeds of the Credit may be disbursed retroactively against expenditures made since April 1, 1992. Expenditures financed retroactively must also conform to Bank procurement guidelines. 6 30. Accounts and Audit. The sector agencies, MFEPD, and the Reserve Bank will maintain records ankd accounts of all transactions under the Credit. Relevant documentation wil be kept locally and for auditors. Accunting and audidng procedures of the Reserve Bank are acceptable to the Association. All Credit accounts will be audied by independent auditors under ternms of reference acceptable to the Association. Audited Credit accounts, including tl' a Special Account and SOEs will be forwarded to IDA and the other donors within nine months of the end of the fiscal year. Currently there are no overdue audit reports in Zimbabwe. 31. The government bas agreed to underae a number of actons critical to the implementation of its program. These are set out in its Letter of Emergency Drought Policy (attached as part of the Tecimical Appendix). Ihe Association will undertake peric4ic reviews of the status of these actions and of the progress of the government's program, the first of which will take place within four months of the date of effectiveness of the Credit. E.vi -me AID= 32. An adverse environmental situation already exists in the drought affected areas of the country. The lack of rains will have serious effects on the local ecology both this year and in the future unless preventive measures are undertaken rght away. The government's program will help alleviate some of the problems caused to the environment by the drought. Environmental provisions agreed under on-going projects such as the Agriculural Credit and Exo Promotion Project for fertlizer and pesticide usage, will be followed under this Credit. 33. A lack of access to the range of internationally-traded crop chemicals in recent years, due to the shortage of foreign exchange, bas damaged short-term agricultural productivity. In addition, it has resulted in a failure to rotate among different types of pesdcides and herbicides, an environmentally unsound practice with potenially disastrous long-term iplications. By alleviating this botdeneck, the program will encourage chemical use that is more envi ly sound. 34. Ihe agricultural sector program will promote minimum tillage techniques which reduce potenti soil erosion and promote water retention. Zimbabwe is one of the leading nations in the use of integrated pest control, and has pioneered an environmentally-friendly system of "pest scouting" so that chemicals are only used when required, rather than in a pre- determ d sprayig schedule. The designated program would continue to promote these principles. 35. The drought has worsened over-crowding of water sources by human and livestock populations. By increasing the nuimber of functioning water points, the government's water supply recovery program wfll reduce over-crowding and mitigate the associated environmental stresses. A qualified hydrogeologist has confirmed that the planned development of new water sources in underserved areas will have no appreciable imract on the aquifer. Environmental sments will be made of all proposals for urban water supply rehabilitation. 36. The urban in-migration contingency plan, by helping to prevent the establishment of squatter setements, should limit the stress placed on the local natr environment and on 7 water and sanitation infrastructure. By planning ahead for an appropriate settlement scheme of displaced persons, the contingency plan would minimize the stripping of local vegetation for construction of sub-standard shelters and would ensure proper sanitadon facilities and controlled discharge. 37. Finally, the public works programs lessen incentives for environmentally destrueive income-generating activities, such as the collection and sale of firewood. These programs include manv projects, such as re-afforestation and land grading, that prevent soil erosion or have other environmental merits. Progrm Risks and Benefits 38. Rapid implemenation of the food, agriculture, transportation, and water components of the government's program is critical to averting famine and to avoiding mass migration and its attendant social dislocations. The main risk for this Credit wiil be the government's ability to implement its brought Relief and Recovery Ptogramme in a tiumely fashion. Although administratively stronger than many other countries in Africa, Zimbabwe stiU faies limitations ir, its ability to implement and coordinate an effort of this magnitude. The relatively early, sustained itervention of the World Bank Group and other donors has played an important role in overcoming this problem. To ease implementation, the program has been made administratively as simple as possible and will make maximal use of existing institutions. In additon, other donors will be supplying technical assistance to key implemenation agencies. 39. A second risk relates to the reliance of the country on outside ports for its access to the sea. With the whole region suffering from drought, road and rail transport infrastructure will be severely tested. However, a umber of donors are providing technical assistance to the Port Authorities and Railways and are setting up a coordination unit to make the most effective use of the infrastructure that is available. 40. A third risk is that urban constituencies, being more visible to policy-makers, will receive a dispropordonate share of the program's benefits. The possibility of an inadequate government response to the relatively greater rural needs is addressed by the government's explicit commitment to fully fund the Food-for-Work program of nral public works. It is also expressed in the government's strong rural water rehabilitation program component. 41. Finally, Zimbabwe faces the risk that it will be unable to meet its extrnal obligations. Although this risk cannot be entirely alleviated, the substan incremental assistance that has been pledged by donors makes it less likely that the drought will fotce the government into a paymens crisis. 8 Re comn endato 42. 1 am satisfied tbat the proposed Credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve it. Lewis T. Preston President Attacments June 4, 1992 Wasngton, D.C. 9 11 Table l: Esthated Costs of Govermen _rt Rl and Recov Prm (US$ m;io) Donort Funds Farign Ahreody tof WBIDA Local E1hap cmitted PDofli SEA Q LO 1. Foodstuffs 111 100 - - 243 4S4 2. Transport 2.1 Road - - 30 38 68 2.2 Ril 7 - 5 90 47 149 3. Agricultu 3.1 Communal Faruing Rehab. 1 - - 120 79 200 3.2 Iyorts of Inputs and Equipmnt - - 7 - 57 64 4. Rund Wate Supply 7 - - 4 18 29 5 Urban Water Supply & In-igamtton - - 25 2 2 29 6. Btiems and Public Wors Prgms - - - 42 6 48 7. hwdtodond Support 1 1 - - - 2 Toal 127 101 37 278 490 1,044 /Sch,edule A may be subject to considerable revision, as the fiuding levels of other donors is confirmed during the furthooming severa weeks. 2/I is asumd that the government itself will finance any copnet that remamn unfunded. SchedWiLAR Procuranait Procedures Except as indicad otherwise, the following procedural requirements apply to any procurement contact for US$500,000 equivalent or rea. Unles otherwise sttd, procuem contracts for les than US$50,000 equivalent shall be based on three quotations obtained from at least two countries. Agricultural inputs Simplified ICB Commodities, including chemicals Simfied ICB (regardless of procurement amount), and and fefilizer inputs packaged for bulk procurement Construction materials Simplified ICB Cropseeds Three qualified bidders, or other approved procedures, for an aggregate sum of up to $4.9 million of multiple varieties of geographically-distinct cropseeds. Equipment for water works (excluding drilling rigs) Simplified ICB Petroleum products Simplified ICB, regardless of amount (aggregate procurement of petroleum products not to exceed 20% of the Credit) Proprietary spare parts, equipment, Direct contratin procedures up to US$500,000, under and cropseeds, standardized equipment procedures acceptable to IDA Selected motor veicles and spare parts Simplified ICB Vehicles and agricultural IDA will finance imports made by these agents from their equipment principals 11 Schedule C Timetable of Key Credit Processing Events Time Taken to Prepare Credit: Tbree months. Single Preparation and Appraisal Mission: March 24 - April 21, 1992 Yellow Cover meeting: May 20, 1992 Negotiations: May 28, 1992 Planned Date of Effectiveness: July 10, 1992 Estimated Completion of Credit Disbursement: September 30, 1993 12 Sdhedule ZIMBABWE: Status of Pank Group Operations (Details of Bank Group operations are discussed in Section E of the Technical Annex.) Aaiunt in USS million (tess canceltatiaw) LOW or Fizad lbis- Closino Credit Mo. Year Borroer Purpos Bank IDA bjrsed Date ~~~~,_ ,_,, ,__. .. ... ..... ..... ....... ... ...... .... Credits 4 Credits(s) closed 53.30 C=10m-ziNS) 1992 Z21ABW SAP 50.00 49.19 12/31/93 TOTAL ruiw Credits u 1 50.00 49.19 L . .......4.2 12 Lows(s) closed 446.z8 L35-ZIIS 1984 ZIABNE EXT&RES.IFAD 13.10 2.21 09/30291(R) L244SO-ZIN 1984 ZIEUA8 URBAN 1 43.00 20.61 09/30/92(R) L2O-ZIN 19M Z1I6ASlW SSE I 10.00 2.78 12/31/92 L2900-ZTIt 1988 ZIIBAMWE PamR 11 44.00 10.07 12/31/92 L2990-ZIN 1988 ZIlBABWE HIGWMYS It 32.70 25.95 06/30/95 L30630-Zl 1969 zueA' A0tI.ctD. & EXWRT P 36.30 20.41 12/31/95 L30790-ZIN 1969 ZIMBABE URAN SECIREK DEEV. 80.00 76.07 12/31/96 t3i?790Z1% 1990 Zti#AB FOEST REsWEU MMT 14.50 13.90 06/30/98 L32730-ZIN 199 ZIIAM RAILWAYS 11 38.60 35.32 06/30117 L33390-ZtN 1991 ZItEAE FMIILY HLTH.II 25.00 25.00 12/31/97 31.340-ZIN(S) 1992 Z I2 E SAIP 125.00 125.00 ¶Z/31/93 TOTAL Aer LOS 462.20 357.31 T0TAL** 906.48 103.30 of wici repaid 234.99 .25 _............. ......... TOTAL held by B!* L IDA 671.49 103.05 Ammt sold 70.32 of idch rvid 70.32 TOTAL udisbjsed 406.55 llotes: ..................... e Not yet effective ma Totat sired d tn balance r at both active aid nactive Loas Wd Crdits. (R) indicates forwtly rwisd Ctosin Date. CS) indicates SAL/SlAL LoS Wi Credts. The Net Approved Ba 8n R q_at amre historical vlue, all othes ar* wrket value. The signing, Effwctive, a Clositr dates ar based WM the Loan DepartifIt off I csl dta wid are not takan from the Task su:et filo. 13 ZEMWADWE: Statement of IFC Invetmenis Invest Typo of M1r FY Obt igor ausinss Loan EcMity Total .......................... 7 ...... ......................... -- ......* U# u iion.*...... 2728211i 1992 Neikles Htoel Tourism 8.3 8.3 21?1-Z1" 1992 Petrozim Pipeline Petroleum 32.? 32.? 2164421" t99t Venture Capital Zib Capital Markets 1.1 1.1 2167-21M 1991 Spinweeve Textiles 5.0 5.0 2166tZ1N ¶99 National Blankets Textiles 6.5 6.5 2450-ZIN 1991 T A Tradinr Tourism 2.0 2.0 2163-21h 1991 FM8 Holdings Leasing 2.7 2.7 2440-211 1991 artclays Sk Bunking 20.4 20.4 241ZIP 1991 Merch Bnk of Cent Aft Banking 25.5 25.5 2442*htN 199 1st March Bnk of Ziub Bank%ng 30.6 30.6 2443-211 1991 Std Chart'd lerch BAk Banking 30.4 30.4 2444.ZIN 1990 Syfrets March Sank Banking 25.4 25.4 2210-ZIN 1990 Nashotlad Holdings heufacturing 4.8 4.8 1238-ZIN 1990 Scotf In Capitat Narkots 7.5 7.5 2172-IN 1990 Retrof it Ea'g Servic 0.3 0.1 0.4 2170-2IM 1990 Not-Tootls m faturin 0.4 0.3 0.7 848-211 19" Cret Bredes Food/Food Proc 5.1 0.6 5.r 745.ZIN 196 911 ZN 1987 1078-213 1968 WC Limited NxW/Cap Mkte 11.? 0.4 12.1 552-ZtZ 161 VWnk Cott fry infnfng 38.0 36.0 ........................... Total are" Coeltmmnts 254.7 5.2 259.8 Les Cwttlltone, teimnattn, ehange OdJSwtmontS, rep.tusnts, write-offs, ui syidlcato sales 124.7 (0.0) 124.6 Total coltmwnts held by tFC 130.0 5.2 135.2 Total Undiabarsed 14.3 0.8 1S.1 Total DOfbursd 115.7 4.4 120.1 14 AMNul ZMdABWE: Key Mic dato Table 2. Zimbbwe: Key Indicat 1990-95 199022 V92 mi93 1995 EaL - Proected- Growth and inflation rates GDP 2.6 3.6 8.7 6.0 5.8 5.0 Comer prices (annual average) 15.5 23.6 ... ... ... Debt service Debt sevice (US$ million) I/ 436 439 454 516 S40 665 (Of wich: ineest) 183 207 218 272 305 321 Debt sftviceXGS 1/ 22.0 21.6 2S.2 25.4 23.4 25.2 Debt servicelGDP 7.0 7.S 10.3 10.9 10.8 12.8 Ratios to GDP Gross investment 20.1 22.0 21.0 23.0 25.0 26.0 National saving 17.3 12.6 ... ... ... Public inwetment 21 4.8 2.5 4.7 5.1 6.0 6.0 Pubfic saving 2/ -0.9 0.7 ... ... ... Private investment 15.3 19.S 16.3 17.9 19.0 20.0 Private saving 18.2 11.9 ... ... Governmnnt revenue j/ 37.3 38.3 ... ... ... Govement exenditure 1 48.0 46.9 ... ... ... ... Overall deficit (-) /1 41 -10.7 -8.6 ...... ... eal exchage rate -11.4 ... ... ... ... Exqpxt volume growth rate -3.7 0.3 -5.2 10.7 13.8 9.1 ExportGDP 27.7 30.6 3S.1 37.4 40.7 43.S Import volume growth rate 9.6 26.4 -1.0 -4.9 -2.9 6.9 ImportaGDP 24.4 32.1 41.3 37.8 35.1 35.2 Curent account (US$ millio) / -294 -691 -956 -724 -377 -216 Curent account/GDP !/ -4.7 -11.8 -19.3 -13.5 -6.5 -3.5 Gross reserves (US$ nillon) 219 299 371 465 585 715 * (onthns of imports) 1.7 2.0 2.8 3.2 3.S 4.0 op am"S0