Documentof The World Bank FOROFFICIAL USE ONLY ReportNo. 43257-TG INTERNATIONAL DEVELOPMENT ASSOCIATION INTERIM STRATEGY NOTE FOR THE REPUBLIC OF TOGO FORTHE PERIOD FY08-FY10 May 16,2008 CountryDepartmentfor Togo AFCF2 AfricaRegion ~~~~ ~~ ~ ~ ~ ~ This document has a restricteddistribution and maybe usedbyrecipients only intheperformance o f their officialduties. Its contents maynot otherwisebedisclosed without World Bankauthorization. The last Country Re-EngagementNote was discussedby the Executive Directors on December 14,2004. CURRENCY EOUIVALENTS CurrencyUnit =CFA Franc (CFAF) CFAF 423 =US$ 1(as ofMay 8,2008) US$ 1.64 = SDR 1(as of May 16,2008) WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR January 1-December 31 ACRONYMS AND ABBREVIATIONS AAA AnalyticalandAdvisoryActivities AFD Agence FranGaise de Dtveloppement (FrenchAgency for Development) AfDB AfricanDevelopmentBank APL Adaptable ProgramLoan AU AfricanUnion BIA Banque Internationalepour 1'Afrique BOAD Banque Ouest Africaine de Dtveloppement (West AfricanDevelopmentBank) BIDC Banque d'hvestissement et de Dtveloppement (Investment and Development Bank) of ECOWAS BTCI BanqueTogolaisepour le Commerce et 1'Industrie CARE Cooperative for AmericanReliefEverywhere CDD CommunityDrivenDevelopment CDP CommunityDevelopmentProject CEB CommunautkElectrique de Bknin (BeninElectricityCommunity) CEDEAO Communautd Economique des Etats de 1'Afiique de 1'Ouest (see ECOWAS) CEET Compagnie d 'EnergieElectrique du Togo (Togo Electric EnergyCompany) CFAF CFA Franc CNSS Caisse Nationale de Stcuritt Sociale (National Social SecurityFund) CRT Caisse des Retraitts du Togo (TogoPensionFund) CWIQ CoreWelfare Indicator Questionnaire DPO DevelopmentPolicyOperation DSA Debt SustainabilityAnalysis EC EuropeanCommunity ECOWAS/CEDEAO Economic CommunityofWest AfricanStates EDF EuropeanDevelopmentFund EFA-FTI EducationFor All -FastTrack Initiative EITI ExtractiveIndustriesTransparencyInitiative EPPR EmergencyProgramfor PovertyReduction ESW Economic and Sector Work FA0 FoodandAgriculturalOrganizationof the UnitedNations GDP GrossDomesticProduct GEF GlobalEnvironmentFacility GFATM GlobalFundfor the FightAgainst AIDS, TuberculosisandMalaria HIPC HeavilyIndebtedPoor Country HIVIAIDS HumanImmunodeficiencyVirus/AcquiredImmune-DeficiencySyndrome IBRD International Bank for ReconstructionandDevelopment IDA InternationalDevelopmentAssociation IFC InternationalFinance Corporation IFG InternationalFertiliserGroup IMF InternationalMonetaryFund I-PRSP InterimPovertyReductionStrategy Paper IsDB Islamic DevelopmentBank ISN InterimStrategyNote LICUSTF Low-Income CountryUnder Stress Trust Fund MAP Multi-CountryHIV/AIDS Program MDG MillenniumDevelopmentGoal MDFU Multilateral Debt ReliefInitiative MIGA Multilateral InvestmentGuaranteeAgency NGO Non-GovernmentalOrganization NPL Non-PerformingLoan OECD/DAC Organizationfor EconomicCo-operationandDevelopment/Development Assistance Committee OIF InternationalFrancophoneOrganization OTP Office Togolais des Phosphates PAL Port Autonome de Lomk (AutonomousPort o f Lomk) PCF Post-ConflictFund PEFA PublicexpenditureandFinancialAccountability PEMFAR PublicExpenditureManagementandFinancialAccountabilityReview PER Public ExpenditureReview PFM PublicFinance Management PRGF PovertyReductionandGrowthFacility(ofthe IMF) PRSP PovertyReductionStrategy Paper SMP StaffMonitoredProgram(of the IMF)) SNPT SociPtP Nouvelle des Phosphates duTogo (New Togo PhosphateCompany) SOTOCO Sociktk Togolaise de Coton (Togo CottonCompany) UE Union EuropPenne(EuropeanUnion) UN UnitedNations UNDP UnitedNations DevelopmentProgramme UNICEF UnitedNations Children's Fund UTB Union Togolaise de Banques (TogoUnionof Banks) VAT Value AddedTax WADB West African DevelopmentBank WAEMU West AfricanEconomic andMonetaryUnion WAPP West Africa Power Pool WB World Bank WBI World BankInstitute WFP World FoodProgram CountryManager : Joseph Baah-Dwomoh(AFMBJ) TTLs : EvelynKennedy(AFCF2) and INTERIMSTRATEGYNOTE(ISN) FORTOGO Table of Contents Pages EXECUTIVESUMMARY ................................................................................... 111e.. I INTRODUCTION . ...................................................................................... 1 A Background . .............................................................................................................................. 1 B Political Context . ....................................................................................................................... 2 C EconomicContext . .................................................................................................................... 3 D Social Contextand PovertyImpact . ........................................................................................ 7 E Governanceand Transparency . .............................................................................................. 8 I1. BANKENGAGEMENTTO DATEAND LESSONSLEARNED ..............10 A Country Re-EngagementNote . .............................................................................................. 10 B BankProgramduringthe CRNPeriod(FY05-07) and to date . ......................................... 10 C LessonsLearned . ..................................................................................................................... 11 I11 TOGO'S MAINCHALLENGESAND OPPORTUNITIES . ....................... 12 I V . THE GOVERNMENT'S REFORMPROGRAM ...................................... 14 V . PLANNEDWORLD BANKASSISTANCE, FYO8-FY10 .......................... 16 A Rationale and Approach for the Interim Strategy . .............................................................. 16 B Objectives of the ISN . ............................................................................................................. 17 VI. MONITORINGAND EVALUATIONOFRESULTS ............................... 25 VI1. DONORCOORDINATIONAND PARTNERSHIPS ................................ 25 VI11 MAINRISKS AND MITIGATIONRESPONSES . ..................................... 26 I X . CONCLUDINGREMARKS ..................................................................... 28 Tables: Table 1: Togo - SelectedEconomicIndicators .......................................................................... 5 Table2: Togo and ComparatorCountries: SocialProfile....................................................... 7 Table3: Togo: Bankand Other DonorAssistanceProgramfor Togo .................................. 24 Figure: Figure1: Togo -ExternalPublic Debt....................................................................................... 6 Box: Box 1: CountryProfile ................................................................................................................. 1 CountrySpecificAppendices Appendix 1: InterimStrategyResultsFramework ................................................................... 29 Appendix 2: Donor Assistance to Togo ................................................................................... 33 StandardCASAnnexes CAS Annex A2: Togo at a Glance........................................................................................... 35 CAS Annex B2: Selected Indicators of BankPortfolio PerformanceandManagement.........38 CAS Annex B3: IDAProgramSummary ................................................................................ 39 CAS Annex B4: Summary ofNon-Lending Services .............................................................. 40 CAS Annex B6: Key Economic Indicators .............................................................................. 41 CAS Annex B7: Key SocialIndicators .................................................................................... 43 CAS Annex B8: Statement ofIFC's HeldandDisbursedPortfolio ......................................... 44 CAS Annex B8: OperationsPortfolio (IDA and Grants) ......................................................... 45 Map No. IBRD 33497 The World Bank team working on the preparation o f the Togo ISN was led by Evelyn Kennedy (Operations Analyst, AFCF2) and Homa Zahra-Fotouhi (Operations Officer, OPCFC) under the guidance o f James P. Bond (former Country Director, AFCF2), Antonella Bassani (Sector Manager, AFTP4, and Acting Country Director, AFCF2) and Joseph Baah-Dwomoh (Country Manager). The core team included Christina A. Wood (Senior Economist, AFTP4); Yvette Dan Houngo (Economist, AFTP4); Giuseppe Zampaglione (Senior Operations Officer, AFTH2); Andre Ryba (Lead Financial Sector Specialist, AFTFP); Ayi Klouvi (Agricultural Economist, AFTAR); Yves Jantzem (Operations Analyst, AFTAR); Kwabena Amankwah-Ayeh (Senior Urban Specialist, AFTU2); Alexandra Pugachevsky (Operations Officer, COCPO); Fanny Missfeldt-Ringius (Senior Energy Economist, AFTEG); Sunil Mathrani (Senior Energy Specialist, AFTEG); Emile Finateu (Lead Financial Management Specialist, AFTFM); Nathalie Munzberg (Senior Legal Counsel, LEGAF); Marc Lixi (Operations Officer, AFTRL). Kathy C. Li Tow Ngow (AFCF2) provided valuable team assistance. Francesco Scaduto-Mendola (Consultant) provided valuable support to the team. - 11- EXECUTIVESUMMARY 1. Togo has known a long period of political and economic instability and tensions since its independencein 1960. Following achievement o f the comprehensive political agreement (Accord Politique Global) inAugust 2006, a transitional government o f national unity organized legislative elections in October 2007. These were deemed free and transparent by the international community and marked a milestone in Togo's democratization process. The new Government has committed to pursue political and economic reforms and to re-engage with the international community whose activities in the country have been modest over the last decade and a half. 2. After political turmoil, governance shortfalls, and poor performance o f public enterprises, including state-owned banks, contributed to poor economic performance in the 1990s and early 2000s, the recent positive political environment and improved macroeconomic management enabled a rebound in economic growth in 2006 and 2007. The authorities have satisfactorily implemented an IMF Staff-Monitored Program (October 2006-June 2007) and negotiated a 3-year program under the Poverty Reduction and Growth Facility which was approved bythe IMFBoard on April 21,2008. 3. Togo faces several challenges in its efforts to promoteeconomic recovery and povertyreduction. To strengthen economic performance andboost growth, Togo needs to tackle issues that would help restore productive capacity inthe short term inthe cotton andphosphate sectors. At the same time, it would need to lay the basis for medium-term growth by improving public financial management, restructuring the financial and bankingsectors, and meeting urgent infrastructure needs working with its ECOWAS and WAEMU neighbors. Growth would be strongly influenced by Togo's regional connection, notably exploiting its transit corridor and using its deep port facilities at LomC, leveraging its past reputation as a strong regional financial center, and promoting the services sectors. 4. The Government's program of reforms is presented in the Interim Poverty Reduction Strategy Paper (I-PRSP) completed in March 2008. The I-PRSP sets out an ambitious poverty reduction strategy to revive economic growth and improve basic living conditions along three strategic axes: (i)strengthening political and economic governance, (ii)promoting economic recovery and sustainable development, and (iii)developing social sectors, human resources and employment. 5. The I S N supports implementationof selected interventions under the three inter-related pillars of Togo's I-PRSP. The over-arching goal o f the ISN is to help Togo recover from a long period o f instability and suspension of aid and begin laying the foundations for sustained, shared growth over the medium term. This will be achieved through: (i) support for the normalization o f relations with the World Bank through the clearance o f arrears which would set the stage for the provision o f regular IDA resources, facilitate Togo's efforts to re-establish relations with the rest of the international community, and pave the way for Togo toward debt relief under the HIPC initiative and MDRI; (ii)assistance to improve public financial management and governance in key - 111- ... sectors and public institutions; and (iii) assistance to address critical and social needs on the ground. A common theme throughout the assistance strategy is support for economic governance reforms inthe critical sectors o f the economy. The total FY08 IDA allocation i s SDR [114.5] million, o f which SDR [93.3] million is provided as exceptional arrears clearance support and SDR 21.2 million as an exceptional IDA reengagement allocation. Although IDA 15 country allocations are not yet available, the annual lending program for FY09 and FY10 i s expected to be about SDR 18 million, but could be larger in light o f the substantially increased resources available under IDA15, as well as possible country performance improvements. The I S N has been prepared in close coordination with the main development partners in Togo, in particular the International Monetary Fund,the European Community andthe African Development Bank. 6. This ISN is developed in an uncertain environment, but the Bank must be engaged early and in a flexible manner to support the window of opportunity in the current political and economic recovery process. In such an environment, the ISN presents a program that responds to the socio-economic conditions and opportunities presented. In particular, given the lessons learned over the past few years, Bank staff have conceived a program which can be, ifrequired, less prone to political shocks inthe process - such as the focus on community driven development. - iv - I. INTRODUCTION A. BACKGROUND 1. This Interim Strategy Note (ISN) presents the support to Togo planned by the World Bank for the period May 2008-June 2010. In May 2002, Togo fell into non-accrual status with the World Bank, as a consequence o f the decade-long political and economic crisis, with the resulting suspension o f Bank Grou operations. Inline with the Low-Income Country Under Stress (LICUS) Task Force recommendations, a P Country Re-engagement Note (CRN) was prepared and endorsed by the Board o f Executive Directors on December 14,2004. The CRN paved the way for a resumption o f Bank work in Togo in the form o f analytical work and activities financed through the LICUS Trust Fund. Box 1: CountryProfile Togo i s a low-income country o f 56,785 km2located on the Gulf o f Guinea in Western Africa. The population i s estimated at 6.3 million in 2006 with an average annual growth rate o f 2.6 percent. The country i s a member o f the West African Economic and Monetary Union (WAEMU). In 2006, Togo had an estimated per capita income o f US$350 and a gross domestic product o f US$2.2 billion. Togo ranks 152nd out o f 177 countries in terms o f human development, according to the UNDP's 2007 Human Development Report. Lomk, the capital city, has about 800,000 inhabitants and houses the port which is an important transport hub for the landlocked neighboring countries. The country i s divided into five regions and 30 prefectures. The 1992 constitution provides for presidential and legislative elections every five years; however, it was amended in 2002, abolishing the two-term presidential limit and increasing presidential powers. The country's main economic activities are in agriculture, phosphate mining, and trade and transport o f goods. Agriculture employs two thirds o f the population and accounts for about 45 percent o f GDP. The secondary sector, including phosphates, cement manufacturing, construction and energy, employs about 12 percent o f the population and accounts for about 22 percent o f GDP. Services, dominated by commerce and transport, employ about 21 percent o f the population and generate about 33 percent of GDP. 2. Since the Board discussion of the CRN at the end of 2004, political developments have been broadly positive, particularly since 2006. Presidential and legislative elections took place in 2005 and 2007, respectively, and a political agreement was drawn up among the main political parties in 2006. The Government has initiated important reforms to set the country on a path o f recovery and long-term economic development. Although Togo has been in non-accrual status, the World Bank has been engaged duringthe last three years by conducting analytical work and by financing some community-based emergency activities through LICUS Trust Fund grants. A deeper engagement i s now needed to support the Government in implementing critical reforms and improving the living conditions o fthe population. ' World Bank Group Work in Low-Income Countries Under Stress - A Task Force Report - September 2002. - 1 - 3. The over-arching goal of this ISN is to outline an interim strategy to help Togo recover from a long period of instability and suspension of external aid and begin laying the foundations for sustained, shared growth over the medium term. This will be achieved through: (i) support for the normalization o f relations with the World Bank Group through the clearance o f arrears; (ii)assistance to improve public financial management and governance in key sectors and public institutions; and (iii)assistance to address critical social needs. The ISN has set realistic and achievable targets with regard to the progress and achievements that can be realized over the next 25 months. B. POLITICAL CONTEXT 4. Togo has known a long period of political instability and tensions since its independencein 1960. The first President, Sylvanus Olympio, was assassinatedin 1963 and was succeeded by a provisional government led by Nicholas Grunitzky. Grunitzky's government was overthrown in 1967 by a coup ledby EyadCma GnassingbC, who became President and ruled the country until his death in 2005. Various presidential elections, which reconfirmed EyadCma GnassingbC as President, were boycotted by the opposition who expressed serious concerns about the integrity o f those elections. Many donors, particularly those in the European Community (EC), continued to stress the need for democratic reforms in order to resume assistance that was cut off in the early to mid- 1990s. 5. The death of EyadCma GnassingbC in February 2005 was followed by the election of Faure GnassingbC as the new President of Togo in a disputed ballot in April 2005. The election triggered several weeks o f intense civil unrest, prompting a clampdown by the security forces and an exodus o f an estimated 40,000 refugees2 to neighboring Ghana and Benin. Lengthy negotiations among the main political parties, also mediated by President Blaise Cornpaore, o f Burkina Faso, culminated in a comprehensive political agreement (Accord Politique Global) in August 2006. The agreement provided for a new, transitional government o f national unity, whose mandate included the organization o f legislative elections by the end o f October 2007. 6. Legislativeelections were held on October 14, 2007. The incumbent party, Rassemblement du Peuple Togolais (RPT), won a comfortable majority of seats (50 out of 81) in the NationalAssembly. The constitutional court ruled that the elections were fairly contested, and the majority o f EC and other foreign observers also endorsed the elections results. All parties who won seats during the elections are participating in the National Assembly. On November 29, 2007, the European Community informed the Togolese Government that it had restored full cooperation with Togo, after a 14-year suspension, citing progress in improving human rights and restoring democracy through the holding o f free and transparent elections. The E C also immediately unblocked Euro 40 million inaid. The estimate is reportedby the UnitedNations HighCommission for Refugees (UNHCR) intheir August 2006 Report on the humanitarian situation (Rapport sur la situation humanitaire aolit 2006), issuedby the Office for the Coordination of HumanitarianAffairs (OCHA) Regional Office for West Africa, UNOCHA, Dakar. - 2 - 7. On December 14, 2007, the President named a twenty-one member cabinet composed of fifteen membersof the rulingparty and six membersfrom opposition parties and civil society. The inclusive cabinet mitigates the risk o f resurgence o f political tensions which could potentially weaken political stability in the medium term. A real achievement has also been accomplished by the new Government in placing reformers in key positions o f influence in the economy (including the customs, the port andthe cotton sector). At the same time, the legislature reflects cross-cutting hues o f the political spectrum with a stake in the political process and an interest in helping to move the country forward. 8. The new Governmentis also committedto bring the country back to a path of economic recovery and poverty reduction and to full re-engagement with the international community. As a reflection o f this commitment, the Government implemented an IMF Staff Monitored Program (SMP) between October 2006 and June 2007 to restore macroeconomic stability. InApril 2008, the IMF Boardapproved a three- year PRGF-supported program whose implementation commenced on January 1,2008. The Government has also started implementation o f important governance reforms to improve transparency and accountability in the public sector. Inparticular, reform measures are being successfully implemented in key sectors (financial, phosphates, cotton and energy) andpublic financial management (see details below). But a substantial reform agenda remains to be implemented in all o f these thematic areas. Following the political and economic reforms implemented in the past two years, several donors are considering to re-engage with the country. C. ECONOMICCONTEXT 9. The prolonged period of political instability, economic and financial mismanagement and the related withdrawal of donor support resulted in an economic declinethat reduced living standards for a largesegment o fthe population. As described inthe CRN, the period starting inthe early 1990s was characterized bypolitical turmoil, poor economic management and donors' suspension o f aid, except for a period o f relatively stronger economic activity in the mid-199Os, which coincided with an improvement in the political situation, the implementation o f an important stabilization program and a partial resumption o f foreign assistance. GDP growth rebounded in 2003 (5.2 percent) following an average annual decline o f 0.6 percent during 1998-2002 but in 2004-2005, a period marked by political violence, average annual growth remained weak (1.8 percent). As a member o f the WAEMU, Togo is required to respect the macroeconomic convergence criteria established for the zone but had difficulty doing so. Since 1998, when the WAEMU established the multilateral surveillance, Togo generally respected only one or two out o f the required eight convergence criteria. The inflation rate, however, usually remained within the 3 percent ceiling, due mainly to a common prudentmonetary policy for the zone. 10. The political and economic problems caused a contraction in the formal economic activities and encouragedthe expansion of the informalsector, which led to a significant decline in Government revenues. Also, treasury management severely weakened due to lack o f systematic monitoring and recording o f transactions at an aggregate level. This reduced the transparency o f the fiscal situation and resulted in a - 3 - breakdown in expenditure procedures. Excessive public debt and weak public finance management also led to large arrears, undermining the confidence o f suppliers and creditors. The business environment i s constrained by decades o f underinvestment in infrastructure (notably transport and energy) and poor governance. More recently, Togo's economy has been hit by a severe energy crisis, the negative terms o f trade impact of highfood andenergy prices, the Euro appreciation(to which the CFAF is pegged) vis-a- vis the U S dollar, and flooding incertainparts o fthe country. 11. Poor management of state-owned enterprises caused large losses, in particular in the cotton and phosphate sectors. Weak management o f the phosphate sector resulted ina drop inits share o f GDP from 2 percent in2001 to just over 1percent in2006, as well as inits share of export earnings from 13 percent in2001 to 6 percent in 2006. The sector's losses became a drain on the public treasury and its significant non- performing loans have restrained the role o f the financial sector in Togo's economic growth. The cotton sector's share o f GDP also fell from under 4 percent in2001 to under 1percent in2006 and its share o f exports fell from 17.5 percent in2001to 6.3 percent in 2006. As with the phosphate sector, the cotton sector's losses are a drain on the public treasury and its non-performing loans (NPLs) also constrain the role o f the financial sector in Togo's economic growth. Due in large part to the phosphate and cotton sectors as well as to weak management o f the banks, non-performing loans inthe bankingsystem reached 29 percent o f total loans by end-2006, much higher than the 19 percent WAEMU average. 12. Successful implementation of reforms under the Staff Monitored Program (SMP) with the IMF (October 2006 - June 2007), has paved the way toward reengagementwith the donor community.Performance under the program was strong, with all fiscal targets comfortably met as a result o f fiscal reforms. The fiscal deficit was below the SMP target, domestic arrears were reduced for the first time in years and revenues performance was strong (reaching 16.9 percent o f GDP in2006 compared with 15.7 percent in 2005). Expenditure management was prudent in 2006 as well as in 2007 despite pre-election pressures. Implementation o f governance-related reforms was satisfactory and structural benchmarks were generally met. 13. In response to the reforms, economic recovery has been underwaysince 2006 although tempered somewhat by exogenous shocks. Real GDP grew by about 4 percent in 2006. A buoyant services sector benefiting from growing regional trade and a moderate increase inthe value o f phosphate exports (owing to an international phosphate price boom) offset the dramatic decline (by over 50 percent) inthe export o f cotton fiber. Thanks to an improved political climate and a modest rebound in cotton production, the recovery continued in 2007 dampened somewhat by electricity supply shortages and flooding in the North o f the country in the fall that hurt local agriculture. The external current account deficit (including grants) widened, reflecting higher oil prices and a sluggish growth inexports. While inflation pressures subsided somewhat in2007 as food prices moderated, significant increases in world market prices for food and fuel over the last five months have resulted in about 17 percent increase in food costs and also increases in agricultural input prices. Inflation pressures in 2008 are therefore likely to be higher relative to the current estimate for the year. - 4 - Table 1: Togo - Selected Economic Indicators 2004 2005 2006 2007 2008 2009 2010 Actual Estlm. Program ' (Percent change, unless otherwise indicated) National Income,prices,and exchange rates Real GDP 2.4 1.3 4.1 2.1 3.0 4.0 4.0 Real GDP per capita -0.3 -1.3 1.5 -0.4 0.5 1.4 1.4 GDP deflator 2.8 7.6 0.2 0.9 1.6 2.0 2.0 Consumer price index (annualaverage) 0.4 6.8 2.2 1.o 4.1 3.8 3.5 (Percent of GDP, unless otherwise indicated) Governmentbudget Total revenue and grants 17.6 16.9 18.3 18.7 19.5 21.2 22.1 Revenue 16.8 15.7 16.9 17.0 17.2 17.5 17.8 Total expenditure and net lending 16.6 20.4 22.1 20.6 21.9 22.9 23.4 Overall balance (payment order basis) 1.o -3.5 -3.8 -1.9 -2.4 -1.7 -1.3 Primary balance 3.2 -0.5 -1.1 0.2 0.0 0.6 1.1 Externalsector Current account balance -3.0 -5.3 -6.0 -6.4 -7.9 -6.7 -6.4 Externalpublic debt 92.7 90.3 83.9 80.9 64.2 60.8 36.3 Of which: arrears 27.0 28.6 29.5 32.2 0.0 0.0 0.0 Externalpublic debt service (percent of exports) 13.1 10.6 9.2 9.1 6.7 5.3 4.9 Gross international reserves (months of imports) 3.6 2.0 3.1 3.5 3.2 3.1 3.1 'Sources:Togolese authorities: and Fund staff estimates and projections. Reflects PRGF objectives. Assumes external debt and arrears rescheduling/relief in 2008-2010, broadly in line with potential debt relief under the HlPC Initiativeand MDRI. Revenue minus expenditure, excluding grants, interest, and foreign-financed expenditure. 14. The medium-term macroeconomic outlook is based on the assumption of consolidation of socio-political stability following the elections and a steady economic recovery. Real GDP growth i s projected to be about 3% percent a year on average during 2008-10, on par with achievements since 2006. The initial recovery i s expected to come from a governance-reform-induced rebound in cotton production from the current low capacity utilization levels (para. 37)' and a resumption of donor-financed public investment. Phosphate production would recover following implementation o f key sector reforms and investments during 2008-2009. Economic growth beyond 2008 would be supported by ongoing andplannedstructural reforms centered on public finance management and financial sector governance, and measures to address infrastructure bottlenecks (notably the port and energy) that previously stymied private sector growth. Togo's growth potential largely relies on its comparative advantage as a transit corridor to neighboring countries and its deep port facilities at Lom6, its past reputation as a strong financial center and its potential to further develop services around these activities (see paras. 36-42 for more details on Togo's main challenges and opportunities in these areas). The regional monetary-exchange arrangement is expected to ensure monetary and price stability. 15. The primary balance is assumed to increase progressively from a balanced position in 2007 to a surplus of 1.1 percent of GDP in 2010 to achieve broadly sustainable fiscal and debt positions that avoid renewed arrears accumulation. The Government's macroeconomic framework targets a modest primary fiscal surplus while - 5 - reallocating spending toward health, education, energy, roads, and the restructuring o f state-owned banks and enterprises, supported by scaled-up external assistance. Revenues would gradually increase, to about 17.8 percent of GDP by 2010, while the domestic primaryspending envelope would decline slightly. 16. Togo is in debt distress with large external arrears and an unsustainable public debt, as indicated by the large proportion of its debt that is in arrear~.~Togo's external public and publicly guaranteed debt, including arrears, at the end of 2007, was estimated at US$2.2 billion in nominal terms, or 80 percent o f GDP. Of this, the bulk was owed to the World Bank and the Paris Club creditors, o f about US$0.8 billion and US$O.9 billion, II Figure1: Togo -ExternalPublicDebt Other Bilatemland II respectively (Figure 1). Togo's debt to Canrnercial other creditors was relatively modest incomparison: US$145 million to the WcrM Bank (DA) AfDB Group, US$215 million to other multilateral creditors, and US$115 Pans Club million to Non-Paris Club creditors. External arrears were US$0.8 billion, African Daeloprent Bank or 30 percent o f GDP at end-2007. The most recent estimate o f Togo's debt to commercial auditors as of end-2007 is U S 3 1million. 17. Togo has yet to benefit from debt relief under the HIPC Initiative and preliminaryinformationsuggests it is likelyto qualifyfor relief underthe Enhanced HIPCInitiativeandMDRI. With domestic revenues exceeding 15 percent o fGDP, and exports exceeding 30 percent of GDP, Togo would meet the HIPC Initiative indebtedness criterion under the "fiscal window" which requires that the net present value o f external public and publicly-guaranteed debt exceeds the HIPC threshold o f 250 percent o f revenues. Consistent with the HIPC Initiative framework, Togo needs to clear arrears to all multilateral creditors or reach an agreement for their clearance, prior to reaching the HIPC Decision Point. Under current plans, the HIPC Preliminary Document could be submitted to the Boards o f the Bank and IMF in the third quarter o f CY2008, and Togo could reach its HIPC decision point in late 2008, after establishing a track record o f reform for six-months under the PRGF and reaching agreement with Bank and Fund staffs on completion point triggers. Given Togo's large arrears to the major multilateral creditors, a significant share o f the debt relief required from these creditors under the HIPC Initiative would be deliveredthroughthe clearance o f arrears. As a result, the debt service reduction during the HIPC interim period from these creditors may be limited. After the completion point, the remaining pre-2003 debt to IDA andpre-2004 debt to the African Development Fundwill be cancelled under the MDRI. This assessmentis based on the data that has beenreconciled incollaboration with the IMFinpreparation for the HIPC Preliminary Document, which could be submitted to the Boards o f the IMF and World Bank inthe thirdquarter ofCY2008. - 6 - 18. The IMF, the World Bank, the AfDB and Paris Club creditors have coordinatedclosely with the Government to ensure a coordinatedarrears clearance process and avoid the risk of fallingback into arrears. To this end, Togo has reached understandings with its main creditors to clear its arrears in 2008, to reschedule its payments (as needed) over the next three years, and to obtain new financing (inproject or budget support) over the next three years4 (see para. 2.25 o f the Program Document for the Economic Recovery and Governance Grant, FY08). D. SOCIAL CONTEXTAND POVERTY IMPACT 19. The extended crisis had a significant impact on Togo's social indicators, a numberofwhich lagbehindthose of neighboringcountries(see Table 2 below). I IBurkinaI Cote I I Source: UNDP HumanDevelopment,2007, and the World Bank"At-a-Glance"Tables. 20. The period of political instability and the related withdrawal of donor support have resultedin an economicdeclinethat hasreducedlivingstandards for a large segment of the population. Weak expenditure management and lack of external financing have squeezed social spending and public and private investment. Expenditures on health, education andpublic investment are far below regional averages, largely reflecting low external assistance and poor expenditure prioritization. Also, government budgets favored urban rather than rural areas; infrastructure investment in the rural areas was very limited and there i s high unemployment in the urban areas. Togo's Human Development Index failed to improve in recent years and stood at 0.512 for 2007-2008, in contrast with a gradual improvement experienced in Sub-Saharan Africa. 21. A survey on core welfare indicatorscarried out in 2006 indicatedthat about 62 percent of the population was poor: the poverty level was much higher in rural (about 74 percent) than in urban (about 37 percent) areas. There were also significant variances among regions, with a relatively low level inthe LomC area (about 25 percent) and a very high incidence in the northern region o f Savanes (over 90 percent). A qualitative survey o f the perceptions o f poverty in Togo, conducted in December 2006, revealed that the population sampled attributed the worsening o f living conditions between2000 and 2006 mainly to economic difficulties and health problems. As a result, 4Inthis regard, itis worth notingthat anAide-mbmoire was signed onApril 15,2008 betweenthe AfDB and the Togolese authorities outlining modalities for the clearance o f the country's debt to the AfDB. - 7 - poverty has deepened inrural areas, and pockets o f extreme poverty exist inurban areas, including the capital. Weak public finance management, in particular due to weak financial management o f key state-owned companies whose losses have been financed by the public treasury, has eroded resources for vital public services. 22. While some progress has been achieved toward reaching the Millennium Development Goals (MDGs), many of the goals are unlikely to be met by 2015. According to a recent assessment o f the MDGs, progress was most notable in reaching the goal o f universal primary education: both the net primary enrollment and the primary completion rate improved between 1990 and 2005; the youth literacy rate also improved. In addition, there was some progress toward the attainment of the goal of promoting gender equality. However, it would be difficult to achieve the goals o f halving extreme poverty and hunger, as well as reducing infant mortality, given recent declines in child immunization. The incidence o f tuberculosis increased during the period and the prevalence o f HIV/AIDS among the adult population was estimated at 3.2 percent in2005 (no comparable data is available for 1990). E. GOVERNANCE TRANSPARENCY AND 23. Governanceandtransparencydeterioratedas a resultof a cultureof political patronageand cronyism. The combination o f economic crisis, relatively low or unpaid salaries to public officials and political patronage nurtured a culture o f lack o f transparency and accountability in the public administration. The years o f political instability also weakened the country's public sector institutions. Problems o f governance inpublic expenditure management resulted from the non-application or non- respect inthe past o f existing rules and regulations for public financial management. The 2006 Public Expenditure Management and Financial Accountability Review' (PEMFAR) showed that despite the adoption o f new rules and procedures in the early part o f the decade, there were difficulties and failures infinancial management inseveral areas. The main areas where actions were needed include: (i)the clarification o f the institutional and regulatory framework; (ii) budgetpreparation process and the use o f exceptional the expense procedures; (iii) the system o f public accounting that makes it difficult to trace the execution o f the budget; and (iv) non-existent or non-functional internal and external financial control and audits o f public spending. The Government has recognized the importance o f addressing these public expenditure management weaknesses and has started implementing a robust reform program (see below). 24. Governance and transparency issues emerged in the two main public sector companies, notably the phosphate and cotton companies. Financial mismanagement of, and corruption in, these companies prompted the Government to replace their management in recent years. In the cotton sector, the Government also undertook from mid-2005 a number o f reforms, including repayment o f arrears to farmers, audits o f SOTOCO (Socie'te' Togolaise de Coton, the cotton company) accounts and organization, and required that SOTOCO management put in place new procurement and control Public Expenditure Management and Financial Accountability Review (PEMFAR) prepared by the WorldBank, African DevelopmentBank, UNDP andthe FrenchCooperation(June 2006). - 8 - procedures. In the case of the phosphate company, the joint venture with a private strategic partner was dissolved inMay 2007 given that the strategic partner did not meet the technical and financial terms o f its contract. A new company, the Societb Nouvelle des Phosphates du Togo (SNPT), was formed in its place. SNPT, while benefiting from the recent increases inphosphate prices, is not making the most o f current opportunities due to absence o f a business plan to enable adjustments to the company's existing operational and marketingpolicies. The Government intends to strengthen the corporate governance o f the new entity and to search for strategic investors. A strategic and financial audit o f SNPT is planned. 25. A financial sector review prepared by the World Bank with the Banking Commission in 2006 showed similar weaknesses in the banking sector, where three banks, accounting for 56 percent o f the market, have negative equity. Reform o f the banking sector is underway, with a temporary administration put in place for Banque Togolaisepour le Commerce et 1'Industrie (BTCI), a restructuring exercise for three o f the main banks, BTCI, Union Togolaise de Banques (UTB) and Banque Internationale pour 1'Afrique(BIA) and an eventual search for strategic partners for BTCI andUTB. 26. Improved governance and transparency have been the central theme of the Government's reform program and of the World Bank and IMF policy dialogue with the Togolese authoritiessince the increasedengagementin late 2006. Under the Staff Monitored Program with the IMF, the Government started implementation o f important governance reforms to improve transparency and accountability in the public sector, including in key sectors (financial, phosphates, cotton and energy) and public financial management. The Bank's dialogue with Togo has comprised exchanges with civil society, NGOs, students, journalists and different political parties, in addition to the Government, as part o f the reengagement process. The work has included information sessions and exchanges organized with the groups. Through the annual country office small grant programs, the Bank has also supported NGO civic engagement with the population on governance issues to reinforce the demand side o f governance. Inaddition, prior to arrears clearance, a large part o f Bank finding through the LICUS TF (see below) has focused on supporting the Government's governance reform agenda, particularly but not exclusively in public financial management and the phosphate, cotton, and financial sectors. Following arrears clearance and more complete re- engagement, the Bank will continue to work with the Government and with other development partners to pursue and implement further governance and transparency reforms. 27. The years of political instability negatively affected natural resources and environmental management. As the highly centralized public administration system weakened in the wake o f social unrest, policy instruments that relied heavily on command-and-control became ineffective in protecting the natural resource base. The limited regulatory enforcement encouraged exploitation practices that are non sustainable, resulting inincreased natural resource and environmental degradation inboth rural (national parks, protected forests, fisheries) and urban areas. One o f the alarming trends i s the rapid deforestation o f the country: forest areas, which accounted for about 13 percent o f the total land area in 1990, declined to about 7 percent in2005. Following the normalization o f relations with the country, the Bank will stand ready to support the - 9 - Government in addressing this important area and complementing an ongoing EC- supported decentralized environmental protection project. 11. BANKENGAGEMENTTO DATEAND LESSONSLEARNED A. COUNTRYRE-ENGAGEMENT NOTE 28. The previous Country Re-engagement Note (CRN) was endorsed by the Board of Executive Directors on December 14, 2004, consistent with the recommendationsof the LICUS Task Force. Itprovided a coordinated strategy for the Bank and UNDP reengagement and a framework for strengthening donor assistance through the end o f 2006. The CRN had three basic objectives : (i) buildingmomentum for sociopolitical change through political dialogue (mainly by the E C and bilateral donors) and through civil society engagement and governance (World Bank/UNDP); (ii)preparing the ground for economic recovery and international reengagement with increased analytical work (poverty diagnosis, PRSPMDG process, capacity building, debt analysis, fiduciary assessments and strengthening); and (iii) emergency assistance for social service delivery to the poorest people inunderserved areas (LICUS emergency program for social services). B. BANKPROGRAMDURINGTHE CRNPERIOD(FYO5-07) AND TO DATE 29. During the period covered by the CRN, the Bank's support reflected the main objectives of the Note. The main results during the CRN implementation period were as follows: (i) civic engagement activities were supported by UNDP and the Bank essentially through the small grant program; (ii)a number o f analytical activities were completed (see details in para. 32); and (iii)a LICUS TF-fbnded community-driven development program was implemented successfully in two regions and later expanded to the remaining three regions as described below. 30. The largest program during the CRN, the LICUS TF-funded community- driven development Emergency Program for Poverty Reduction (EPPR) was approved inJuly 2005 for an initial amount o f US$l.lmillion and complemented by two additional LICUS grants o f US$1.7 million in FY07 and US$1.4 million in FY08. This program was intended to halt extreme poverty and the deterioration o f social indicators. The program financed about 100 sub-projects (primary schools, health posts, small community infrastructure and community training) and trained more than 1,000 people on community approaches to development and project management. This phase o f the EPPR was closed on June 30, 2007: the grant was fully disbursed and had particularly satisfactory results in terms o f sub-projects, capacity building and impact. Virtually all sub-projects were carried out with strong community participation, all institutional rebuilding objectives were attained, and compliance with fiduciary arrangements was satisfactory. More recently, as a result o f the satisfactory implementation o f the program, the EPPRwas extended to the remaining three regions (US$1.4 million). -10- 31. Additional LICUS TF grants were approved in late 2007 and early 2008, includingto support the Government's reform program, as follows: the Economic Recovery and Institutional Re-engagement grant (US$1.6 million) to support reforms for key state-owned enterprises andkey growth sectors; Avian Influenza Control and Human Pandemic Preparedness andResponse grant (US$0.6 million), for both animal and human health; and Lomk Infrastructure Rehabilitation and Maintenance grant (USS1.5 million) for rehabilitating, improving and expanding sustainable access to urbanmobility services for some ofthe city's most deprived neighborhoods. 32. In addition to the LICUS TF-funded activities, the Bank recently completed some analyticaland advisory work, including: a poverty diagnosis (CWIQ), a Poverty Assessment (PA, 2005), a Public Expenditure Management and Financial Accountability Review (PEMFAR, 2006), a Financial Sector Review (2006), an Agricultural Development Assessment Update (2007), a Peri-Urban and Urban Note (2007), a Debt Sustainability Analysis (DSA, 2007), and a Development Policy Needs Review (DPNR, 2008). The Bank has developed a good knowledge base in the education sector through an Education Country Status Report (2007) and is assisting Togo inpreparing for access to the Education for All - Fast Track Initiative (EFA-FTI), which will make the country's education sector eligible for hndingfrom the EFA-FTI's Catalytic Fund. 33. Since 2006, the Government has designed and implemented, in close policy dialogue with the World Bank, the IMF and the AfDB, a program of economic recovery and reforms aimedat restoringmacroeconomicstability,improvingpublic financial management (PFM) and restructuringthe phosphate,cotton, energy, and financial sectors. The Government's commitment to these reforms was set out in the Memorandum o f Understanding (MoU) betweenthe Government and the Bank signed on February 27,2008. The M o Uwas preceded by an Article IV Consultationmission o f the IMF and the satisfactory completion o f an IMF SMP in June 2007, with all quantitative targets comfortably met and significant progress made on fiscal governance reforms. A joint World Bank-IMF-AfDB mission in November-December 2007 and subsequent discussions with the Government further advanced the policy dialogue on public expenditure management, governance and transparency in the key sectors-phosphate, cotton, energy, and financial-and clarified necessary steps inthese reform areas. C. LESSONS LEARNED 34. Recommendationsfrom the analyticalwork and lessonslearnedthrough the implementationof Bank activities in Togo (OED 2004 review) have been taken into account in designing the strategy presented in this ISN. Specifically, the proposed strategy supports reforms for which there i s clear Government ownership and broad consensus exists or is being built, so that vested interests will be less likely to undermine reform progress. Inthis regard, the strategy relies on the main recommendations from the DPNR (itself a compendium o f several prior Bank analytical studies) which was prepared in a participatory manner during the period of the Government of national unity, in collaboration with the I-PRSP team and including discussions and inputs from key sector ministries, civil society and a number o f Government Ministers. -11 - 35. Also, the strategy incorporates lessons learned from the implementation of the LICUS EPPR grant (the only one under implementationuntil recently). The EPPR grant showed the importance o f adapting poverty reduction activities to the institutional realities o f Togo's local governments and demonstrated the resilience o f interventions providing support directly to communities in need, even in the face o f political and economic instability. Outreach activities conducted with the press and students as part o f the implementation o f the grant allowed to focus public attention on the needs o fthe poorest and the challenges faced by the rural poor inTogo. 111. TOGO'S MAINCHALLENGES AND OPPORTUNITIES 36. Togo faces several challengesin its efforts to promoteeconomic recovery and poverty reduction. The several years o f political and economic instability have clearly showed the fragility and the vulnerability o f the economy not only to external shocks but also to weak governance and institutional capacity. To strengthen economic performance andboost growth, Togo needs to tackle issues that would help restore productive capacity inthe short term inthe cotton andphosphate sectors. At the same time, it would need to lay the basis for medium-term growth by improving public financial management, restructuring the financial and banking sectors and meeting urgent infrastructure needs (notably energy and the port). Togo's position as a coastal country and a transit corridor provides a lot o f advantages for it to participate and benefit from regional trade and integration. Growth would strongly be influenced by Togo's regional connection- notably, exploiting its transit corridor and using its deep port facilities at Lome, leveraging its past reputation as a strong regional financial center and promoting the private and service sectors. 37. Restoring Productive Capacity. In terms o f restoring short-term productive capacity, the most urgent challenges are to improve governance and management efficiency inthe areas ofphosphates and cotton. PhosphateSector. The potential for phosphate production inTogo is still quite high and would be a major factor in the country's medium-term economic recovery. However, because o f poor management inthe past inthe phosphate company, Office Togolais des Phosphates (OTP) faced major financial difficulties for several years and became a major debtor to the banking sector. A joint venture set up in 2001, International Fertilizer Group (IFG)/Togo, was unable to improve management or governance. Several measures need to be taken to strengthen the financial and institutional performance o f the sector. Some o f these measures are already being implemented, including: investing in new equipment, undertaking financial and organizational audits o f the new company (SNPT), defining procedures that would improve internal control and reduce production costs, and establishing and enforcing rules o f good governance, such as setting up an external unit to monitor and do regular audits. In order to enhance the phosphate sector's contribution to growth, there i s a need to develop a strategic vision for the sector, including attracting strategic investors and modernizing the company's equipment as soon as possible. - 12- Cotton Sector. After reaching a record high o f 187,700 tons in 1998, cotton production slumped to reach about 45,000 tons in 2006. The main cause o f the decline was extremely poor governance and management problems in the cotton company, SOTOCO, which resulted in huge deficits for the company over the years and culminated in the non-payment o f farmers and creditors for the 2003-04 cotton season. This, together with the declining world market prices for cotton, shook the confidence o f farmers and creditors in the system and as a result cotton production fell considerably. The first major challenge in the sector that the Government has started to address i s to restore this confidence by taking measures to improve SOTOCO management (being done); improve its governance structure (done); and ensure that farmers participate in the decision making process. While cotton production may not be a major source o f growth in the medium to long term, it will still be an important activity for poverty reduction. The challenge therefore would be for the Government to have a program that would considerably reduce cotton production costs and increase the share o f farmers in the world market price. A system o f full farmer and private sector participation inthe management o f the sector would enable achieving these objectives. This would involve: (i)in the short term, liquidating the current company and creating a new one with farmer participation in the capital (40 percent) and management; and (ii) the medium term, seeking in strategic investors inthe company. 38. Layingthe basis for medium-termgrowth. Inaddition to restoring short-term productive capacity, additional actions are needed to support the short-term economic recovery and lay the foundation for future shared growth and poverty reduction. These are in the areas o f public financial management, the financial sector, and infrastructure (notably the port and energy). 39. Public Finance Management. For more than a year now, the Government has undertaken to clean up the system o f public finance management. Thus, it has already taken several measures in this regard including: reducing the use o f exceptional procedures in budget implementation, introducing management changes in the Tax and Customs Departments, installing Sydonia++ to improve customs revenues, and significantly improving control procedures for expenditure. Despite the progress already made, additional measures are needed to improve public financial management. These measures relate to: (i)improving the institutional and regulatory framework; (ii)management o f the use o f public revenues and domestic debt; (iii) improving budget preparation procedures; (iv) improving the system o f public accounting; and (v) strengthening the internal control andexternal audit system. 40. FinancialSector Governance. Itis clear that development o fthe financial sector supports and stimulates economic growth, while financial instability would contribute to curb this growth and can cause major financial crises. The financial sector in Togo, particularly the banking sector, has been in a precarious situation for several years. Commercial banks have been having difficulties in meeting prudential norms; many o f them have negative equity; non-performing loans are significant due, to a large extent, to arrears from public enterprises and the Government; operating costs are highresulting in high operating coefficients; and corporate governance is inadequate. Because o f these major weaknesses, a successful restructuring o f the financial sector is essential and urgent -13 - for a return to an efficient, viable and profitable banking sector both in the short and medium term. The eventual withdrawal o f the state from the management o f banks will help strengthen their financial position and help solve some o f the governance issues that we see today. The Government has started the restructuring process o f the financial sector by changing the management and governance structures o f the most affected banks and by charging the new management to put inplace a restructuring plan within the next few months. 41. The Port Autonome de LomC (PAL). The PAL is the only deep water port o f WAEMU, which can accommodate big container ships. It plays a vital role in national development and serves as a major transit port for the countries o f the hinterland. PAL, however, faces competition from other ports in the sub-region as regards servicing landlocked countries, in part because o f management weaknesses and equipment bottlenecks at the port, as well as o f the poor road network in Togo. Despite recent improvements especially in customs services, it will be important to put in place measures to improve the effective and transparent management o f the port. The most urgent o f these measures include establishing a monitoring program for transit (for example, "smart" or seal GPS / GSM); making operational the one-stop shop for port operations; and rationalizing staffing and skills. Installing new equipment, easing congestion, and improving cargo handling, are actions that would improve the competitiveness o f the port in the medium term. In addition, the port's potential would be hrther enhanced by improving Togo's link to the regional transport network andtrade facilitation. In this connection, Togo is participating in the IDA-supported regional program o f the Abidjan-Lagos Transit and Transport Facilitation Project (ALTTFP) scheduled for Board inFY09/10. 42. Energy. Over the last year, Togo has experienced severe shortages o f energy. This impacted considerably on the industrial and service activities o f the country and affected economic growth. Given that the energy problem is region-wide and Togo imports about 90 percent o f its energy from the region, the challenge remains for Togo o f finding means inthe short term to complement the regional supply. Short term measures to ensure adequate supply o f energy would include making budget provisions for energy supply (including for imports), improving the efficiency o f the local energy distribution company, CEET, and reviewing the relationship between CEET and the Benin-Togo energy company, CEB. It would also be essential to design a comprehensive strategy for the sector that takes full account o f available regional energy solutions including programs by the Togo/Benin Energy Company (CEB) and others being prepared as part o fthe West Africa Regional Power Pool. IV. THE GOVERNMENT'SREFORMPROGRAM 43. The Government's program of reforms is presentedin the Interim Poverty ReductionStrategy Paper (I-PRSP) completed in March 2008. The I-PRSP sets out an ambitious poverty reduction strategy (PRS) to revive economic growth and improve basic living conditions along three strategic axes: (i) strengthening political and economic governance, with a focus on institutional reform and fiscal governance; (ii) promoting -14- economic recovery and sustainable development, with measures to reform state-owned enterprises and financial institutions, improve the business environment, strengthen regional integration and trade, revive agricultural production, rehabilitate infrastructure, and improve management o f natural resources and the environment; and (iii) developing social sectors, human resources and employment, with a focus on improving access to andthe quality o fbasic education andhealth services. 44. In the pursuit of the first pillar, strengthening of political and economic governance, the Government intends to continue the actions to promote good political and economic governance undertaken since 2005. Four specific programs are involved: (i)improving political governance through continuation o f the national reconciliation and political reform process and strengthening the rule o f law and o f security o f persons and property; (ii)implementing institutional reforms, including streamlining the administration, reforming the justice system, promoting humanrights, and decentralizing government; (iii)achieving fiscal stabilization and combating corruption through enhanced revenue mobilization, realistic budget programming and proper execution, reviving public investment and improving the procurement system; and (iv) sound and effective management o f aid flows through subscribing to the Paris Declaration on Aid Effectiveness and improving debt management. 45. For the second pillar, promoting economic recovery and sustainable development, the Government plans to: (i)pursue policies to reform key public enterprises and restructure the banking and microfinance sector; (ii) strengthen regional integration and trade promotion by improving the institutional and regulatory environment, and ensuring more active participation in the international organizations concerned with world trade; (iii)revive the agricultural and rural economy by strengthening the legal and institutional framework, building economic and social structures in rural areas, professionalizing farming activities, improving access to productive resources and markets, and boosting coffee-cocoa and cotton production as well as livestock breeding and fishing; (iv) develop infrastructure to support economic growth, notably by increasing energy resources, developing overland and maritime transportation infrastructure and developing telecommunications; and (v) manage effectively the natural resources and the environment by promoting integrated management of coastal areas, strengthening national environmental management capabilities, fighting pollution, and preventing and managing disasters. Having in the past experienced national disasters such as droughts and flooding, the Government launched in 2007 the Togolese National Platform for Disaster Risk Reduction (DDR). The main objective o f the Platform is to mainstream disaster risk reduction into sectoral policies, planning and programs. The Government i s also developing the National Adaptation Project on Climatic Change (PANA) with UNDP funding. 46. The Government's third pillar, developing social sectors, human resources and employment, will be implemented through the following programs: (i) developing the educational and training system by promoting pre-school education, improving access to and quality o f primary and secondary education, improving technical education and training, continuing support for higher education and implementing literacy campaigns; (ii)developing the healthsystem andhealthcarebypromotingmaternal-childhealth care, preventing and treating HIV/AIDSandmalaria, and strengthening the screening and - 1 5 - treatment o f tuberculosis; (iii)improving the nutritional status o f the population by establishing new programs to combat nutritional deficiencies, increasing awareness of proper diet and strengthening institutional capacity for promoting nutrition; (iv) increasing access to drinking water and sanitation infrastructure by improving the water resource management system, promoting the appropriate infrastructure for sanitation and water supply and raising the population's awareness o f the impact of proper hygiene and sanitation; and (v) promoting gender equality through education of girls and women, women's health, improving the legal and social status of women, and women's work and participation in decision-making; developing a social protection policy; protecting children; andpromoting community development by supporting NGOs andendowingthe more disadvantaged parts o fthe country with infrastructure. 47. As indicated in the Joint Staff Advisory Note (JSAN) on the I-PRSP, presented to the Board on May 6, 2008, the I-PRSP clearly identifies the major obstacles to poverty reduction in Togo and outlines a reasonable framework for implementing the Government's growth and poverty reduction agenda over the period 2008-10. The I- PRSP also outlines the institutional framework for its implementation, monitoring and evaluation, and a well detailed timeline and participatory process for the preparation o f the full PRSP. As recommended inthe JSAN, the implementation o fthe I-PRSP andthe formulation o f the full PRSP would benefit from: (i)setting realistic deadlines and providing additional specificity with regard to the sequence o f reforms and key implementation risks in the areas o f public finance, financial sector, cotton, phosphate and energy; (ii)deepening the analysis on the links between growth policies and sectoral programs and expenditures, and their impact on poverty reduction; (iii) elaborating the costs o f key sector programs through sector medium term expenditure frameworks that are consistent with the medium-term budget framework; and (iv) identifying, where possible, the development partners that could support specific reforms identified inthe I- PRSP, given the need for both technical and financial assistance in many areas. The Government also needs to specify mechanisms for coordination with development partners to ensure that donor financing and technical assistance is aligned with the PRS priorities. The Government plans to prepare a full PRSP in2008-2009 that will take into account the JSAN recommendations and will underpin the development o f a longer-term strategy. V. PLANNEDWORLD BANKASSISTANCE,FYOS-FYlO A. RATIONALEAND APPROACH FORTHE INTERIM STRATEGY 48. This Interim Strategy Note was prepared in accordance with guidance providedin the Good PracticeNote on Country Assistance Strategies in Fragile States and the IDA-15 Operational Approaches and Financing in Fragile States. The ISN i s aligned with the I-PRSP and closely follows the outline o f the informal country presentation made to the Board on March 25,2008. 49. Several notable developments underpin the timing of this strategy. First, a comprehensive political agreement (Accord Politique Global) was signed between the -16- major political parties in 2006 and legislative elections were held in October 2007. Second, in addition to the improvements in the political situation, the Government has demonstrated a commitment to implement governance reforms, improve fiscal and economic management, and address weaknesses in key public enterprises. In this respect, it is noteworthy that the new Government has placed reformers inkey economic posts following the departure o f the key representatives o f the status quo. Moreover, the Government has shown a clear commitment to normalizing relations with the international donor community. In light o f these developments, the current context in Togo provides a significant opportunity for the international community, including the World Bank, to support critical reforms and policy actions in a coordinated fashion with other development partners. The World Bank will continue to work closely with the IMF, the AfDB andthe EC, as well as with other donors as they re-engage with Togo, to support the implementation o f the Government's I-PRSP. 50. The team has held discussions with the Government throughout the preparationof the ISN, the thrust of which was initially agreedto duringthe visit of the Minister of Economy and Finance to Washingtonin February2008. Inaddition, consultations on the I S N were held in Lom6 in April 2008, including with the Prime Minister andother Government officials, with development partners present inTogo (Le., Agence FranCaise de De'veloppement,UNDP, EC), andwith civil society representatives, such as members o f youth groups, women groups, the private sector and academia. There was general consensus on the pillars and interventions proposed for the ISN. Following normalization o f relations with the Bank and upon satisfactory implementation o f this ISN to address the immediate needs and priority sectors, tertiary education and skills training was proposed as a possible area o f focus to address youth unemployment in Togo. B. OBJECTIVES OFTHE I S N 51. The over-arching goal of this Interim Strategy Note (ISN) planned for the periodMay 2008-June 2010 is to help Togo recover from a longperiodof instability and suspensionof aid and begin layingthe foundationsfor sustained,shared growth over the mediumterm. This will be achieved through: (i) support for the normalization o f relations with the World Bank through the clearance o f arrears which would set the stage for provision o f regular IDA resources, facilitate Togo's efforts to reestablish relations with the rest o f the international community and pave the way for Togo toward debt relief under the HIPC Initiative and MDRI; (ii)assistance to improve public financial management and governance in key public sector institutions; and (iii)assistance to address critical social needs on the ground. The I S N has set realistic expectations with regard to the progress and achievements that can be realized over the relatively short term period (next 25 months) covered by the interim strategy. 52. As a reengaging country, Togo is eligible for exceptional support from IDA during the ISN period. Togo is also eligible for exceptional IDA support for arrears clearance. The total FY08 IDA allocation is SDR [114.51 million, o f which SDR C93.31 million i s provided as exceptional arrears clearance support and SDR 21.2 million as an exceptional IDA reengagement allocation. Although IDA 15 country allocations are not yet available, the annual lending program for FY09 and FYlO is expected to be about - 17- SDR 18 million, but could be larger in light o f the substantially increased resources available under IDA15, as well as possible country performance improvements. Actual allocations during the I S Nperiod will be determined on an annual basis and will depend on: (i) Togo's performance rating; (ii) terms o f IDA'Sassistance to Togo (credits or the grants); (iii)the performance and assistance terms o f other IDAborrowers; (iv) total IDA resources available in IDA15; and (v) the number o f countries eligible for IDA support. It is important to note that, while the ISN refers to Togo's participation in one regional project through an IDA contribution o f about SDR 3 million, this could leverage significant regional topping-up resources due to the flexibility allowed to countries with small IDA envelopes. Togo will also explore possibilities to participate inother regional projects during the I S N period given the importance o f regional integration for Togo's development (see para 53, Pillar 2). Inorder to enhance performance prospects, the I S N focuses on supporting improvements in critical governance and economic management areas, which would contribute to increase actual IDA allocations. The Bank assistance would also contribute to the Government's efforts to improve the performance o f the phosphate sector which has a good export and revenue growth potential. The Bank i s also encouraging other donors to increase their financial assistance, including through budgetsupport, to Togo. 53. In order to achieve the goal outlined above, this ISNhas been closely aligned with the Government's I-PRSP and has been prepared in coordination with the main development partners in Togo, in particular the IMF, the EC and the AfDB. The I S N i s based on three interrelated pillars: (i) improving economic governance and transparency; (ii)promoting economic recovery and sustainable development; and(iii)addressing urgent social needs. Pillar I: Improve economic governance and transparency. Bank assistance will focus on supporting the Government's reform program to improve governance, transparency and efficiency in public expenditure management as well as advance structural reforms aimed at strengthening governance and transparency inthe key sectors o f the economy (phosphates, energy, cotton and financial sector). This approach would lead over time to strengthened fiscal sustainability, enhanced transparency o f State institutions and processes, improved economic governance and increased economic growth. The Economic Recovery and Governance Grant, ERGG (a Development Policy Operation for US$[170.6] million, planned to be presented to the Boardtogether with this ISN) will be used for direct reimbursement o f a bridge loan extended to clear Togo's arrears to IDA (US$[153] million) and for budgeted fiscal needs (US$17.6 million), in the period immediately afier arrears clearance.6 This one-tranche operation would support governance and transparency reforms and lay the basis for economic and social recovery. It would pave the way for HIPC debt relief and MDRI. The LICUS Trust Fund grant for Economic Recovery and International Reengagement (USS1.6 million, approved in FY08) will complement the ERGG by 6The authorities achieved timely completion o f the prior actions for the proposedEconomic Recovery and Governance Grant (FY08), and implementation o f further actions for success o f the program has been initiated. - 1 8 - providing financial and technical assistance to: (i) improve economic governance of the state-owned enterprises operating in the cotton and phosphate sectors; (ii) strengthen the procurement system; and (iii) undertake strategic reviews o f the coffee, cocoa and energy sectors, as well as the LomC port in view o f its important regional role. Two Development Policy Operations (US$12 million each, planned for FY09 and FY10, respectively) would provide support to the Government for the formulation and the implementation o f additional governance reforms, including wider public dissemination o f operational information on budget execution, procurement and public enterprises. A Financial Sector and Governance Reform TA project (US$lO million, planned for FY09) would support banking, social security and microfinance institutions restructuring and recovery, through the funding o f strategic audits and provision o f other technical assistance, as well as continued improvements inpublic financial management. At the regional level, participation by Togo ina program promoting financial integration will also be explored. Assistance to statistical capacity building by the Bank i s being provided through an ongoing Trust Fund for Statistical Capacity Building grant (US$85,000, approved in FY07). The grant i s supporting the development o f a National Strategy for the Development o f Statistics (NSDS) whose overall objective i s to provide Togo with reliable, regular and timely statistics. The grant has financed an assessment o f the National Statistical System that has been validated at a workshop in March 2008. Discussion o f a national vision and setting o f national goals for the strategy (implementation planned for 2009-2013) is underway, supported by the Bank, the UNDP, the EU and Paris 21 (Partnership in Statistics for Development in the 21st Century) which plays an advisory role inthe process. The Bank plans ajoint mission with Paris 21 inJune 2008 to start preparingthe financing o ftheNSDS. A Public Expenditure Management and Financial Accountability Review (PEMFAR, ongoing and expected to be completed in FY09) would assist the authorities in preparing a medium-term program o f public finance management reforms in coordination with key development partners, including the French Cooperation Agency, the AfDB, the E C and the UNDP. The PEMFAR will also include an assessment o f the procurement processes, on the basis o f the OECD/DAC methodology. The Bank i s also conducting a debt management performance assessment for Togo, which will identify priority areas for strengthening debt management capacity in anticipation o f the HIPC process. At the regional level, Togo will be included in an effort to harmonize procurement practices in the eight member states o f the WAEMU. The Bank, along with the AfDB and other partners, i s also planning to support Togo in the effective implementation o f a new investment code aligned with OHADA standards. Other donors' activities complementingBank activities under this pillar include: -- AEC: support for electoral process (Euro 9 million for 2008-13); institutions and P B : support for arrears clearance; budget support for 2008-10 (US$15 million) administration (Euro 13 million for 2008-13); European Investment Bank (EIB) arrears clearance (Euro 19 million for 2008-13); macroeconomic support (Euro 15 -19- million for 2008-13); civil society and national reconciliation (Euro 5 million for 2008- 13) --- IMF Poverty Reductionand Growth Facility (PRGF, SDR 66 million for FY08-10) AFD: budget support (CFAF 2.3 billion). Paris 21/UNDP/EC: support for development o f national strategy for development o f statistics (2009-2013) Pillar 2: Promote economic recovery and sustainable development. In the short term, the Bank supported program will help the Government rehabilitate critical infrastructure and restore productive capacity in the key areas o f phosphate, cotton, banking and port services. Given that private-sector development7 will be critical to ensuring that Togo returns to a path o f sustainable economic growth, the Bank will support the Government in identifying the challenges and obstacles to, and the potential entry points for, private sector investment as a catalyst for growth inTogo. 0 The LICUS Trust Fund for Urban Infrastructure Rehabilitation and Maintenance (US$1.5 million, approved in FY08) will pilot interventions to increase access to infrastructure and urban services in the capital city Lom6, which would be scaled up by the planned Emergency Infrastructure Rehabilitation Project (US$lO million, planned for FY09) providing investments for the energy sector and the rehabilitation o f urban infrastructure, particularly for roads and sewerage. Togo i s expected to be part o f the regional Abidjan-Lagos Transit and Transport Facilitation Project (about US$5 million IDA contribution to cover Togo's share o f total costs in FYlO), with parallel financing from the EU, the IDB and the West African Development Bank (WADB). This project is expected to include a road infrastructure component for the Aflao-Sanvi-Conji coastal corridor passing through LomC (50 percent o f total costs to be covered by the IDB) and a transit facilitation component (customs, port, regional integration). The Bank will explore other regional projects with Togo, for example, in the important energy and mining sectors. Togo, which benefits from the West Africa Power Pool*, i s interested in seeking other solutions to satisfy its energy needs (including possible participation inthe regional Adjarala Hydropower project that the Bank is considering supporting). With regard to mining, the Bank will support the Togolese authorities in exploring partnership linkages with other West Africa countries on a harmonizedminingsector reform strategy, and inexploring the process toward membership in the Extractive Industry Transparency Initiative (EITI). To support private sector development, a Support to Growth-inducing Sectors Project (US$9 million, planned for FY10) would focus on supporting the implementation o f the findings o f the Sources of Growth Study CEM to be undertaken in FY09 (see below), with an emphasis on activities to improve agricultural productivity and diversification and transport infrastructure, by reinforcing the capacity o f the Lome port. 7 Inpast decades, Togo demonstratedits capacity to be a vibrant private sector hubofWest Africa. 8 On 18 January 2008, the ECOWAS member states adopted the Emergency Power Supply Security Plan which includes the following investments that benefit Togo: a 400 MW thermal generation plant at Maria GlCta (Benin) and a 400 MW thermal generation plant at Aboadze (Ghana), in addition to cross border transmission lines. Implementation o f the Maria GlCta project i s proceeding satisfactorily with the expectation of deliveringelectricity by end 2009 (100 MW o f which would go to Togo). - 20 - 0 A Sources of Growth Study (CEM, planned for FY09) would include a review o f potential drivers o f economic growth and o f the agriculture sector, to identify opportunities and constraints, particularly in the diversification o f agricultural exports, and promotion o f animal husbandry and aquaculture. The study would review possible regional approaches to agricultural growth that Togo can participate inandbenefit from as well as approaches to increase local agricultural productivity. A Country Environmental Assessment and Poverty and Social Impact Note (FY09) would be prepared to identify and address possible social and environmental impacts o f the operations in the ISN. The Bank will draw on the country environmental analysis recently completed by the EC to identify specific areas o f reengagement in the environmental sector. 0 Other donors' activities complementing Bank activities under this pillar include: - AjDB: LomC-Notse Road Rehabilitation project; a planned water and sewerage; Regional: planned assistance for the KantC-CinKansC Road and Adjarala - EC: infrastructure Hydropower projects (Euro 38 million for 2008-13); natural resources and environment (Euro 5 million for 2008-13) -- BOAD:rural and urban transport, water supply and energy (CFAF 5 billion) IsDB: loan for the leasing o f new mining equipment for the phosphates company, road transport, agriculture (Euro 45 million) -China: economic and technical assistance (CFAF 2.5 billion). PiZZar 3: Address urgent social needs. The assistance strategy will focus on improving access to, and supply of, basic social services for the most vulnerable groups, thereby improving economic opportunities and helping the Government deliver visible results to the population. This will be achieved by expanding the community-driven development approach implemented through LICUS TF grants since 2004. A Community Development Project (CDP - US$17.2 million IDA grant, planned for FY08) would be a scale-up o f the LICUS TF grant EPPR. The operation would provide improved access to public services and income-generating opportunities to the residents o f poor communities in Togo, especially inthe rural areas. Since Togo has been one o f the Sub-Saharan countries hardest hit by the recent food and fuel price crisis, under the CDP, as many as 150 community based organizations (CBO) will use small grants for income-generating activities, most o f them expected to be in the agricultural sector. These agricultural activities will target the poorest communities and vulnerable groups, particularly those affected by the increases in food prices. The CBO will purchase equipment and inputs such as fertilizers and improved seeds with the aim o f increasing agricultural production and o f supporting the emergency and community-based response to the developing food price crisis, and hence alleviate its impact on the poorest. Additional support could be considered under the new instrument which is being established by the Bank to respond to the global food crisis. The project i s an important part o f the Bank's overall emergency response in Togo. It will be processed subject to the procedures outlined under OPBP 8.00 (Rapid Response to Crises and Emergencies). The use o f OPBP 8.00 is warranted as the project responds to two o f the objectives specifically highlighted in - 21 - the OP/BP, namely: rebuilding and restoring physical assets and preserving or restoring essential services. Moreover, by supporting community-based decision- making and management processes, the Project will contribute to establishing and/or restoring human, institutional, and/or social capital, including economic reintegration o f vulnerable groups. The application o f OP 8.00 streamlined procedures will allow for the timely processing of the project in response to the immediate needs o f the Government to address the impact on the poor o f the prolonged political and economic instability, made more acute by the recent oil and food price shocks, energy crisis and floods. While the ISNdoes not specifically provide for IDA involvement in HIV/AIDS, the Global Fundto FightAIDS, Tuberculosis (TB) and Malaria (GFATM) has committed over US$75 million for the three diseases with over US$48 million disbursed. While principally implemented through UNDP, Population Services International has also been GFATM's implementing partner. Further, the Global Fund has committed US$19 million for the HIV/AIDS AbidjdLagos Transport Corridor effort, and Togo is among the country participants and beneficiary. Other donors' activities complementingBank activities under this pillarinclude: ---- AEC:Burbanandyouthandhumancapacitybuilding(US$3.3 million) P : institutional employment (US$30 million) ECOWAS-BIDC: roadtransport and health (CFAF 14.3 billion) AFD: capacity building, education, transport infrastructure, public finance management (CFAF 3.5 billion) - IsDB: small scale rural water supply and road transport, irrigation and agriculture (CFAF 18 billion). 54. In addition to the areas of assistance highlighted above, the Bank will provide support to the Government for the preparation of the full PRSP and for donor mobilizationby helpinghold a Consultative Group (CG) meeting inFY09jointly with other development partners. The Bank will also work jointly with the IMF for Togo to access debt relief from the enhanced HlPC Initiative and MDRI. With continued strong performance, Togo could reach the HIPC decision point by the time o f the first PRGF review before end o f CY2008 and the HIPC completion before the end o f the PRGFarrangement. 55. Giventhe significant capacityweaknesses inthe Togolese administration,the Bank-financed projects will include capacity building components. Dialogue and assistance on the reform program will be supported under the Economic Recovery and Governance Grant (FY08), a proposed Financial Sector and Governance Reform TA project (FY09) and subsequent proposed annual Development Policy Operations (FY09, FY10). An ongoing LICUS TF grant supports knowledge generation and technical assistance on issues inthe cotton, phosphate, coffee, cocoa, energy, port and procurement sector. Finally, the proposed Community-Driven Development project (FY08) will scale up activities under an ongoing LICUS TF grant to support development o f community- based decision-making and management processes, and contribute to establishing and/or restoring human, institutional, and/or social capital, including economic reintegration o f - 22 - vulnerable groups. The broader issue o f developing capacity on a systematic basis (e.g., through civil service reform) will be pursued in a fbture CAS, following more in-depth analysis and dialogue with the Government and development partners on this issue. It should also be noted that the ADB, EC and France are supporting, or plan to support, capacity buildingefforts invarious sectors. 56. The International Finance Corporation (IFC) is planning to re-engage following arrears clearance. IFC's current strategy for Togo is to proactively develop and support projects in general manufacturing and services, infrastructure (ports and harbors), mining and financial markets. IFC i s also considering opportunities in other sectors such as telecommunications and power, where it hopes to support the sector's privatization efforts. Discussions are ongoing concerning strategic investments underpinning Pillar 2 (Private Sector-led Growth), notably in the area of electric power generation and ports. IFC will continue to collaborate with the World Bank, IMF and development partners to improve the investment climate inTogo. 57. While there are no projects in the MultilateralInvestment Guarantee Agency (MIGA) pipeline, the agency remains committed to review requests for MIGA support on a case by case basis, albeit inthe context o f the ongoing dialogue that the Bank leads with the Government. 58. Although Togo's participation in World Bank Institute (WBI) programs has been very limited, the WBI's activities in Togo would likely increase following the Bank's re-engagement with the country. - 23 - Table 3: Togo: Bank a 1Other DonorAssistance Pro1 am for Togo Activity PILLARI PILLARI1 PILLAR I11 ImproveGovernanceand PromoteEconomicRecoveryand Providefor UrgentSocial - Transparency SustainableDevelopment Needs New Grants/ - EconomicRecoveryand - New - - FinancialSector and Governance New - CommunityDevelopment Lending GovernanceGrant (US$[170.6]m, ReformTA project (US$lOm, FY09) Project (US$17.2m,FY08) ofwhich US$[1531million for arrearsclearance, FY08) - EmergencyInfrastructure OngoingLICUS TF grants - Two Rehabilitation(US$lOm,FY09) - EmergencyProgramfor Poverty DevelopmentPolicy Reduction(US$l.7m inFY07; Operations (US$12meach, in - Support to Growth-inducingSectors US$l.4minFY08) FY09 andFYlO respectively) (US$9m, FY10) - Avian InfluenzaControl OngoingLICUS TF grant - EconomicRecoveryand New Regional - Abidjan-LagosTransit (US%0.6m,FY08) andTransport InstitutionalRe-engagement Facilitation(US$Sm,FY10) - LomeInfrastructure Grant (US$1.6m,FY08) -Other regionalprojects(e.g. energy, RehabilitationandMaintenance mining, t.b.d.) (US$ISm, FY08) - New - New AAA -- EnvironmentalAssessment - New Sources of Growth (CEM, FY09) andPoverty and SocialImpactNote (FY09) 0neoing Ongoing - PEMFAR Ongoing -Trust Fundfor Statistical Capacity Building (US$85,000, approvedFY07) RecentCompletions - Debt SustainabilityAnalysis RecentCompletions -- FinancialSectorAssessment RecentCompletion - PovertyAssessment Agricultural DevelopmentAssessment Update UrbanNote - AfDB: --Peri-Urbanand support for arrears - DevelopmentPolicy NeedsReview AfDB: Lome-NotseRoad - AfDB: institutionalandhuman Other clearance; budget support for Rehabilitation(t.b.d.); Water and capacitybuilding (US$3.3m) Donor 2008-10(US$lSm) Sewerage(t.b.d.); Regional:KantC- support - EC: CinKanseRoad(t.b.d.) andAdjarala - EC: urban andyouth support for electoral Hydropower(t.b.d.) employment (US$30m) process (Euro 9m for 2008-13); institutions/administration (Euro - EC: infrastructure(Euro 38m for 2008- - ECOWAS-BIDC: road 13mfor 2008-13); EIB arrears 13); naturalresourcesandenvironment transport andhealth(CFAF clearance(Euro 19mfor 2008- (Euro 5mfor 2008-13) 14.3b) 13); macroeconomic support (Euro 15mfor 2008-13); civil - BOAD: rural andurbantransport, - AFD: capacity building, societyhationalreconciliation water supply andenergy (CFAF 5b) education, transport (Euro 5mfor 2008-13) infrastructure, public finance -EC/UNDP/Paris21: statistical - IsDB: loanfor the leasingofnew management(CFAF 3.5b) capacitybuilding for 2009-2013: mining equipmentfor thephosphates t.b.d.) company, roadtransport, agriculture -1sDB: rural water supply, road - IMFPRGF (Euro45m); Parallelfinancing(with the transport, irrigation and (US$108.4 m. for WB, EC andWADB for regional agriculture(CFAF 18b) FY08-11) Abidjan-LagosProject -GlobalFundto Fight AIDS, TI3, - AFD: China: economic and technical Malaria(US$75m) plusUS19 budget support (CFAF assistance(CFAF 2.5b) m. for regionalproject - 24 - VI. MONITORINGAND EVALUATIONOF RESULTS 59. This ISN sets realistic, achievable targets, is results oriented and will be monitored and evaluated using benchmark performance indicators. ISN performance indicators are designed to capture a selected number o f key, monitorable results and outcomes o f the authorities' policy efforts and Bank assistance. The monitoring and evaluation framework takes full account o f Togo's existing information systems and capacity levels. Indicators o f performance were designed to be easy to monitor, in consideration o f the short (25 month) horizon o f this ISN (see Appendix 1). Progress will be monitored and evaluated on a six-month basis. The Government has set up an inter-ministerial monitoring committee chaired by the Director o f the Economy (Ministryof Economy andFinance) to follow up on reform measures included under the Economic Recovery and Governance Grant. The committee will work with a National Council for the PRSP Monitoring, chairedby the Prime Minister and with representatives from the legislative branch, civil society and the private sector that the Government will set up to track progress inthe implementation o f its poverty reduction strategy formulated in the I-PRSP and PRSP. Other existing entities that will contribute to monitoring the overall I-PRSPPRSP measures include a technical steering committee, a permanent technical secretariat, and sectoral committees. The monitoring and evaluation system will gradually expand as the Government's statistical capacity building is strengthened through the work it has started with the Bank and other partners in preparation o f a National Strategy for the Development o f Statistics. VII. DONORCOORDINATIONAND PARTNERSHIPS 60. Most donors suspended their activities in Togo in the 1990s. The level o f donor support for Togo over the last several years has therefore beenvery limited. As o f now, few donors have restarted or are in the process o f restarting their activities in Togo and even then the activities are focused on a few strategic areas. The Bank has been coordinating closely with the main donors active in Togo (European Community, IMF, France, UNDP, and AfDB). The Government is trying to organize a donors' meeting in June, in Brussels, to encourage donors to reengage in Togo and has asked the Bank to assist inits organization. 61. The Bank's activities during the I S N period have been defined taking into accountwhat the active donors planduringthe ISN period.The specific areas o f IDA support involving economic governance have been identified in close collaboration with the IMF and the AfDB in aiming for synergy with their respective interventions and buildingon IDA'Scomparative advantage inthese areas. The Bank activities complement those on economic and political governance being h d e d by the E C to improve institutional performance inkey sectors such as agriculture. 62. The Bank has also been working closely with other developmentpartnersin Frunpise de Dkveloppement - AFD). The UNDP and the World Bank jointly prepared Togo, in particular the UNDP, the European Community, and France (Agence the CRN in 2004 and have been cooperating since then mainly in community-driven - 2 5 - development activities in the context o f the LICUS TF-fimded program. While France had been one o f the main donors o f Togo in the recent past, it i s now in the process o f rethinking its assistance program and is likely to provide support for the budget, capacity building, and the education sector. The EC resumed full cooperation with Togo in November 2007, with the provision o f Euro 123 million for the 10th European Development Fund (EDF) covering the period 2008-2013, The EC sectors o f intervention under the 10th EDF will be mainly economic and political governance, institutional and economic reforms, and infrastructure and urban development. Some support is also foreseen for civil society capacity building and natural resources. The Islamic Development Bank (IsDB) has provided assistance to the phosphate sector inthe form o f a Euro 45 million loan for the leasing o f new mining equipment. Analysis o f donor intervention in Togo, both over the past years and during the I S N period, i s provided in Appendix 2. 63. In areas where collaboration with other donors will enhance impact, the Bank would finance activities (energy development, road and transit infrastructure, capacity building) jointly or in parallelwith other donors such as the EC, BOAD and AfDB. In addition, the timing and modalities o f arrears clearance have been closely coordinated between the Government and the World Bank, AfDB and IMF. It is expected that these institutions and other donors will continue to collaborate closely during implementation o f the ISN program, especially through joint dialogue with the authorities, and joint missions and analytical work. Finally, the Bank i s collaborating closely with the AfDB, the French Cooperation Agency, the UNDP and the EC in the preparation o f the PEMFAR, which will provide input for the definition o f a medium- term PFMreform program. VIII. MAINRISKS AND MITIGATION RESPONSES 64. The ISN is designed to help Togo recover from a long period of instability and suspension of external aid and begin laying the foundations for sustained, shared growth over the medium term. Nevertheless, there remain a number o f significant risks that could derail the progress made so far: Political risk. Despite progress in building consensus, a resurgence o f influence o f non-reformers or o f other political tensions could delay or stall implementation o f the Government's reform program. A delay could jeopardize the attainment o f program objectives, dampen donor support, and cause political instability. Also, slow progress in addressing the most pressing social and economic problems could lead to instability in volatile areas and adversely affect security conditions, the business climate and macroeconomic management. The political risk, however, i s mitigated by the strong commitment to reform by the top political echelons. Also, to reduce vested interests' resistance to reform in critical sectors and to enhance governance, steps are beingtaken to set the stage for more transparent and accountable practices in the phosphates, energy, cotton and financial sectors. Events have also been organized with the media, civil society, academia, and some opposition leaders to explain the reform program and its objectives. Close coordination with the IMF, AfDB and other - 26 - donors and the intensified dialogue will help ensure that top priority i s given by the Government to the reform o f these sectors. There were extensive consultations with the Government and civil society during the preparation o f the I-PRSP, the DPNR and the ISN. The forthcoming PRSP process also provides an opportunity to foster national consensus across the Togolese society and among Government representatives on a medium-term reform agenda. 0 Macroeconomic risk. The country's macroeconomic performance represents another important risk to the strategy. The recovery could stall if the Government fails to maintain a responsible medium-term macroeconomic framework or if the Togolese economy cannot adequately adjust inresponse to climatic or commodity price shocks, such as the current sharp increases ininternational food and oil prices. The challenge inrespondingto these shocks could, among others, adversely impact socio-economic conditions, heighten the risk o f falling back into arrears, or exacerbate the already precarious financial situation o f several banks, with possible adverse spillover to the region. The IMF and the World Bank will support the Government inits intention to pursue a prudent macroeconomic response to these shocks, including a coordinated regional response to the food and oil price increases. Togo is already working with its WAEMU neighbors on a coordinated regional approach to the food crisis and the Bank will encourage WAEMU and ECOWAS members to allow for free movement o f food commodities in order to reduce the impact on any single country. By supporting the Government stabilization and economic recovery program going forward, which will include support to agriculture, the I S N would help reduce the Togolese economy's structural vulnerabilities over the medium term. The IMF and the World Bank will continue to closely monitor the Government's macroeconomic performance including providing ongoing advisory assistance to the financial sector reform program. This will be supported by a plannedBank-financed Financial Sector and Governance Reform TA operation inFY09. Next, the Government is committed to a rapid attainment o f the HIPC Decision and Completion Points. Also, to mitigate the risk o f Togo falling back into arrears, the budget framework for 2008 foresees continued debt service payments to the World Bank as well as to other creditors such as the AFDB. Finally, strong, predictable and timely donor support will also be critical to mitigate possible external risks. 0 Project disbursement and fiduciary risks. With weak institutional capacity and remaining governance and transparency problems, project and fiduciary risks will remain significant. These risks will be mitigated by (i) strengthened monitoring and reporting o f public finances through recent and planned reforms and technical assistance to improve public financial management provided in the context o f preparations for the Bank's ERGGand follow-up development policy operations, and (ii)implementation o f a new procurement code. Inaddition, the ongoing PEMFAR is providing: (i) a diagnostic analysis o f the current strengths and weaknesses in the country's public financial management (PFM) system and practices; (ii) for the input design and preparation o f a medium-term program o f P F Mreforms, including a time- bound sequenced action plan; and (iii) rating o f all key components o f the PFM a system against international benchmarks, which can be used to judge hture progress inPFMreforms. Inaddition, nationalworkshops areplannedwith all counterparts for training on existing and new procurement and FM guidelines. Furthermore, the CDD - 27 - approach pursued through the LICUS TF grant and through a proposed new IDA grant will build capacity at the community level. Other donors, particularly the EC and the AfDB, are also providing assistance to strengthen institutional capacity. 0 External shocks. Some commodity prices (i.e., phosphate, cotton, cocoa and coffee) may decline, reducing export earnings, budget revenues, and incentives for farmers' efficient production. Togo still depends heavily on electricity imports, resulting in frequent energy shortages, and its external competitiveness remains vulnerable to the risk o f higher oil prices. Further increases in food prices would also put pressure on domestic inflation and affect the nutritional status o f the population. As Togo's currency i s linked to the Euro, the country's competitiveness can also be eroded by hrther Euro appreciation. Furthermore, given Togo's role as a hub for regional trade andits financial linkages across the WAEMU, shocks inneighboring countries could hurt Togo's economic prospects. Prudent fiscal management and strengthened governance in general and inthe phosphate, cotton cocodcoffee sectors, inparticular, will help to somewhat mitigate these risks. Inaddition, to mitigate the risks o f rising food prices in Togo, planned Bank support includes a Community Development Project (scheduled for Boardpresentation inJune 2008) which contains some targeted measures to support food production. Additional support could be considered under the new instrument which is being established by the Bank to respond to the global food crisis. IX. CONCLUDINGREMARKS 65. This ISN is developed in an uncertain environment, but the Bank must be engaged early and in flexible manner to support the window of opportunity in the current political and economic recovery process. In such an environment, the ISN presents a program that responds to the socio-economic conditions and opportunities presented. In particular, given the lessons learned over the past few years during the crisis, Bank staff have conceived a program which can be, if required, less prone to political shocks inthe process - such as the focus on community driven development. A number o f variables noted earlier will determine the financial envelope available for FY09 and following years, including the performance of the country. It i s expected, however, that the focus o f the Bank's program will remain on supporting economic governance reform; complemented by investment operations on infrastructure rehabilitation, the financial sector and growth inducing sectors, as well as strengthening decentralization andprovision o fbasic social services at the community levels. - 28 - " .3 I QI N I I s + m rcl 0 3 Ba I 0 m d I m 3 I r 4 m Appendix 2: DonorAssistance to Togo Since 2007, the immediate focus o f the Government and development assistance partners has been on the settlement o f arrears, notably to multilateral institutions, and the resumption o f economic growth. The donors' effort for the FY08-10 period is also focused on improving public finance management and governance, facilitating national reconciliation and enhancing security, building capacity in both the central administration and public enterprises, supporting agriculture, investing in infrastructure, fostering community development and rehabilitating the financial sector. All loans listed below are on concessional terms, except where noted. As o f early April 2008, the only financing o f the African DevelopmentBank (AfDB) was a project designed to support institutional and human capacity building, for US$3.3 million. AfDB's re-engagement in Togo is within its new Framework for Bank intervention in fragile states. Under this Framework, AfDB plans to provide fhding in addition to the regular FAD-11 allocation. Resources available under the FAD-11 for the fragile states will help Togo clear its arrears toward the AfDB. AfDB's interventions will be integrated into two pillars: (i) improving governance and transparency and strengthening the capacity o f the administration; and (ii)rehabilitatingbasic infrastructure. Inaddition to an arrears clearance grant and accompanying budget support (US$15 million), the AfDB will provide resources for water and drainage, road infrastructures and state-owned enterprises. A small pool o f additional resources, specifically targeting capacity building and knowledge management, will also be available. AfDB will also assist in the revival o f productive activities, including support o f sub-regional integration projects. The European Commission (EC) resumed full cooperation with Togo in November 2007, with the provision o f Euro 123 million for the 10th EDF covering the period 2008-2013. The EC sectors o f intervention under the 10th EDF will be mainly economic and political governance, institutional and economic reforms, and infrastructure and urban development. Some support i s also foreseen for civil society capacity building and natural resources/environment. The interventions o f French cooperation are directed to public finance management, transport infrastructure, capacity building and education. In 2008, France intends to provide budget support o f CFAF 2.3 billion andproject support inthe amount o f CFAF 3.5 billion. The UnitedNations agencies operate mainly inthe sectors o f health, social and regional development, and humancapacity strengthening. Paris 21 (Partnership in Statistics for Development inthe 21" century) has been involved with the EC and UNDP in supporting statistical capacity building (development o f a national strategy for the development o f statistics: 2009-2013). China has been investing in infrastructure and agriculture. At the end o f the joint Commission Togo-China which took place in February 2008, China exempted from tariffs some Togolese products, and signed a grant agreement o f CFAF 2.5 billion to provide assistance in economic andtechnical areas. - 3 3 - The West African Development Bank (BOAD) supports mainly rural and urban transport infrastructure, water supply and energy. Over the past two years, CFAF 11.2 billion have been committed and an additional CFAF 5 billion will be available for 2008. ECOWAS'sinvestment bank (BIDC) finances road transport and health for CFAF 14.3 billion, ofwhich CFAF 4.4 billion would be available in2008. Loans from the Islamic DevelopmentBank aim at supporting rural water supply, road transport, education, agriculture and the leasing o f new mining equipment for the phosphates company (for CFAF 18 billion). A non-concessional loan o f Euro 45 million to the SNPT (not guaranteedby the Government) i s structured as a lease agreementrelating to the purchaseofnew equipment necessary for the company's production to recover and will be carried out with the assistance o f a strategic partner. - 34 - CASAnnex A2: Togo at a Glance Togo at a glance 9/28/07 Sub- Key Development Indic a brs Saharan LOW Africa incme &e distribution,2W6 f=) Two Female Pcpulatlon, rrid-par (trillions) 6.3 770 2,403 7074 Surfacearea(thws andsq. h) 57 24,265 29,215 60SCI Populaltongrowth (Oh) 2.6 2.3 18 M.5d Urbanpopulation(% oftotal papulation) 41 36 30 4044 GNI (Atias mthod, US$ billions) 2.2 648 1,562 1034 GNIper capita (Atlas method, US$) 350 a42 650 2026 GNi per capita (PPP, international$) 1,493 2,032 2,6B ,014 0.4 GDPgroMnh(%) 4.1 5.6 8.0 GDPpercapitagrowth(%) -1.5 3.2 6.1 (mostrecent estimate, 2000-2WS) Powtyheadcwnt ratioat $1 a day (PPP, %) 41 Powtyheadcwntratioat $2a day(PPP, %) 72 Under-5mortally rate (per 1,OW) hfe e-tancyat birth (years) 55 47 59 Infant mwtality(per 1,OWIiw births) 78 96 75 Childmalnutrition(% ofchildren under 5) 29 150 Adult literacy, mie (% of ages 15 andolder) 69 69 72 Adult literacy,femle (% of ages 15 and older) 36 50 50 $00 Gross primaryenrdin-ent. mle(%ofagegrwp) 108 98 108 Grosspimary enrollrent. femle (% of agegrwp) 92 86 96 50 Accesstoanimproved watersource(% of population) 52 56 75 0 Accesstoimprowdsanitation facilities( O h of population) 35 37 36 Net Aid Flows 1980 1990 2000 2006' (US$ ni/iims) NetODA andofficial aid 93 258 70 87 Grovdhof GDP and GDP per capka (%) Tqo3 d m s (in 2005): France P 91 29 31 20 r Germny 17 37 9 8 Netherlands 0 1 0 5 Aid (% of GNI) 8.2 16.2 5.4 4.1 Aidper capita(US$) 32 65 13 14 Long-Term Economic Trends 29 1 . SO 95 00 05 Cwumer prices(annual%change) 0.3 1.9 2.2 GDPinplicit deflator (annual % change) 10.5 3.0 -1.7 0.2 -4-GGDP -W P percaota Whangerate(annua1 average,local 211.3 272.3 712.0 522.4 Termoftradeindex(ZOW= 100) 126 100 96 1980-90 1990-2WO 2000-06 (average annual growth %) Pcpulatlon, md-year (mliions) 2.8 4.0 5.4 6.3 3.5 3.0 2.7 GDP(US mliions) 1,136 1,628 1,329 2,221 1.7 3.5 2.3 (%of GDP) Agriculture 27.5 33.6 34.2 43.6 5.6 4.0 2.9 industry 24.6 22.5 17.6 24.0 1.1 1.8 8.1 Manufacturing 7.6 9.9 8.4 10.1 1.7 1.6 7.5 W C e s 47.7 437 47.9 324 -0.3 3.9 07 Hwsehdd final consumptionexpendture 54.5 71.1 92.0 85.0 4.7 5.2 01 GeneralgoVtfinal consunption epnditure 22.4 14.2 10.2 10.0 -1.2 0.0 1 3 Gross capitalformbon 28.4 26.6 17.8 18.4 2.7 -0 1 6.1 Exports ofgoods andseruces 51.1 33.5 30.7 35.2 0.1 1.2 5.7 lnpwtsofgwdsandseruces 56.4 45.3 50.7 48.6 2.8 1.1 3.1 Gross saungs 13.2 204 0.3 7.0 Note Figuresin italics arefw years other than thasespecified 2006 data are prelimnary indicales data are not awilable a hd data are for 2W5 Developrent Economcs, DevelopmentData Grwp(DECDG) - 3 5 - Togo __ __ Balance of Payments and Trade 2000 2006 (US$ millions) Total merchandiseexports(fob) 327 631 Total merchandiseimports(ci0 646 1,077 Voice andamuntaMlW Net trade in goodsand services -193 -382 Poliucalstability Workers' remittancesand compensationof employees(receipts) 34 148 Rwulatoryquality Currentamount balance -160 -264 Ruleof Iw as a % of GDP -12.0 -12.0 COntrnlOf mrmpnon Reserves,induding goid 152 375 Central Government Flnance (% of GDP) Current revenue (includinggrants) 12.8 15.3 Tax revenue 11.0 15.4 Current expenditure 15.0 18.5 Technologyand Infrastructure 2000 2005 Overall surplus/deficit 0.0 -3.6 Pavedroads (% of total) 31.6 Fixedline and mobilephone I subscribers(per 1,000people) 17 82 High technologyexports (% of manufacturedexports) 0.6 0.1 External Debt and ResourceFlows Environment (US$ millions) Total debt outstandingand disbursed 1,430 1,708 Agricultural land (% of land area) 67 67 Total debt service 30 17 Forestarea (% of land area) 8.9 7.1 Debt relief (HIPC, MDRI) - - Nationallyprotectedareas (% of land area) .. 11.9 Total debt (% of GDP) 107.6 81.0 Freshwaterresourcesper capita(cu.meters) .. 1,871 Total debtsenice (% of exports) 6.1 1.8 Freshwaterwithdrawal(% of internal resources) 1.5 Foreigndirect investment(net inflows) 42 3 C02 emissionsper capita(mt) 0.30 0.36 Portfolioequity (net inflows) 6 0 GDP per unit of energy use (2000PPP $per kg of oil equivalent) 3.5 3.0 Energy use per capita(kg of oil equivalent) 386 449 IBRD. 0 ShmUrm. 226 Pltvm., o IDA,867 (US$ millions) IBRD 011.11d. 580 Total debt outstandingand disbursed 0 0 Disbursements 0 0 IMF,14 Principalrepayments 0 0 Interestpayments 0 0 IDA Total debt outstandingand disbursed 604 696 Disbursements 15 0 Total debt service 8 0 IFC (fiscal year) Total disbursedand outstandingportfolio 0 0 of which IFC own account 0 0 Disbursementsfor IFCown amount 0 0 Rankedas a major constraintto business Portfoliosales, prepaymentsand (%of managerssurveyedwho agreed) repaymentsfor IFC own account 0 1 n.a. n.a. MlGA Gross exposure 0 0 Stock market capitalization(%of GDP) New guarantees 0 0 Bank capital to asset ratio(%) Note:Figuresin italics are for years other than those specified. 2006 data are preliminary. 9/28/07 ..indicatesdata are not available. -indicates ObSeNatiOnis not applicable. Development Economics,DevelopmentData Group (DECDG). - 36 - Millennium Development Goals Togo Withselected targets to achieve between 7990 and 2075 (estimateclosest to date shown, +/- 2years) Goal 1:halve the rates for $1 a day poverty and malnubltlon 1990 1995 2000 2005 Povertyheadcountratioat $1 a day (PPP, % of population) Povertyheadcountratioat nationalpovertyline(% of population) 32.3 Share of income or consumptionto the poorestqunitile (%) Prevalenceof malnutrition(% of children under 5) 24.6 19.0 25.1 Goal 2: ensure that chlldren are able to complete prlmaryschoollng Primaryschoolenrollment(net.%) 64 77 78 Primarycompletion rate (% of relevantage group) 35 39 61 65 Secondaryschwl enrollment(gross, %) 20 30 40 Youth literacyrate (% of peopleages 15-24) 74 Goal 3: ellmlnate gender disparity In educatlon and empower women Ratioof girls to boys in primaryandsecondaryeducation(%) 59 69 73 Women employed in the nonagriculturalsector (% of nonagriculturalemployment) 41 Proportionof seats heldbywomen in nationalparliament(%) 5 1 5 9 Goal 4: reduce under4 mortallty by two-thlrds Under4 mortalityrate (per 1,000) 152 146 142 139 Infantmortalityrate (per 1,000live births) 88 83 80 76 Measles immunization (proportionof one-year olds immunized,%) 73 53 58 70 Goal 5: reduce maternal mortallty by three-fourths Maternalmortalityratio(modeledestimate, per 100,000live births) 570 Birthsattendedbyskilledhealthstaff (% of total) 31 49 61 Goal 6: halt and beglnto reverse the spread of HIV/AIDSand other maJordlseases Prevalenceof HIV (% of populationages 15-49) 3.2 Contraceptiveprevalence(% of women ages 15-49) 34 26 Incidence of tuberculosis (per 100,000people) 336 348 360 373 Tuberculosiscases detected under DOTS (%) 13 12 18 Goal 7: halve the proportlon of people wlthout sustalnable access to bask needs Access to an improvedwater source (% of population) 50 50 51 52 Access to improved sanitation facilities(%of population) 37 36 34 35 Forestarea (% of total landarea) 12.6 8.9 7.1 Nationallyprotectedareas (% of total landarea) 11.9 CO2 emissions (metrictons per capita) 0.2 0.2 0.3 0.4 GDP per unit of energyuse (constant 2000 PPP $ per kg of oil equivalent) 4.1 3.5 3.5 3.0 Goal 8: develop a global partnership for development Fixedlineand mobile phone subscribers(per 1,000people) 3 5 17 82 Internet users (per 1,000people) 0 0 19 49 Personalcomputers(per 1,000people) 3 19 30 Youth unemployment(% of total labor force ages 15-24) iducatlon lndlcators (%) Measles lmmunlzatlon (%of lyear olds) CT Indicators (per 1,000 people) 7 75 n 50 25 25 2ow 2w2 2w5 0 (@SO 1885 2000 2005 2ow 2w2 2M)5 *Primary net enmilmen1ratio -0- Ratioofgirlstoboysinprimary& OTogo OSub-Saharan Ahica 0Fixed +nobile subscribers sewndary educaUon E8 Internetusers Note:Figures in italics are for yean other than thosespecified...indicatesdataare notavailable 9/28/07 DevelopmentEconomics,DevelopmentData Group (DECDG). - 37 - CAS Annex B2: Togo Selected Indicators* of Bank Portfolio Performance and Management As of 05/08/2008 Indicator 2008 Podfolio Assessment Number of Projects Under Implementationa 0.0 Average ImplementationPeriod (years) ' 0.0 Percent of Problem Projects by Number 0.0 Percentof Problem Projectsby Amount 0.0 Percent of Projects at Risk by Number 0.0 Percent of Projectsat Risk by Amount a , d 0.0 Disbursement Ratio (%) e 0.0 Podfolio Management CPPR during the year (yesho) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since Last Five FY80 FYs Proj Eva1by OED by Number 40 0 Proj Eva1by OED by Amt (US$ millions) 683.4 0.0 % of OED Projects Rated U or HU by Number 55.0 0.0 % of OED Projects Rated U or HU by Amt 53.7 0.0 a. As shown in the Annual Report on PortfolioPerformance(except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projectsrated U or HU on development objectives (DO) and/or implementation progress(IP). d. As defined under the PortfolioImprovement Program. e. Ratio of disbursements duringthe year to the undisbursedbalance of the Bank's portfolioat * All indicatorsare for projectsactive in the Portfolio, with the exception of Disbursement Ratio, the beginningof the year: Investmentprojectsonly. which includesall active projectsas well as projects which exited during the fiscal year. - 38 - CAS Annex B3 IDA ProgramSummary Togo - As of Date Q5IQ8l2QQ8 ProposedIDA Base-Case Lending Programa Fiscal Proj ID US$(M) Strategic Rewards Implementation Year (H/M/L) Risks (H/M/L) 2008 Economic Recovery and Governance [170.61 H H Grant (ERGG)* Community Development Project 17.2 H L Result 187.8 2009 Financial Sector and Governance 10.0 H H ReformTA Project Emergency Infrastructure Rehab. 10.0 H M Development Policy Operation 12.0 H H Result 32.0 2010 Support to Growth-inducing Sectors 9.0 H M Development Policy Operation 12.0 H H Result 21.0 Regional Abidjan Lagos Transport 5.0 H L And Trade Facilitation Result (incl. regional program) 26.0 Overall Result 245.8 *Note: ERGG would include exceptional support o f US$[153] million for arrears clearance. - 39 - CAS Annex B4 Summaryof Non-lendingServices:Togo As of Date05/08/2008 Product Completion FY US$ `000 Audiencea Objectiveb Recentcompletions CountryProcurementAssessmentRpt FY04 104 G,D,B,PD PD, KG PovertyAssessment FY05 79 G,D,B,PD PD, KG PEMFAR FY06 196 G,D,B,PD KG FinancialSectorAssessment FY07 183 G,D,B,PD KG Agric. Dev.Assessment Update FY06-07 86 G,D,B,PD KG Peri-UrbanandUrbanNote FY06-07 91 G,D,B,PD KG DebtSustainabilityAnalysis FY07 30 GYW KG,PS DevelopmentPolicyNeedsAssess. FY08 193 G,D,B,PD KG Underway PEMFAR FY09 150 G,D,B,PD KG InterimStrategyNote FY08 40 G,D,B KG,PD Supportfor I-PRSP/JSAN FY08 31 G,D,B KG,PD Debt SustainabilityAnalysis FY08 30 G,D,B KG,PS Planned Multi-donorAssessmenKG FY09 100 G,D,B KG,PS Supportfor PRSP/JSAN FY09/10 60 G,D,B KG,PD Sources of GrowtWCEM FY09/10 150 G,D,B,PD KG,PD EnvironmentalAssessment and FY09 80 G,B,D KG,PS PovertyandSocial ImpactNote E-HIPCPreliminaryandDecision FY09 30 G,D,B,PD KG,PS Point Documents a. Government, Donor, Bank, public dissemination. b.Knowledge generation, public debate, problem-solving. Costs are being included. - 40 - CAS Annex B6: Togo :Key Economic Indicators Indicator 2003 2004 2005 2006 2007 2008 2009 2010 2011 Nationalaccounts(as YOof GDP) Gross domestic product' 100 100 100 100 100 100 100 100 100 Agriculture 44 45 48 45 47 45 44 43 43 Industry 23 21 21 22 21 22 23 25 25 Services 33 34 31 33 32 34 33 32 32 Total Consumption 101 102 112 108 111 110 100 95 98 Grossdomesticfixed investment 11 11 12 13 12 16 18 20 21 Governmentinvestment 1 2 3 4 2 5 6 7 7 Privateinvestment 10 9 9 9 10 11 12 13 14 Exports(GNFS)b 43 41 40 42 42 44 45 46 47 Imports(GNFS) 57 56 57 62 63 68 69 70 70 Grossnational savings 7 8 7 7 6 8 12 14 15 Memorandum items Grossdomesticproduct 1672 1935 2111 2221 2497 2818 3033 3271 (US$millionat current prices) GNIper capita(US$, Atlas method) 270 310 350 350 360 Realannual growthrates Grossdomesticproductat marketprices 5.2 2.4 1.3 4.1 2.1 3.0 4.0 4.0 4.0 Realannualper capita growthrates(%, calculatedfrom 78 prices) Grossdomestic product at market prices 2.4 -0.3 -1.3 1.5 -0.4 0.5 1.4 1.4 1.4 (Continued) a. GDP at market prices b. "GNFS" denotes "goodsand nonfactorservices." c. Includesnet unrequitedtransfers excluding officialcapital grants. d. Includesuse of IMF resources. e. Consolidatedcentralgovernment. f. "LCU" denotes "local currencyunits."An increaseinUS$/LCUdenotesappreciation. - 4 1 - Togo Key EconomicIndicators(cont'd) - Actual Estimate Projected Indicator # 2003 2004 2005 2006 2007 2008 2009 2010 2011 Public finance (as % of GDPat market prices)' Current revenues 17.0 16.8 15.7 16.9 17.0 17.2 17.5 17.8 Current expenditures 14.1 15.1 17.6 18.5 18.5 17.1 16.6 16.3 Capital expenditure 1.1 1.6 2.8 3.6 2.2 4.8 6.3 7.1 ofwhich : Externally financed 0.8 1.3 1.6 1.6 0.8 2.9 4.3 5.1 Monetary indicators MZIGDP 27.5 31.1 28.9 33.9 38.3 40.2 Priceindices (Y2000 =loo) Terms of trade index (% change) 3.8 -12.2 -3.6 -1.7 4.9 Nominal exchange rate(CFA/US$)f 579.9 527.4 526.9 522.4 478.5 Consumer price index (% change) -0.9 0.4 6.8 2.2 1.0 GDP deflator (% change) -9.9 2.8 7.6 0.2 0.9 1.6 2.0 2.0 2.0 a. GDP at marketprices b. "GNFS" denotes "goodsandnonfactor services." c. Includesnet unrequitedtransfers excludingofficial capital grants. d. Includesuse of IMFresources. e. Consolidatedcentralgovernment. f. "LCU" denotes "localcurrencyunits." An increaseinUS$/LCUdenotes appreciation. - 42 - CASAnnex B7: Togo Key Social Indicators - Latest single year Same regionlincome group Sub- Saharan Low. 1980-85 1990-95 1999-05 Africa Income POPULATION Total population, mid-year (millions) 3.4 4.5 6.1 741.4 2,353.0 Growth rate (% annual average for period) 3.7 2.6 2.8 2.3 1.9 Urban population (% ofpopulation) 27.2 33.3 40.1 35.2 30.0 Total fertility rate (births per woman) 6.7 6.0 5.0 5.5 3.7 POVERTY (% of population) National headcount index Urban headcount index Rural headcount index INCOME GNI per capita (US$) 220 280 350 745 580 Consumer price index (2000=100) a8 113 127 128 Food price index (2000=100) INCOMEKONSUMPTION DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) . .. 1.1 Education (% of GNl) 3.4 3.1 Net primary school enrollment rate (% of age group) Total 64 78 80 Male 75 84 83 Female 53 72 77 Access to an Improved water source (% of population) Total 50 52 56 75 Urban 80 80 80 88 Rural 36 36 43 70 lmmunlzatlon rate (% of children ages 12-23 months) Measles 27 53 70 64 63 DPT 24 58 82 64 67 Child malnutrition (% under Syears) 29 39 Llfe expectancy at birth (years) Total 56 56 55 47 58 Male 55 54 53 47 58 Female 58 59 57 48 59 Mortality Infant (per 1,000 live births) 96 83 78 100 80 Under 5 (per 1,000) 162 146 139 168 122 Adult (15-59) Male (per 1,000 population) 457 389 369 489 298 Female (per 1,000population) 375 321 310 467 244 Maternal (per 100,000 live births) 570 921 684 Births attended by skilled health staff (%) 61 42 41 CAS Annex 85. This table was produced from the CMU LDB system. 02/20/08 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months who received vaccinations before one year of age or at any time before the survey. -43 - 0 C 0 C 0 C 0 C 0 c 0 c 0 c 0 c 0 c a Q, Q c Q U E a C c !! .-aQ) c .-i: 8 v) $- C Q ; cR r- 0 c1 0 e r- b 0 a IBRD 33497 To To Ouagadougou BURKINA FASO Diapaga 1°E TOGO To To SELECTED CITIES AND TOWNS 11°N 11°N To To PREFECTURE CAPITALS Navrongo Dapaong Mandouri T Ô N E REGION CAPITALS To To Natitingou NATIONAL CAPITAL Oti RIVERS SAVANNA MAIN ROADS O T I Mango RAILROADS Koumongou PREFECTURE BOUNDARIES REGION BOUNDARIES K E R E N INTERNATIONAL BOUNDARIES 10°N Kanté Kanté DOUFELGOU To To Niamtougou Kpagouda BINAH This map was produced by the Map Design Unit of The World Bank. Yendi The boundaries, colors, denominations and any other information To To Guérin Guérin K AKaR A Kokoro shown on this map do not imply, on the part of The World Bank Kouka ra Group, any judgment on the legal status of any territory, or any Kara KOZAH endorsement or acceptance of such boundaries. To To B A S S A R Tamale ASSOLI Bafilo To To Parakou G H A N A Bassar TCHAOUDJO Tchamba To To 9°N Sokondé Sokondé Parakou 9°N ts. M o aoz a F Mon B E N I N C E N T R A L Sotouboua N YA L A SOTOUBOUA Blitta To To Bimbila Anie O G O U 8°N Elavagnon 8°N To To Savé Savé Anjé Anjé NIGERIA WAWA WAWA AMOU Badou Atakpamé Atakpamé Amlamé Amlamé Lake Amou Volta P L A T E A U To To Apéyémé Apéyémé Yendi To To Kétou Kétou K L O T O H A H O 7°N Mont Agou Notsé Notsé 7°N Kpalime (986 m) Agou Sio To To YOTO Accra Z I O Tabligbo M A R I T I M E LACS TOGO Kéve Kéve V O To Lagos Tsséviéé évi Vogan Aného 0 20 40 60 Kilometers LOMÉ 6°N GOLFE 0 10 20 30 40 50 Miles To To Bight of Benin Accra 0° 1°E 2°E 3°E NOVEMBER 2004