Report No. 11559-SE Senegal Public Expenditure Review May 27, 1993 Africa Region Sahelian Department Country Operations Division FOR OFFICIAL USE ONLY MICROFICHE COPY Report No.:11559-SE Type: (ECO) Iratle: PUBLIC EXPENDITURE REVIEW Author: OSEI, ALBERT Ext.:34952 Room:J 9105 Dept.:AF5CO Docuwent of the Worid Bank This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OMCIAL USE ONLY SENEGAL UBL EEmNDUREV TAKLE DECONIaN RXECIrUIVE SUMMARY ..... ................................ v L I?MRODUCTION 1........ ... . 1 X MACROECONOhC FRAMEWORK ......... 2 A. Recen Macroecononic Perfmance .............. 2 B. Exel Trends ........ . 3 C. T inknRwen ... ....... . . . . . . . 9 D. MediumTermMo utlook. ... .. . .. . 11 IL SECrORAL E NPEND1 RE PROGRAM, ... ..... . 18 Education .2. 22 A.grkuhi dend aReourc .................. 27 .. ... 27 Road - I ---atoure......... ...... ... ...... O.*. ...~.... 32 Eninrgy Sector ...................... . ....... 35 Summnafyof ExpWmdiurPrposais fr Plor1tySoctom .. ........3 Iv. EXPENDTUREPLANNING AND DIPLEMENTATION 44..... A. Imdesi ...................... 44 B. do ..................... 4S C. VeNI o ing and Execution.. 48 D. R.e...n.endatio.s ..S3 ANJNETX 1: DATALSSIUES ....................................... 55 ANNEX 2: DETALED SECrOR REPORIS Health .................... .. ... ..... 59 E....*...................... 74 A.grluiuhred Natral.eourcee.8 Road I ructe .. . .... .101 This document has a restricted distribudon 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. STATISTICAL ANNEX Table 1: Central Govenment Revenue by Source Table 2: Ceral Coverment Revenue in percent of GDP Table 3: Remrent Expenditure by Economic and Functional Claificaton (80/81) Table 4: Recurret Expenditure by Economic and Functional Classification (82/83) Table 5: Recurnt Expenditure by Economic and Funcdonal Classification (84/85) Table 6: Reurrent Expenditue by Economic and Functional Classiflcation (8687) Table 7: Recurrent Expenditure by Economic and Functional Classification (87/88) Table 8: Recurrent Expenditre by Economic and Function Classfcation (8/89) Table 9: Recurrent Expenditure by Economic and Functional Classification (89/90) Table 10: Recurren Expenditure by Econmic Classiflcation (80/81-89/90) Table 11: Recurrent Expenditure by Functional Classification (80/81-89/9 Table 12: Invesment Expenditure by Functional Classification (81/83-89/90) Table 13: Total Expenditure by Functional Classification (81/83-89J90) Table 14: Execution of Investment Expenditures (PTIP) 1988/89 Table 15: Execution of Investment Expenditures (PMIP) 1989M90 Table 16: Financing of Investment Expenditures 1988/89 This report is based on the fndiWn of a mission that visited Dakar in April/May 1991. Tho mission consisted of Mr. Albert Osei (Mission Leader), Mr. Heak Koppen (Consultant), Ms. victoria Kwakwa (Economist), and Mr. David Jones (Agricultnur Eonomist). Contributions were also received from Mr. Rend Vaurs (Senior Economist, AF5PE), Mr. Alassan Diawara (AFSE), and Ms. Brigitta Mitchell (Senor Economist, AFSN). Mr. Richard Wesn served as peer reviewer. Ms. Katherine Marshall is the Departme Director, Mr. Franois Laote, th Department Lead Economist, and Mr. Jean-Louis Sabib, the managing Divhision Chief. Secretarial support was provided by Ms. Myrina HaTris and Mr. Mather Pfiffenberger. This report doer nt reflect developmen since the end of the 1991 fiscal year. Since then, the financial siuaon in Senega has considerably worsened. The wage bill is rising again and total accumulat arrears are increasing at an alarming rate. The maroeconomic fiamework is seiously off track and specific conditions related to the disbursement of the last tramche of the ongoing strctural adjustment operation are becoming less meaningl. Neverheless, the Public Expenditure Review remai very relevan for fiuture opetional work on Sengal. It represents a first attempt at a retrospective analysis of public expenditures in Senegal and gives a detailed survey of the issues at the sectoral level. Should the macroeconomic siuation improve in the near futre, it would provide an invaluable guide to adjustment Issues following stabilization. Senegal Public Expenditure Review Executive Summary i. This report sets out the findings of a Public Expenditure Review conducted in May/June 1991 and based on data for the 1981-1990 decade. It should be read in conjunction with the Macroeconomic Update Report appearing at the same time, which focusses on the broader issue of macroeconomic performance during the same period and which reaches the same broad conclusions on fiscal performance as this study. The findings contained herein represent the views of Bank staff; nevertheless, the basic task of reconstructing a data series was done by a joint Bank-Senegal team. The convergence of views between the Bank and Senegal on the data thus lends comfort to the expectation that the diagnoses are largely shared as well. ii. The major objectives of the study, the first formal review of this nature carried out by the Bank in Senegal, have been: a) to check the completeness and consistency of the data base on public expenditures; b) to seek insights into the nature and extent of possible expenditure restructuring plans that would more closely respond to Government's expressed development priorities; c) to identify institutional and procedural reforms that would improve the management of the process for establishing expenditure plans, implementing them and measuring the results of such spending; and d) to indicate public expenditure issues that require further study. iii. After a brief introductory chapter, the report sets the context for an examination of public expenditures by a brief look at the outcome of macroeconomic policy, and especially aggregate revenue and expenditure trends, during 1981-90 (Chapter II). The chapter also recalls the macrofinancial framework contained in the most recent Policy Framework Paper (PFP), which sets out the factors likely to condition expenditure restructuring efforts in the next 2-3 years. iv. Four major observations emerge from the retrospective review with respect to public expendituress a) There has been good progress towards meeting the stabilization objectives of the adjustment program. In particular, fiscal, monetary and external balances have improved. - vi - b) The tools used to arriva at these results have been flawed, in the sense that on both revenues and expenditures, the decisions taken are either inimical to stated development objectives or are not sustainable. C) Neither the level nor the composition of expenditure has been adjusted enough to make a real and lasting impact on improving competitiveness, which has been the over-arching objective of adjustment efforts in the eighties. d) Overall, the judgement has to be that there has not been active, aggressive use of fiscal management as a policy instrumentl rather, Government seems to have consistently taken the course of least resistance. This is particularly troublesome given the central nature of fiscal adjustment for the strategy Senegal has chosen. v. Stabili&ation Gains. By all the usual summary measures, Senegal has made significant strides towards macro-economic stabilization during the eighties. In 1981/82, the overall fiscal deficit, on a commitment basis and excluding grants, was 8.0% of CDP; by 1990/91, there was an approximate balance between budgetary revenues and outlays (a budget surplus equivalent to 0.2% of GDP was recorded). On a cash basis (i.e., taking account of the changes in domestic and external arrears) and excluding the effects of non-continuing expenditures (for paying separation grants to civil servants and for meeting the Cobnroment'l obligations arising from banking reforms), fiscal performance has been consistently positive, with a declining deficit from 10.8% of GDP in 1981/82 to 1.7% in 1990/91. These results have in turn allowed improvements in the current account balance (a deficit of 24.3% of GDP at the beginning of the period had been reduced to 7.8% by the end) and in the overall resource gap (from CFAF 130.2 bn. to CFAF 63.4 bn). vi. Instruments of Fiscal Adiustment. The instruments used to attain these gains contain the seeds of future trouble, are generally non-sustainable, and have not infrequently worked against the achievement of stated development objectives. Broadly speaking, expenditure reduction rather than revenue mobilization has carried the fiscal adjustment: Revenues have gone from around 23% of GDP in 1980 to about 18.9% in 1991; in contrast, total expenditures, which were 33.8% of GDP on average during 1981-83, had fallen to 23% of GDP by 1989/90. There are several things wrong with this. vll. On the r"venue side, the low yields have been in spite of an lncrease in the avorage rate of taxation on the formal sector and tax revenues as a share of GDP has gone down even more (18.2% to 15.2 percent) than the overall revenue-to-GODP decline. This double weakness- -efforts to increase revenues have led to disincentive taxation rates on the formal private sector which has shrunk partly as a consequence, - vii - leading to tax revenues growth that has not only not kept pace with CDP but has in fact been negative--dramatizes one dilemma in fiscal managements tax at higher rates in order to generate sufficient revenue although thli tends to cause the "informalization" of the tax base which triggers a new round of increased rates. A second implication of this manner of reverue mobilization has been the increased dependence on "extra-normal" tax measures, in this case the appropriation by the public exchequer of the "windfall" profits accruing from the fall from unusually high levels in the world petroleum price (and similar implicit duties on imported rice). These measures have had perverse effects, in the one case of increasing energy prices for local producers of tradeables and in the other case of keeping the price of the main wage good high with the predictable result that wages are subjected to upward pressue. To complete the picture of weaknesses in the revenue generation policy during the eighties, reference needs to be made to the increasing role of external sources in financing public expenditures. External finance rose from 31.8% of total public expenditures in 1981/82 to 41.0% in 1989/90 and, worse, budgetary (non-capital) external finance, insignificant in 1980/81, peaked at 59.3% of all external flance and almost 25% of total expenditures in 1987/88. viiL. On the expenditure side, the robust reduction would be irable if it were a managed outcome. In fact the sectoral and functional incidence of the reductions leave one with the inescapable conclusion that it happened by default rather than by design. ix. The first remark is that investments as a share of total expenditure fell from nearly 40% on average during the early part of the decade (1981-83) to 32% in the 1989/90 fiscal year. In real terms, there was a reduction of some 30% in investment spending by the public sector during the period. In this falling share, the big gainers in terms of economic classification were: General Public Services (which accounted for two-and-one-half times more proportionally of investment expenditures at the end of the period than at the beginning), and agriculture (88% more). Health (38 percent) and education (6 percent) also saw some increae but from a low base; there was also a high proportion of recurrent expenditure hidden in the education and health figures because of the convention of treating all project-related external assistance as capital expenditure. The high share of agriculture also highlights a cause of distortion, as described below (para. xi). X. Within recurrent expenditures, the trend was initially in the right direction until 1986/87, when they began to rise again, with the result that by the end of the decade, real recurrent expenditures had more or less caught up again with the beginning-of-period levels. The major cause of this inability to continue to contain recurrent expenditures was, of course, the large interest burden arising from the (largely foreign) borrowing used to forestall adjustment after commodity price and petroleum price shocks in the mid-to-late seventies. Within these broad developments, however, there were again sectoral and functional distributions that give pauses Compared to expenditures at the beginnLng of the period, recurrent expenditures (in constant prices) on health had gone down by 26 percent, whereas defense and general - viii - pwalc sevices wero only, resptiv ly, S and 9% lower; and the wage and salary blll wnt down only 6.3% compred to 24% for xpenditures on operations ad maintnanc. xi. Fiscal oliCy and cutitiye. Senegals adjustment strategy depends for its success on sustained dmestic deflation to improve competitivenoe. Given the limited influence of national authorities on monetary (credit and interest rate) and exchange rate policies in the West African xonetary Union (uM0), management of the size and composition of public sector revenues and expenditures become the principal method by wh1ch the public authorities can affect overall demand and thus the general level of domestic prices as well as the relative prices of tradeables and nvan-tradeables. The conduct of fiscal policy, as briefly descrlbed above, has frequently had procisely tho opposite effect on the overall price level. To start with, the persistently high wage bill is the combined effect of both a buoyant demand for labor by the public sector (employment grew by about St in the 10-year period) and an average civil service salary which was abnormally high to begin with (on average Senegalese civil servants are paid 9 times per capita GDP compared to 3 times in a sample of non-CPA Franc countries). This eontitutes a major expenditure on a non- tradeableg further, the public sector wage level tends to drive the level of wages in the formal sector as a whole. Finally, at the aggregate level, the large size of the public sector as a share of GDP reduces resources and increases costs for the private sector. The high energy price is a case ln point; another source of high costs for the private sector derlves from the persistence of public sector deficits which has meant reduced access to credit and higher interest rates for the private sector. In the eighties, in spite of the effort of deflation, the real exchange rate is still significantly overvalued. xii. Actilve Manaeant of Flscal Policy. Given these consequences of fiscal policy in the eighties, it would be legltimate to ask whether tho Senegalese authorities have consciously chosen these outcome or, as other comentatorc have recently asserted, have beon allowed to postpone adjustment* by the unu.sually high amounts of external finance that was available to the loverument. The major indicators of the failure to make expenditur* shifts are worth citing againa Zxpendltures on General Public Services (lncluding Defense and Law and Order) have been protected in a period when outlays on Uconomic Services were being reduced; Salaries and Wages have decllned but not nearly as rapidly as have the operating funds needed to ensure that civil servants can perform their functions; - Covernment consumption has been favored over PublLe Investment. - 13s - ThS Main recommendations of this report, relating to expenditure reStructuring have been made notwithstanding thls hlitory of falled or incomplete adjustment because the external resources that contributed to making it possible are not likely to be available to Senegal in the future. The argument made ln tho report is that the full impact of the years of lneffectlve fiscal management has perhaps never been fully conveyed to the authoritles, and that faced with the evldence, the necesasty for declsive action can no longer be denied. xili. The review has examined expenditure policy ln the key sectors of Health, Education, Agriculture and Natural Resources, road transport and energy (Chapter 11). The choice of sectors has been influenced by the apparent consensus that they represent areas wher Government lntervention is necessary. For each of these sectors there exists a clear statement of sectoral development policy agaLnst whlch the sufficiency and effLieency of actual expendltures in the recent past may be judged. The conclusions may be summarLsed as follows: In Health, the priority needs are to shlft resources (especially staff) from Dakar, Lncrease allocations for materials and maintenance, and much more for drugs (effectlve cost sharlng programs could and should pay for a large percentage of drug expendLtures). It is recommeAded that the shares of salaries, operations and maintenance, an drugs change from 74S24:S in 1989/90 to 48:30s22 by 1995 and that, in real terms, expenditure increase by some 54% above 1989/90 levels so that health sector expenditures would be 6.7% of total expendltures for 1995 compared to 4.1% in 1989/90. For Education ln order to meet the target enrollment ratio of 6S% by 1995, to improve quality, and to make slgnlficant internal effLeLency gains especially at the universLty level, an increase ln the share of the total recurrent budget going to the sector would be necedlary, of the order of 5 more percentage points of total expenditure in 1995 compared to the 1986-89 average. Intra-sectoral realignments in the recurrent budget would also be required, so that the prLmaryssecondarysuniversity/other shares will go from 41:25s34 to 53:28:19. For the investment budget, the major need is for greater coordination of external aid donors' programs so that exLsting and planned funds can be redirected to better respond to national priorities. Itt AarLculture and Natural Resources, better oversight of expenditure would require consolidating all sectoral programs ln a aingle budget (instead of the present split between mlinitry-accounted services and the expenditures of parastatals such as SED). Among other things, the gross imbalances between sub-sectors and among functions would be more readily apparent. At a omnimum, to begin to correct these imbalances, a major reduct$on in the servicee for Lrrigated crop production would be esskntial. Fortunately, thli should be feasible glven the demonotrated inefficiencies in the sub-sector. In real terms, economies of some 33% and over 50% are possible in the cost of services for, respectively, rainfed and irrigated crop productlon. in the cae of rainfed crop production services, the economies will derive in large part from reductions in personnel for e.g. cooperative development and defunct reional development agencies. In irrigated agriculture, the bulk of the savings will come from autring back on "zehabilitation 0, maintenance and mechanization services all provided by SAND. In contrast, services and programe that have been underfunded (Research, Forestry and the Environment) will need to be allocated more resources than in the past. Overall, the suggested restructuring could mean savings of some CFAP 27.0 bn (28 percent) in 1995 compared to planned expenditures in 1990/91. For the and sTans subsector, no significant reallocation is required principally because the current expenditure program has been arrived at in the context of a multi-donor funded sector adjustment operation which has correctly Identified priorities. In the Enerow sector, the only substantive recommendation is to rationalize the constitution, funding and management of the Energy Fund. This Fund is theoretically sourced from the "excess profit tax on petroleum imports. In fact, the bulk of funds from thls source (more than 80% in 1988-90) support the general budget. Further, Its mission, which includes the promotion of renewable energy sources and rural electrification, has been dominated by another of its original objectives, to subsidize the energy consumption of the phosphate companies to compensate for the competitive disadvantage c operating in a high energy cost environment. The recommendation seeks to provide the Fund with a predictable source of revenue, to limit eligible projects to those that involve Oalternative domestic renewable" energy sources, and to streamline its operations. xiv. The overall effect of the recommended expenditure roalignments, taking the 1995 budget as the target horizon, would be that the priorlty sectors discussed above will require only one percentage point more of GDP in 1995 than was allocated in 1989/90. In constant prices, the increase in 1995 over 1989/90 would be 33 percent. Given this level of funding for the priority sectors; given the PFP projectLon of tax and non-tax revenues and of the target deficit; and given Interest obligations falling due in 1995I allocations to the non- priority sectors would need to be some 28% lower. Thus, although target expenditures on priority sectors are not disproportionately higher as a share of GDP in 1995 than five years earlier, accommodating this plan would require major restraint of expenditure elsewheres the 28% real reduction is a fair measure of the challenge of expenditure management in the nineties that Senegal is faced with. - xi - xv. Any serious effort to come to terme with the problem will need to confront and deal with tne myriad sources of inefficiency and lack of transparency that characterize expenditure planning.and implementation processes in Senegal (Chapter IV). The principal problems highlighted area inflexible and non-rooponsive resource allocation proceduresl lack of coherence between capital and recurrent budgetsa poor organization and incompleteness of data on public expenditures; implementation procedures that are redundant, cumbersome and not geared to seeking efficiency in resource use so much as to establish the legality of transactions. Investment planning, which has benefitted from several years of technical assistance, is still merely a formal exercise and does not serve to haelp choose between competing alternative weso. It iL neither comprehensive nor always technically well-done. xvi. Detailed proposals for reform have to await further discussions between the Bank and the Senegalese authorities, which are scheduled to take place before the end of 1993. 1. This rport presents the flndings of the first fomal Public uxpeniture Review for Senegallf. as an Laltial attmpt, the aim ha bee limited to "xmbling, collating and checking baLc expendLture data for consistency and cohernce and examining recent fLical uianajement in OrL d to provild insights Lato the nature ad thb extent of such expenditure rstructurLng as may be required to meet medium-trm objectives in the key sectors of health, eduoation, agriculture, natural resources, transportation and energy. 2. The flrst chapter dLicusses rocent trand, broad xpendlture and revenue pattrns and the projected macroframeork through 1994/95. Chapter rI provLdes a detailed -eview of expendlture programs and Lisues in priority sectors and proposals for improving both the quality and the volume of the recurrent and investment expenditure in these sectors. The chapter ends with a broad estimate of desirable expenditure allocations between prlority sectors and non-priority sectors, glven the PIP based fLscal deficit targets. The flnal chapter discuss key Lasues in expendlture planning, Progracig and ¢ontrol. 3/ lbs XAi. _ sMnt PrpmIu adi I WIeqinuta qeWs Ms rftv_ui fwUy to "BP ad d. pao itisf is tb-_m fumty .e v. X . !4ACROSCONOMI4! ZRAJWOK= A. Recent tacraecosoi Performancg" 3. In the early 1980e Senegal faced severe macroeconomic and financial crises, charecterized by huge current account and public sector deficits. This was attributable mainly to an unsustainable level of consumption generated by rapid overextension of the public sector after a shortlived boom in groundnut and phosphate export prices in the mid-1970s. Government attempts to sustain this high level of consumption through a rapid increase in external borrowing coupled with sharp increases in the world price of oil and domestic drought conditions, only served to deepen the crises further. In 1985, the Government launched a program of structural adjustment supported by the World Ba.ik and the IMF. The key objectives of this program have beens (i) the attainment of Improved and sustainable fiscal and external balance positions; (ii) significant real exchange rate depreciation to restore incentives for production of tradeables and for overall growth; and (iii) increasing the relative role of the private sector in economic activity. 4. The most striking achievements of the reform program, have been in the area of stabilization with the movement towards the re- establishment of fiscal, monetary and external sector balance. overallf macroeconomic balance has improved considerably as evidenced in the narrowing in the resource gap from CFA 130.2 billion (19.3% of CDP) in 1981, to CFAP 63.4 billion (4% of GDP) 'n 1990. This has been achieved mainly through a slowdown in expenditure growth -- particularly private sector consumption growth. Import compression accounts for a large part of this overall consumption slowdown, the result of restrictive demand management and slower overall economic growth, reinforced by declines in the unit price of imports (due to sharp falls in the prices of key imports; petroleum and rice):V. These developments are also reflected in the improvement in the current account deficit from 24.3% of GDP at the beginning of the period, to 7.8% of GDP in 1989/90. Export volume growth however stagnated over the period and did not contribute in any appreciable way to these improvements. 5. Given the consumption squeeze, and in response to rising interest rates, private savings have picked up significantly from the negative levels of the beginning of the decade, to about 10.4% of GDP in 1989/90, allowing improvements in the savings investment balancet and a reduction in the share of gross domestic investment financed by foreign savings. Overall investment absorption of resources fell in the first > Te details an data souces. the cemtructian of the data basot da werlis the atysis of this dcapter end other data Issues is provided in Aram 1. v1 in 1974 jhtsphte prices increased by altet 400L J TeTno of trade are nevertheless still wors than in 1980. it nst be noted that prrt of the 1apova in the sving and imestmnt bot.n. stm froa the retatively toa levets of fnvestzent averaging 12 pwcant of 0P as co.zred to th averap of 15.5 percent for Sub-aaran Africa. - 3 - half of the decade, but began to recover in the second halt due mainly to mprovements in private sector investment. 6. Fiscal balance has also improved with a fall in government expenditures relative to GDP. Government dissavinge have narrowed relative to GODP and the overall public sector deficit has fallen from 8.0% of GDP (cash basis and excluding grants) in 1980/81 to 4.3% in 1989/90 and a surplus of 0.2% of GOP was recorded in 1990/91. On the revenue side, these fiscal balance gains have been achieved at significant cost to private sector competitiveness (para. 21). Tuble 1. SEML: Ftle of Fias (perent of MP) 1981 1"a 19t9 Prtweeo sectw Sawbus ~~~~-3.6 0.1 7.2 10.4 tat ~~~~~7.7 5.9 836 8.9 8-1 -11.3 -5.8 -1.4 1.5 PiMic Ssw1,qs -3.9 -150.3 -1.? b~~~s~~t ~4.2 3.9 3.9 3.8 8-1' ~~~~-8.1 -5.4 -3.6 -5.5 bemusce Betafis -19.4 -11.2 -5.0 -4.0 *8-I inmsr f,, thfs tube wre stigstly twugor than ewvaUt pMfc sects? deficit merts site the TUE (Sswninnt baftt) does not cqmur'. attl nvesUt spwAndl. 7. Pzrogres on "lstructUral adiustment" has on the other hand been more limited. The lack of real exchange rate depreciation and the limited progress in removing constraints to private sector investment and growth, have contributed significantly to constraining real growth (the modern sector has continued to shrink over the past few years). This in turn puts in question the sustainability of the stabilization gains. Additionally, while membership of the CPA zone has encouraged the achievement of domesitic monetary discipline, it has not decreased Senegal *s reliance on foreign financing which has been significant over the past decade, with some adverse consequences (paras. 37-39). A. Ninenditurs Trends S. Public expenditures deolined significantly over the decade. While such contraction was warranted given the unsustainable fiscal deficits the economy was faced with at the beginning of the decade, it has been achieved at the unnecessary expense of cuts in expenditures that are -4- critical for longer tots growth and development, particularly investment in human capital, and expenditures towards the provision and maintenance of upporting Lafrastructure. 9. Total expendLture fell sigaLficantly, both relative to GDP and in real terms; from about 34% of GDP in the early 1980of to 23% ln 1989/90 and by 10. 6-in real terms. Since 1986/87 however, the trend has been reversed and the Lncrease in the accumulation of domestic government arrears indlcates that government absorption is Lncreasing by more than is suggested by the expenditure data. While both recurrentE and lnvestment expenditures fell relative to GDP, the greater part of the overall change was achieved through the squeeze on lnvestment spending, whose shre in total spendLng declined to 38.1% at the beginning of the decade from 31.8% in 1989/90. lrl. 2. SUEAs Key Trms In Totat PMItc Swetor Elmlures 1961- 19166/87 1987/88 19S489 19119/96 Total a/ 395.4 331A 3.4 350.8 353.5 Recrrent 242.1 221.2 234.3 241.1 211.0 Ciptal 1S3.3 110.2 101.1 109.7 112.5 S.of CDP Tauta 338 25.7 23.6 21.0 23.0 karerrt 20.7 17.2 16.5 16.5 15.7 capita 13.1 8.5 7.1 7.5 7.3 X of Total _nuruit 61.2 66.7 69.9 68.7 6L2 Captal 3.8 33.2 30.1 31.3 31.8 10. The biggest change in the sectoral composltion of overall xpenditures is the marked decline in the share going to economic services, (t.e., agriculture, Lncluding livestock and fishing; mines; Ladustry; energyg transportation; and communications), which has fallen by over 13 percentage points over the period. This is explained largely by lower investment spending, particularly in mining and industry. This queeze on economic services has allowed increased shares to hbgher education and to general public services. The share of health expenditures have remained low, barely increasing over the period. gi Rehm to swap ezpenditsr ow 191 /82 152. h ffiseal year na fri July l- amS 30. As oat Jary 1, 1993 it witt conrapor to the catdwr voa. Z Etliuda apndidtures an the su*ln Stwr 1efom ad the CIvt Service Votapey mt o fra. Defense share Ln total expenditures lncreased margLnally over the perLod, from about 8.3 to about 8.8% in 1989/90. ThLs ia l9ver than the Sub-lahaan African average of about 12,5%. Trends In Public Expenditures , n~~osta. ..* _s frnm lea 360 490 9a00 ~ 3 !4oo "M0 140 1Jtl 100. ISi-IS tloos 1tlll lOP 1 068V81_00 Yw Rcrent Exaenture 11. After peaking in 1982/83, expenditures on the recurrent budget fell slgnLficantly until 1986/87 but have since increased, offsetting the earlier dolineg real expenditure in 1989/90, was about 2% higher than at the beginning of the decade. The most striking chang is the substantial increase interst jS jgi whlch by 1989/90 had risen to 18.7% of total recurret spending and 2.9% of GDP from the le"ls of 9.51* of rcurreat spending and 2.0% of GDP that prevailed ln the early 1980.. This surge is largely a reflectLon of the rLse in world lnterest rates in the 1980. and also of the hlgh degre of foreign financing of the senegalese economy over the period. Over the decade however, Senegal has succeeded ln restructuring its borrowing towards more - 6 - favorable terms2 and external debt has also stabilized in recent years. It is expected that in the medium term, the weight of interest expenditure will fall significantly reflecting these factors as well a more debt cancellation from creditors. Ta1b 3. SENEGL: Trends in Cqasitfon of Recrrmt Expunitsw. CFAF f illiwa tCCmtet 1985 Priem) i__________ 195018 19/t9 1984185 19/ 190 1909J90 vageaW 135.2 124.9 113. 1126 120.3 123.2 80 45.1 "a 39.0 33.3 35.0 31.1 T'fs 37.6 36.9 31.5 36.5 37.6 33.0 terest 19.9 35.6 47.1 38.1 47.6 4.1 Total 236.4 2462 234.7 1.2 241.1 211.0 12. Other important changes in real recurrent expenditures were the declines in the waax blll and in materials and maintenan¢ expenditures. Zn constant dollar terms, the wages and salary billW fell by about 7.3% over the period contributing to the erosion of average cLvil wages as the civil service size grew by about 8 over the period. In real terms, the average civil servant gets paid only 89% of what he obtained in 1980/81. This has meant signifLcant declines in civll service incentives and consequently in motivation levels with obvious consequences for efficiency. Even so, civil service salaries are much higher in Senegal than in other parts of the Sub-Saharan Africa. Civil service pay is about 9 times per capita income as compared to the average of 3 times per capita income in a sample of non-CFA countries. Furthermore, Senegal continues to spend a large fraction of both domestic revenues and national income on civil service wages (51.1% and 8 4% respectively). Given the need for real increase in the average civil service salary on the one hand and, for a significant reduction in the wage bill on the other hand, the only possible recourse seems to be to reduce the number of civil servants. 13. The biggest erosion in the recurrent budget occurred in Mktatrla an maiantnance expendltures which fell by about 24% in real terms over 2/ lb do of wod M_ ad lto-tem d bs increei cameiamt lown nou sumAt for 45 pcnt oftotal tstock - epse to 49 pecet 1n l965; Ii th an intwet roe n all nea semit fell fro 5.5 pece 191 to 1.7 pecnt i 1990. 1 'Ibis definitfin of vow ad salaris tclde tranpwrtatifn *llua es and hompitfltatien beweit for civil serwnts. If thaewe. included, thm btll would smet to CFAF 117.5. 121.1. 124.8 rd 123.9 billion for 1986/87. 1987/88, 19951 ad 139m1/90 repctilty. , vewn In eastien ad defame e the total ebitll incrsedifn mte dtllar tu* hmem In prl of 54 pect nd 19 prNt restively ha be _sh tht te verage __plq, in h eos stfil got paid low in 1989/90 the i 9"MM. -7- the period. This trend has continued in 1990/91 with an across the board cut in budget allocations for non-interest, non-wage xpenditures to holp redress expenditure overruns. The 1990/91 cuts were made without an overall framework to prioritiz pending. Such a framework is urgently needed in order to prevent further erosion of maintenance expenditures critical for efficient use of capital and to avoid further deterioration in the quality of social services. 14. The extent of underprovision for materials and maintenance spending in the recurrent budget is particularly evident in education, where this item is less than one tenth of wage expendltures. For agriculture, the corresponding ratio is about 1*Ol. y These ratios are low; a healthy balance between wages and materials and maintenance in the two sectors, would imply ratios of 1sO65 and lsO.80 in education and agriculture respectively. However, spending in other parts of the budget may imply a higher overall ratio of operations and maintenance to wage expenditures. i5. Outside of the recurrent budget, some recurrent spending occurs ln the investment budget and under the special accounts. As a convention, donor financed technical assistance and support projects which involve mainly recurrent type expenditures are classified as investment spending. Estimates in the Health and Agriculture sectors indicate that the apparent underfunding of materials and maintenance is significantly compensated for by spending under the capital budget. At the global level however, it is unlikely that this is the case. 16. Table 4 presents real lndices detailing the changes in recurrent expenditures across sectors and economic categories. The squeezing of mater'-al and maintenance expenditures was observed across all sectors including the education sector where overall spending lncreased, with the biggest drops in community services, health and agrlculture in that order. In all sectors, the balance between wages and materials and supplies expenditures worsened over the period as wages increased or in most cases fell by les than did materials and maintenance expenditures. Transfer outlays increased significantly in Genoral Public Services (payment of membership obligations to various international organizations), in Education (payment to university students primarily) and in Agriculture (payment for maintenance and rehabilitation of irrigation infrastructure and for research). Overall real recurrent expenditures increased only Ln ducation where a 54% increase in personnel numbers, led to growth in the sectoral wage bill of some 13t. Interest outlays more than doubled over the period. , 11mm rZhats mfsr to 19899 lmldtmu. SW. Tate S In Stathtcl uK. Table 4. SENEGAL: Indices of Real Recurrent Expenditures. 1989/90C 1980/81 a 100 sges OZ Trarnfers Total Gen. Pulic 81.1 82.3 283-0 90.9 Services Defense 104.10 7 _.0 7-0 94.6 Education 112.8 72.3 115.8 110.6 Health 80.0 59.6 80.2 73.7 Caminity 90.8 37.2 61.5 67.5 Services * Econ Services 72.8 71.6 107.9 85.9 Agric. 84.4 61.9 228.4 94.5 Interest 227.2 Total 92.7 75.7 101.3 102.2 Met of Int 90.7 * Social security, local goverruent services, and other social services. Investment Expenditure 17. Investment expenditures have borne the brunt of the squeeze on total public expenditures, falling by over 30% in real terms over the period. This fall is relative to the high levels of the early 1980a when there was still a big push in the context of the 5th and 6th development plans to build up basic economic and social infrastructure. There was also less scrutiny and selectivity in the choice of projects resulting in several "white elephants" being embarked upon. The biggest drop has been in the share of investment in economic services which fell by about 5 percentage points over the period, due to declines in spending for mining and industry. The share of general public services has increased the most, whilst other sectors increased their shares marginally. Agriculture sector investment has on average absorbed the Table 5. SENEGAL: Composition of Investment Expenditures (X of Total) 1981/83 (period avg) 1986-90 (period avg) Gen. Pubtlic Services 2.4 6.6 Educkation 3.2 3.4 Health 2.8 3.8 Comauity Services 5.9 6.0 Economic Services 85.7 80.3 Agriculture 17.6 32.0 Mining & IrKkmtry 38.8 1.1 -9- largest ingle hare of investment spending averagLig 32% of total Lavestments over the last four years. Thls La due malnly to the presence of large scale irrigation projects. In some se¢tors, notably health, the decline Ln expendltures towards the acqulsdtion of capltal may be even larger glven the LncreasLng proportlon of reeurrent type spendLag in investment outlays. 13. As mentioned above, a range of recurrent costs assoclated wlth donor-financed projects are categorlzed an capital expenditure. The sustaLnablilty of the lnvestment program depends strongly on the ability of government to ralse domestic resources to finance the recurrent costs of maLntainLng new and exLitLng capltal. Thus, lt is important that such costs that are currently classLfled as capltal expendltures be LdentLfLed and properly categorLzed. 19. Whlle it is unlikely that the observed lower lnvestment ratLos have been assoclated wLth an lncrease in the effieLency of public investment, the deelLnLng public sector lnvestment ratlos naed not necessarlly signal further slowdown ln growth ln thle future, given the continued existence of slgniflcant levels of unused capacity and the fact that over the last five years, private sector lnvestment, whlch is relatLvely more efflclent, has begun to plek up. 20. The functional composltlon of expendltures also needs to improve to allow inereased allocations to prLmary health care and prlmary education whlle reducing allocations and shares for general public servicss and defense. While educatlon sector expenditures have increased apprecLably, the bulk of this has Vone towards higher education - particularly student transfers - and significant restructuring of expenditures within this sector is caLled for. FiLancLag of Publlc Inventmonts 21. External funds have tradLtionally financed the bulk of investment spending, averaging about 78% of total fLnancing over the last two years. The balance is provLded from central government revenues (20% of total expenditures) and by publie enterprises and beneficLary contributions (2 percent) Many of these funds go to agriculture, which alone absorbed 228 of external funds ln 1988/89. C. ,teds )n Revenues 22* Tax revenues have performed increasingly poorly over the decade. By 1989/90, receLpto had fallen to 14.2% of GOP from a level of 18.2% in 1980/81. Thl compares with the Sub-Saharan Afrlcan average of about 20 percent. in real terms, receipts fell by about 5% of their 1980/81 level Tax buoyancy was only 0 6 over the period. This occurred in spite of efforts to improve revenue mobllizatLon through improvments in both tax structure, and administration. Whlle this fall has been spread across the dlfferent components of tax revenues, the biggest relative - 10 - fall. kave occurred in taxes on good. and services and on external trade. 23. This tend is due to the shrinking tax base and contlnued weakness in tax administration. The tax base which has historically been low, has actually shrunk somewhat over the period an the formal modern aector has contracted* -- thls is reflected in the falling turnover for firms in the modern (private and parapublic) sector -- and imports have declined relative to QDPW. Furthermore, the formAl sector upply response to what measures of economic liberalization have been undertaken by the government is muted by the continued existence of other significant constraints tv growth in this sector. While the informal sector has expanded rapidly, the government hag not been successful in it. efforts to bring It under the tax net. Additionally tax levels remain highW and have aggravated the problem of tax evasion through smuggling and underinvoiaing. The existence of numerous exemptions from customs duties is also a big part of the poor revenue intakes between 1987/88 and 1989/90, 38% of total imports were exempted from payment of customs duties with duties thus foregone representing 8S% of realised customs revenues. T1e 6.o IIGs K:y Utmmu Inicats TotW vAfOMMAs 19.3 16.9 - Tems 18.2 14.2 TuMeu/Tiotal by 94.2 84.5 - Treu Tu_ 35.5 35.8 I-TM iLTotl Iua 5.8 15.5 - _e_ __ 0.0 12.2 5.1 6.0 (S8 - Urn-Caal_ _ 0.0 4.4 24. Non-tax revenues -- mainly windfall revenues from petroleum and rice imports - have consequently assumed increasing importance in domestic revenues with its share increasing from about 5 8% in 1980/81 to 1S.S% of total revenues whilst petroleum windfall revenues which were non-existent at the beginning of the decade, now constitute about 12.2% of domestic revenues. Though this has helped offset some of the shortfalls ln tax revenues, it has also kept the cost of energy inputs much higher than international levels, with significant adverse effects on competitiveness of domestic industry. 25. if lower petroleum world prices had been fully passed on to domestic consumers, domstic revenues would have been lower by as much , T_rns en tntetie.l trb contftt the larget - nrt of ta reum mti,W to 40 pescent of the total in 1989/0. IV Thoug te coand cstm aid wvalum-add t_moo mm rejced by abut 30 pe_cwe points mrliw, m res mnt.. ha" e cse the overs few to se si., to riaut 90 pemlent feor ped Nst suCePtible to ugigng. - 11 - as an annual average of 15% in the last four years an4 the recorded fisal deficit as a shA of GDO would have been about 2.5k higher. TdA T. SEE: INPUt of Ebcqepl FfwmInri4 a Flscal blate 19"W 1987/lB NW7 1909/90 _WWu01W U.0 17.5 16.8 16.7 OiM oil 15.4 15.1 14.1 14A S.f eiuPw -2.4 -2.6 4.1 -43 oflStUPw -5.8 -5.3 -6.0 5.7 cman. Oil ilidfaU.. ad 26. Uterual revnues, particularly non-capital budgetary support have increased sigifiLcantly over the period. Budgetary support and debt "lief reached a high of about $390 million in 1988/89, reflecting the adjustment program in place. At the beginning of the decade, exteral grants went solely towards capital outlays but by 1988/89, non-capital grants had peaked at 57.9% of total grants and 6% of total revenues. Though non-capital grants have fallen sLnce then, it is clear that grant financing of current expenditure deficits increased significantly during the period.l D MediLm eZM Macroeconomic Outlook 27. The medium-term macroeconomic framework which gives the likely overall resource envelope and hence sets the constraints on public expenditures has been developed on the basis of the 1990/91-1991/92 Policy Framework Paper that was agreed upon by 008, the Fund, and the Bank in September 1991. 28. The PFP foresees the government pursuLng its internal adjustment process very much as it has done over the past five years and projects a surplus on the overall fiscal positLon as early as 1992/93. The current account balance position is also expected to improve substantially over the period, falling to only 3.9% of GDP by 1994/9S. With the continuation of tight monetary policy, inflation (as measured by the GODP W {dffcft an* oa tmet basis ad xctuding Mnts D5erficit exelujis nxtanit uns. mmftie ffnuciw of tho overall bhet deficit ha roafned ntive ovr the lat fa war. - 12 - deflttor), will continue to be kept in check at on annual rate of around 2.3 prcent. 29. This ptormano is achievable with only arginal improvemet in overall real growth from the current average of 3.3% to about 3.5 percent, much of whlch is projected to go towards contlnued p in savings performance - particularly pub li sector savngs pe rfomance wlth government absorptLon share ln GOP contLnuLng to fall over the perLod. Thli Ls to reflect contlnuation of polLey lnltLatlves to reduce the slzo of government and allow the private sector a bigger rolo in economic activlty. Prlvate sector Lnvestment is projected to lncreasoe, in response to polLcLes to lmprove Lncentives to thls sector. ThLs will offset some of the fall ln the public sectors share but longer term growth is expected to come more from efficLent use of exlstlng capltal than from new capltal acquisLtLon. 30. The improvement ln flscal balance is premlied on -Mprovements in revenue performnces a sLgnlfLcat Lncrease from 16.7% of GOP in 1989/90, to 18.8% of GOP ln 1990/91, reflectLng the Impact on tax effort of now tax measures and some mprovements ln tax administration. In the ensuLng years however, tax and total revenues receLpts are projected to decline relatlve to GOP, a reflectlon of the lLited potential to improve tax effort and pollcy efforts to reduce excessive taxation of the prlvate sector in line wlth the objectlve of improving prlvato sector iacentLves. The net result is an increase ln the tax effort by 1 percentage point of GOP over the period and in overall revenues by 0.6 percentage points. The resulting overall resource envelope will increase to 20% of GOP ln 1990/91 but will from then fall, reachLag 18.3% of GOP in 1994/95, a net Lncrease in absolute terms of 0.3% of GoP over the period. 31. Thli revenue and pattern of growth performance will require total expendlture and net lending to continue to fall relatlve to GDP, reachLng 15. 1% of GDPW in order to achieve the desired target of an overall surplus on a comiltment basli (excluding grants) of 2.2% of GDt by the end of the period. Much of thli reductlon is anticLpated to come from lower lnterest obligations and from a four% fall ln the 81se of the wage bill over the period (from CFAP 125 bllion to COA? 120 billLon). 32. The iprovemnt ln external balance and the elimination of the fLancLng gap is expected to result from both hlgher export growth (avrage of S.7% per annum) and lower lmport payments. The latter reflects (i) lower petroleum lmport payments due to projected lower world petroleum prices, and a change ln the composLtion of petroleum imports ln favor of crude oll rather than reflned petroleum, and (ii) lower cereal import payments due to falling world rLce prLce forecasts. The whole program will require the contlnuatLon of strict demand managemnt with per caplta consumption of imports remalning at depresse levels. Tho debt service account is projected to decrease conslderably due to lower scheduled interest payments, and debt cancellation maLnly from France and the United States. JV ftprsue toal owaint 9pma_ttwo ai nt tlblnd. - 13 - T*it@ IL UECJ. Ceant rAl snuent 4Degatifl cas %of U) (lasein. PoP Scaurl) onomic projectLons were to accompany each year's PTSP and the sme assumptions On iAflation, etc. were thus to be applied in the analysis of all the projectsg recurrent costs were to be given greater attentlon ln project submLssLons; and for bigger projects, feasibility studLes and rate of return calculatlons were made mandatory. Thus project selctLon was to be strongly based on natLonal economic priorities, recurrent cost implications of lnvestment (partlcularly for investmnts that were not dlrectly productive) and the conomic and financial return of projects. ResponsLbilLty for project preparatLon, and programing was to be transferred to the technLcal ministries who would be expected to submlt to the MPC, not indlvldual projects but fully integrated "loL-programaesm and to do much physLcal and financLal maonitorLng themselves. RI fie du". t _prouSuw ms dwi tru* dthe far yaw dm .ts plan with mpnito ftwm e purely fp= owonuet fwd detf led In the Bd*t fstfamt pfaudpnt. RI Those t1_ bl nstries me _wgs fn the gaomt redhffte of naturn 199. - 49 - 106. An assessment of the ne programming system was carried out by the Bank in 1988, in conjunction with the review of the 1988/89-1990/91 PTZP. This assement concluded that while sme progress had been made ln achieving the central objectives of the PTXP, the system as was being operated was still far from perfect and several improvements were needed. Progress was judged to be constrained by limited human resources and technical capacity of the planning and executing agencies and it appeared that key reforms were being interpreted differently by the governnt and by the Bank. Three years later, these conclusions are still largely valid. Additlonally, most of the recomendations made at that time, were never implemented by government and hence the operation of the system has not improved -- in fact in certain respects, some of the lnitial progress made has been eroded. 107. The main imrovemnt in investment programming is that a larger number of projects is subjected to economic and financLal appraisal than was the case before, and there is more discussion on potentLal white elephants especially in dialogue between the Bank and the planning authorities. More staff have been provided for evaluation, and procedures have been strengthened. Thus the investment program has become somewhat tighter and there is more of a llnk between sectoral investment programs and sectoral development policies. However, there is a lot more that still remains to be done. 108. Whlle some economic evaluation is done for a significant proportion of projects and there is some informal dialogue between the planning agency staff and technical ministrLes, the target of evaluatLon of 80% of the total cost of the PTIP has never been achieved since its inception and the screening process is still weak as evidenced by the followings 109. In project evaluation very little crltical analysis is undertaken and quantitative analysis, If carried out, is usually highly mechanlcal with no questioning or justLfication of basic underlying coefficients. Projects with low or in oom extreme cases negative rates of return, are still justified on the basis of various national strategLi priorities, e.g., greater food security or regional balance. In other instances, projects wlth clearly inflated rates of return are allowed to go ahead. Additlonally, it la not clear that government policy on increasing the role of the private sector is generally taken into account since the suitabillty of public as opposed to private financing of projects is rarely conslderedp in fact Lt does not appear that any projects have been ever bIen rejected on the grounds that it would be preferable to let the private sector do them. The fact that Bank review of the PTZP continue to challenge numerous projects in the program (large projects for controlling salt intrusion in the Casamance Region aro a case ln points unit costs varied from one project to another and they lnvarLably included subsLdized complementary inputs) attest to the continued weakness of the screening process. 110. The incorporation of recurren cost considerations is still unsatisfactory although some sectoral studies in education and health have provided the basis for some refinements to recurrent cost norms ln these sectors. Project forms on recurrent costs are frequently filled - so - perfunctorily or not at all. This is partly because staff at the technical .inLstrLes are not always clear on the defLnitLon of these cost, and also because of the unavailability of standard noram for such types of expendltures; though several studies on estimates of recurrent cost norm have been lnitiated in the past, not much ln the way of useful results have been obtaLned and such informatLon as has been developed lo neither standardized nor wldely used by project analysts. Thus ther is no agregate data on projected budgetary outlays for thelr coverage. ThLs has constrained government abllity to quantlfy the impact of the PTIP on public finances, and lts impact on external borrowLng and proposals for flnancing the.m. Tn the recent past, foreign funds have funded substantial parts of recurrent costs of some ongoing projects and lt is Lmportant that such costs that wll continue after the project has been completed be properly Ldentified to allow governmnt to plan for and *asess the sustalnabillty of investment projects. 111. Human resource constraints continue to be a major problem ln investment programming. Technlcal ministries are generally still characterLsed by weak capacity to prepare, program and monitor projects. A government report issued in Aprll 1990 revaled that staffing for project proramin was on the whole lnadequate both in terms of size and of training level. In some cases, the proposed transfer of project identifLcatLon and programming responsibliLties to the technlcal ministrLes has been made even more difficult by thLs weakness and by the shrinkage in staff resultLng from the government reshuffles of 1990 (e.g., at the Ministre d'ZquLpement). 112. A related issue li the fact that the few hlgher trained staff workLng in this area are maintained in these jobs by slgnificant contributLons of external fund towards their salariese. Thle is particularly evident in the two key divisions of the planning organization; in early 1991, the salary bill for the Directlon de la PlanLfLcation 06n6rale was paLd almost entirely from outside sources (all 6 senior staff were paLd from external funds -- 4 by IDA through the PAGD project and 2 by the UNDP) In the DlvLsLon d'IvaluatLon de Projets et Politlque Sectorielle, 9 out of the 14 senior level staff were paid through foreign aid projects. Thli raises concern about the job stablilty of staff most intensively involved ln thls new system aince such high contribution of foreign aid in staff payment is unusual and probably unsustainable. Uven worse, lt could create the impression that the whole planning exercise is done for the benefit of donors. 113. There is also evidence that five years after lts introductLon, the penetratLon of the new system is limited; most planning staff were not aware of the guiLd. Pr-ati m for project evaluation nor of existence and use of project monLtoring files (ln ome cases, these files were not used because they were thought to be too complex or otherwise inappropriate). -urther ore, the LnstLtutLonal framework that was set up to support thLs new system is still not fully functional. The W ibis - ew of do *I_es of do Ohuuust's April IT Lett of wel4pmeft PticV. Ml Ta to esqattivw itt smliatw J. It d. pwntatata ed privat setors, tsw t Wm hW to off. mtars suh1a thusw l.it civil oewvice ltelts. - 51 - Comit& de Selection de Projets has met only flve tLmes iLAce ltA lnceptlon. 114. The project selectlon process has been weakened further by the 1990 government reshuffle whlch led to the transfer of the project selection, programming and monitoring functions to the ODI. This has meant that those who are most knowledgeable about the substance of projects -- the Sectoral Cellules Ln the DlvLiLon of Ivaluatlon and Sectoral PolLcies - are effectively excluded from the selectlon and programing process; they have no further role after they wrlte their evaluation notes. Addltionally, thls has also created the exLitence of two sets of sectoral teams, each thinly staffed thus dllutLng the objective of sectoral specialization. However, the reshuffle ha also had some positive effects; more informal communlcation between all units ln the process since they are now all under one mlnistry; and the computerized debt tracking system of the DDI should become a more effective instrument in the monitorLng of investment. 115. There is insufficLent coordination between governrent and various donors in the PTSP/BCI programming process. On the government ide4, not enough ha been done to bring donors into this new programing system and several complain that they do not recelve drafts to comment on and to cross-check program Lnscriptions against their data. Sn January 1988, for the first time, the government communicated its draft program to other donors for the 1988/89-1990/91 PTIPW, but thl consultatlve proces has not continued. It appears that on the other side, some donors have not been forthcoming in providing government wlth information on the details on their projects (e.g., the nature of expenditures and stage of execution of their projects). Ixecution and Monitorino 116. Project execution and monitoring is still flawed in several wayes coverage of investment spending is not cgM2reheneLve; project implementation is slow and there are stlll several projects that are executed outslde the programs (oroiects hors elan); and data on project expenditures are inaccurate and not up to date. 117. The PTIP system was to include all Lavestment expenditures except at the local government level and cases where spending units havo autonomous budget.. This has howevor not happened siace several projects are still left out. Som donors complain that not infrequently, projects they are financing are absent frzm the PTIP. ThLs tends to happen in cases where no government counterpart financlng is involved and is a reflection of the lack of adequate consultation between government and donors in the entire process. 118. Several projects are executed whlch do not appear in the PTIP for that particular year (projects hors plan).. In 1988/89 and in 1989/90, such projects accounted for about 17.2 and 15% respectively of total expendLtures on the PTIP (see tables 15 and 16 of statistical annex). w it to it ew ta donor c lmete tdkn frut aCMt. - S2 - it La clear that though the magnltude of such projects hta fallen over time, the monitorLng agency (DO?) has no authorLty to reject or block funding for projects alrady started even though they did not appear L the orlgial program. Though some of these projocts may be picLked up in subsequent pogr awing cycles, lt appears that this La one way that ministrea a"r able to get their pt- projects lnto the program without going through the screenLng process or after being turned down. Such projecte that have failed (or not been subject to) the screenkng process should not be under implementation but clearly some mlnLsttLes are able to get around thli by concludLng financial agreements wlth donors outside the PT?P. Some of these projects are also fully government funded. 119. This problem also stems from the fact that some changes can be made to the program at the ministerial level, i.e.. one project substituted for another or fundLng swltched between projects so long as ministries keep wlthin thelr allocated investment resource envelope"a'. Such changes are not inherently bad for the investment expenditure decisLon proess sance it could be consiLtent with a vLiw of allowing projects in the PTZP to change after more study, analysis nd dialogue wlth sponsorLng technical mLiistrles and donors, to divert or reshape projects that *re poorly conceived or of low priority. However, it appears that this has not been the case and consequently, these changes serv to aLtlgate the usefulness of the selectlon process. a lot of thess ministerial level changes depend on which project managers ar knowl dgeabl enough about the praoedures they need to go through to get monies dLibursed for their projects and how aggresidve they are in donB this. It appear that this is done without any framework for prLorLtLszhg project executionW' in th3 case of shortfalls ln resources. 120. Project financial execution ratesW are quite low: 678 and 63% for 1988/89 and 1989/90 respectlvely. ThL is explained in some cases by delays due to the non-provisLon of government fiancial obligations or non-performance on required polLcy changes. Goverment crediblilty is also so low that ln some cases, projects have been held up because lt has been difflcult to flnd contractors to work on projects for which they would be paid by governmt funds. There may be more serious underlying problems ln project implementatlon but a study on project execution problems, planned for 1987, ha still not been carried out. 121. The reforms gave much attention to strengthenLng monLtorLag and some success has been achieved ln thLs rgard. ComputerLsation has been introducNd and more information on project content and evolutLo* is available now but its usefulnes is constralned by the fact that files are not kept up to date partly because of failure to do annual updates I Ltmmi orly fwn aintlel _ wt f* b. W ibis .a..d alao kelp amse tat 5tw"t .uxwp tso riat. NI TaMi. acmh of aemial i Wpumian any h*stu proJ.a relative to dot -i b*atsi. i.e., uctudia qamLItum an project that wrwt in th prIoam - 53 - et the time of prpaation of each PTIP, and also because of the lack of data on expediture whlch are directly executed by donors. The publishin of the bilan d'2&ouicn detailing project implefmntation though a major step towards better monitoring and transparency, is unable to produce usable data in time to allow accurate budget estimates. Addltionally, the number and quality of these bulletins have declined signLfLcantly in the last few years and there are serious concrn about the quality of the data provided in these reports. 122. 3vaatien. In view of the current staffing constraints, one possible way of improving the efficacy of project scwreenig li to concentrate efforts on the evaluation of big and or especially important projects. On average, in each year, projects with planned expenditures over CMAF 1 bllion number between 35 - 50 and absorb S4 to 80% of total PT!P expenditures. This will improve the quality of evaluation and consequently of investment till such a time as staffing improves to allow more comprehensive coverage. Additionally, some evaluatlons could be contracted out to the private sector. On non-directly productive projects, efforts should be made to introduce and standardize the use of qualitative crlteria. The MPC has itself suggested the use of such criteria in the past. These consist of specifying a number of simple qualitative criteria (e.g., transparency of data, degree of softness of aid tomes, social impact, contribution to national priorities, possibillty for private sector financing, etc.) and assigning weights to them and grading each project according to its score. 123 R cnarrent LGQAt More attention needs to be given to estimating and lncorporating the recurrent cost implications of investents into project analysis. MLnistry staff, with some technical assistance should clearly define these costs and estimate and compile acceptable norms for the various sectors. Planning staff should then be trained on the use of these norms. The experience of other countries -- notably Ghana in this area could be useful. 124. 8-1ection. selection process ought to be made more rigorous and projects with unacceptably low or negative rates of return excluded. Critical scrutiny of evaluation reports and accompanyLng quantitative analysis is needed to ensure that underlying assumptions are realistic and acceptable. 125. Trainin and Stakff L. The Direction de la Planification could be made responsibl. for traLaLng of new economists. This could include the setting up of a trainee program by which a few university graduates with outstanding reordo would be taken on as trainees for two years. They would work as economists or planning officers, take specially designed courses at the University or at C035h, supplemented with formal in-house and informal on-the job training and be absorbed into the project evaluation, programming and monitoring process. 126. Execution and Monitorina. more attentlon should be pald to lmplem_ntatlon and the long delayed study on project implementatlon - S4 - problms should be undertaken quickly to help shed more light on how slowly proje*ts are executed and why. The quality of the data on execution needs to be significantly improved and updated often enough to make it useful. More information should also be sought from donors on their project expenditures. 127. *L CLyatL9A. Greater attention should be given to increasing donor participation in the entire process; donors should be rgularly sent drafts of PTIP/DCI documents for their verification and comment. Donors should also provide regularly to government information on expenditures and progreas on projects that they are funding; particularly those that are purely foreign financed. 128. Purhl rAactions fr Imorovina Public Nimendlkure xanaaenmnt. The key follow up to this study should center on institutional development and capacity building for more effective public expnditure planning, budgeting and implementation in Senegal. The recm_endations enumeated in this chapter, provide elements of a plan of action for achieving this objective that could feed into the proposed Public Bector esouroes Management Operation planr.ed for FY93. 129. As discussed in the introductory chapter this study was an initial step towards improving and deepening our knowledge of public finances in Senegal. In view of the magnitude of the expenditure cuts required to meet minimal standards of service in priority sectors (para. 85-86)o the most urgent task should be to undertake a move detailed analysis of expenditures in non-priority sectors -- not sparing defense - to identify a credible program of reductions that can be effected in the near and medium term. Further stepa towards this objective could include the following: (1). More analysis of government domestic arrear8s (Li). Identification of adminlitrative services of central overnment that could be carried out by the private sector, and evaluation of the progress made so far in areas wher such identification has already been madet ($$$). Examination of the activities -- financing and expenditure - - on key special accounts in the recent past and examination of ways to prevent them in the future; (iv). Closer analysis of tho link between capltal expendituro numbers in the TOFE, the PTIP and the National Accounts with a view to reconciling these data. - SS - 1. The finances of the covernment of Senegal ar organized ln thrae Separate but LAterrlated accountss the recurrent budget, the capltal budget and special and correspondent accounts at the treasury. Though the recurrent account covers expendlture items that are primarily of a recurrent nature - government consumptLion, transfers and subsLdies ad interest on domestic and external debt, ome item of capital expenditures are included under this account. Similarly, and perhaps more significantly, the capital budget, although representing mainly expenditures towards gross fixed capital formation, incorporates Ltem of a recurrent nature. 2. Financing of the recurrent budget is provided from domestic tax and non-tax revenues and fram external non-capital budgetary loans and grants. Financing of the capital budget consists of external capital grants and loans and domestic borrowingl. The speclal accounts detail revenues and expenditures for certaLn supecial' purposes 6e.g.. debt service and road maintenance) and are funded from various earmarked tax and non-tax revenues and from current revenues and grants. They cover expenditures of both recurrent and capital nature though they are generally classified as capital expenditures. The correspondent accounts represent the accounts of various entities, mainly public enterprises and local governments which ar required by law to bank with the treasury. These accounts should ideally be used to servlce tax and other obligations of such entities. The guidelines and procedures for spending out of these special and correspondent accounts are less strict than those applying to the recurrent and capital accounts and thLs has contributed to the large deficits on these accounts ln recent years. 3. Two key data sources have been used in deriving data sete on government finance for this studys the Table of Government Financil1 Operations (TOFU) prodiced by the Senegalese Treasury and the DIMF nd different documents issued by the Budget Office and by the Debt and investment Unlt (DOI), both in the Ministry of Uconqmy, Finance and Planning. The following is a summary of how these data sources are used in the report and the key differences between the data ets derived from them. 4. For consistency with the PFP procses, the discussion on recent macroeconomic trends and the medium teom macroeconomic framework is based on data presented in the TOFU (historical and projected). However, the dicussioa on Uxpenditure Trends nd 8ectoral Fxpenditus Programs is based on a dat set constructed by staff on the basis of documents from the Budget Office and the GDD. This data base was constructed using the guidelines provided in the accompanyLag manual to the IW1 Public Finance statistics. Actual expenditures used in the analysis refers to expenditures that have gone through the r4gleMsnt" stagel that is, expenditures for whlch payment orders have been issued. This Is the closest data to actual payment for expenditures that is y JlA 11 pwt of the ft,wasb of tm apital seui ceO fra e au rsAm thru* a traw to this saet* trm th reoxrut WOW. - 56 - Anx.L roadLly aviabl L a *ngggted om. Thio, howevr, understfates totsl governm'nt absorption, since the issuing of payment order oocure aster consumptLon of the goods and sevles and usually with substantial (and variable) ti. lags. These delays sta not only fro the long and cumberome procedures for budget executLn (see Chapter RZ) but also ia same oases from the lnsufflce"ey (relative to cctual consumptio levls) of budgetary approprlations to various deartments. ThLi appears to be frepently the cae for telephone, electrclity, transport and water servie s. in some lnstances , issuing of paymnt orders are intentionally delayed to provlde government ome Zbroathing space" ln terms of settling its legally binding payment obligations. Thli dftinitLon was adopted since it ia the closest to actual payment for expendltures and also for consistency wLth an earlier study whlch prepared a database on expenditures ln the early 1980 (some of the results of that study wer used ln the analysis). In vLew of the dlffLculty of obtaLning reliable data on the Special and Correspondent Accounts, these are not covered La detail (with the exceptlon of the Road maLatenance tund and the Natlonal nergy Pund), in this report. The data set thus focuses on the recuxrent and capltal accounts. S. The constructed data base and expenditure data prented la the TOWN differ ln two key aspects. Ca±ital g32Wditurjs Public investmnt exntur have consistently been ude recorded in the TO mainly because the Publi Inestment Program (PT!P) li not fully intograted into the norml budgetary process. Table 1 below compares capital expendLture data asrecorded in the O to capltal e ture data presented in the PT!?. Though official exteral poject fLnancing data (both grants and loans) gives rise to total capital expenditure numbers conslstent with what appears in the PT?, the impLied TOrn definition of what constltutes expenditure by government excludes expenditures that are clearly in the public domain and thus have been included ln the analy81si heoce our data set on capltal expendLtures also differs signlfLcantly from what li presented ln the TOFU. The governmeat has declded to fully lntegrate the MP into the normal budgetary and expendlture process and it is expected that the TOWN will be altered accordLngly. Tabl L. Canital xsendlture Data CFAR Billion ~*******..~..j 1966/87 1 1987/8S 1988/619 9/0 I TOF W I 38.1 41.7 41.0 39.8 PSIP 114.6 102.0 110.0 112. PBmmarent Msnhnitut same of the data on expenditures for materials and aintenanc from th regions outside Dakar and fro dlplomatic missions abroad are not receLved promptly and do not - S7 - &=a I appea in the published documents of detailed expen4iture over the fiscal yea (although the treasury gets this data sad incorporates it ln th preparation of the TOFU). The constrcted data base exclude thes expenditur numbers for coa-parabUlty with data tram earler years for whLch such information was not available. Frthermore, while the functional classiflcatlon of expenditure from diplomatic mLilions La clear, the rest of the total is not broken down by functional category. The data on waeL and ealarin l.a the T0JB is also higher the that presented in the car2ntructed data set since. in accordance with 1MK guidelines, hospitalization and transportatlon benefits for cLvil servants are excluded from thls total. Thes benefits, on the other hand, are lnoorporated in the TOFS definition of wages and salaries. Table 2 details these diffrences. ZTLab . 2 ROME= Msre Du Cray Billion ____________ 1986/87 1987/88 1988/89 1989/90 TOFU W Wage 119.8 122.3 12S.2 126.8 - 08K 44.7 47.3 50.3 61.1 Recurreat 232.7 244.7 248.1 254.3 STAFF Wage 117.1 116.9 120.6 123.7 - oeX 34.6 32.6 35. 34.2 Recurrent 230.0 236.4 241. 6 242.0 In view of these differences, the summary of expenditure proposals in Chbapter U is done la the framework of a TOF$ that is modified from the origlnal to take account of the differences between the original and the constructed data set which underl'.es the dlscussion of expenditure proposals. 31 kt noWAS, treeWN atImlid OeUm PAdM _fmnud to _b_ C_I 10.1 bMlhIMs (CMAF 4.9 bi11e frm do dlpsomtf. sAsse ud CMIA 5.2 bittin fw mlINItse in the rwoe). -S8- AM= I1 ZTabl 3. Modifications to TOPS CFAI Billion 1989/90 Original Adjusted Total Rev & 276.2 315.7 Giant. Grants 19.6 59.1 Govt 19.6 19.6 V-Govt 0.0 39.5 1xp. & not 325.9 386.7 LendLng Cuarrnt 254.3 242.0 Capital 39.8 112.9 Others 31.8 31.8 overall Deficit _ 69.3 -130.1 (Dx. Grants % of GDP _ 4.5 - 8.5 The main steD in going from the original to the adjusted TOFW are as follows$ (I) Adjustment for Capital expendituress involved the incorporation of the full size of the PTIP; on the revenue side, "Son- Government, project grants were added under grants. (ii) Adjustment for recurrent expenditures: wages, interest and operations expenditure data from the constructed data -at was used to replace the original TOFB data. - 59 - AnnsX 2, A. RA I. DescriDtin of Seator 1. Health 8aMug.. The most significant Lmprovments in the health condition of the average Senegalese were achieved in the 1950c and 1960w. In recent years, the overall health situation has not improved but, with the exception of pockets of resurgence of epidemic diseases, does not appear to have overly deteriorated. While better than elsewhere in the Sahel, senegals health indicators generally compare poorly with those in other parts of Africa: death rates, in particular for lnfants, children and pregnant women remain relatively high, and life expectancy at birth, relatively low. Ironically, these rates are recognized as a major factor explaining high birth rates. Other problems include the persistence of endemic diseases (tuberculosis, leprosy, etc.), seasonal nutritional deficiencies, and sexually transmitted diseases, with the threat of the spread of the RIV infection. Ithe 1. IsgALs leith Sctw - Deic Indicators, 19 _Idicetor so moot S-U.rm Africs Lift UpectoW 46 51 MAdt Lit _o_ Zl 4Z Per Thoused Pqpuaatius -cnb birth rats 45 47 10 Liw Sirh -infnt.- utlity nas 12B 106 -uabr 5 earttity raet. 210 173.A fPqtalanie pe - phsicia 13060 mU _us* 5) 2. The Health Care System. Public Health facilities are organLzed in pyramidal fashion under the Ministry of Public Health and Social Affairs (NPHSA). A large and rapidly expanding prlvate sector (concentrated mainly ia the Dakar region) operates alongside the public sector ln both ambulatory and hospital care. .V' Ib psfo mm ofthe USnualme heath seto has hebs partfaiay idttrd d tum the iqlommstein of thw Firt Rua sealth Project ad the preparation of a _a Rerce Dswlmqnt Project C) fecnmfrU on papsetian ad beetth (se the SA Ru 91B0SE fw d1ts). oth project foAed em primy tth re. A- rectsUa health fisnfepg i1mums in _Inqal end a first attat at iqarwiag ow _I_mwede of the hu_Iitd actor; ittl I b' of the qaetho pforeueof the priate setor, In spte of its iq_tus. - 60 - MME 2 3. The tfrst two levels of the health care system provide Abu1stgU SM& The first consists of 659 hbalth_Dosts (1 pFr 11,S00 population) each managed by a trained nurse who also supervise between them, tho 1,400 wcsem de sant " and their village health workers (VHWi). The second level includes 37 health Cater, each managed by 2 doctors, alternatively supervising the health posts in their designated zone of ref erral; in regional capitals, except for Dakar, FMtick and Eolda. regLonal hospltals play the same functlons for the posts near them. Bach of these zones defines a system of 45 health distctes (1 for 161,000 popul&tLoi). supervLsing 15 posts each on average. A health district is the basic operational unlt at the periphery. 4. A few other ministries offer health servLces to their particular constituencies; Ministry of Natlonal BducatLon for students, and Ministry of Defence for the Armed Forces. MPHsA also runs a Center for public servants. About 20 large parastatals wlth a few large prlvate enterprises offer on-slte health services for staff and their families and often their mmediate neighbors. S. The Private, for-profit care sector includes 47 posts, and 272 Lndividual practLtLonrs (doctors, dentists and speciallts). The private, non-profit sector runs 85 health postsl several GOs have started to integrate health programs as part of their developmont pogr_ams all but one intervene outside Dakar, mostly in rural areas. Seventy two posts are regrouped in one Christian Association. 6. ftsgital camr is provided at the third (consLitLng of seven regional hospitals) and the fourth (the national hospital system CHU, consLstLng of four hospitals in Dakar with teaching and training functions) levels of referral. other hospltal facilLties outsLide this system, include the Hl8pLtal Principal" run by the Armed Forces with substantial French assistance the Center of Traumatology and Orthopedics (CTO), a modern equipped hospLtal recently completed, fLnanced by the Social Security Fund (CN8)g and one non-profit hospital (Saint Jean de Dleu in ThiAs). The for-profit hospital care sector includes 25 clinLics, six of whlch are outside Dakar. The total number of beds available (excludLng beds in health centers for dellverles and slmall" surgery) is roughly 4,130 (or 1 bed per 1,900 populatLon), distributed as follows MHuS - 2353 beds Non-profit HospLtals - 1880 beds For-proflt Clinlcs - 700 beds 7. In 1968 there was about 1 physLclan per 13,000 population), 1 nurs per 2,000 population and 1 midwlves per 14,000 population. These numbers indlcate a shortage of doctors (standard norm is 1 for 10,000) 31 This tMberepres Math cente that ae mctIowau. m lw of btb by hospitat vary tmn evee. The dittrea oft en_s free to differen cmwpt seIused, btmn the, ipysicat cepe lty d dho fpc{mmta4fteity tar muw of bak -ure acre prwiid Is admAst.) TM minr of be&n toe fw-profit tliies Is boud an staff etitae. - 61 - AMUUL2 and midwives but not nurses (standard norm for both L 1 for 5,000). An analysis of reglonal dlstribution patterns, shows that health services and facilitles are heavily concentrated ln the Dakar region. where only 22% of the population lives permanently. It has about 4S% of total public health personnel and almost 80T of privato personnel. Over half of all hospltal beds are located in this regLon. S. The publlc system for dg ditr has stagnated whilst the prlvate pharmaceutlcal market La expanding rapldly. Publlc facilities are partlally supplied wlth drugs by the National Pharmacy (iRA). The private sector Lncludes two local manufacturers, three importers- wholesalers, and 120 pharmacies; one manufacturer SIMO? just lost its .de-facto local market monopoly for all drugs it produces. The pharmacLee supervLie 140 distributLon points where drugs are sold along with other comuercial products. 11. Issues in Health 8ector Strateav and Develomnent 9. In June 1989, the GOS adopted the National Health Policy, to guide the restructurLng of the sector over the 1990s. The main objectlves of thLo polLcy Include the following: * increased participation by population through CMOC and private Mo sector; rationalization of drug distrlbutionl promoting the decentralization and strengthening of health distrLits and the integration of vertlcal programs improving resource management and planning and budgeting capacity at central and regLonal levels. Achieving these objectives will requlre some LnstLtutional and regulatory canges - particularly the clear definition of th resnctiv roles gf the ublic and 2riLate sectors APS? and MM shold be rorganized and thelr roles redefined in line wLth the objective of Lnereased private sector partlcipation and greater partnership betwon the central government and other branches of government and the private sector. Health facilitLes wlll have to be glven more managerLal autonomy and the system and methods of training improved. 10. At the dlstrigt leveI key elements of the strategy include community particLpation in the fLnancLng and the management of health posts and centers; promotion of essential drugs; and strengthenin of health care dellvery through improved training supervlslon and etraliation of budget managemnt. Ze2sures that have already been introduced in line wlth thls objective lnclude: the use of an annual development plan for each dLstrlct (PDD8) to define and to link all programs to improve health conditions and consolidate all financlig sources (central government, local governments, CEO contributions and external fLnancing). -62- AMk=X_2 budgetLng allocatlons by distriLt using input allocation norms anod the soparatLon of drug allocations from other operating costs. reallocation of personnel to meet staffing norms for health posts and centers. 11. for the hosptal seotor a coherent strategy is yet to emerge but the following elements should be important components of any strategy adopted: strengthening the technieal capabilities of regional hospitalsl complete reconversion of the CHU into units combining traLning in new medical technlques with research on medlcally and economLeally effLcient techniques to cope with local epidemiological needsl promoting managerial autonomy and cost recoveryp and * coordlnatlon with the prlvate sector. 12. Dra distriution is a key element in provLdLng health care. The @08 now has a clearly stated policy to promote the use of essential drugs at low cost. This can only be achLeved by providLng most of the public with generic drugs procured under international competitive biddings such a policy requires the public sector to play a catalytic role in promoting the preseriptLon, distribution and use of essential drugs, by providLng adequate incentives for private sector to carry these drugs and ensurlng drug quality control. The GO8 recognises this and as a first step, public health facLlities at dLstriLt level w1i from now on prescribe only from a small, compulsory list of carefully selected essential drugs. The proposed restructuring of the PNA which has hitherto been lnefflcient and largely ineffective, will be a key element in achieving thls objective. 13. Other msls to be defLned. This would include the promotion of schemes to induce greater particLpation by hlgh- and middle-income groups in the financing of their health costs. Progressively, public funds should be allocated in priority to develop health programs with collectlve impact (concept of public goods as opposed to personal satLsfaction) such as preventive care, and targeted at vulnerable groups. Implementing these new policy orientations requires mor study of households, capacity and willingness to pay for health care; the program of household surveys initiated under the SDA program should be deigned to evaluate the impact of new measures such as cost recovry and insurance premium schemes, combined with the role, suspected to grow rapLdly, of traditional medicLne (healers and pharmacopoeia). This program should be coupled with a special survey of all health activltLes, particularly non-governmaal actLultls, to supply a consistent basis to evaluate their economlc and financial contributlon, and monltor theLr trnds uslng the annual survey of economic actLvitles carried out by the Department of ForecastLng and StatLatics. Private practLtioners will also need to accept to collaborate in efforts of coordination and mutual support. Several elements of private medical practice, notably fee and tariff pollcy, flical issues and drug pricing - 63 - Annex. policy4, wlll have to be examined with a view to producing the proper balance between the profit-seeking motive and the need to assure services to poorer families and regions. Health Financina Issues and Ontions 14. Between 1988-90 an average of about CFAF 46.7 billion was mobilized annually for financing health sector activities in S negal. This is equivalent to about 3.1% of GDP or US$26 per capita. Tn 1981, about CFAP 28.4 billion was mobilized for health financing, equivalent to 4.3% of GDP or $18 per capita. This represents a decreased share of GDP for health, and a marginal decrease in real per capita terms. The structure of health sector financing has shifted somewhat away from governmental sources to non-governmental sources with an increased contribution from external financing. In 1989/90, 22% of thli funding was channeled through health insurance; 24% through direct contacts between households and prlvate practitioners; 32% was spent on drugs. Table 2. SEIEGAL:' Stnuture of Neslth Fil,wwia 1981 19t9 Centratl Buiet 35.6 33.4 Othe oestource l Otl___________I b______ 9.5 11.4 Extewml Fifwicirg 15.9 17.3 Private Epditures Wf _____________________ 39.0 37.9 [ Total L 100.0 100.0 AV Nstty fro dmn e trprises. W Inlctdimu prmius nd dau-pa)ofnt to health 1nsurance contracts. 15. Recent trends indlcat- a growing diversification of financing sources whlch needs to be explolted to help redress the increasing mismatch of resources between private and publlc facilities that has occurred at the same time, and to improve financing of the sector as a whole. a. cost recovery schemUs: Senegal has an unusual traditlon of community participation in health flnancing. But the fullf development of lts potential has been hampered by the poor management of funds collected through community health organlzations (CHOs) In many cases, recelpts from servlce jf Fees ad taiffs are regulated, wad levels hav not dmed sinoe 191. Prfees in the private drug mrket are controlled, based on a fixed m*rgn of th purchse price. Setl er urgfnas are allotd for a number of dugs on a Osocial ltst in order to lower prices. H werr, thes smIler mrgin reduce the privat. distributors' infentive to ecrry esential dnigs; oreover, this prfce controt policy reinforces the tendwncy to caryr dru in nrn-generic fore, with prfies several times higier than the generic eAivatlent. DI The contribution of this prticipation is nerthlese not negligible. - 64 - anD=. 2 fees collected by these CHOs are used to hire support personnel in excessive numbers, to finance non-health- conneCted expanses, or to give to local leaders who hoard then as polltical war chests. Recently, the 005 redefined the legal and regulatory system of CHOs at health posts and centers. The changes pertained to the fee fxing mechanism, the budget preparation and executlon, the designation of the CHO bureau and its accountability, and the co-management procedures with health personnel. Now funds collected by a given CEO will be spent entirely in the public health facllity it manages. b. health insurance schemes: There are three maln schemes: (i) one for the 65,000 public servants, 25,000 retirees and thelr families, the budget relibursing 80% of hospital and agreed private doctor and clinic costs, but not drugs purchased separately; (1$) another for the 58,000 wage earners in the modern sector, 60,000 retlrees and thelr family, wlth individual lnsur Ance funds (XPX) for each large enterprise or group of small ones, relmbursing 66% of all medlcal costs on average. Premia are shred between enterprises and employees; and (iii) private lnsurance schemes, whlch have developed rapldly over the last 3 years and now has 15,000 partlclpants. c. mutualaJv=achess A lot of them are directly inherited from the tradltional ways of facing risk collectlvely at the level of clans, groups or even ethnic groupes little li known of the global impact of that kind of approaches. More recently about 50 MOOs have started helplng communlties, mostly rural, deflne a program to improve lts sanltary conditions and take advantage of all resources available includLag foreign assistance. 16. The overrLdLng issue remains the use of the funds mobliLzed for heath care to promote an ecuitable access to basic health needs for the Sonulatlon in aeneral and vulnerable arouns Ln partlcular. A thorough analysi of these equity aspects should wait till the completion of a Priority 8urvey planned for 1993. It is clear that the increase ln external aid and in lnsurance schemes have somewhat compensated for the slow growth in budgetary expenditures. Whlle external assistance, focussed on national programe has probably contributed to preventLng rapid daterLoratLon in health status, the combined effect of insuffioLent budgetary funding and the increase in health lnsurance may have woreened the inequity in the availability of health servlces by Lncreasing the access provided to hlgh-income groups -- who can pay for nsurance - relatlve to the rural poor who cannot afford insurance and rely more on government health funding. - 65 - 2flhm.. III. Issues in the Hgalth Sector Public Rx2enditurs ProrM= 17. Budgetary resources going towards recurrent spending in Health have been eroded over the past decade. expenditures fell by 21.4% in real terms and from 5.4% of total government recurrent expenditure in 1981/82, to 3.7% in 1989/90. Wages and materials outlays fell by 15 and 42% respectively ( materials outlays fell in nominal terms as well) while transfers stayed constant in nominal term. This erosion ln recurrent budgetary expenditures was to some extent compensated for by increased external financing through technical assistance and support project (see para 24). Performance in budget execution also deteriorated over the period, with the health sector achieving a lower rate of budget execution than the overall average. Tde 3. SEMEIL: Recsraent Expndlituw In mtth Secto. CFA SIIIn 1961/82 _ 999 KRa U.u vow 4.9 6.6 -__ 1ntwists 2.5 2.2 __ Tremwfa 0.1 0.1 -35X Totd ?.S 9.0 -21 18. Within the sector recurrent budget, in line with governrent strategy for health sector development, the share of resources aoina to Primar Health Care IPHCI increased with allocations to health districts risina to 44% from 390. However, real PHC expenditures lagged behind population growth and per capita PHC expenditures did not increase in real term. At the same time, the share of the recurrent budget going to hospital care fell. Regional hospitals had their share in the recurrent budget reduced from 19 to 1S and by 60% in real terms, while the CHU share fell from 34 to 23%. Ta1e 4. SENEGAL: Coyposltian of Smtth Setr Rcurmt EMietWes CeM R 11^a 191/82 196W 1967/8 . 198 19"9WM Rptal 4.0(OM VA M VIA 3A(W Cdiv 3.5 (41K VIA I/A VA 5.62l) Dilstt (.9) 39) 4.0(442) Tota 7.5 9.0 8.s 9.3 9.0 sha tn Iuwpt 5.4 - 3.9X 3.61 3.83 3.71 19. The trends in the pattern of geographic allocations for health dLstricts and regional hospitals indicate that there was some reductlon - 66 - Annex 2 ln the degree of disparity of allocations per capita. For example, the ratio between the highest (excluding Dakar) and the lowest per capita allocation fell from 5.6 in 1981/82 to 2.S in 1989/90. However, significant disparLties still remain, confirming the continued ineqpitable distrLbution of public resources in the Health Sector. 20. Although the inereased share of health sector recurrent budget goLng to PWH is encouraglng, there has been little overall improvement in health status over the poriod. Instead, health status has becme precarlous and attendance at publi¢ health facilities has dwindled in spite of a population growth of approximately 3% annually. I nv estmot-mndLtgme 21. Not all investment spendlng in the sector is captured in the PTIPg som investments financed by domestic funds outside the central budget are not included and several technical assistance projects and vertlcal programs are missLng, giving a dlstorted estimate of the external resources moblli:ed for total livestment spending in the sector. Staff estimates of expenditures outside of the PTIP and recorded data on PT?? expenditures, form the basis of the discussion in this sectlon. 22. Total Lavestment spending in the Health sector increased from a total of CPAF 30.8 bllion for the 1981/82 - 1985/86 period, to CFA? 47.6 billion over the second half of the decade (roughly a 1% real increase). The share of local financing of health investment spending, decreased from 25% over 1981-1985 to 15% ln the second half of the decade1, falling below the average of 25% for overall investment spending. Health sector investment spending has therefore became increasingly dependent on foreign financing. WLthin sectoral investment expenditures, the followLng key trends were observeds 23. A growlng share of expenditures went to PHC whose share lncreased from 36% to 46%, while the share of expenditures golng to hospitals shrunk. This has been largely due to fast growLag external flnancing for national and vertical programs such as immunlzatlon, AIDS and tuberulosiL. 24. Expendltures of a recurrent nature more than doubled between the two periods increasing this share to 56% from 42% Ln the first half of the decade whle- the share of expenditures on fixed capltal formation declined. ThLs trend is explained by the rapld Lnc'ease ln technical assistance and support operatlons. External financing has thus beome a significant source of recurrent expendlture fundLng ln thls sector, compensating to a large extent for the insuffLcLency and the decline in public budgetary resources allocated for health as a whole and for recurrent heaLth spending in particular. Ibis tae ceu of tur rm tho Socfal seurity Fud which hue ba comiducle in _ yE. (in 1969, Social security fwm mm sed to ewtnut an m bed hupitt) but are wt factuied in the PTIP. -67 - hn 2 1to 5. UE3E6LS CMm.t1u, of5e Settor Una s 't* E1mtwI __________________ __________________ ~~*91N1- 19J6690 C_.____.__ _ ._ ..tn S VW" C_A .i_le - I Ttl 30L 100.0 47.6 100.0 - Flp 16.5 536 18.4 3.7 - owr 143 6.4 29.2 63.3 wmnuu* 2.0 6.5 3A ao. Oh Lo 5.8 18.6 3.1 6.5 Pomlp 23.0 74.7 30.7 U.S Find caItal 17.9 S3.1 21.1 4_3 1mwrmnt 12.9 41.9 26S 55.7 (fuilpa (12.5) (40.6) (25.S) .6) UmpItals 14.9 45.1 16.2 31.0 PU: 10.0 35.7 22. 46. _hm~bs S.9 19.2 9.4 19.6 IV. Pronosed Chnes in Seotoral E2wnditure Program teerr XW2Wditures 2S. Table 6 summarizes the proposed allocation of budgetary funds uggested for the 199S/96 horizon. It is based on the following assumptionLs a. an improvement in the ratio of public health posts from 1 per 11500 population to 1 per 10000 population. This would involve the provision of adequate funding for a total of 989 health posts (an increase of about 15% in current number) and the provision of adequate funding for health districts on the basis of official NPHSA resource allocation norms. b. an improvement in bed availablilty in regional hospitals to 1 per 6,000 populations this would imply providing the adequate funding for the 7 already existing hospitals; upgrading 2 newly constructed centers in Fatick and loldal and ln the Dakar region, the restrnaturing of the CMU would provide 3S0 beds for 1 or 2 regional hospitals. C. to stabilize the allocation in nominal terms for all others usages* training, Central administration, vertical programs, Natlonal Hygiene Service)l the 10 specLal institutes should be integrated within the other NPESA's services. - 6G - Annex 2 Tat. 6. Mupu Prqpmd Seat Endtdtw. 19W/W. 1909nO 1995/9 0pasad) ._ Ta .. .N"s Totl . 1W .ft _I8at1 6* 6.6 6.7 6.7 _hptal 2.0 2.0 2.4 2.4 6th1 4.4 4.6 4.3 4.3 Umwuls 3.1 1.9 4.2 3.0 umotels 1.4 1.1 23 1.7 02kw. 1.7 0.8 1.9 13 unip 1.0 0.5 3.0 2.0 bupltal 0.6 0.4 1.0 1.0 OdAM 0A 0.1 2.0 1.0 tofta 10.5 9.0 13.9 11.7 IIptosI 4.0 4.0 5.7 S.1 rth. 6.5 L.B 8.2 6.6 26. these assumptions would result in an increase in requird total recurrent funding of about 32% from the 1989/90 level of CFAF 10.5 billion to C0AF 13.9 billion ln 1995/96. CT" 2.2 billion of thli is antLcipated to be raised through cost recovery, with the governeent providlng CnAI 11.7 billion through the recurrent budget -- a nominal increae of 19% from the 1989/90 budgetary expenditure level. 27. Th allocation between indlvldual items i as follows: a~ IQMMLsttjU. The hospital sector will account for 41% of the total reulred funding, a 3% poLnt lncrease ln lts 1989/90 share. Hospital fundLng would need to Increase by over 40% from COA 4 bllion to about CIA? 5.7 billion ln 1995/96. With anticLpated mobLlization of CFAF 0.6 billion through cost recovery, the remaLning CFAF 5.1 billion would come from the recurrent budget (a 28% increase from 1989/90 level). This proposed increase breaks down as follows - raalonal hoanitals, would r kd CFAF 3.2 billion, (56% of thli allocation) to go towards the setting up a network of 1.400 beds (2.3 million per bed) compared to the current CFAF 1.4 billion for 950 beds (1.S million per bed). The needed lncrease in personnel would raise wage costs by 80% to CPA? 1.4 billion# funding for drugs would need to go up to CFAP 0.4 billion and other goods and servlce funding would increase to CPAF 1.4 billion. It can be anticLpated that cost recovery would provide roughly only CIA? 0.6 bllion. JI Sbiotk ad flU=m insti6 - 69- Aex-2 - gjg. In the absence of a new strategy, out recoammendation is to leave the allocation at its present level of CFAF 2.4 million. Personnel will have to be reduced (and in large part, redeployed within the regional hospitals) and the resources saved, used to increase other oporating expendlture. b. Health Distrkitg and Nong-are. Recurrent fundLng for thli sub-sector would need to increase by 26% to CFAF 8.2 billion, wlth CPA 6.6 bllion of this required to come from budgetary sources. Thls increase is entlrely for health dLstrtLgM, whose budgetary funding lncreases to CFAP 6.1 bllion, from CAT 4.4 bllion (an Lnerease ln lts share in recurrent budgetary resources from 42 to 44%). *This increase is accounted for by a 12% Lncrease ln non-wage, non-drug costs and a fivefold increase in funding for essential drugs. current funding for non-care servLces1 will remain at the 1989/90 level of CPF 2.1 bllion. 28. The key impacts of the suggested restructurlng, would be (1) a St increase in the health sector wage bill (from CFAF 6.4 billion to C,AP 6.7 blllion)V; (ii) a 35% increase in non-wage, non-drug expenditures, and (ii) a 300% increase ln funding for the provision of essential drugs. The key uncertaLity li the share of these costs that can be r covered throuh CHOs. If cost recovery lags behLnd antLicpated levels, then expendlture allocations will have to be based on the priorLties described in para. 33 and 34. IMMntmvnxeLtures 1290/94 SPTI 29. Planned Health Sector investment expenditures ln the 1990/93 PSTP amounts to CUF 9.4 billion, thls represents a reductlon in average annual lnvestment spending; CuAP 2.7 bllion annually over the period, compared to CFAP 4.2 billion annually over the 1985/90 perLod. It also falls below the Claw 9 bllion annually that would be roeuired to meet the target of allocating 6% of public investment expendlture to thls sectorJs, 31. ibis danot inclul allocaton or foail affairs jAida bcem part of the ifnistr" of Ibalth sin.e its r t1tufian as thw WM In artl 1990. 21 Buy fr hirifng dutmrs for hbalth distic ad spatilt fo nefmnl hopitals. 3W1 Thif is lizto the gowmitoo's jbesti of sltocatfio, of the remtnt buoft 'to heath. - 70 - ADDLx T1Ut 7. #SEIULs Uatth iSeco PTIP. 19W-O. Totat cost PtimW £pudtwe _CFAF BiltK) upftale 2.8 1.6 cm 1.7 1.2 kWoMI 1.1 0.4 h6latsry cws 32.7 9.S Omaith Cad 2.0 1.5 PIt 24.7 4.8 Vetticat Prgrai 6.0 3.2 0Umgg 0.4 0.3 Totat 35.9 11.4 30. As it stands all projects are justified, but 2 of the, because of their size, need clarification. The first one, financed by tho 8audi Fund, is targeted at che dysfunctional CHU, but in view of its shaky future, this program should be limited to providing the baic egulpment needed by the teams of specialists now in place. The second project, financed by Italy, is targeted at providing equipment to health ceoter and is justified only if it focuses on centers with a PDDS developed by all involved parties. 31. The PTIP does not provide any assesgment or cotina of medial efcuinmet and facilities reolacement or repairs. This is one of the major weaknesses of the investment expenditure allocation. It is dilfficult at this stage to estimate the cost requirement of maintainLng capital at its optimal level of functionality. All told, it is fair to assume that at least 6 to 7% of capital invested in hospitals should be allocated to amortization (buildings, medical equipment and ome vehicles with their different economic lifespan.) and 4% in health posts and centers (roughly estimated at CPA? 4 billion in 1990 prices). 32. In contrast to the planned PTIP, we suggest that a five-year investment program in the health sector includes - a program for building 250 health posts requiring about 6 billion over 5 years; - no program for health centers, except to convert some existing facilities into health posts or centers to meet the norms applied at health district leveli - a program to expand the coverage of regional hospitals requlring about 7 bllion; and - a restructuring program for the CHU to convert present facilities jsee pras 11 and 25). This could require several billion CrA. Bxternal assistance could decrease technical assistance, but maintain support for reform through the financing of (i) an initial drug stock which would serve as a jumphoard for CH0 revolving funds, (L1) trainlng "71 Annex 2 assistance .and (1ii) Incentives to reforms created by poor comunities. Such an approach should be transcribed into a specific list of projects to be presented at the Donors' meeting planned for end 199L for their endorsoment and subsequently at other Donors' confrernces. Because of the drastlc changes it implies, a step by step plan will hive to be designed, starting with the building of new posts requixa' by the district promotion strategy, and including a fund to upgrade existing facilities. Priorties and Core Expendlture oroMram 33. The main obstacle to these objoctives is the uncertain availability of funds. In contrast to past practices of giving low priority to non-wage operating costs, it is now highly recommended that, in the best interests of overall health conditions and particularly those of infants and pregnant women, some strict prioritios be set ln health expenditures. 34. The PDRH project has already defined a core program with the Government. Its main feature is to increase by 1Q% the current allocation to 02nonwAg ourrerit exmenditure. for health dLstricts. (Note that this would ensure enough drugs only if the bulk is financed under cost recovery). In addition, it would provide rules Insuring that a fixed allocation for drugs would be transferred on a regular basis into a special account in order to guarantee the regular procuremnt and distribution of essential drugs. In comparison to the budgetary needs of districts, hospital sector requirements should grow at the slower rate of 5 annually, at least until norms are defined for the renovation of regional and national hospitals. The global number of personnel would remain unchanged. Cost ameoverv 35. Over the next five years, improvements in cost recovery will be implemental in expanding primary health care in keeping with the expansion of the population. The legal system is in place, and a program of assistance to CHOs ready to be implemented. But the way ths new system will operate remains to be tested; there is a risk that the proceeds from cost recovery will not be enough to ensure an adequate supply of essentlal drugs at health post levels. There are two main issues which will have to be discussed by XPUSA staff with the Health Donor aroups (i) how to avoid flooding a CH0 wlth drugs finaced either by budget or external assistance if it is not ready to turn over the funds needed to maintain the level of drugs required; and (ii) identification of communities unable to turn over the drug fund in its entirety as planned. 36. At the hospital level, cost recovery is more difficult to implement. The legal system created for. CHO at post and center level is also applicable for a hospital. But such an association will be difficult to develop due to the complexity of operations provided by a hospital and the magnitude of the resources needed. More thinkLng is required before cost recovery can be expanded in that sector. -72 - Annux 2 External Ansltnace 37. The intense effort made by external donors to support Senegal in Its restructurLng effort must not decrease in the health sector. Its role Is going to be crucial on several frontet a. providing enough reoourcoe to finance the development progra outlned above (para. 32). The priority la to stop financing projects in isolation, while maintaining sectoral reform programs. Another piece is to set up a fund to maintain the proper functioning of buildings and equipment. b. assisting public health facilities and CBOs ln implementing the new strategy. At the dlitrict level, this will require that external assistance be channeled in coordlnation with each PDDS and not through national programs whLih easlly bypass the various level of care. As already mentLoned, there is an urgent need for assisting the Covernment in preparing a restructuring plan for the hospital sector. V. Institutional Issuge 38. The XPHSa units in charge of planning and budgeting issues will need to be strengthened so they can establish criteria for allocating resources to health facilitLies and to promote thelr efficiency and equity. The administrative Unit (DAa3), which the PDRB project will continue to support, should take a more aggressive role ln the preparation, impleeentation and post evaluation of the health budget. The following measures will have to be implementeds (i) presentation of the budget with indivldual allocations for each health distrlct (and hospital)t (Li) clear allocatlon for drugs and enforcement of funds trnsfer to a banking account to facilitate Pfl's drug purchases monitoring of a ratio linklng thli allocation with the district population; (iii) standardization of the level of this ratio across reglons wlthin a period of 2 to 3 yearst (lv) preparation by DAM of a set of performance indicators which will be included Ln each PDOS a"n will be used at a second stage to reward or penalize districts basd on their performance; (v) using computerized NMPH8 personnel flles, annual updating of staff mix to meet norms ln all public health facilities. 39. DAM3 and the PHSA will succeed only if the Ministry of rlnances (REsP) backs them fully. OMosa complains that, hitherto, requests for changes Ln funds allocation within the health resource envelope, has been modified, if not even denLed by MRFP. HEFP, on the other hand, claims that NPRSA La fully responsible. It is difficult to clearly detrmzine responsibilities, but there is one clear fact: the health budget has not been functionally presented or managed, and allocations have boen decided on a ad-hoc basis. The measures outlined above on preparation and presentation of the HOHSA budget were considered acceptable by as"i. Consequently theve should be no problem in applying them. - 73 - Annx 2 40. With regards to development projects, there have been many previous recommendations to improve thalr evaluatlon so no new study Ls necessary at thls polnt. The plannlng unlt in MPHSA has adsquately trained peoplet projects are computerlzed and data la available. overnment and donors, because they finance most of theme projects, should consider for financing, only projects with adeqpate appraleal files contaLaLng the following elements a. a speclfli strategy LncludLng justlficatlon in the context of the overall development of the subsector ln questLoni b. dLetLaction between expenditures for fixed investments and recurrent costs: the external financLng of theme costs should be justifLed ln relation to other local sources of funds be they the budget, local governments, cost recovery, or insurance schemes; c. justLfLcatLon for long-term foreign assLitance which should be exceptional; d. priority financing of 6%.atrict plans (PDDS)# buildings and equipment maLitenanoe of regLonal hospLtals; e. strategy to prmote and support a program of studies on health flnancing and management Issues. - 74 -nnex 3. X. * Denerintin gf Sector, 1. The education system is managed jointly by several ministerial departments the Mlnistry of National Educatlon (MEN), which la responsLble for primary, mlddle and secondary educatlon, the unlversLty and lts institutes, and certain traLning schooles and the Ministry of Labor and VocatLonal Training which overseen the greater part of vocational training. Other technlcal Ministries namely the MinLatry of Tourim and Environment and the MLnLstry of Rural Development, have responsibLlity for some certaln higher-level vocatlonal LnstitutLons and schools. tn 1988/89, the student population ln the various levels of education was about S52,752.U 2. Enrollment. Total pre-universlty schoolLng enrollment increased by 27% between 1983/84 and 1988/89. The biggest increase in enrollment over the period was at the pre-school level (63%), followed by general and tochnlcal education, middle school and prlmary school enrollment ln that order. Whlle urban primary school enrollment rate increased to about 95% from about 91% in 1986/87, due to the lntroduction of dual stream teaching and the redeployment of teachers Ln adminLitrative positLons, the rural enrollment rate remalned virtually unchanged (between 34 and 35%) over the perlod. University enrollment has also incrased significantly in the recent past, a reflectLon partly of the increased length of tlme that students take to complete a degreeP. The UniversLty of Dakar le currently overcrowded, with an enrollment in 1989 of about 16,500 students for an estLmated capacity of some 8,000. The recently opened Universlty of Saint Louls, which recelved 600 students in 1990, plans to reach a capacity of 4,500 students in 1993-94. Several training schools on the other hand, are operatlng below capaclty. Lent of 1903/84 1958/0 , _at m .___ __ __ _ _____ _ _ _ _ _ _...__ _ _ _ _ No. admols o. clas EnrottenPt No. sdwels no. el_m. EnrolUm Poldms 95 9.414 141 475 15,30 Prlasry 2,150 9. 53.394 2.432 11,094 _ _102 fdie 197 1.947 J8,e8. 247 2,536 U1,I5 comtnarsd 43 6"1 24.127 56 924 33.308 _unc 001111[110111, Eimtlm Afctt, _Aiat 1990. 3/ IsAm _ WeIM_ 195U19W Ort *Wmrt. 2/ macat m oat lw difficulty of findfig omnt after gradaetin, sttdmt prolw tlbAr .mivrsity sl ootieg as two as possble. - 75 - AnnL.a 3. Despito efforts in recent years to increase the availability of primary school services with the introduction of dual stream and multi- grade teaching, the need for clasrooms and teachers remains high as evidenced in the fact that classroom occupation shows on average 3.3 students per bench and table set, i.e., a current deficit of 110,000 sets. in som rural areas classes have had to be canceled because of a lack of teachers. Private education accounts for 54% of preschool enrollents, 9% of primary and 30% of middle/secondary enrollment. 4. Unit CLote, Education in Senegal is also characterlied by significant imbalances in unit costs across various levelsa in 1984/85 the unit cost for primary education, firat cycle of secondary, second cycle and university was respectively (in CFAF) 41,998; 110,878* 164,347 (lyo6es); and 811,900. This implied unit costs per capita GDP ratLos of 0.26; 0.99 and 55.12. respectively. These unit costs are fairly high in comparison to levels in comparator countries. This dLiproportLon in costs between post-secondary and other levels is due to the generous direct subsidies (meals, lodging, transportation and social services) and fellowships to post-secondary education. By 1988/89, unit costs had fallen somewhat; CFAF 38,562 for primary, CFAF 111,723 for mlddle/secondary and CFAO 682,000 for university.1 11. Sectoral Obiectives and Stratea S. The Government's education policy is based on the conclusions of the education and training 4tats gdndraux' and recommendations made by the National Zducation and Training Reform Commission. The policy objectives includes - prlorlty for the development of primary education; - the need to maintain and regulate enrollments in middle and secondary education and improve the quality of education and school administration; - increase in the internal yield of training structures ln higher education; - improvement in the quality of higher education, development of new streams and research as well as the rational use of resources and efficient management of teaching personnel. 6. Wlth a view to achLeving the first, the government plans to expand primary education for children 7 to 12 years old by the year 2000 wlth the Lntermediate objectLve of raising enrollments from their 1988/89 lvol of 56.4% to 65% of the primary school age cohort by 1995. Extrst f.m OM .r Wmt In DecA eobw I n 3sugt Anltsis for 198/9. Tlhs fies to mn intimt tha ecltus for*win Jasidifs resived by the uimvwsit d e *ntame. in fadhu for thu UI. 011s: l ftu in Swutal awe oa fao of gsvont, teedia wd parent M_"*atVft - 76 - Annex . Specific actLons for the medLum run (1991-95) Lnclude the constructLon and rehabilitatLon of classrooms (the 65% enrollment target would require the constructLon of 4,100 now classrooms and the rehabLlitation of 493 existing classrooms)l increased recruitment of teachers ( on average 700 primary teachers per year will need to be recruited)i the introductlon of pedagogical innovations through resarch Lncreased production of textbooksp and the decentralizatLon and modernizatLon of school admLnistration. Thi8 will go hand ln hand wlth a strategy for controlling unlt costs through better utilization of teachers and a reduction in construction costs, repetitions and school dropouts. Sfforts will also be made to dLveesify funding sources by encouraging lacreased communlty participation and the Lntroduction of cost recovery systom in area where feasible. The feasLbliLty of thli classroom construction and teacher recruitment program has to be assessed ln rolatlon to the constraLnts related to expected resources and lmplementatLon capacity. 7. As regards the other levels of education, the reforms will seek to balance cost-effectLveness measures in the secondary and higher educatLon systms bys - the recruitment of students on the basli of available placesl - greater rlgor in authorLzed repetitlons, dependLng on the cycle; - better teacher utilization; and - containment ln the growth of enrollments ln relatiou to avaLlable financlal and human resources. S. On the bas of current practLces (promotion rate of 20% from prLmary to mLddle education, automatLc promotion to secondary educatlon for all holders of the OFEM (r.vet de Ain des Etudes d'NnaeIgnement Noyen -- Middle School DLploma) and uncontrolled repetLtion and returns) mlddle and secondary enrollments would increase from 172,000 students in 1989/90 to 222,000 ln 1997/98. This would requlre 76 new schools; 52 mlddle schools (CUlo) with a capacLty of 500 places and 24 lyceJs wlth a capaclty of 1,000 places. in addltion, 120 teachers would have to be recruLted for each new school year, at an annual cost of ClAP 600 mLillion. 9. The Government's education pollcy does not yet provLde for explieLt lncentlves to the prlvate sector, which nevertheles has played a dynamic role ln thli sector. ven though notlons of partnership are vaguely evoked through the Lnvolvement of the local communltles and NGOs, the developmental neesd of all levels of education, remain almost exclusively dependent on public fundLng desplte the Lncreasing constraints on government funds. - 77 - A=2& 1!. Zauves in the Educgtion Sector Excenditure ProaraM 10. Budget allocations (only to Ministry of Education) by level of education for the period from 1986/87 to 1988/89 are shown in Table 10 of main text. 11. The breakdown do.e not reflect the policLes formulated for the education sector, in particular the prLority accorded to the development of primary education through an increase in appropriations, and the containment of the rapid increase in resources allocated to other levels of education, partlcularly higher education. Growth in the budget for primary education (6 6%) over the period, has lagged behlnd growth ln the budgets for secondary and hlgher education (18.28 and 24.4%) due to inability to lmplement measures to contain the operating budgets for secondary and higher education and the fellowshLp and COUD (Contre d'Oeuvres UniveraLtaires de Dakar) budgets. Primary enrollment was 56.4% ln 1989/90 as opposed to the target of 60%. Eftaatte, kctmz Actua leU_fen Egzeammdt. (19"M-0 _______ _UI _ _ _ _ CCfAF Bittla yam 3-.8 40.3 40.9 i44. 2.? 1.9 _S 3.0 lusmfes s9.7 11.4 11.4 15.0 Total Etmtian 51.3 53.6 55.2 _l_S loa !g!_ 1tu. 30.0 236.4 MIA 242.0 Sam= PR is0m My 1991. 12. Recurrent education expenditures Lncreased about 22% ln nomLnal term and by 26% in real term between 1986/87 and 1989/90, increasing lts share in the overall recurrent budget from 22.3% to about 26% (overall recurrent expenditure lacreased only 5%). This increae is attributable to a 14% increase in wage expenditures and a 55 increase in expenditures on transfers (maLnly to hlgher education). Meanwhleo nominal expenditures on supplies and maLatenance stagnated, thus falling in real term. Expenditures classified under transfers, include oubsidies and fellowships, as well as allowances paid to education personnel which by virtue of their nature constLtute personnel expendituresl and some expenditures for textbooks which should in fact be classifLed under supplies and maintenance. The overall picture of low and fa1lLng supplies and maintenance outlays on the one hand and rapidly rlslng wage and transfer expenditures La however still valid. Thli pattern of expendLtures has contributed to the deterioration of school lnfrastructure to such an extent that expanslon is jeopardied by the sheer magnitude of resources that must be set aslde for rehabliftation. The budget dloequilibrla evident ln allocations across - 78 - AnnmUL. levol of education and across economic categories, reflect the inconsistency of allocations with sectoral priorities. Reeurrent Exuenditge Dudastina and EXeguti2n 13. The education sector, just like other sectors suffer from the deficiencies of the overall budgetary and cost control system as described in Chapter 11Z. Budgeting of operating expenses li not always based on set criteria and is usually rigidg the allocations to certain establishments remain unchanged for several years even though their operating conditions (capacity, equ&ipent, etc.) have undergone radical changes thus ln ome cases, new establishments have larger allocations than others of the same nature but which havo a greater capacity nd which have been in existence for several years. The recurrent expenditure need of existing capital, are also not adequately accounted for. The necessary adjustments, even if possible through transfers, are slow and difficult and sometimes not made. Transfers are therofore often made wLthin a given heading or from one headinq to another so as to fund the credits transferred only in the next budget. 14. Some of these deficiencies are rooted in the institutional relations between and the capacity of the offices theoretically involved in the programming and budgeting process. Although the Planning and Education Reform Department (Direction de la Planification et do la Reforms de lBnseignement - DIE) is responsible for coordinating the formulation of pollcies and strategies in the various areas of education, preparing new projects and collecting and analyslng sector statistics, it plays a marglnal role In the budgeting of operating expenditures. This task falls to the General Administration and Infrastructure Department (DirectLon de lAdministration Gndral* at do 1'quipement -- DAG). Inastitutional strengthening in the programing and budgeting of expenditures could limit these deficiencLes. 15 Credit commitment and cost control procedures are fairly long and generally do not ensure that goods and servLees are received by educational establishment within the school year. In view of this slow process and the fact that the school year is shorter than the flical year, the process for acquLsition of educational schools supplies ought not to follow the usual procedures for the commitment of credlts. Although exceptLons are authorised for the procurement of supplies or equipment, the processing of documentation for these exceptions can often run into the same delays as the normal procedure. This often means that budget officers must engage in lrregularities and then straighten them out later, thus contributing to the lack of transparency and the inefficiency of budget executlon. 16. Budget allocations for operating expenditures are generally comitted as a whole. Payments are usually very late owing to cash flow difficulties that the State has been experiencing for several yeas. In any given year, some proportlon of allocations goe towards commitments made Ln previous yeats but which were not paid because of delays in the comitmnts and the actu 1 payment process. Such expenditures represented about 2% of supplies and maintenance expenditures for fiscal 1990/91. -79- ahhLE2 1991292-1993194 PTYIP 17. The education sector PTIP for 1991/92-1993/94 totals CMF 11.106 billion for 14 projects wlth a total cost of CPAr 22.098 billion, broken down as follows: Mtal gout Prlmary 14.473 General and vocational secondary 3 386 Higher education 2.760 Other 1 479 (preschool and instltutlonal support) Although the breakdown of investments by level reflects the priorLty accorded to primary education, it does not reflect operations under way or being prepared ln other subsectors through the human resources development program in education and training. 18. As regards higher education, the expected investments associated wLth the UnLversity of SaLnt Louli (under the project (no. 45026)) involving the constructlon and equipment of four buLldLngs are inconsiatent wlth the rehabilitatLon and rationalization measures for investments to be made at the UnLversity of Dakar. Thli reflecto an Ln¢rease in social actlon to the detrlment of the pedagogLcal problms experlenced by the UnLveraLty of Dakar. The link betwen the secondary education development plan and the lnfrastructure projects for eight middle schools and the constructlon and equippLng of fLve high schools is also not apparent. 19. The investments provLisonally ldentLfLed for the PDUH amount to [CFAFP 86.5 billlon, of whlchs Primary 69 4 Kiddlo and econdary 3 1 Higher educatlon 3.8 Vocatlonal traLning 8.2 Implementation unlt 2.0 This program has to be assessed ln the light of the education sector policy, whlch is now being formulated. Tradeoffs will be necessary in vLew of the State's budgetary constraLats, the capacity to carry out the programs and the tlm frame for the implementation of rehabilitation measures in the sector wLth a view to ensurLng the vlablilty of the lnvestments. 20. Although the project selectlon and programming process is fairly clear in prLnciple, Ln practlce lts implementatLon leaves much to be desirod. This is evident ln the lnclusLon of projects (constructLon of buLldLngs at the universLty, constructlon and equLppLng of hlgh schools T5:s ctmtw Ifggfw fn origimmi; trantattm seof to cqe ms th wther p_ssimy fnt*dmS - so- Annex 2 aul nursery sachools) that do not fit in with the PDRH. It appears that tho ministtLes responsible for formulating sectoral policies and identifying Wojects are working outside the macroeconomlc and financLal constraints not by the Ministry of Sconomy, Finance and Planning. Moreover, th. delays in publishing the implementation data for the PT!P make it difficult to assess the realism of the programuing of new investments. There is only a vague knowledge of the absorptive capacity of the investment credits. IV. Prooo.ed Sectoral Soending Program 21. Total public spending on education (operating and investment expenditure) for the period from 1990/91 to 1994/95 was estimated on the basis of data provided in project documentation for the Human Resource Development Project (PDRH2), education and training and other projects under the PTIP and projected operating expenditures calculated by UMO planning offices. This represents financing requirements of [CFATl 395 billion, of which (CFAF) 86.5 billion for PDRH2, (CFAF) 11.1 billion under the PTIP and (CFAF) 297 billion for operating expenditures. This latter figure should be taken with "a grain of salt," as all recurrent costs that the PDRH2 investments and others under the PTIP will generate are not accounted for. 22. The prLmary education development project called for budget adjustment meaures, an increase in allocation. fc- primary education while maintaining the education budget at its 1985/86 level and containment of post-primary expenditures by reallocating the funds thus freed to primary education. DurLng the perlod from 1986/87 to 1988/89, allocations to education and wlthin the sector were just the reverse. Nevertheless, the situation of the pout-primary levels continued to deteriorate both as regards infrastructure as well as the quality and results of education. 23. The difficult economic context that prevailed during the period, together with budget constraints, will certainly continue over tne medium run, as indicated by the figures on projected State revenue. Nevertheless, the education share of the general budget should be maintained ln the proportions recomuended by the current education sector adjustment project. 24. Zxpenditure on higher education should be kept at its current nominal level current level and rationalization measures (e.g., reduction ln transfers) should be implemented with a view to generating savings. Those savings will be reallocated to other areas of higher education which are key to improving the quality of educatlon or where funding is short. Owing to demographic growth and the swell of enrollments from primary toward secondary, expenditures for secondary education can ie maintained in real value while a system for regulating and rationalizing enrollments Ln relation to available capaclty is established. Lastly, any increase ln public revenue will be allocated to primary education within the limit of the share of budget allocations to education. - SI - aAnuex 25. In the context of restrictive budgetary measures, private education, especially in urban areas, should be integrated into national education through the use of public resources. Measures are needed to promote thlc development of private education ln a controlled fashion, offset by subsLdies to ensure the dynamism of that subsector. The establishment of a new place in a prlvate school Le much les expensive to the State, as its financial comitment is limited to the subsidy. 26. Wlth the exception of primary education projects, other projects in the PTIP have to be postponed until they are reviewed as part of the PDOR. The nursery school projects should be left to private initiative. When finalised, the program envLiaged under the PDRH should constitute -the core of the investments to be made in the sector over the next five years. The recurrent expenditures of that program as they appear at present are very high in relation to Senegal's budgetary possibilities, in particular for primary and secondary education; under the assumption of 1,000 classroome per year with 66 students per class and a unit cost of CFAP 38,562, primary education will require CFAF 2.1 billion in additLonal expenditures per yearl the annual recruitment of teachers for secondary education under the program would cost CFAF 600 million per year. Ed*atimn Sector: Prepsd Eqpaitum CFAF bittfmn ______________ 19Q-9 X 1992- X 1993-94 x 1994-93 O Total uacation S8.3 100 59.4 100 60.5 100 61.5 100 Prlqw_ 27.9 48 29.6 50 31.4 52 33.5 54 Scm*usV 16.4 28 16.9 29 17.5 29 18.3 30 *fduru oathe _ 14.0 24 12.9 21 11.6 19 10.0 6 27. The above table shows projected expenditure for educatlon and its breakdown by level, for the period from 1991/92-1994/9S. The estimates are based on the following assumptions: - The total budget was projected on the basis of trends ln budget allocations in the last four fiscal years. - The share of primary education is based on the objective of a 65% enrollment rate by 199S with the introduction of dual stream teaching. - The share of middle and secondary education is based on projected enrollments at those levels, mlnus about 20% representing private education. The result is multiplied by the unit cost for training a student at the middle/secondary * level. That unit cost is assumed to be contained at its 1988/89 level throughout the rest of the period. - 82 - annex a STh balance reprsents the share for higher education and other are"a of spocialLsed instruction (literacy, teacher traintng, research and developmnt (cabInet), eta.) not attributable to any level given above. - 83 - Annea. a r. Descriotion of Sector 1. Tho "gricultural sector consists of crops, livestock, forestry and fisheries. Its contribution to GDP has stagnated around 220 of GDP for the last decade. Real annual growth of the sector averaged around 2 2% - less than that of population (2.7%), but about the same as rural popultion growth (2.1%). Within the sector, crop agriculture fell from 52% to 42% of the total, whereas livestock production advanced from 28% to 35%, accounting for most of the soctors real growth. The area under crops hac actually decllned slightly over the last twenty years, and crop ylelds have been static. Farm gate prices for agrlcultural products have fallen ln real terms, reflecting poor world market prLces, and the progressive removal of subsidLes. TAM.R Is Qgmnosit lon of A_rlculture Cntrlbutlon to GD? 'percent) subustor 197t8/80 ZIQL crop agriculture 12.0 9.1 Livestock 6.4 7.7 Flshing 3.1 3.3 Forestry 1.8 1.6 Total 23.2 21.8 2. Agrlculture remains the largest materLally productlve sector of the economy and the largest source of household Lncomes. The main cach crops are groundnuts, rlce and cotton, ln that order, and hortlculture is of major importance, although hard to quantLfy. The sector is also a major foreign exchange earner, wlth agrlcultural and fishery products provldLag 60% of export earnings in 1988/89. FLsh exports have recently overtaken groundnut product exports. 3. Watural condltlons for agrlculture are poor. Soils are Lnfertlle and rainfall ia low and unrelLable. Half the country ha an annual rainfall of less than 400mm per year, which is the mnimal level for crops. in addition, over the last 30 years the average rainfall has decreased by 0.7% per year. There is little unused agrlcultural land, and average farm dsiz are declinLng. There is however, potentlal for hlgh- value export products, exploiting Senegal's proximLty to Ruropean markets. The fliherL resource is rich, but fully exploLted, so Lncreased Lncomes will have to com from better processing and marketLng strategLes. 4. Most of the sector's productLon takes place ln about a millLon domestLc enterprises (the only large formal agrlcultural enterpriLe being the Coanwoni. Sucrlbre S6n6oalaine, wlth a work force of 7,000). The famLly farm sector ia belLeved to have been decapitalLzed. There has also been substintlal rural-urban mlgratLon, including much of the more productive rual labor force. - 84 - LQx 2 5. GoVetnut institutions serving the sector have been affected by budgetary stringency, and only those actLvitLes receLvLng external donor support have contlnued to be fully operational. Agrlculturak research has ben sustained by project aid from SDA and other donors, and agricultural extenhlon actLvltLes have been fLnanced and recapltalized through the IDA- funded AgrLcultural Service Project. 6. A particular feature of the lnstLtutLonal set-up Lo that a number of organLzatLons provLdLng non-commercial servlcees to the sector, and lacking self-generated resourceo, have been establisehd as publie enterprise outside the central budget. Thl. is true of the agrLcultural research organLzation. J8RA, and the Lntegrated regLonal projects (RORs), which were a major Lnstrument of agrLiultural development ln the 1970. and 1980.. The latter have ben run down, as a pollcy decLsion, but several survlve at a low level of activity, competing for project fundLng wlth central government structures. 7. Two speclal case are LirigatLon development and cotton development in eastern and central Senegal. IrrLgatLon has been very heavily flnanced through externally financed projects, and the IRDR charged wlth irrLgatLon development ln the Senegal River valley (BAND), has also had access to non-budgetary resources from the CaLige de Pereauation et do StabiliLation dn Priz. DespLte this, lt has operated ln a situation of permanent financLal crisis, with insuffLcient resources to maintaLn Lnstalled irrliatlon infrastructue. s. Cotton wone development has been undertaken by an SRDR, SODUFlTUX, wLth external funding (prlnclpally IDA and France/CaLsse Centrale) which has acted both as a commerclal psrastatal company producing cotton fiber, and as an lntegrated development project. This activity has also faced financLng problems, because of the Lse of lts commercial losses. 2canitalisatlon of the Environment 9- The most serlous long-term threat to the sector is the decapitalLsation of the natural environment. Without remedial measures, the soils of the region are estimated to decllne in productlvlty by 3-5% a year. The remedies required go far beyond simple mlneral fertilzatLon (currently at a very low level). Xn fact the physical and chemlcal condltion of the more heavily-used agricultural soLls is so poor that mineral fertilization has little impact. Essential aspects of rehabilitation are the restoration of a sustainable productlon system and prevention of erosion, both of whlch are associated with the preservatlon of trees and woody perennials. Seneal is however dependent on forestry products for 63% of its energy requirements, and lts forestry rosources are dealining at 1.2% per year. These problems seem certain to get worse as populatLon espands. Other envlronmental problems include salinizatLon of agrLcultural land in low-lyLng coastal areas and along estuaries, assocLated with the raLnfall declne. - 85 ArneX 2 S. Definitian of Ees!er trateov 10. She genera objectives of ooveinsnt policy (drawn mainly from the neclaraLon do Eglitims, de Dlvlonnmept "rLale of December 1990) is to redyomize the agricultural sector through diversifi ation, progresolve *tate disengaget from production, processing and trade, lLberalization of iprim, removal of subsidies, reduction of costs, restoration of flnancial self-sufficLency wlthin the main sectors, and transfer of responsibility for management of natural resources and investmnts to farmer producer groups and the prlvate sectorw. specfic objectives ares - better rural income distrlbutioni - slowing rural-urban migration# - equitable regLonal distribution of developments - increased food self-sufficiencyt - better Onagement of natural resources, through improved integratlon of agriculture, forestry and livestock. 11. Complementing the commitment to reduce the comnercial and regulatory activity of the state, is a c-wtmeat to strengthen rural instLtutions and public service activitLes such as agricultural research and extonsion, mlgratory pest control, control of epLzooties, and protection of natural resources' nh inue of Real * n1 ee2h Rate Ovrvaluation 12. The competitiveness of s8negales agriculture is seriously prjudiced by the overvaluation of the CPA franc. Potential export products have dlfficulty competing with other suppliers unless they are subsidized. There is no general policy for dealing with this problem, and an accumulation of ad ho solutions obscures the true competitive posltLon. Octimal PaEckaa of Infrastructure and Services 13. Government I role in agriculture ia fundamentally different from its role ln such sectors as transport, education or health care, wher it provldes much of the productLve investment. Agriculture is esentially a private sector productive actlvity, where Government s maln to.ke are to provide a policy framework conducive to development, ensure a minimu level of services ln area that are attractive to the private sector, and protect the long-term public interest where this conflicts with individual or short-ter interests. 14. Covernment direct investment in the sector falls into the following main categorLes (a) lnfrastructure and qpipment to allow government to carry out its servico activLties (e.g., vehicles, offices, research stations and laboratory equipment for extension, research and phyto/soosanitary control)g (b) public infrastructure (e.g., rural roads and markets) to facilitate agricultural productiong - 86 - Annex 2 () Linnovative activities that arx lntended to be transferred to or adopted by the private sector (e.g., on-farm reafforestations); (d) direct productive invegtments for private users in cases where the Scale or technical complexity of such investment rules out direct prlvate investment or would exclude intended beneficlarles. 15. iven the Government's objectives and its comitment to dieengage from commrcial actlvitles, the highest priority ln terms of total public agrlcultural expendlture is to ensure the functioning of the gervige aJ±&t sa of agriculture - notably agricultural extension, agrlcultural research, phytosanitary and zoosanitary protectlon and control in order to ralse the Latensity of agrliultural production ln terms of value added per unlt of productive land. in the light of their relative importance in GNP, slightly more attention should be given to crop agriculture than to livestock, with fisheries reoeiving a signifliantly smallor share than either. The second prlority is action to safeguard the environment and prevent natural resource didinvestment. in both these areas, what is important Ls to ensure that polLeLes and services are a.eglvqxR. 16. Investment Ln public Lnfraittumture Ln agriculture comes third iA the order of priorities. Excepting irrigatLon, the scope for thLs I limLted once items covered by other budgets (rural roads and teiecommunications) are excluded. In Senegal small rural water supplies (generally not lnvolving irrigation) have come under the control of the MLaLstry of Rural Development and Hydraulics since 1990, which is a defensible combinations, given the importance of water supplies to the productive potential of the rural household. 17. Irrigation is the maLn area where the Government now invests heavily in directly productive agricultural facilities. As will be shown, lt now dominates real public expenditure on agrLculture; yet performance has been so poor ln economic torms that arguably its overall impact has been to decrease total agricultural output. On the other hand, micro-irrigation of high value crops appears to be highly profitable. III. Issues ln the AUrlcultural Sector Public Exnendlture PZggg 18. Public expendlture ln the sector consists of th normal recurrent budget, thu investment budget under the Plan Yriennal d Invegtiasement, and the budgets of various public-sector institutions. There iL considerable overlap between these three categories, and the system as a whole is poorly deslgned as an instrument for expenditure control. This is particularly evident in the case of the recurrent budget, whre several hundred expenditure heads are listed in apparently random order. A very large part of the public expenditure in the sector is not covered by the budget process. The largest category of extra-budgetary activity concern transfers from the Price Stabilization Fund (CPsP) to the senegal River Valley agency (SAED) - 87- Annexa 2 19. Comparisons of recurrent budgets over a number of years suggests a substantial decline in materials and maintenance relative to wages and salarles. This situation is sulzaised belowV. Recurent Budoet Allocations for AurLculture*s 1C0a millions Wages & Goods & Transfers Total salaries services 1986/87 4927 1184 1853 796S 1987/88 5070 1742 1678 8492 1988/89 5351 1150 3S68 10070 1989/90 S260 1495 3323 10078 1990/91 5025 1196 4624 10845 1990/91(cuts**) 5025 826 3861 9712 * Corresponds to 1989/90 minLetry structure excluding hydraulics. ** After the cute made In the budget Isn August 1990. 20. Over this period, the share of the budget allocated for goods and services thus fell considerably, from 1S% to only 11% in 1990/91, and to 8.5% after the August 1990 cuto. in relation to wages and salaries they fell from 24% to 16.4% after the cuts. The present ratio is so low as to preclude effective functioning. A functional ratio in a ministry with a lot of field operations would be between 50% and 100%. 21. Actual expenditures fell short of budgeted expenditures by about 6* overall, but most of thio shortfall was in the "goods and services' category, where the average shortfall over the four years 1986/87 to 1989/90 was as high as 27%. Thus the squeeze on operations and maintenance expenditures is worse than ia suggested by looking at the budget. Realized axo.nditures for Aaricultura*t PC0A millions Wages & Goods & Transfers Total salaries servLces 1986/87 5162 864 1853 7879 1987/88 5312 800 1691 7803 1988/89 S454 629 3498 9581 1989/90 5471 548 1658 7677 * Corresponds to 1989/90 ministry structure excluding hydraulics. TheV MM919 remwrtw hs*st - beAty PAt in h*M 19 beasme of the huibt wilsis, Ien -e Comentay refeis to doe sIsmtlm~ b.fee eatW ad stftw ats or %wsfnutU ad _fh. - as- AnnoXi 22. In real term (using the GD deflator) all maor ponnt of realized recuret agricultural expenditure on the budget have declnd between 1986/87 and 1989/90u however, whereas wages and salaries fell by only 1I, goods and seri¢ces fell by 41%. This is a classic exampl. of budget stringency falling on the moat eaily compressible lte in the recurret budget, creatin * dysfunctional dLitortion. The result is that governmet serices lack the material means to work and to maintain past investmeta. ThLi process also leads to distortions within categories. For instance 20% of th reomaining goods and services budget for forestry actlvitlie is for unlform. This situatlon was aggravated by the budget cuts of August 1990, whlch involved an across-the-board reductLoan of 40% in most budget items except salaries and utlilty paymnts. 23. Unfortunately lt is very hard to determine whether or to what extent these apparont trends Ln recurrent spending are counterbalanced by the transfer of recurrent expenditure to the Lavestment budget. The recurrent budget includes only a small amount of investment (mainly rural water supplies) but is very far from coverLng all recurrent expndlture in the sector. Since ald donors are reluctant to fund recurrent expenditure, it may be assumed that the directlonw of the trends observed are correct, and are only partially cpensted for by a mitlgatLng shift of expenditure to the investmuet budget. 24. A hlgh proportion of recurrent expenditures goes on transfer (40W in 1990/91 after the cuts). These are mainly transfers to the research instLtute I.S.R.A. (01F 913 million), the Senegal River Valley agency GARD (COn. 161 million), and regional rural development soclities. Thwes consist mainly of recurrent expenditures, coverLng both personnel and other categories. Other "transfer" ltem in the budget apper to be accounting fLitions as they are really transfers to broad recurrent budget categories (e.g., crop protectLon). The initLal 1990/91 budget also appars to have double-counted a number of substancial transfer expendLtures, partisularly in relation to agrliultural research, and most of the cuts in this category in August 1990/91 consisted of removing transfers whlch had been duplicated. 2S. The total authorLzed recurrent budget of the ministries and epartments lnvolvwd in agrlculture (Rural Developmtnt, Livestock, Fisheries, Rural Hydraullcs, Water and Forests and Natural Resource ProtectLon) breaks down as follows between functional categorLes (transfers have ben allocated as far as possible to -appropriate functional categorles)a -09- 1nD_2 TANA 2I EO t FRt SUIOL1UAL SEcT 19W/91 V*i_ VW LIt" we W weSu t w ~ ese we_- 51.5 t*I~~~w re SIMON"W VW Wu Wu Ws Wu VW 1 , o_ n " t 90rt Vs _dovq Wu *nr e re re_ SlIt WI II VD tV tP 4r xw we r V* wi SW VW VP Vs I lt **U * "~~~W re eo ets SW W II II ri vt £54 wi Wts W St e A-_ US~ WI _ ZWIWWII @W 3W WI LU WIe IL urn WI Wa WI. 5 "_ res SAt WtS, law no 6 smis WAP * at. .mtwuw. mumsa aweVdMd Msrnuaw AUSM ODA= ~ mnn~ nmuIs _ ain _ SZT - 126 - Pq. 16 of 16 MU I: FPOW=I=IU OF INESIUT OEWIUE tg9 tCFAF ILLISM) UITEAIL DOOIIC FIIIIUCI Fl_ _ _ _ _ _ _ _ l t TeAL lEer. ~~~~PubIIe M3aranMc Privaft Prf~a7 IlS 4.5 L. 0.4 O 4.0 S _cu~ry 3.6 0.4 3.5 0.1 2.6 latimy16.7 4.4 2.3 0.O 5.4 11.3 3X 2.6 0.4 1U.0 TTAL 87.1 13.0 9.0 0.9 110.0 (1W) (11) (8.2) (0.8) (100) ,~~~~~~~~~~~~~~~~~~~~~~~~~k .. . . .xA r e Nt~~~~~~~~~~~~~~~~~~ A U R I T A N I A Al,_ \ tEt 9 S E ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~VN$ E G A L iT -_.~~C1 t_t E G 1, _E0 1- ~ M m JIomew J,e At/antie R E~~~ ~~~~~~~ G I O NN s. twawrOF __# L U G A -__ Ovean~~~T- H9a I E-- D < R E G1 N; OFy S I N E, S A L O U M >REG <~~~~~~~~~~~~~~~~~~~~ E I 0t N f 0 F M Ar L) - '5 ,o , x i T SrF~~~~~~ E N E G A L- i " " -7 ' , . O . ,~~~~~~~~~~~~0R E N 'T"$'F L | no.w. r. R E G I O0 N O F ' >C AS A M A t'N C E \:/tLta .~~~~~~~~~~~~~~~fnJA °VARK._ PMd 7h W*W 'W f "l! 41sl@t#././\KduX + Ocy o-_ ......... - S }w-' 16- GUINEA -BISS_ AIJ 14 SL,fr G U I N E ',A,,.g