The World Bank TOGO Economic Governance (P158078) REPORT NO. RES42037 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF TOGO ECONOMIC GOVERNANCE APPROVED ON OCTOBER 3, 2017 TO REPUBLIC OF TOGO GOVERNANCE AFRICA Regional Vice President: Ousmane Diagana Country Director: Coralie Gevers Acting Regional Director: Francisco Galrao Carneiro Practice Manager/Manager: Alexandre Arrobbio Task Team Leader(s): Saidou Diop, Jean Charles Amon Kra The World Bank TOGO Economic Governance (P158078) ABBREVIATIONS AND ACRONYMS AE Commitment Authorization (Autorisation d’engagement) ARMP Public Procurement Regulatory Authority (Autorité de régulation des marches publics) COVID-19 Corona Virus Disease 2019 CP Payment Credit (Crédit de paiement) CSO Civil Society Organization DLI Disbursement Linked Indicator EU European Union FCFA Franc of the African Financial Community (Franc de Communauté financière africaine) HR Human Resource IDA International Development Association IFR Interim Financial Report IGF Inspection General of Finance (Inspection Générale des finances) IRI Intermediate Results Indicator ISR Implementation Status & Results Report IT Information Technology MAPS Methodology for Assessing Procurement Systems MEF Ministry of Economy and Finance (Ministère de l’économie et des finances) MTDS Medium-Term Debt Strategy NDP National Development Plan OTR Togo Revenue Office (Office des recettes togolaise) PAGE Economic Governance Support Project (Projet d’appui à la gouvernance économique) PDO Project Development Indicator PFM Public Financial Management PIM Public Investment Management PIP Public Investment Plan PPP Public-Private Partnerships RBF Results Based Financing TA Technical Assistance US$ United States Dollar The World Bank TOGO Economic Governance (P158078) BASIC DATA Product Information Project ID Financing Instrument P158078 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 03-Oct-2017 31-Oct-2022 Organizations Borrower Responsible Agency Ministry of Economy and Finance Ministry of Finance Project Development Objective (PDO) Original PDO The project development objective is to improve public investment management, domestic revenue mobilization and public accountability and monitoring mechanisms for better service delivery in priority sectors. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-D2340 03-Oct-2017 21-Dec-2017 20-Apr-2018 31-Oct-2022 15.00 5.68 9.15 TF-A8463 04-Sep-2018 12-Apr-2019 12-Apr-2019 31-Oct-2022 4.50 0 4.50 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project status Background 1. The Economic Governance Project (Projet d’appui à la gouvernance économique, PAGE), approved by the Board on October 3, 2017, became effective on April 20, 2018 and has a closing date set for October 22, 2022. Co-financed by the World Bank (US$15 million International Development Association, IDA, Grant) and the European Union -EU- (Euro 5 million, Grant), it supports Government’s 2018-22 national economic development plan's (NDP). The Project Development Objective (PDO) is to improve public investment management (PIM), domestic revenue mobilization (DRM) and public accountability and monitoring mechanisms for better service delivery in priority sectors. The project combining Technical Assistance (TA) and Results-Based Financing (RBF) has four components: (i) strengthening PIM and public private partnership (PPP); (ii) supporting DRM; (iii) increasing public accountability and citizen engagement; and (iv) project implementation. This is the first project restructuring and as of 30 June 2020, the disbursement rate was 38 percent. 2. Corona Virus Disease 2019 (COVID-19) impact. Due to social distancing and lockdown measures taken by authorities to address challenges raised by the COVID-19, some capacity building activities and missions have been postponed, causing delays in project implementation. Meanwhile, the project is on good track to meet its Development Objectives (DO). Progress toward achievements of Project Development Objective (PDO) 3. Achievement of PDO and Project Implementation Progress are satisfactory, with PDO indicators and intermediate results indicators (IRI) met or on track despite challenges caused by the COVID-19 crisis. The last Implementation Support Review (ISR) rated overall project implementation satisfactory. The PDO is measured by five indicators: (a) public investment projects approved for financing that have been appraised in line with PIM appraisal guidelines; target: increase of 50 percent; (b) total registrants post taxpayer census in Lomé; target: increase by 15 percent; (c) regular income taxpayers with turnover > FCAF 10 million post census; target: increase of 30 percent; (d) large taxpayers satisfaction with Togolese Revenue Authority (Office Togolais des Recettes -OTR) responsiveness; target: increase from 43.8 to 60 percent); and (e) citizens satisfied with quality and access to basic services in maternal and child health, primary education, and urban water supply; target: increase of 15 percent. 4. Two out of five PDO indicators have exceeded end-project target and remaining PDO indicators are on track. All Public investment projects approved for financing in the 2020 budget were appraised in line with PIM appraisal guidelines, exceeding the target of 50 percent. Total registrants’ post taxpayer census in Lomé increased by 37 percent, exceeding the target of 15 percent. Significant progress has been made towards achievement of the other three indicators: a firm has been recruited by the OTR to carry out satisfaction surveys of large taxpayers; a firm has been selected to carry out satisfaction of citizens surveys in targeted sub-sectors and first survey results expected by end of 2020. Overall, project management, financial management and procurement is satisfactory. While some project activities have been postponed due to COVID-19 delaying project implementation, stakeholders support and buy-in remain strong. In fact, due to social distancing and lockdown measures taken by authorities to address challenges raised by COVID-19, some capacity building activities and missions have been postponed, causing some delays in project implementation. 5. Seven out of nine IRIs have been achieved and the remaining IRIs are on track to be achieved: (i) systematic use of economic and cost-benefit analysis for appraisal of major public investments including PPPs (projects valued > FCAF 2 billion); (ii) adequate alignment between the Public Investment Plan (PIP), the sectoral medium-term budget framework and the Budget Finance Law; (iii) reduction in number of tax instruments (from 29 to a maximum of 15); (iv) deployment of qualified OTR operational staff to undertake field audits; (v) full automation of cross-checking of taxpayer returns for VAT and customs declarations; (vi) regular publication of citizens’ national budget; and (vii) number of Government and civil society organizations (CSO) staff trained in new accountability, citizen engagement mechanisms, and Public Financial The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) Management (PFM). Activities are under implementation to support achievement of remaining IRIs i.e. reduction of time to address taxpayer requests by 50 percent expected by end 2021; and share of women trained in new accountability, citizen engagement mechanisms, and PFM (currently at 16 percent) expected to reach twenty percent by end-project. Project status by components 6. Component 1: Inter-ministerial coordination has been strengthened through the operationalization of the PIP Committee and the development of tools and methodologies for better PIM. The project is supporting the PIP Committee in prioritization of investment projects to be included in the annual finance law. Key achievements include (i) development of a manual of procedures for the selection, prioritization and programming of public investment projects as well as its operationalization tools, (ii) training of all stakeholders in the use of the manual; (iii) supporting the program budgeting reform through quality review of programs and use of Commitment Authorization (Autorisation d’ Engagement- AE) and Payment Credit (Crédit de Paiement - CP) in sectoral programs; and the modernization of the Procurement Regulation Authority (Agence de Régulation des Marchés Publics, ARMP) website, and the ongoing public procurement system assessment using the Methodology for Assessing Procurement Systems (MAPS II). The MAPS will inform the strategic policy and plan of ARMP and guide the revision of the public procurement code. 7. Component 2: OTR capacity is being improved through TA and RBF and Tax Policy Unit under establishment is being supported. Several disbursements linked indicators (DLIs) have been met : (i) 23 percent of OTR's qualified operational staff deployed on field audit missions against a 15 percent target; (ii) full automation of cross-checking of taxpayer returns for VAT and customs declarations; (iii) completion of general taxpayer census in Lomé, resulting of an increase of 37 percent of taxpayers registered in Lomé against a target of 15 percent. 8. Component 3: Public accountability mechanisms and citizen participation in budget preparation and implementation processes are being reinforced. Activities include (i) follow-up missions to monitor implementation of General Inspectorate of Finance (Inspection générale des finances, IGF) recommendations, (ii) training of National Assembly Finance Committee members covering budget policy debate and program based budgeting, (iii) drafting (ongoing) of a strategic plan for the Court of Auditors, (iv) drafting and publication of the 2020 Citizens' Budget. The selection of CSOs is underway to develop the methodology and collect citizens' feedback on the quality and accessibility of public services in three priority sectors (maternal and child health, primary education and water supply in urban areas). 9. Component 4: Project Implementation Support is satisfactory. The component supports the effective and efficient coordination and administration of the project and TA the Permanent Secretariat in charge of PFM Reforms. Implementation progress of this component is satisfactory. Annual project budget, Interim Financial Reports (IFR), and Annual audited financial statements are submitted on time and of acceptable quality for the World Bank. Procurement, rated moderately satisfactory in the last ISR due to delay in filing procurement documents in the procurement tracking system (STEP) is being addressed by the project implementation team. B. Rationale for restructuring 10. The restructuring is a response to a formal Government request and will contribute to ensure public administration continuity and strengthen human resource (HR) capacity within the Minister of Economy and Finance (MEF) for improved management of the COVID-19 crisis. The proposed restructuring comes in response to a formal Government request n°1319/MEF/CAB/SG dated May 4, 2020. The proposed restructuring aims at reinforcing results achieved so far and ensuring their sustainability while adapting the interventions to address challenges arising from the COVID-19 crisis. To that end, the restructured project aims to (i) support public administration continuity through providing remote work solutions for civil servants and (ii) increase MEF resilience through improved crisis management by supporting HR capacity building in fiscal and economic planning and management. The MEF, based on technical and financial partners’ advice, recently reorganized its departments and issued a new organizational chart. Its effective implementation will require adequate staffing in key areas i.e. economic policy research, budget management, debt The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) management and HR management. In addition, to improve the management of the economic and social shock of the COVID-19, MEF departments require new skills and tools. 11. Implementation of new activities proposed as part of the restructuring will also contribute to PDO achievement. Contributing to improved business continuity of the MEF throughout the COVID-19 crisis, will contribute to maintain operational core MEF functions i.e. selection of projects to the PIP, PIM, control of public spending, budget and debt management, DRM, accountability and monitoring of service delivery in sectors. Consequently, the new activities will contribute to PDO achievement. 12. The restructuring proposes to finance two new activities that will contribute to strengthen the COVID-19 crisis management by the MEF: (i) strengthening HR resources capacity of key departments of MEF (i.e. Budget, Economic research, Debt management, HR); (ii) developing tools and systems to facilitate MEF teleworking. II. DESCRIPTION OF PROPOSED CHANGES 13. The PDO remains relevant as new activities are within its scope. The project restructuring was discussed and agreed upon with the Government. The original PDO and components are maintained, and the restructured project will continue to support critical reforms related to public investment and economic management, DRM, and public accountability and citizen engagement. The following changes are proposed for this restructuring:  Adding two new activities under a new Component 1.4 in response to COVID-19 challenges;  Reallocating grant proceeds to carry out the additional activities;  Adjusting IRIs. Adjustments to component 1 to reflect COVID-19 related activities; 14. Two activities will be added under a new sub-component 1.4 : “ Strengthening the Capacity of the MEF and support to COVID-19 response”: These activities will contribute to (i) Strengthen the HR capacity of key MEF departments i.e. ((Budget, Economic research, Debt management, HR)); and (ii) ensure public administration continuity through remote work solutions. Technical experts in various fields i.e. economic management, statistic, public administration, HR and PFM) will be selected to strengthen the capacity of the following departments : MEF’s Cabinet, Directorate General of Budget and Finance, Directorate General of Economic Research and Analysis, Directorate of Financial Controls, Directorate of HR, Directorate of Pubic Debt and Financing. In addition, support will be provided to (i) introduce remote work solutions for civil servants, including provision of necessary digital tools and Information Technology (IT) equipment; (ii) Identify vulnerabilities in operations and systems (IT systems, identification of key staff, security, etc.) and mitigating actions; (iii) adopt payment solutions i.e. mobile payments, pre-paid payment cards etc. to efficiently and quickly disburse salaries. Adjustments to the Intermediate results indicators 15. IRIs will be adjusted to better track key results expected from new project’s activities. Proposed new activities will contribute to the achievement of existing IRIs. The Government continues to improve debt transparency, which is key to support flexible and sustainable borrowing in the COVID-19 context. A new Medium-term Debt Management Strategy (MTDS) for 2020-2024 was published in March 2020. It provides information on the target debt portfolio by currency, interest rate, maturity and instruments, as well as an analysis of portfolio risk, refinancing risk, market risk, and exchange rate risk. To reflect support to improved debt management, a new IRIs related to debt management transparency will be added. The Publication of the Annual Debt Report will allow to assess progress in the implementation of the MTDS. Table 1 summarizes the proposed IRIs changes. Table 1: Summary of Change to Intermediate Results Indicators Baseline End-Target IRI Indicator Unit Rationale (2020) (2022) New : Publication of the Annual Measure: improvement in the Number 0 2 Debt Report. transparency of Debt Management The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) Reallocation of grant proceeds to carry out the additional activities; 16. A reallocation of resources is necessary to finance new activates that will be implemented in response to emerging needs. Based on detailed review of implementation progress of activities and disbursements, it is proposed to reallocate the project proceeds as presented in table 2. A total of US$5 million will be allocated to a new Subcomponent 1.4 : “Strengthening the Capacity of the MEF and support to COVID-19 response”. These resources will be mobilized through the reduction of the following subcomponents : 1.1 "Strengthening Public Investment Planning" (US$1,800,000); 1.2 "Selection and budgeting of high-quality public investments" (US$600,000); 1.3 "Improving the Implementation of Investment Projects" (US$800,000); 2.1 "Strengthening the Capacity of the Tax Policy Unit" (US$1,100,000); 3.3 "Citizen Engagement in Priority Areas" (US$500,000) and 4.2 "Monitoring, Evaluation and Communication" (US$200,000). 17. The reallocation will not affect the achievement of initial PDO and Intermediary Results Indicators. The reallocation ensures that there are sufficient allocations to implement initially planned and ongoing activities. This will ensure that PDO and Intermediary results indicators will be achieved as initially planned. Table 2-1: Summary of resources allocations by Component (US$ million) Total IDA funding Total Revised Project Components initial Initial Revised EU funding Reallocation Allocation Allocation Allocation Allocation Management of Public Investments and PPPs 6.06 5.50 1.80 7.30 0.56 7.86 1.1 Enhancing planning of public investments 3.06 2.50 (1.80) 0.70 0.56 1.26 including PPPs 1.2 Ensuring selection and budgeting of high- 0.40 1.00 1.00 (0.60) 0.40 quality public investments 1.3 Enhancing the implementation of public 1.20 2.00 2.00 (0.80) 1.20 investments 1.4 Strengthening the capacity of MEF and 5.00 5.00 5.00 supporting the COVID-19 response Supporting DRM 7.20 6.00 (1.10) 4.90 1.20 6.10 2.1. Strengthening capacity for tax policy 2.00 2.00 (1.10) 0.90 0.90 2.2. Broadening tax base through tax 4.20 4.20 3.00 3.00 1.20 administration improvements 2.3. Enhancing taxpayer services to promote 1.00 1.00 1.00 1.00 voluntary compliance Increasing Public Accountability and Citizen 3.48 3.98 1.50 (0.50) 1.00 2.48 engagement 3.1 Strengthening capacity for formal 0.80 1.30 0.50 (0.50) 0.80 oversight and accountability institutions 3.2 Strengthening civil society engagement in 0.56 0.56 0.56 the budget process 3.3 Citizen engagement in priority sectors 2.12 1.00 1.00 1.12 2.12 Project implementation support 2.56 2.00 (0.20) 1.80 0.56 2.36 4.1 Project management and reform 1.50 1.50 1.50 1.50 Coordination 4.2 Monitoring, evaluation, independent 0.86 1.06 0.50 (0.20) 0.30 0.56 review, and communication Part executed by IDA 0.80 0.80 0.80 Total 20.6 15.00 15.00 5.60 20.6 The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) Table 2-2: Summary of resources allocations by Components/Categories in SDR million IDA funding Project Components/Categories Initial Reallocation Revised Allocation Allocation (1) Goods, non-consulting services, consulting services, Training and Operating 7.10 0.40 7.50 Costs under the Project, except for Components 2.2, 2.3 and 3.3(b) (2) Competitive Grants under Component 0.40 - 0.40 3.3(b) of the Project (3) Payments under Eligible Expenditure Programs under Components 2.2 and 2.3 of 2.80 - 2.80 the Project (4) Refund of Preparation Advance 0.40 (0.40) - Total 10.70 - 10.70 The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Reallocation between Disbursement Categories ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Management of Public Management of Public Investments and Public-Private 6.06 Investments and Public-Private 6.06 Partnerships Partnerships Supporting Domestic Resource Supporting Domestic Resource 7.20 7.20 Mobilization Mobilization Increasing Public Increasing Public Accountability 3.98 Accountability and Citizen 3.98 and Citizen Engagement Engagement Project Implementation Project Implementation Support 2.56 2.56 Support Unallocated 0.80 Unallocated 0.80 TOTAL 20.60 20.60 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-D2340-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: GD,NCS,CS,TR & OC expt Pt B2,B3,C3b 7,100,000.00 1,434,129.23 7,499,400.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: COMPETITIVE GRANTS - Pt C3b 400,000.00 0.00 400,000.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: PAYMENT UNDER EEP - Pt B2,B3 2,800,000.00 1,877,000.00 2,800,000.00 100.00 100.00 The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) iLap Category Sequence No: 4 Current Expenditure Category: PPF REFINANCING 400,000.00 581.00 600.00 Total 10,700,000.00 3,311,710.23 10,700,000.00 . The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) . Results framework COUNTRY: Togo Togo Economic Governance Project Project Development Objectives(s) The project development objective is to improve public investment management, domestic revenue mobilization and public accountability and monitoring mechanisms for better service delivery in priority sectors. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Improve Public Investment Management Public investment projects approved for financing that have been appraised in line 0.00 0.00 10.00 25.00 40.00 50.00 50.00 with Public Investment Management appraisal guidelines (Percentage) Improve Domestic Revenue Mobilization Share of total registrants post taxpayer census 0.00 0.00 5.00 12.00 15.00 15.00 15.00 increased in Lome (Percentage) Increase in filing taxpayers in Lome with a 0.00 0.00 0.00 10.00 20.00 30.00 30.00 turnover exceeding 10 The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 million CFAF (Percentage) Improve Public Accountability and Monitoring Mechanisms for better service delivery in priority sect Citizens satisfied with quality and access to basic services in maternal and 0.00 0.00 5.00 8.00 12.00 15.00 15.00 child health, primary education, and urban water supply (Percentage) Satisfaction of large taxpayers with the 43.80 43.80 45.00 50.00 55.00 60.00 60.00 responsiveness of OTR (Percentage) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Management of Public Investments and Public-Private Partnerships Systematic use of economic and cost-benefit analyses for appraisal of major public 0.00 0.00 10.00 15.00 25.00 30.00 30.00 investments including PPP (programs superiror to 2 billion FCFA) (Percentage) The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Difference between Public Investment Program, Sectoral Medium Term 15.00 15.00 12.00 10.00 8.00 5.00 5.00 budget framework DPPD and Finance Law in priority sectors (Percentage) Publication of Annual Debt 0.00 0.00 0.00 0.00 1.00 1.00 2.00 Report (Number) Rationale: Action: This indicator is The new result indicator related to debt management transparency will measure the increased capacity of the MEF in debt management by the publication of New the Annual Debt Report. Supporting Domestic Resource Mobilization Reduction of national tax 29.00 29.00 29.00 25.00 20.00 15.00 15.00 instruments (Number) Full automation of cross checking of taxpayer returns for VAT and No Yes Yes Yes Yes Yes Yes customs declarations (Yes/No) OTR operational staff are qualified and deployed for 6.00 6.00 15.00 15.00 15.00 15.00 15.00 field audits (Percentage) Reduced length of time to address taxpayer requests 12.00 12.00 10.00 8.00 6.00 6.00 6.00 (Days) Increasing Public Accountability and Citizen Engagement The World Bank TOGO ECONOMIC GOVERNANCE PROJECT (P158078) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Introduction of citizen report cards to provide MDAs with citizen feedback on quality and access of service delivery for 0.00 0.00 2.00 4.00 6.00 6.00 6.00 maternal and child health, primary education, and urban water supply (Number) Publication of citizens No No Yes Yes Yes Yes Yes national budget (Yes/No) Government and CSO staff trained in new accountability, citizens 0.00 50.00 200.00 300.00 350.00 400.00 400.00 engagement mechanisms and PFM (Number) Percentage of Women trained in new accountability, citizens 0.00 0.00 5.00 8.00 15.00 20.00 20.00 engagement mechanisms and PFM (Percentage) IO Table SPACE . The World Bank TOGO Economic Governance (P158078)