Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 17269-SE

MEMORANDUM OF THE PRESIDENT OF

THE INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE EXECUTIVE DIRECTORS

ON A COUNTRY ASSISTANCE STRATEGY

OF THE WORLD BANK GROUP

FOR

THE REPUBLIC OF SENEGAL

December 29, 1997

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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[ The last Country Assistance Strategy for Senegal was reviewed by the Executive Directors on February 16, 1995.

CURRENCY EQUIVALENTS

Currency Unit = CFA Franc (CFAF)US$1 = CFAF 595 (December 1997)

WEIGHTS AND MEASURES

Metric system

FISCAL YEARJanuary 1 - December 31

ABBREVIATIONS AND ACRONYMS

AfDB African Development BanlkAGETIP Agence d'execution des travaux d'inter2t public contre le sous-

emploi (Public Works Executing Agency)BCEAO Banque Centrale des Etats de I Afnique d 'OuestCFD Caisse Francaise de DeveloppementCNES Conseil National des Employeurs du SenegalCNP Conseil National du PatronatCNTS ConfMdration Nationale de Travailleurs SenegalaisCPPR Country Portfolio Performance ReviewCRJ Comite de Refonnes JuridiquesEDI Economic Development InstituteEIB European Investment BankESAF Enhanced Structural Adjustment FacilityEU European UnionFSP Fondation du SecteurPriveGEF Global Environmental FacilityGRCC Groupe de Rdflexion sur la CompgfitivWte et la CroissanceGRS Groupe de Reflexion StrategiqueHIPC Heavily Indebted Poor CountriesIDF Institutional Development FundKfW Kreditanstalt ftr Wiederaufbau (Germany)NEAP National Environmental Action PlanNGO Non-governmental OrganizationOHADA Organization pour I 'Harmonisation du Droit des AffairesOMVS Organisation pour la Mise en Valeur du Fleuve Senegal (Regional

Organization for the Management of the Senegal River)PIP Portfolio Implementation PlanSAES Syndicat Autonome des Enseignants du SuperieurSAGA Social and Gender AnalysisSENELEC Societe Senegalaise d 'Electricite (Power Company)SOE State Owned EnterpriseSONACOS Societe Nationale de Commercialisatzon des Oleagineux (Groundnut

Oil Company)USAID United States Agency for International DevelopmentWAEMU West African Economic and Monetary UnionWID Women in DevelopmentXGNFS Exports of Goods and Non-factor Services

Vice President Jean-Louis SarbibCountry Director Mahmood A. AyubSector Manager Emmanuel Akpa

FOR OFFICIAL USE ONLYREPUBLIC OF SENEGAL

COUNTRY ASSISTANCE STRATEGY

TABLE OF CONTENTSPage No.

EXECUTIVE SUMMARY ................................... i1. BACKGROUND ..................II. RECENT ECONOMIC DEVELOPMENTS ....................................

A. Policy Reforms Adopted During 1994-97 ................................... 1B. Impact of the Reforms ................................... 3

Ill. SENEGAL-S DEVELOPMENT AGENDA ............................................................................................................ 3A. Maintaining M9acroeconomic Stability .................................... 4B. Private Sector Development .................................... 5C. Promoting Rural Development .................................... 6D. Social and Human Development .................................... 6E. Regional Integration .................................... 7F. Cross-Cutting Themes .8.................

Gender .................................... 8Governance and Capacity Building ................................... 8Enmironcrnt .................................... 9

IV. ECONOMIC OUTLOOK AND RISKS ................................... .9A. Exte mal E nvironment .................................... 9B. Base Case Scenario ................................... 10C. High Case Scenario ................................... IID. Low Case Scenario .II................1E. Social and Political Constraints to Growth ................................... II

V. THE BANKS COUNTRY ASSISTANCE STRATEGY ................................................. 12A. Implementation of the Previous CAS and Lessons Leamed ................................................ 12

What Worked Well.:12What Did Not Work Well ............................................. 13Lessons Learned ............................................. 13

B. Toward a Poverty-Focused Assistance Strategy ............................................. 13Achieving More Rapid and Sustained Growth ............................................. 14Social Sustainabilitv ............................................. 15Management of the Bank's Existing Portfolio ............................................. 16Other Bank Group Activities ............................................. 17

VI. COORDINATION WITH DEVELOPMENT PARTNERS .............................................. 18VII. CAS SCENARIOS AND RISKS ............................................. 20

A. The Base Case .............................................. 20B. The Low Case ............................................. 20C. The High Case ............................................. 20D. Risks Facing the Strategy ............................................. 2 1

BOXES

Box I Main Structural Reforms Since 1994Box 2 Key Economic IndicatorsBox 3 Senegal's Major Development PartnersBox 4 - Triggers for High- and Low-Case Scenarios

ATTACHMENTS

Attachment I Summary of the Proposed CASAttachment 11 Poverty and the CASAttachment Ill CAS MatrixAttachment IV Alternative Economic Growth ScenariosAttachment V CAS Consultation ProcessAttachment VI Treatment of Cross-Cutting ThemesAttachment VIl Standard Annexes

MAP

This document has a restricted distribution and may be used by recipients only in theperfornance of their official duties. Its contents may not otherwise be disclosed without .World Bank authorization.

;~ ~ ~ ~ ~~

EXECUTIVE SUMMARY

i. The last four years have witnessed a remarkable turnaround in the implementation ofeconomic reforms in Senegal. This reverses two decades of poor economic management andlackluster growth performance. The impact of the policy reforms adopted since early 1994 isalready evident in terms of reduced fiscal and balance of payments deficits, a return of inflation topre-devaluation levels, and an average growth rate of 5 percent during the past three years.Senegal's social and economic indicators -- poor by the standards of countries with comparablelevels of income -- have also started to improve recently, reflecting the increased attention andresources the Government is allocating to social development. Moreover, the status of the Bank'sportfolio has improved significantly over the past three years (see paras. 57-64).

ii. Recent progress notwithstanding, a sizable unfinished agenda of reforms remains.Unemployment rates remain high, especially for urban youth. Based on daily caloric intake, one outof every three Senegalese is poor. Despite being one of Africa's politically most stable regimes witha solid macroeconomic stabilization program, the country has been unable to attract appreciablelevels of foreign direct investment, thanks to cumbersome and opaque administrative and judicialprocedures, an incomplete privatization process, and the high costs of the factors of production suchas electricity, water, and transport. Senegal is also saddled with a bureaucracy that still has somevestiges of the dirigiste tradition, and is too large for a small country with limited natural resources.

iii. The Bank Group's assistance strategy for Senegal seeks to address these issues, guidedby the country's Ninth Economic and Social Development Plan and molded by the lessonslearned during the implementation of the previous CAS (see para. 44). The over-archingobjective of the CAS is to reduce the incidence of poverty and create gainful employment, especiallyfor youth. This would be addressed through a two-pronged strategy (see Attachment I for anillustration of the proposed strategy): supporting policies and programs aimed at more rapid andsustained growth; and ensuring the social sustainability of the program. The proposed base caselending level of US$560 million for 14 projects (compared to 16 under the previous CAS) ispredicated on continuing improvements in performance. In particular, it assumes good progress onthe implementation of reforms to unshackle private sector initiatives, continued good portfoliomanagement, and allocation of sufficient attention and resources to the development of social andhuman resources. In terms of lending instruments, the base case includes two adjustment operationsin the areas of energy and trade liberalization, and five sector investment program (SIP) operationsin the health, education, agriculture, transport, and water sectors. The SIPs are also foreseen asadaptable lending instruments that provide financing for the first phase of a larger program.

iv. The proposed CAS has some notable features. First, the preparation has been highlyparticipatory, involving in-country focus group consultations with various segments of Senegalesesociety (see Attachment V). Second, the CAS exercise also included a social analysis undertaken bya Senegalese sociologist, which has guided the design of the CAS. Third, the CAS stressesselectivity in the Bank's involvement. It identifies the areas where the Bank should lead donorefforts (trade reform and policy reforms in the energy, agriculture and education sectors), and areaswhere it would follow other development partners (for example, CFD in rural water supply, theDutch Cooperation on environmental issues, and the European Union, CFD and USAID in selected

subsectors of agriculture). Further details are provided in para. 72. Fourth, even though this CASwas not planned as a joint Bank/IFC product, the collaboration has nonetheless been very close. TheBank's support is focused on solidifying the enabling environment for private sector developmentand making Senegal a "good business address". IFC -- helped by the opening of its office in Dakarin February 1997 -- will increase its direct support to the private sector, especially in the power,mining, small- and medium-size business, privatization and capital market development. Finally,the CAS subjects each of the proposed projects to the test of how it addresses the key cross-cuttingissues such as gender, capacity building, and the environment (see Attachment VI). In addition to itsusefulness for the CAS process, the exercise also helped sensitize task team leaders to the cross-cutting nature of project preparation.

v. There are risks facing the proposed strategy. Apart from exogenous shocks such as thedebilitating droughts in this Sahelian country, a more likely risk relates to delays and even reversalsof policy reforms as the country heads into an election cycle: legislative elections in May 1998 andpresidential elections in 2000. As the discussion in this document (para. 39) indicates, there is farfrom unanimity on the need for significant policy action. However, there are some mitigatingfactors. On several of the more controversial and difficult reforms (such as in the energy andeducation sectors), the President of the Republic is himself taking the leadership and holding openconsultations with civil society on the need for reform. Second, some important measures (forexample, in the energy sector) are being adopted up-front to avoid their becoming politicized in therun-up to the legislative elections. Above all, there is growing realization among the authorities thatthe days of easy and plentiful external assistance without domestic effort are over. This last factorlargely explains the good reform implementation record of the past four years.

vi. Even with these mitigating circumstances, the proposed strategy is medium risk.However, the rewards are high. For example, if the foreseen reforms in the electricity andpe troleum subsectors are implemented, Senegal would move to the forefront of Sub-Saharan Africancountries for reforms in the energy sector. The Bank will be closely monitoring progress on theimplementation of the reform agenda and will reduce its lending volume significantly (to US$275million) or increase it to the high case level (US$630 million) depending on performance. Thecriteria and triggers for the various lending scenarios are outlined in Box 4.

vii. The Board may wish to discuss the following issues:

* Are the overall thrust, priorities and instruments proposed by the CAS appropriate?

* Do Senegal's reform efforts and economic prospects justify a proposed base case lending levelof about US$560 million over the period FY98-2000?

* Does the CAS adequately reflect the challenges and risks to implementing the proposedstrategy?

MEMORANDUM OF THE PRESIDENTOF THE INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE EXECUTIVE DIRECTORS ON ACOUNTRY ASSISTANCE STRATEGY

OF THE WORLD BANK GROUP FOR THE REPUBLIC OF SENEGAL

I. BACKGROUND

1. Historically one of the most stable and least repressive political regimes in Africa, whichhas been spared the ethnic and religious strife and military coups that have torn apart other Africannations, Senegal has nevertheless had a checkered record of economic growth during the period1960-93. In 1960, its per capita GDP of US$1,017 (1985 US$) was higher than that of South Korea.By 1993, South Korea's per capita was at least fifteen times that of Senegal. Falling terms of tradefor its main exports (groundnuts and phosphates) was one factor. The frequency of debilitatingdroughts was another: for a country that depends for about 20 percent of its value added and 60percent of employment on agriculture, Senegal has experienced 11 years of severe drought duringthe last 30 years. But most of all, the weak performance of the past reflected a poor record ofeconomic reform, marked by little ownership, weak implementation and occasional back-tracking ina "no-sanctions atmosphere" caused by generous aid inflows.

II. RECENT ECONOMIC DEVELOPMENTS

A. Policy Reforms Adopted During 1994-97

2. Over the past four years, a major improvement in economic policy implementation hasoccurred, whose results so far have been positive. The wake-up call came in 1993, when theeconomy was plunged into a severe recession. Because of Senegal's inability to adjust the nominalexchange rate (Senegal belongs to the CFA currency zone, which requires unanimous agreement onaction by all CFA zone members and France), the authorities resorted to ad hoc measures and lastminute juggling to reduce fiscal imbalances caused primarily by a shrinking tax base. With therealization that the internal adjustment measures were too little and too late, the Government ofSenegal, in consultation with other member countries of the CFA franc zone, revised the parity ofthe CFAF from 50 CFAF/FF to 100 CFAF/FF in early January 1994.

3. The exchange rate adjustment was accompanied by a comprehensive medium-termadjustment and reform strategy aimed at creating the conditions for strong and sustainable growthand poverty alleviation. The strategy is based on fiscal and monetary stability and structural reformsintended to liberalize the economy, reduce the size of the public sector, foster private sectordevelopment, and support social sector development (see Box I for the major structural reformsimplemented since 1994). The over-arching objective is to reduce the incidence of poverty: one-third of the Senegalese population lives below the poverty line and the country's social indicators arepoor even by Sub-Saharan African standards. The macroeconomic adjustment and structural reformprograms have been supported by the international community, including through a three-year ESAFarrangement from the IMF, and structural and sectoral adjustment lending from the Bank.

2 Senegal CAS

Box 1: Maior Structural Reforms since 1994

Price and Trade Liberalization* Major liberalization of consumer and producer prices, and of imports* Abolition of special agreements (conventions speciales) for 5 enterprises, and re-negotiation 'of another

Labor and Regulatory Legislation* Revision of the Labor Code to allow enterprises to freely adjust their work forces for economic reasons* Elimination of prior authorization for professions other than those affectingpublichealth and security:c* Simplification of customs procedures for import of intermediate inputs used in producing eported goods

Public Enterprise Reform* Privatization (completed or underway) of several public enterprises hitherto considered "strategic" and of a:

number of smaller enterprises* Liquidation of the waste disposal company, SIAS* Close monitoring of the economic and financial performance of key enterprises

PublicWAdministration* Completion of an audit of the civil service, and elimination of etrabudgetai0 y arrears* Settlement of cross debts with public enterprises* Passage of the Local Government Law stengtheniiing decentralization

Agriculture* Complete removal of subsidies on fertilizer and other inputs* Liquidation ofthe import monopoly for wheat and rice (Caisse dezrequation et Jde'stabilasation desprix)* Ongoing restructuring of the cotton processigngcompanty, S0DEFTEX* Privatization of the rice mills belonging to the rural development agmcy,0 SAED

Energy* Decision to liberalize the petroleum sector, including the abolition of conventions iales and repeal of other

rents to monopoly* Decision to privatize the power company, (SENELEC) and to gradually liberalize the electricity sector

Transport* Abolition of the monopoly granted to the national shipping company for 40 percent of maritime transportation* Privatization of road maintenance* Implementation of a staff reduction plan for the national railway company, SNCS* Reduction of costs at the port, establishment of normal billing procedures, and reduction of port tariffs* Decision to privatize urban transport company, (SOTRAC) and the Dakar/Bamako railroad activities.

Social Sectors and Environment* Adoption of the principles of the Cairo Conference on Population and Development, and establishment of

parliamentarian committee for promoting population policy* Adoption of the strategic framework for improving health sector management and promoting cost-sharing* Adoption of a national program to reduce high illiteracy, especially among women* Integration of Desertification Convention program into the National Environmental Action Plan

Senegal CAS 3

B. Impact of the Reforms

4. The policy reforms pursued since early 1994 have led to a marked recovery of economicactivity and a significant improvement in Senegal's financial position (see Box 2).

* Inflation has been brought down from about 32 percent in 1994 to less than 3 percent in 1997.

* After three years of virtual stagnation during 1991-93, real GDP increased by 2 percent in 1994,and has averaged around 5 percent during the past three years.

* A strict budgetary stance has allowed the reduction of the fiscal deficit from almost 6 percent ofGDP in 1994 to, less than 1.5 percent in 1997. The share of wages and salaries in totalexpenditures has declined from 41 percent in 1993 to 35 percent in 1997.

* Despite import liberalization, exports have been growing more rapidly than imports, leading to areduction of the external current account deficit from over 10 percent in 1993 to an estimated 6percent in 1997.

- In the real sectors, better economic policies have led to substantial improvement in the industrial,service, construction, and fisheries sectors, stemming from strong export demand, rising profits,and increasing confidence. Total nonagricultural output in 1997 increased by over 6 percent,which will more than offset a drop in agricultural production in 1997 caused by irregular rainfall.In general, there have been significant income effects from the increases in production of "poorfarmer" crops such as millet and sorghum, as opposed to rice.

5. On the other hand, there is little doubt that these achievements were accompanied by socialcosts emanating from the dismantling of the public sector, which had dominated the economicscenery for over three decades. Unemployment rates remain high, and for urban youth in the 20-34age group, they have reached 40 percent. Despite the social safety net put in place by theGovernment in 1994, there are indications that the fiscal tightening did result in a reduction of thebudgetary allocations to the social sectors (especially education and health) and some deteriorationin social indicators. Senegalese cities, especially Dakar, appear to be facing an explosive situation,marked by declining quality of infrastructure, chronic unemployment, juvenile delinquency, anddrug addiction. Only recently have the social indicators started to register some recovery.

III. SENEGAL'S DEVELOPMENT AGENDA

6. The Government's overall development strategy is well articulated in the Ninth Economicand Social Development Plan, adopted by the National Assembly in February 1997 after extensiveconsultations with various segments of the civil society. The Plan's over-arching objective is toreduce the incidence of poverty and create gainful employment opportunities for youth through asignificantly higher (and somewhat unrealistic) growth rate of 9 percent per annum during 1998-2001, as well as through effective measures of social and human development. Specifically, theauthorities' strategic agenda can be grouped under the following six themes: (i) maintainingmacroeconomic stability; (ii) encouraging private sector development and redefining the role of thestate; (iii) promoting rural development as an effective poverty alleyiation mechanism; (iv)

4 Senegal CAS

accelerating human and social development; (v) fostering regional integration, particularly in thecontext of the West African Economic and Monetary Union (WAEMU); and (vi) providing specificattention to cross-cutting issues of increasing relevance to economic and social development, such asgender, capacity building and environment.

Box 2: Key Economic Indicators(percentages unless othetwise stated)

1986-93 1994 1995 1996 1997

Real GDP growth rate 1.7 2.0; 4.8 5.6 47Population growth rate 3.0 2.7 2.7 2.72.Real per capita growth rate -1.3 -0.6~ 2.2: 3.0 21.1Investment/GDP 12.7 13.7 15.6 S 16.3 :16.5Domestic Savings/GDP &66 7.4 v:104 :1J1.4 11.8Export growth rate 2.7 5.3 9.4 4.8 1.5lmlport growth rate -0.2 -9.5 5.5 6.5 0.6~i ~QTer ms of trade (1983 = 100) 116.9 110.51 i; i 108.2! 106.5 107.3BOP current account deficit/GDP -102i -6.5 -6.1 -.5 -6.1Fiscal deficit/GDP (excl. grants) -2.6 -57 4 -3.2-2.0 -1.3Foreign direct investment (US$m) -25.1 95.1 2.7 8.21 29.9Debt outstanding & disbursed (US$b) 3.6 3.7 3.8 3.7 3.4Debt outstanding & disbursed/GDP 72.2 94.3 79.0 71 .5 69.6Debt service ratio (percent XGNfS) 24.3 15.9 15.1 17.0 17.57 : : f 2 4 5t! Vg f :f:!t :g: tfEi :L:i: .i 5. A 7- 1 : : Tt :!: T: Inflation rate 0.2 32.1 8.1 2.8 2.51

A. Maintaining Macroeconomic Stability

7. Despite significant progress in removing the key macroeconomic distortions, several itemson the macroeconomic agenda in the areas of fiscal adjustment, financial sector deepening, andexternal debt sustainability remain unfinished.

8. In the area of fiscal adjustment, the authorities plan to build on achievements since 1994through measures on the revenue and expenditure side. On the revenue side, the Government plansto harmonize indirect taxation, with a broadening of the VAT base and the adoption of a commonlist of excisable goods. The Government also plans to implement a major revision of the taxation ofpetroleum products during 1998-2000 as well as a comprehensive reform of its tariff in the contextof the adoption of the common external tariff by the member countries of WAEMU. These reformnswill have substantial economic and financial impact on Senegal. To offset part of the shortfall ingovernment revenues, the authorities expect to take additional measures to broaden the tax base andfurther improve tax administration. On the expenditure side, the Bank-supported Public ExpenditureReview (PER) exercise, focusing on health, education, and justice, is expected to improve thecomposition of public expenditure, budgetary procedures, and overall expenditure management.

Senegal CAS 5

9. Following a major restructuring during 1989-91, the financial sector of Senegal continuesto remain thin, as shown by standard financial deepening measures and by the limited availability offinancial instruments and services. As part of the reform in the banking sector, the Governmentplans to strengthen the judicial system and train judges and magistrates to assure prompt andimpartial enforcement of contracts. Microfinance institutions have flourished in Senegal during thepast few years, and the challenges for the Government are to avoid new regulations that couldjeopardize the flexibility of these institutions, and to work closely with the many NGOs that aresupporting these institutions.

10. The Government plans to complete an external debt sustainability analysis by early 1998,with Bank/IMF support. Preliminary indications are that, even with continued implementation ofsound macroeconomic policies and prudent debt management, and with recourse to concessionalfinancing only, the ratio of debt service obligations to government revenue will remain relativelyhigh. A stock-of-debt operation on Naples terms, including a topping up of previously rescheduleddebt, which Senegal plans to request from the Paris Club, could contribute to reducing debt servicingobligations to more sustainable levels.

B. Private Sector Development

11. The private sector dominates the Senegalese economy. Its share in total GDP is about 82percent, representing virtually all the value added in the primary sector, and about 80 percent in therest of the economy. Several constraints have inhibited more rapid growth of the private sector.First, despite some progress, the regulatory environment continues to be cumbersome, involvinglong administrative processing delays and an absence of transparency. Second, the costs of thefactors of production (electricity, water, and transport) are relatively high and considered a majorconstraint to private sector activities. Third, despite progress on the implementation of thedivestiture program, the state is still involved in activities where its comparative advantage isdubious. There is a need to accelerate the privatization program and to limit the role of the state tothe creation of a framework conducive to the expansion of private sector activities.

12. The Government's strategy in this area is aimed at addressing the above constraints. Itinvolves: deepening the price and trade liberalization; providing a more enabling environment forprivate investment; assuring good governance and improved legal and regulatory framework(modifying the commercial and criminal legislation to better suit the needs of business, and bettertraining of magistrates and judicial personnel in commercial law); investing in high priorityinfrastructure projects that support private sector development; and continuing to reform the publicenterprises, privatizing those that have already been slated, and improving the surveillance of thosethat will continue to remain under government control. These measures will be essential toaccelerating the growth of exports and attracting private investment. In terms of institutional supportto the private sector, the Government plans to continue its support to: (i) the Groupe de Reflexionsur la Competitivite et la Croissance (GRCC), an independent group that is assisting in identifying,and proposing solutions to, the key legal and policy constraints; (ii) the Comite de ReformesJuridiques (CRJ) which is working on improving the legal and regulatory environment of the privatesector; and (iii) the Fondation du Secteur Prive (FSP), a totally private institution that providesinformation and guidance to private enterprises. These institutions were set up with support fromprevious Bank operations.

6 Senegal CAS

C. Promoting Rural Development

13. With four-fifths of poor households living in rural areas, no poverty alleviation strategy cansucceed without a heavy focus on rural development and on its main engine: agriculture.Agriculture accounts for almost 20 percent of GDP, 60 percent of employment, and a sizable portionof the country's foreign exchange earnings.

14. Despite its importance for growth and poverty alleviation, Senegal's agriculture sector hasstagnated during the past decade. While the parity change of the CFAF in early 1994 did have apositive impact, the supply response was more muted than in some other CFA zone countries.Senegal's limited natural resource base and its degradation are certainly two factors behind the poorperformance. Another is the climatic risk factor, with the impact of debilitating droughtsreverberating for many years through its effect on productive assets and on the behavior of farmnerswho seek low risk/low productivity farming systems. However, there are also other reasons, relatedto 1he policy and institutional framework. First, the state continues to remain involved in somesubsectors, and exporters still face a host of infrastructural constraints to penetrating increasinglycompetitive markets. Second, despite considerable progress in empowering farmers' organizations,much remains to be done on the institutional front to restructure public agencies and change theirbureaucratic and centralized culture. Third, access to basic services (appropriate technology, credit,agricultural inputs, and potable water) and markets (locally, regionally, and internationally) needs tobe iimproved considerably. Finally, there is need to redress the imbalance between the large-scaleirrigation investments in the Senegal Valley, which have yielded low returns, and other regions andrainfed agriculture.

15. The Government considers the development of the agricultural sector to be one of itshighest priorities, and the major policy reforms undertaken during the past four years confirm itsserious commitment. In addition, in 1996 the Government launched a national consultation on theissues and plan of action for the sector. This exercise, coordinated by an independent Groupe de.Rflexion Strate'gique (GRS) is expected to lead to the adoption by the Government of a Documentd'Orientations Strategiques, reflecting a broad national consensus on development priorities, and tothe preparation and adoption of a new, detailed rural development strategy and supporting publicinvestment program.

D. Social and Human Development

16. Senegal's ability to respond to competitive market conditions will be determined in largepart: by: (i) its ability to supply a well-trained, competitive, and healthy labor force; and (ii) a moreeffective women-centered population policy that succeeds in reducing the high population growthrate of 2.7 percent per annum. Based on data from the latest Poverty Assessment (Senegal: AnAssessment of Living Conditions, May 1995) and other sources, Senegal's indicators of humandevelopment are well below those of other countries with comparable levels of income (seeAttachment II).

17. In the education sector, progress is being achieved in terms of enrollment in primaryeducation, education of girls and women, and reforms in higher education. However, the gains arefragile. For example, much of the recent advances in primary enrollment ratios were achieved byrecourse to the recruitment of contractual volunteer teachers, who now comprise about 25 percent of

Senegal CAS 7

the teaching force. Unless a more permanent, lower cost solution is found to the provision ofteachers, and unless personnel management improves, it will not be possible to substantially increaseaccess to primary education. Similarly in the higher education subsector, the significant reformsimplemented since 1995 to economize on student support services and scholarship budgets havebeen partially reversed by the agreement reached to end the prolonged strike by teachers andstudents during 1997. The Government's strategy for education aims at addressing the above issues,in addition to promoting the development of technical and vocational training, and encouraging theinvolvement of the private sector and NGOs in education.

18. The country's health sector is characterized by a high burden of disease, much of which ispreventable and treatable. In particular, Senegal might experience an explosion of its lurkingHIV/AIDS epidemic unless additional preventive measures are taken soon. Despite progress madeduring the past decade as a result of a clear policy shift toward prevention and the provision of aminimum package of primary health care, the public health system continues to suffer frominadequate and -inequitable sector financing (actual expenditure of US$8 per capita in 1995,compared to the minimum of US$9-$12 per capita recommended in the 1993 World DevelopmentReport and "Better Health in Africa" report). There is also substantial inefficiency in the use ofresources that are allocated to public health facilities. Finally, the institutional base for health caremanagement is weak, and there is minimal involvement by the private sector and NGOs in publichealth.

19. Since the early 1990s, the Government has increased investments in primary health care,with support from its development partners. The key elements of the accompanying health reformsinclude: decentralization of the planning and management functions to the regions and healthdistricts; redirection of the pharmaceutical subsector toward the use of generic essential drugs; andefforts to increase beneficiary and NGO participation in the financing and management of, basichealth care services. The Government is also committed to increasing the sector's share of the totalrecurrent budget from the 6 percent in 1996 to 9 percent by 2002, as recommended by WHO.

20. In the area of population policy, even under the most optimistic assumptions about fertilitydeclines, Senegal's population will double to more than 16 million by 2020, of whom some 9 millionwill live in urban areas. This obviously carries the risk of social instability: it will exacerbatepressures on the consumer and social sector services, absorb a major share of GDP growth, and placea heavier burden on an already fragile environment.

21. There is a critical need to overcome traditional resistance to change in fertility behavior andto further expand the supply of reproductive health information and services, especially in ruralareas. In line with its Declaration of Population Policy adopted in 1994, the Government hasintegrated family planning into the broader public health system. However, until recently, its publicstand on the issue has been lukewarm.

E. Regional Integration

22. Several important initiatives are underway in the context of WAEMU to introduce acommon external tariff and a common framework for investment incentives, and to harmonizeeconomic policies among the member states. This should serve as an additional incentive for,Senegal to streamline its incentives further and improve its business climate. Moreover, the right set

8 Senegal CAS

of incentives, adopted at the regional level, will boost credibility vis-a-vis domestic and foreigninvestors to the extent that it renders policy reversals by individual countries impossible.

23. Another aspect of regional integration is the hydroelectric power project of Manantali,which involves cooperation among Mali, Mauritania, and Senegal. It will help reduce the long-termcost of electricity supply to all three countries and reduce some of the environmental and healthdamage from the construction of the dam, in whose financing the Bank was not involved. Anotherexample of regional cooperation, in which the Bank played an important facilitating role, is theagreement reached in early 1997 between Malian and Senegalese authorities to create a privateoperating company for international rail traffic on the Dakar/Bamako line.

F. Cross-Cutting Themes

Gelnder

24. Women's groups in Senegal outdo those of neighboring countries in numbers (3,600) anddynamism, and the Government has been implementing programs to improve the condition ofwomen since the early 1 960s. Senegalese-educated women in recent years have made their mark onthe intellectual and cultural life of the nation. In spite of this, women face several hurdles to theirevolution of women as equal partners in Senegalese society. Female illiteracy rates are high (66percent, compared to 47 percent for men), as are female dropout rates due to early marriage and theneed for girls to help their mothers. Their health status is generally poor as a result of undernutritionand frequent pregnancies, and is marked by a high rate of mortality, anemia, and female genitalmutilation (the incidence is estimated at 20 percent). Women's access to land (especially irrigatedland) and agricultural services is limited, and access to credit is predominantly limited to credit clubsestablished by women (tontines), which can only provide small credits. Finally, while theCoonstitution guarantees women equal rights and statutory law does not discriminate against them,personal, business, and inheritance matters are still largely conducted in accordance with unwrittencustomary laws that put women at a disadvantage.

25. The Government is well aware of the additional efforts needed to improve the condition ofwomen. The establishment in 1990 of a separate Ministry of Women, Children and Family Affairshas had a very positive impact. The Ministry, working very closely with NGOs, civil society, andkey development partners, has completed the second National Action Plan for Women, whichfocuses on five strategic areas: (i) development of economic activities for women, includingimproved access to land, credit, and extension services; (ii) improved female access to education;(iii) strengthening of health and family planning services; (iv) legal status of women; and (v)stepped-up cooperation among organizations that promote the role of women. The Government isalso working closely with women's groups and NGOs to discourage the traditional practice offemale genital mutilation (see Attachment VI, para. 5).

Governance and Capacity Building

26. Good governance, defined as public accountability, citizens' participation, governmentresponsiveness, transparency, and efficiency, is increasingly surfacing as an important concern of theSenegalese private sector, media, NGOs, and other members of the civil society. A study undertakenfor the 1997 World Development Report demonstrated that the major concerns of private

Senegal CAS 9

entrepreneurs in Senegal were the unpredictability of the laws and weaknesses in the judicial system.In November 1997, Senegalese NGOs held a seminar on code of conduct, corruption, andgovernance issues in the NGO sector, while in the same month more than fifteen ministers attendeda ministerial-level seminar on good governance organized by the British Embassy in Dakar.

27. Several recent Government actions confirm the growing interest in this area. First, with thesupport of UNDP, the Bank, and other donors, the Government is formulating a coherent strategicprogram for good governance and public administration reform. In October 1997, it presented anddiscussed an Action Plan for a National Program for Good Governance. Second, it has established afocal point for capacity building within the Ministry of Finance, in the context of the Partnership forCapacity Building in Africa initiative. This focal point has two main tasks: (i) to carry out aNational Capacity Assessment and subsequently develop a National Capacity Building Strategy; and(ii) to establish a formal National Capacity Building Secretariat to coordinate capacity buildingefforts in Senegal. Third, a critically important aspect of capacity building is the decentralizationprocess underway in Senegal, particularly since 1990. The adoption of legislative reforms inFebruary 1996 and the modification of the Code of Local Governments (Code des CollectivitesLocales) are important initial steps to ensure that the delegation of responsibilities to localgovernments is backed by the transfer of financial resources to support municipal development.Finally, in June 1997, Parliament approved a law on merit-based promotion that should improve theaccountability and efficiency of public services.

Environment

28. Attachment VI provides a summary of Senegal's key environmental problems. In an effortto address these problems, the Government has just completed the preparation of a NationalEnvironmental Action Plan (NEAP). It is translating the strategic objectives of the NEAP into aseries of tables that identify Senegal's principal environmental problems region by region. Based onthe respective ranking of the regional priorities, the Government plans to request support fromdevelopment partners to implement the NEAP in a decentralized framework that empowers localcommunities in each region.

IV. ECONOMIC OUTLOOK AND RISKS

A. External Environment

29. An analysis of Senegal's primary linkages to the global economy indicates that in generalthe country faces favorable external conditions over the next few years.

30. Import demand growth in Senegal's major markets, after taking into account the globalimpact of the East Asian crisis, is slated to improve from the 4 percent of the past decade to 5-6percent over the coming decade. Recovery from sluggish conditions is currently under way in theEuropean Union (EU), which accounts for more than 60 percent of Senegal's merchandise exports.The CFA countries (20 percent of exports) are anticipated to post 4.5 percent demand growth. Whilethe chances are slim that there will be a direct contagion effect of Asian economic and financialturbulence on CFA countries, there are likely to be some secondary effects resulting from the sharpdeclines in the exchange rates of many East Asian countries. For example Thailand and Senegal

10 Senegal CAS

compete in the fish products market in Europe. On the other hand, the emergence of India (10percent of exports) as a fast-growing trade partner should support improved market conditions.International tourism is likely to continue to grow by 4 percent a year during the coming 10 years.However, tighter restrictions on expatriate workers in Europe can be expected to lead to stagnationin the level of worker remittances.

31. Senegal's terms of trade are expected to register a modest decline of about 1 percent perannum over the next decade. The export price index is likely to rise marginally, with the expectedupward movements in fish prices being counteracted by a decline in the prices for processedfertilizers, -including phosphates, as new capacity comes on stream around the turn of the century.ThLe rise in Senegal's import prices, while anticipated to be moderate, is expected to exceed that ofexport prices.

32. In terms of external financing, Senegal has failed to avail itself of the increasing flows ofprivate capital to developing countries (in 1996, for example, Senegal attracted less than US$10million out of US$245 billion flows to developing countries).; Emerging optimism in Senegal andsome other African countries regarding potential capital flows from East Asian countries (especiallyMalaysia) is diminishing in view of the inflow requirements of the Asian countries themselves.Similarly prospects for ODA flows are not encouraging, given the movement toward fiscalconsolidation in major OECD countries and -- of particular importance to Senegal -- the budgetaryrestrictions associated with qualification for the European Monetary Union among EU members. Inthis environment, additional debt relief from Paris Club creditors, if granted as Senegal plans tore(luest in early 1998, and continued progress in privatization are options for covering the financinggap over the next 2-3 years. In this regard, the sizable external inflow (about US$130 million) in1997 related to the partial privatization of the telecommunications company, SONATEL, is apositive development.

33. With the impressive progress in macroeconomic adjustment and stability, the extent towhich Senegal can exploit the positive external environment will depend critically on the depth andpace of second generation structural reforms, particularly in terms of unleashing the entrepreneurialspirit of the private sector and ensuring accompanying measures of social protection.

B. Base Case Scenario

34. The main assumptions underlying the base case scenario (Attachment IV) are that thestabilization program remains on track, the Paris Club rescheduling reduces the external debt burden,and the authorities implement the energy and trade reforms starting in 1998. Assuming thatmacroeconomic stabilization continues and that structural reform improves the Government'sprovision of public services, growth should remain around 5 percent until the year 2000. Totalinvestment, mostly domestic, would increase to around 19 percent of GDP. Exports are expected togrow., only moderately, since the economy is not diversifying the production and export basesufficiently. The increase in exports essentially reflects the growing demand from OECD countries.The fiscal deficit (excluding grants) remains moderate.

Senegal CAS 11

C. High Case Scenario

35. A real opportunity exists for achieving a higher growth rate than forecast in the base case:there is great scope for liberalizing the economy and improving the investment climate. Sub-Saharan Africa is at the center of multiple initiatives to increase trade and investment withpreferential arrangements with the US and the EU.

36. The opening of the economy, together with aggressive implementation of structuralreforms, such as privatization of public enterprises, may increase foreign direct investment toSenegal considerably, given its strategic location and human capital endowment. While these initialinvestments will affect only the portfolios of companies, the improved business climate mightencourage new foreign direct investment that may lead to the development of non-traditional exports(especially in agro-business and simple manufacturing), tourism and information technologyservices, permitting growth to reach 7 percent by the end of the decade.

37. Proceeds from the sales of public enterprises would reduce the debt burden on the budgetduring the next 2-3 years. Together with reform of budgetary allocations, public expenditure in thesectors with more impact on growth could rise. As a consequence, poverty would be reduced notonly directly through higher GDP, but also indirectly through an increase in public expenditure forbasic health care and primary education. This may start a virtuous circle of higher sustainablegrowth, accompanied by a marked reduction in the incidence of poverty.

D. Low Case Scenario

38. The low case scenario assumes a conjunction of delayed reform and unfavorable exogenouscircumstances (see para. 76 below). Under this scenario, absence of significant reforms would leavethe economy undiversified and vulnerable to terms of trade shocks or severe droughts. In thepresence of a fixed arrangement for the exchange rate and inflexible prices and nominal wages, thereal demand/supply shocks would create an overvaluation of the real exchange rate. Such areduction in competitiveness would slow foreign and domestic investment and delay privatization ofpublic enterprises and trade liberalization. Reduced revenues and the need for counter-cyclicalexpenditure would increase the debt burden on the budget and might drive the Government off thestabilization course. An average growth rate of 3 percent per annum would barely keep up with thepopulation growth rate (2.7 percent) and would lead to an increase in poverty incidence.

E. Social and Political Constraints to Growth

39. Despite its many advantages indicated earlier, Senegal has not been successful, until veryrecently, in achieving high, private sector-driven growth. Strong vestiges of the dirigiste traditionlinger, and the elitist education system has led to high rates of illiteracy, neither conducive to growthnor to attracting foreign investment. Also, there is far from unanimity on the need for economicliberalization. The line-up of the main influential pressure groups is as follows:

* Opposed to reform. Many elements of the bureaucracy (fonctionnaires) have the difficult taskof adopting and implementing an adjustment program that chips away at their capacity todistribute patronage, selling to the public a program they believe in only halfheartedly, and yetknowing that without continued aid and its attendant conditionality, jobs and financial resources

12' Senegal CAS

will shrink. The Conseil National du Patronat (CNP), the main employer group representingthe establishment firms with a long presence in Senegal, often foreign-owned (generally French)and which developed under protectionist policies, has frequently criticized the Government andthe World Bank for the "excessively rapid pace of liberalization." The main trade unionfederation, the Confederation Nationale de Travailleurs Senegalais (CNTS), fought theliberalization of the labor code provisions on hiring and firing and has urged pro-employmentpolicies. In the education sector, the Post-Secondary Teachers Union, the Syndicat Autonomedes Enseignants du Superieur (SAES), has led a fight, including during 1997, for higher housingallowances. The primary and secondary teachers' unions have opposed the recruitment ofvolunteer teachers. University students have been frequently on strike against the reduction oftheir generous benefits.

* In favor of reform. Apart from a sizable portion of the civil service, three main pressure groupssupport the reform program. An employer group of more recent vintage, the Conseil Nationaldes Employeurs du Senegal (CNES), favors opening up the economy and increased competition.Farmers organizations, which have flowered, particularly since the 1990s, have gained fromthe agriculture sector reforms and decentralization of the cooperative movement. Women'sgroups have become an important force for policy changes, especially on rural development andgender issues, and particularly since the creation of the separate Ministry of Women, Children,and Family Affairs in 1990.

40. As in many other countries, elections in Senegal have been accompanied by politicaltensions. This was particularly the case in 1983, 1988, 1993, and 1996. Electoral periods have alsobeen marked by a resurgence of the separatist movement in the Casamance region (which in the pasthas affected the country's thriving tourist industry). The country is headed into an election cycle(legislative elections in May 1998 and presidential elections in 2000), and pressure to stall or evenbacktrack on key economic reforms will likely build during the coming months.

V. THE BANK'S COUNTRY ASSISTANCE STRATEGY

A. Implementation of the Previous CAS and Lessons Learned

41. The Board discussed the previous CAS for Senegal in February 1995. Overallimplementation of the CAS has been satisfactory. Actual commitments for FY95-97 amounted toabout US$300 million. This level was higher than the base case proposal of US$200 million for 16operations, mainly because performance triggers justified larger Bank assistance in the context of thepost-1994 policy reform pick-up and good absorptive capacity for Bank lending. In terms of specificaspects of the CAS, success in implementation was mixed.

What Worked Well

42. There has been a definite and favorable turnaround in macropolicy formulation andimplementation, which has had a very positive impact on the key macroeconomic indicators (seeparas. 2-4). The Bank's advisory and financial support was timely and greatly appreciated.Bank/IMF coordination has been exemplary. The status of the Bank's portfolio has improvedconsiderably. When reading the previous CAS document, it is hard to believe that it talks about the

Senegal CAS 13

same country: portfolio performance then was poor even by the standard of Sub-Saharan Africancountries. The situation has improved dramatically (see paras. 57-64).

What Did Not Work Well

43. Little progress has been registered in civil service reform, where the high unemploymentrate and tension between ministries on which one is to take the lead have frustrated the Bank'sefforts. In the energy sector, bold action has been hampered during the past 7-8 years by oppositionfrom entrenched monopolies threatened by the liberalization of the petroleum sector and by the maintrade union's resistance to privatization of the power company, SENELEC. Delays in theimplementation of reforms and projects in the agriculture sector have been due to: (i) differencesof opinion between the Government and the Bank concerning strategy (emphasis by some in theGovernment on food self-sufficiency) and hence over investments (the Government's preference forlarge investments in the Senegal Valley versus the Bank's proposal for more emphasis on rainfedagricultural areas); (ii) the Bank's underestimation of the complexity of the institutional reformsaimed at decentralizing support services and strengthening the professional capacity of producerorganizations, as well as the Government's slow response in undertaking specific actions; and (iii)the absence of continuity in the Bank's technical team.

Lessons Learned

44. Several lessons emerge from the Bank's experience with past assistance. First, certainreforms (particularly those of a cross-cutting nature and those involving long-term institutionaldevelopment issues, such as capacity building and civil service reform) require more time to mature.They need to be discussed extensively by the authorities with all segments of civil society in an openand participatory manner before ownership for those emerges. The Bank should facilitateparticipative dialogue mainly by bringing the experience of other countries and sectors, but it shouldnot set the pace of reform. The Bank's proposed IDF grant for civil service reform is expected tocatalyze this process, in close collaboration with the UNDP and other development partners.Second, while the Bank's collaboration with other donors in Senegal has been generally positive, itneeds to be more selective in its choice of which sectors to focus on and which instruments toemploy. Where other development partners have a comparative advantage, the Bank should followrather than lead (see para. 72). Third, while the recovery in the quality of the Bank's portfolio hasbeen remarkable, there, is considerable scope for improvement in the area of financial accountabilityand procurement. The Resident Mission in Dakar should play a more active role in this area.Finally, there is need for greater support for the management of statistical data on the incidence ofpoverty in Senegal to facilitate refining and monitoring the poverty alleviation strategy.

B. Toward a Poverty-Focused Assistance Strategv

45. The Bank's assistance strategy for Senegal is: (i) guided by the country's Ninth Economicand Social Development Plan; (ii) enriched by extensive consultations with various segments of the-civil society during May/June 1997 (see Attachment V); and (iii) molded by the lessons learnedduring implementation of the previous CAS (see previous para.).

46. The over-arching objective of the proposed CAS is to reduce the incidence of poverty andcreate gainful employment, especially for youth. Attachment II summarizes the nature andincidence of poverty in Senegal, the Government's strategy for poverty alleviation, and the Bank's

14 Senegal CAS

proposed support for this strategy. Overall, Bank support would be two-pronged (see the systematicsummary of the CAS in Attachment I): assistance for the policies and programs aimed at more rapidand sustained growth; and assurance of the social sustainability of the program. Attachment IIIpresents the current assistance matrix and Annexes B3 and B4 list the lending and non-lendinginstruments.

Achieving More Rapid and Sustained Growth

47. No appreciable reduction of poverty incidence can occur without high, sustained, andemployment-generating economic growth. Achievement of such a growth rate will requireinitiatives on several fronts.

48. At the macroeconomic level, the Bank will work closely with the Senegalese authoritiesand the IMF to maintain macroeconomic stability and extend the fiscal reform (broadening the VATbase, better expenditure control, and public expenditure review for selected sectors), financial reform(deepening of the sector and use of more varied financial instruments), trade liberalization in thecontext of the common external tariff of the WAEMU, and debt sustainability. The main instrumentof policy dialogue in this area will be the Policy Framework Paper (PFP) and close coordination withthe IMF in their current and future programs in Senegal. Analytical work is underway on thetransitional costs of trade reform (FY98), which is expected to lead to the preparation of the TradeReform Adjustment Credit (FY2000). The ongoing Public Expenditure Review (FY98) is helpingthe Government improve the size and composition of public expenditures for the period 1998-2000.

49. Critical to more rapid economic growth and poverty alleviation will be helping Senegalsolidify the enabling environment for private sector development and making the country a "goodbusiness address." This would involve: attitudinal change in the role of the state from control tofacilitation, as evidenced by the dismantling of the regulatory and market interventions that continueto hamper competition and private sector investment and initiative; strengthening of the dialoguebetween the public and private sectors; speeding up of the Government's privatization programwithin an appropriate regulatory framework; better identification of the sources of Senegal'scomparative advantage; supporting improvements in Senegal's infrastructure (electricity, water,telephone, and transport), which is characterized by high costs and service unreliability; andassurance that environmental problems do not jeopardize sustainability of long-term growth.

50. The Bank and IFC will continue to work closely in this area, with the Bank concentratingon factors that improve the business environment, and IFC -- helped by the opening of its office inDakar in February 1997 -- increasing its direct support to the private sector, especially in the power,mining, small- and medium-size business, privatization, and capital market areas. (Details on IFCand MIGA involvement in Senegal are provided in paras. 65-66).

51. Several IDA lending operations are proposed in support of this strategy. The PrivateSector Development operation (FY99), a follow-up to the ongoing Private Sector DevelopmentCapacity Building Project, is expected to address the institutional, regulatory, judicial, and financialconstraints of the private sector. It will also assist with the development of Senegal's informationprocessing services industry, where there are strong indications of comparative advantage. TheEnergy Sector Adjustment operation (FY98) will support the Government's program of reforms inthe energy sector, within the framework of its reform agenda to liberalize the economy, reduce thesize of public sector and improve the quality of infrastructure for private sector development. The

Senegal CAS 15

Agricultural Export Promotion Project (FY98) is a pilot operation to facilitate the production andexport of selected agro-based products that have gained from the parity change of 1994 but facespecific bottlenecks. Two other operations in the agriculture sector (Agriculture Services SupportProject in FY98 and Agriculture Sector Investment Project in FY99) will support improvements inrural infrastructure and agricultural support services to improve the supply response in this sector.To mitigate the negative impact of frequent droughts, cooperation with the FAO on small-scaleirrigation will be continued, especially in the context of the Agriculture Sector Investment Project.Finally, six operations (two in the energy sector, two in the transport sector, and one each in thewater and urban development sectors) are expected to alleviate the key infrastructure bottlenecks inthese sectors and to support the decentralization process.

52. In terms of non-lending services in this area, several important economic studies areplanned to identify ways to make Senegal more attractive for private investment. In addition to thestudy on the transitional costs of trade reform (FY98), a flagship study is underway on theconstraints and opportunities for private sector development in Senegal (Senegal: The Challenge ofInternational Integration, FY98). This study is expected to form the basis of high-level workshopsfor all segments of the civil society and Government, to be organized jointly with other developmentpartners and with support from EDI. The aim is to develop agreement on the implementation ofmeasures to significantly improve the environment for private sector development. A FinancialSector Assessment (FY99) will provide recommendations for addressing the key problems of thefinancial sector in Senegal; inputs from this study will feed into the preparation of the Private SectorDevelopment Project and the Regional Financial Sector Project (FY99).

53. Given the environmental problems Senegal faces, it is important that economic growth beenvironmentally sustainable. The Bank will support the Government's multi-donor program toimplement the recently completed National Environmental Action Plan (NEAP). The Bank'scontribution could include: (i) support for environmental capacity building, including environmentallegislation and assessment; (ii) work on coastal zone management issues (where GEF support will besought); (iii) support for addressing specific urban environmental issues; and (iv) implementation ofa soil conservation and reforestation program.

Social Sustainabilitv

54. The Bank is collaborating closely with key development partners, NGOs, and community-based organizations to ensure the social sustainability of the program through: investments in healthand education; greater focus on and attention to population policy and its linkage to the low femaleliteracy rate; increased emphasis on rural development, given that poverty is largely a ruralphenomenon; attention to urban employment issues through selective employment-creating activities(AGETIP-like projects and support for small- and medium-scale enterprise development); andimproved knowledge of the nature and incidence of poverty for more effective support.

55. Apart from the rural development projects already referred to, two important sectorinvestment operations are included in the health (FY98) and education (FY2000) sectors, aimed ataddressing the problems and constraints of these sectors in an integrated manner and in closecoordination with other development partners. A Social Development/WID (FY2000) operation willprovide direct support for poverty alleviation activities, especially those focused on women's socialapd economic development.

16 Senegal CAS

56. Sector analysis in the social sectors will largely be embodied in the preparation of the newoperations. Also, in line with selectivity considerations, it will draw heavily on the work of otherdevelopment partners, especially at the subsector level (see para. 72).

Management of the Bank's Existing Portfolio

57. The Bank's portfolio in Senegal has registered strong improvement during the past twoyears, reflecting both the positive impact of the reform program (lack of counterpart funds is nolonger a critical issue) and also sustained efforts by country officials and the Bank (see Annex B2).In particular, the increasing role of the Resident Mission in portfolio management has been a verypositive factor, involving clear and persistent follow-up until problems are resolved, regularmeetings with the Club of Project Directors, pre-screening of disbursement operations in the field,and the growing experience of the locally recruited procurement/implementation officer.

58. FY97 ended with 20 operations, of which 14 were active and 6 were closed but stilldisbursing during FY97. The commitment value of the 20 operations in FY97 was US$583.3million, with the 14 active operations valued at US$378.2 million. Of four projects rated"unsatisfactory" in FY96, three were upgraded to "satisfactory" as a result of improved performance.The only remaining project rated unsatisfactory (Small Rural Operations II) was restructured inFebruary 1997. Results so far are encouraging, and the status of the project is expected to beupgraded during FY98.

59. The dramatic fall in the proportion of problem projects (from 21 percent to 5 percent) wasparalleled by an even sharper reduction in the proportion of "projects at risk," from a historical levelof about 50 percent to 5 percent. The sole project classified as "at risk" is, as noted, the Small RuralOperations II. The project's specific risk flags on slow disbursements and procurement progresshave been addressed through the restructuring. The reduced proportion of unsatisfactory outcomesfor FY90-98 (21 percent from the historical record of 33 percent), and the total elimination of thedisconnect for this period, confirm the improvement in portfolio performance and increased realismin ratings.

60. Disbursement performance also improved significantly: the disbursement ratio increasedto 30.4 percent in FY97, compared to 15.8 percent in FY96 and 15.3 percent in FY95 (actualdisbursements increased by 61 percent between FY95 and FY97, from US$70 million to US$113million). The disbursement lag decreased from 33.5 percent in FY95 to 21.4 percent in FY96 andonly 12.3 percent in FY97.

61. There is, of course, room for improvement, in particular in the area of financialaccountability, specifically, audits/financial reporting and procurement. Only 50 percent of the auditreports due in FY97 were received, and the number of qualified/unsatisfactory audits increased by 80percent in FY97. In procurement, despite five procurement and disbursement seminars offered toSenegalese officials during FY97, progress was impeded, in large measure by the outdatedprocurement code still in force. Adoption of a new procurement code is under consideration. Therecruitment of a financial analyst/expert in the Resident Mission should also help improve thesituation.

62. A highly participatory Country Portfolio Performance Review (CPPR) was carried out inJune 1997 immediately preceding the CAS consultations in order to draw lessons from the

Senegal CAS 17

experiences of ongoing projects, build on their strengths, and eliminate areas/components that didnot work. The two main themes that emerged from the CPPR discussions were the need to: (i)strengthen the capacity of key ministries through adequate training and equipment for project design,implementation, monitoring, and evaluation; and (ii) promote "sustainability" by strengthening thecapacity of the Government and beneficiaries to enable them to carry on projects beyond the Bank-supported implementation period. Specific action plans were agreed upon for a number of projectsas well as for generic themes. The Resident Mission is monitoring implementation of these actions.

63. Senegal is one of the countries selected Bank-wide for the Portfolio Implementation Plan(PIP) exercise, whose objective is to achieve a major improvement in the performance of projects atrisk. The strategy focuses, inter alia, on retrofitting the portfolio where necessary, increasing the useof Midterm Reviews, further increasing the responsibility of the Resident Mission in portfoliomanagement, better linking local auditing firms with internationally recognized auditing firms,strengthening the capacity in procurement and financial management/auditing through training anddissemination of relevant materials, using trust funds more effectively to help capacity building, andpromptly completing ICRs following project closing.

64. Given the scheduled closing of some ongoing projects and the approval of new operationsduring the proposed CAS period (FY98-2000), it is expected that the portfolio will consist of about23 projects at the end of FY2000. Five of these will be sector investment operations (in the health,education, agriculture, transport, and water sectors) that are typically more supervision-intensive.Efforts in the area of financial accountability will also need to be enhanced. Resources for portfoliomanagement will, therefore, have to be increased during FY99-2000.

Other Bank Group Activities

65. The IFC's current active portfolio in Senegal includes five investments in manufacturing,fishing, and the financial sector. In June 1997, it approved an investment of US$16.1 million in thefirst independent power project in Senegal. This project, with a capacity of 56 MW, will help reducethe growing power shortages in the country. The Corporation, helped by the opening of its fieldoffice in Dakar in February 1997, has identified five priority areas to advance private sectordevelopment in Senegal: (i) power sector, where there is a large demand for expansion and which isbeing liberalized; (ii) small- and medium-size business, where the IFC is already providing technicalassistance in project preparation and implementation through the Africa Project DevelopmentFacility (APDF) and project financing through the Small Enterprise Fund (SEF); (iii) advice andfinancial support for particular privatization deals; (iv) development of capital markets bysupporting the development of diversified funding bases and expanding the operations of existingfinancial institutions regionally through joint ventures with commercial banks in neighboringcountries; and (v) exploring options in the mining sector, where Senegal is starting to attract interestfrom foreign mining companies. The current pipeline of new projects includes two that deal with therehabilitation and expansion of existing companies and two that are greenfield operations.

66. MIGA has not yet issued a guarantee in Senegal, but four preliminary applications invarious sectors are pending. In addition, Senegalese representatives have participated in severalInvestment Marketing Services (IMS) in mining, tourism, capacity building of investment promotionagencies, etc. The IMS newsletter routinely features articles on investment prospects in Senegal.

18 Senegal CAS

67. Senegal is one of the most active countries in Sub-Saharan Africa for the EDI. The Social andGender Analysis (SAGA) training program aims at improving the performance and outreach of agriculturalextension field agents, with women cultivators being its important target group. The Grass RootsManagement Training Program trains poor, often illiterate women to create and run small income-generating activities. Other recent EDI activities include workshops on public expenditure management, aregional seminar on trade, a visit for high-level Senegalese decision-makers to New Zealand to study itsexperience with agriculture reforms, and guidance on Internet connectivity issues. EDI is expected to play acritical role in the series of planned workshops on private sector development (see para. 52).

VI. COORDINATION WITH DEVELOPMENT PARTNERS

68. Collaboration with the IMF has been very close on the macroeconomic and structural reformprogram under the three-year Enhanced Structural Adjustment Facility (ESAF), the Policy Framework Paper(PFP), and the Public Expenditure Review. Bank staff routinely participate in IMF missions, and extensiveconsultations take place.

Bo RX 3: Senga's Maor Develoment Partners

ArtJ from iAtShe larrgest ix Sedevelopment parrs ofnl are:al; Frantce,h teEuropean'Union, US , Japan, Germany, and therican Dieavelopment Bank. The following ista summaryof thleisize and fou oftheiAs oa smm r programs.

France

French pwport tbqoSenegals &developmenttduring the past three years (1994-96) totaled US$700 million. A great deal of the focus was onenabigthetountiyito make a smt transition ferthe!CFAF deivalution of 1994: some US$380 million were provided in the form ofadjustmenItgrants and debt cancellation. Beyond the support f ttu refos,the French;Coopertion ,hasifocused on: social sector

eveI t(educatioyouithdevelo ,health, andclte;produtive sectors (nrurl development, public enterprise development,fisheries, energy, indusry f y and teleommunications); and intiial development (civil service and judiciary reform, anddecentrlization). Ov)er thkenextthree yeEars,thle focus onithese areas is expected to continue, although the levl of technical assistance willlikely decrease tothe re-evaluationievel.

Undv tht.eighth EDF (1997-4001), the EU has targeted thtre mamor areas for total grant financing of about US$200 million: (notinclud budgetXaryaid, stbiiizatiot finwds,Bwfood sertand temergency assistice): promoting economic growth, especially.'in theagriculturesector(supporting activitieson lthe lef bank of the Senegal River, the groundnut basin, and horticulture); strengthening theceapacity of thepblic sector bin thelthservices and road maintenance; and: supporting local development through NGOs, localgoveme n, and co ybased organaions inthefightagainstpoverty, gender discrimination, and environmental degradation. Inaddition toothese threemajore, the EU is also involved in regional integration activities and fisheries.

USAIDDIrng 97, USAID) :comnutmentXs totaled over US$200 millioni, covering the following major areas: health (population and familyiplkhti; n hildsurival, and AIDS);agriculture and natural resource management; human resource development; and market liberalization( WWri tdjustmnt reform). The agency recently finalized its strategy for the period 1998-2006. The level of commitment for thisperiod will be US$215 imillion, of-which US$75 million will be for the period 1998-2000. The three main areas of focus are: support formore ecticve, democratic, and accountable local governments; private sector income-generating activities in selected sectors; andincreasbdAutilizatin ofreprodtive health services (child survival, maternal health, family planning, and STD-AIDS).

Japan's-commitments to Senegal during 1994-96 totaled about US$200 million. Investment has been mainly in: agriculture and fisheries;educatin;tersupply;community-based micro-projects; and structural adjustment programs. For the next three years, the following arethe topp prori areas. water supply;.education (especially basic education); primary health; agriculture and fisheries; and enviroinrent.

GermanyG;ermhansupport,to Senegal during the past three years (1994-96) amounted to about US$150 million. The main areas of involvement havebee itrigation,- water supply, educaion, and health.

Af-ican Develooment Bank

With tlhe regen of AfDB as an active lending institution, its program for the period 1996-98 amounts to about US$115 million,twith.Iheficusontfiel education heal*, agriculture, and energy. sectors.

19

69. Development partners have an important and increasingly coordinated approach to thesocial and economic development of Senegal. Apart from IDA, the most important donors are:France, European Union (EU), USAID, Japan, Germany, Canada, the African Development Bank,the UN agencies (especially UNDP, IFAD, FAO, UNFPA, UNEF, and the WHO), IslamicDevelopment Bank, European Investment Bank (EIB), West African Development Bank (BOAD),Arab Bank for the Economic Development of Africa (BADEA), and Taiwan Province of China.Box 3 summarizes the areas of focus of the development partners with the largest programs.

70. Overall, the quality of cooperation among the donor agencies has been very good. This isbest exemplified by the coordination in the health, water, and environment sectors. In the healthsector, 10 donors (with WHO playing the role of quality assurance) participated actively in thedonors meeting in May 1997, whose purpose was to coordinate policies and to firm up financing forthe sector in the context of the recently approved Bank sector investment program (SIP) operation.While the Bank took leadership for the formulation of the elements of the SIP, the EU took on thecoordination role. Similarly in the water sector, seven donors (IDA, CFD, Nordic Fund, EIB, KfW,BADEA, and the Belgian Cooperation) coordinated closely in the preparation and implementation ofthe water sector strategy. Supervision missions are conducted jointly with all donors. Finally, in thearea of environment, where USAID has been the main donor for the National Environmental ActionPlan (NEAP), there exists an informal donor group in which the Dutch Cooperation, owing to itsheavy presence in the sector, is accepted as the natural leader and coordinator of the group.

71. While strong, there is room for further deepening of the collaboration among Senegal'sdevelopment partners. In preparation for the forthcoming Consultative Group Meeting (scheduledfor March 17-18, 1998), a series of informal consultations among donors is scheduled in Dakar onthe key policy and institutional issues.

72. The challenge for the Bank is to build on the existing cooperation and focus on the areas ofits comparative advantage, leaving leadership in other areas to other development partners.Experience with Bank operations indicates that the Bank Group's strong comparative advantage is inleading the dialogue on difficult policy reformns (especially in the area of trade liberalization, as wellas in the energy, agriculture, and education sectors). It also has technical leadership in various socialand infrastructure sectors. On the other hand, other development partners are better qualified to takethe lead in some sectors, and the Bank will follow. For example, CFD is heading the programformulation in rural water supply, and the Dutch Cooperation is leading efforts on environment. Inthe agriculture sector, other donors, because of their "filiere" approach, invariably have much moredetailed knowledge of specific subsectors than does the Bank. The Bank will continue to rely on theleadership of these donors in the design of sector-specific policy reforms. In particular, the Bankwill collaborate closely with, and follow, the CFD in the cotton subsector reforms, the EU ingroundnut policies, and USAID in reforms affecting the cereal subsector. Similarly, rural credit isan area where the comparative advantage of the Bank is less than clear, and it will need to follow thelead of the EU, French Cooperation, Germany (through PARZ), and a number of NGOs that haveinitiated mutual funds and credit schemes.

20 Senegal CAS

VII. CAS SCENARIOS AND RISKS

A. The Base Case

7:3. The base case scenario is predicated on continuing improvements in performance, whichwill be closely monitored. It assumes good progress in implementation of reforms to unshackleprivate sector initiatives, continued good portfolio management, and allocation of sufficient attentionand resources to the development of social and human resources. It specifically includes theadoption of measures in the areas of energy and trade reform, which would make possible Boardpresentation of the two adjustment operations (see para. 74).

74. The lending program under this scenario consists of 14 operations (two less than in theFY95-97 period) for a total of US$560 million. Included in this number are two adjustment lendingo]perations to support the reform of the energy sector (FY98), and to compensate for the transitionalcosts of trade liberalization in the context of WAEMU. Of the investment projects, the majority arefocused on alleviating key infrastructure bottlenecks, particularly in the energy, transport, and watersectors (both directly and by catalyzing private participation in these sectors) and on supportingsocial sector development. There is also important stress on the use of sector investment program(SIP) operations to ensure comprehensive sectoral coverage, increased ownership, and moresystematic coordination among development partners. These operations, planned in the health(FY98), agriculture, energy, transport (FY99), education, and water (FY2000) sectors, are alsoadaptable program loans (APLs) that provide financing for the first phase of a larger program.

75. The Bank plans to continue tailoring its commitments and disbursements to actualperformance in the four areas indicated earlier: macromanagement; private sector development;social sector development; and portfolio management. Box 4 presents the specific triggers forshifting from one scenario to the other.

B. The Low Case

76. The base case program, while fully justified by good performance and demonstratedabsorptive capacity for lending during the past 3-4 years, is demanding. It assumes continuing fiscaldiscipline in a period of elections and implementation of bold structural measures, especially in theenergy and education sectors, which threaten several vested interests (see para. 39). Ifimplementation of the reform program stalls, and the Government does not provide sufficientattention and resources to development of the social sectors, the program will be scaled backconsiderably to a total of seven operations for about US$275 million for the period. Under thisscenario, lending will focus on the social sectors, and more attention will be devoted to maintainingthe quality of the existing portfolio and to completing the key analytical pieces in anticipation of areturn to the base case.

C. The High Case

77. As the base case already implies a relatively large resource transfer, the triggers for thehigh case entail appreciable improvement in outcome indicators: a growth rate more in line withthe Government's objective of 9 percent per annum; much larger inflows of foreign directinvestment than in the past; further improvement in the disbursement ratio; and visible

21

improvements in the social indicators. Under this scenario, there will be need for an additionaladjustment operation and a line of credit operation for private sector operators whose demand forcredit would increase. The lending level for the three-year period would amount to aboutUS$630 million for 16 operations.

D. Risks Facing the Strateg

78. As indicated earlier (paras. 29-33), the external market environment for Senegal over thenext decade appears generally favorable. On the other hand, the risk of debilitating droughts is quitehigh: there have been 12 years (including 1997) of severe droughts during the last 30 years. Anunfortunate coincidence of adverse exogenous factors such as droughts and a deteriorating externalenvironment would be difficult to endure without slippage in the economic reform policies. In sucha situation, the appropriate course of action would be determined after an evaluation of theconditions on the ground.

Box 4: Triggers for High- and Low-Case ScenariosLOW CASE BASE CASE HIGH CASE

Portfolio Management and * Problem Projects > 20 percent * Problem Projects between 10 * No problem projectsAbsorptive Capacity percent and 20 percent

. Disbursement lag > 20percent * Disbursement lag between 15 * Disbursement lag < 15

percent and 20 percent percentMacroeconomic Performance * No program with the IMF * Compliance with the * Compliance with the

because of non-compliance IMF/ESAF program IMF/ESAF program

* Achievement of a growth rateof 7-9 percent annually

Private Sector Development * Lack of satisfactory progress * Satisfactory progress in * Very good progress inin regulatory and judicial regulatory and judicial regulatory and judicialreforms (benchmarks in reforms (benchmarks in reformsAnnex III, page 1) Attachment I1I, page I)

* Lack of satisfactory progress * Completion of the * Completion of theon ongoing divestiture Government's ongoing privatization program byprogram privatization program by 2000 1999, and approval to divest

additional enterprises

* Adoption of measures in the * More than US$75 millionareas of energy and trade foreign direct investmentreform attracted annually

Social Sector Development * Failure to increase gross * Increase in gross primary * Increase in gross primary(education, health, and primary enrollment ratio enrollment ratio from 59.7 enrollment ratio to 65 percentpopulation planning) above the present 59.7 percent in 1997 to 65 percent in 1999 and 70 percent in

percent by 2000 2000

* Failure to increase the share * Increase in the share of girls' * Increase in the share of girls'of girls' enrollment in primary enrollment from 44 percent in enrollment to 46 percent byeducation above the 44 1997 to 46 percent by 2000. 1999 and 47 percent by 2000percent in 1997

* No progress in * Increase in contraceptive * Same as for base caseimplementation of the prevalence from 9 percent inrecommendations of the 1997 to 13 percent by 2000Declaration of PopulationPolicy of 1994.Contraceptive prevalencedeclines below current 9percent level

* Failure to increase the share * Increase in the share of health * Same as for base case-of health in total public in total recurrent expendituresrecurrent expenditures above to 8 percent by 2000the current 6 percent

* No improvement in present * Decline in matemal mortality * Decline in maternal mortalitymatemal mortality rate of 510 rate from 510 per 100,000 rate to 430 by 1999 and 380per 100,000 births births in 1997 to 430 by 2000 by 2000

22 Senegal CAS

79. A more likely risk relates to delays and even reversals of policy reforms as the countryheads into an election cycle. Consultations with various segments of the society during CASpreparation indicated widespread social discontent with the elusiveness of the benefits of the reform.The Senegalese Government has a history of forsaking fiscal discipline in election years, and thediscussion on the line-up of opponents and proponents of reforms (paras. 39-40) indicates far fromunanimity on the need for significant policy action. However, there are some mitigating factors.First, on several of the more controversial and difficult reforms (such as those in the energy andeducation sectors), the President of the Republic is himself taking the leadership and holding openconsultations with the civil society on the need for reform. Second, some important measures (forexample, in the energy sector) are being adopted up-front to avoid their becoming politicized in therun-up to the legislative elections. Third, there is growing realization among the authorities that thedays of easy and plentiful external assistance without domestic effort are over, that competition fromEast Asian countries is likely to increase, and that, therefore, "muddling through" is not an option.Finally, the informal social safety net appears to be more resilient than expected, which renders thehigh urban unemployment rates less explosive. Clearly the absorptive capacity of the informalsector is stronger than anticipated.

80. Even with these mitigating circumstances, the proposed strategy is medium risk. Rewards,however, are high. For example, if the foreseen energy sector reforms are implemented, Senegalwould move to the forefront of Sub-Saharan African countries in reforms in this area. The Bank willclosely monitor progress on the implementation of the reform agenda to determine which of thelending scenarios to follow.

James D. WolfensohnPresident

by Sven Sandstrom

Attachments

Washington, D.C.December 29, 1997

Attachment IPage 1 of 1

SENEGAL CAS

Overall Bank Strategic Objective:Alleviation of Poverty

,~~~~~~~~~More Rapid and Sustained Growth Social Sustainability

Macroeconomic Private Sector Supporting Environmental Healt and Populanion RuralStability Development Infrastructure Protection Edcto rtcinad Development

i~ ~ ~ ~ ~~~~~~Gne

iI

Attachment IIPage 1 of 1

Poverty and the CAS

Nature and Incidence of Poverty: Based on daily caloric intake, one out of every three Senegalese waspoor during the harvest season of 1991/92. Data from the 1994/95 Integrated Household Survey and thelast Poverty Assessment (Senegal: An Assessment of Living Conditions, May 1995) show the persistenceof a high incidence of poverty. Using a poverty line of CFAF100,000 per capita per year, these dataindicate an incidence of poverty of 38 percent at the national level. Poverty incidence is higher in the ruralareas (67 percent) than in the urban ones (13 percent). In terms of absolute number of poor, Dakar hosts asignificant proportion of poor households. Poverty is also more concentrated in the south. Based oncomparison of Gini coefficients from the 1994/95 survey with those from earlier years, relative inequalityhas not increased, although the absolute number of poor has increased.

Some Social Indicators: Senegal's indicators of human development are below those of other countrieswith comparable levels of income. Gross primary enrollment rates are low (60 percent overall; male 67percent and female 53 percent). Total fertility rate is still high at 5.9 births per woman, associated with alow contraceptive prevalance rate of 9 percent. Life expectancy at birth is estimated at 54 years(compared with 63 years for lower middle income countries). Infant mortality is high (62 per 1000 livebirths, compared to 58 for low income countries). Infant malnutrition rate has remained relativelyconstant during the past decade with 29 percent of children under 5 years being chronically malnourished.

Poverty-Population-Environment Nexus in Senegal: While the dynanics of the linkages betweenpoverty, population, and environment have not been examined systematically in Senegal, some worryingtrends can be perceived, suggesting that the poor are both agents as well as victims of environmentaldegradation. Declining land availability and quality, coupled with a population growth rate of 2.7 percentp.a., have led to rapid rural-urban migration (between 1990 and 1996, the share of urban population hasincreased from 35 percent to 42 percent) and associated environmental problems. In squatter areas (e.g.,Guediawaye, Dallifort, and Malika) of peri-urban Dakar, sanitary conditions are poor or non-existent, andcharacterized by a lack of safe water, indoor pollution, insufficient waste collection and management, andrapid prevalence and spread of waterbome and contagious diseases. Moreover, poverty forces people toconsume low-value energy: more than 80 percent of the population depends on traditional fuel (firewoodand charcoal) for cooking. The expanding population has increased the consumption of traditional fuels(in 1987 US$ terms) by 75 percent. This has meant a continuous forest resource loss, corresponding to areduction of the total forest from 8 million hectares in 1981 to 7.6 million in 1990. The high populationgrowth rate has also resulted in a demographic structure in which 50 percent of the female population isbelow 15 years of age. This introduces a powerfil momentum in population growth rates and theassociated resource demands.

Government's Strategy for Poverty Alleviation: In the context of its Ninth Economic and SocialDevelopment Plan (1996-2001), the Government has issued a draft National Program to Fight Poverty,including strategies and features of an action plan. The program serves as a complement to sectoralinvestment programs with special focus on income-generating activities and employment creation forvulnerable groups (mainly women and unemployed youth). It is strongly conceived as a decentralized andconsultative program, under which grassroots participation and contribution of all development partners isencouraged.

Bank's Support of this Strategy: The Bank's Country Assistance Strategy supports the country'spoverty alleviation efforts through: (i) support of macroeconominc and structural reforms that lead to ahigher growth rate that is also more labor-intensive; (ii) analytical and financial support for greater socialsector development, especially in education and health; (iii) direct pro-poor interventions via ongoingoperations (AGETIP, Community Nutrition, Small Rural Operations II) as well as new operations (suchas the proposed Social Sector Project); and (iv) improving the analysis and monitoring of poverty. Furtheranalysis of the 1994/95 Integrated Household Survey and the recent work of the Groupe de ReflexionStrategique (GRS) should help improve our knowledge of the nature and incidence of poverty for moreeffective support.

Attachment IIIPage I of 5

SENEGAL: Country Assistance Strategy Matrix (FY98-2000)

Diagnosis/Lessons from Experience Strategy/Actions Progress Benchmarks IDA/IFC Instruments1. Rapid and Sustainable Economic Growth

l. Macroeconomic StabilityNon-lending

* Despite considerable trade * In the context of the UEMOA . By 2000, implement import * ESW: Senegal: The Challenge ofliberalization. effective protection common extemal tariff, a new structure with only 4 tariff International Integration (FY98).remains quite high. tariff reform will be rates and a maximum duty * ESW: The Fiscal Costs of Trade Reform

introduced in early 1998 to rate of about 20%. (FY98).simplify the trade regime and * Technical Collaboration with UEMOA.reduce protection.

Lending* Trade Reform Adjustment Credit (FY2000).Non-lending

* Need to increase public savings to * On the revenue side, * Total tax revenue/GDP to . Collaboration with the IMF (which will takerelease financial resources for the harmonization of indirect increase from 14% in 1997 to the lead) and other donors on fiscal reform.private sector and address poor social taxation planned, with a 16% by 2000.indicators of the country. broadening of the VAT base,

and adoption of a common listof excisable goods. * Larger allocation of recurrent . Public Expenditure Review (PER) (FY98).

. On the expenditure side, a budget to health sector (8% * IDF: Civil Service Reform (FY98).new public expenditure by 2000, compared to 7% inreview exercise, better 1997).expenditure controls, and an * Maintain share of recurrentimproved budgetary process. budget allocated to education

at its current level (33%/6).Non-lending

. Despite significant reforms during . Reform of the legal code . Agreement with the Bank and * ESW: Financial Sector Reform (FY99).1989-91, the financial sector remains regulating the financial sector the IMF on a plan of action in * IFC/Bank support to the development of thethin, as measured by standard financial in the context of OHADA. this area. Regional Stock Exchange (ongoing).deepening measures, and has limited * Training ofjudges andfinancial instruments and services. magistrates to reduce delays Lending

in application of business law. . Support to financial sector reforms under* Addressing issues related to ongoing Private Sector Capacity Building

accords de classement, the Project (FY95).debt from the former * IFC supporting a leasing companyONCAD, and the usury rate. (SOGECA) through equity and guarantee

investments.* Private Sector Development Project (FY99).Non-lending

* While not eligible for HIPC Initiative * Government plans stock of * Reduction of all three HIPC * IMF/Bank will support Government's debton the two critical extemal thresholds debt operation, including indicators to more sustainable sustainability analysis (FY98).(debt and debt service ratios), Senegal's topping up of previously levels by 1998.extemal debt service burden as a share rescheduled debt with Paris Lendingof govemment revenue remains high. Club. * Bank-supported debt reduction effort through

* Only highly concessional a commercial Debt Buyback Operationborrowing. (FY96).

2. Improved Private SectorEnvironment

Non-lending* Diverse and cumbersome incentive * Govemment plans to provide * Rationalize and consolidate * ESW: Senegal: The Challenge of

schemes entailing long administrative more enabling environment, all investment incentives in Intemational Integration (FY98).processing delays. Heavy taxation assuring good govemance and the Tax and Customs Codes. . ESW: Promotion of Private Investmenthampers enterprises' ability to improved legal and regulatory * Rationalize enterprise (FY2000).consolidate and strengthen net worth. framework. taxation.Transaction costs and delays affect * Rationalize the cost and * Adopt an improved Lendingimports and exports requiring air procedures of the use of the Commercial Code. * Agricultural Exports Promotion Projecttransportation. Also judicial constraints Dakar airport by * Establish within the Chamber (FY98).affecting the private sector relating to exporters/importers. of CommeTce an arbitration * Agriculture Sector Investment Projectthe administrative law conceming * Support for market research center and a Centre des (FY99).dealings of enterprises with the state, and development in private formalites. . Private Sector Development Project (FY99).bankruptcy procedures, and the judicial firms exporting agricultural * Establish new procedures to * IFC will provide medium-term financing andfranework for microenterprises. Very products. tie govemment payments to technical assistance for selected small andlow level of direct foreign investment. . Reform laws and financial private enterprises and medium companies operating in variousFinally, govenmment arrears continue to procedures applying to eliminate arrears. sectors (manufacturing, tourism, and privatehamper the activity of the private sector. enterprise receivership. I _I schools) through the Small Enterprise Fund.

Attachment IIIPage 2 of 5

SENEGAL: Country Assistance Strategy Matrix (FY98-2000)

Diagnosis/Lessons from Experience Strategy/Actions Progress Benchmarks IDA/IFC Instruments2. Improved Private SectorEnvironment (contd.)

LendingNotwithstanding progress in * Govemment intends to * Completion of the * Ongoing operations (Water Sector Project,implementation of the divestiture accelerate the privatization Governments privatization FY95; Urban Transport Project, FY97) andprogram. there are still 42 public program and to limit the program by 2000. recently completed (Ag Sector Adjustmentcommercial and industrial state's role to the creation of a Credit, FY95) have supported privatization ofenterprises. framework conducive to companies in the water, urban transport,

expansion of private sector cotton, and groundnut subsectors.activities. * Energy Sector Adjustinent Credit (FY98) will

support privatization of the power companySENELEC.

* IFC will provide advisory and financialassistance in selected cases. Has alsoexpressed interest in funding the post-privatization investment of the telecomcompany (SONATEL).

3. Alleviating InfrastructureBotlenecks Energy

Non-lendingA key constraint to a higher * Elimination of monopolies or * Liberalization of the * ESW: Recently completed work in the powergrowth rate. especially of the rigid oligopolies (woodfuel petroleum sector. and household energy sectors.private sector, is the high cost, trade, petroleum products, * Reform the petroleumservice unreliability, and poor electricity power generation products prices and taxation Lendingquality of factors of production and distribution). system to promote * IFC has participated (FY97) in the first(electricity,. water, telephone, competition, reflect economic Independent Power Project on a BOT basis.transport). cost, and remove existing * Ongoing IDA projects (both FY97) in the

subsidies. household energy sector (Sustainable* Improve management of the * Encourage private sector te Participatory Energy Project) and the

power sector to reduce explore for petroleum in Regional Hydroproject (Manantali).growing deficit of power Senegal and limit the * Energy Sector Adjustment Credit (FY98).generation capacity, halt Government's ability to * Energy Investment Project (FY99).deterioration of facilities, and promoting private sectorincrease access to electricity. exploration and production -

* Eliminate the subsidies of the new Petroleum Code.uneconomic refinery that has * Opening up of the powerled to high prices of sector to private sectorpetroleum products. participation (generation as

well as distribution) - newelectricity law.

* Privatization of the powerutility SENELEC.

* Meet the growing urban * Transfer to local communitiesdemand for household fuels of responsibilities for thewithout loss of forest cover management and use ofand other environmental forestry resources (woodfiueldamages. and charcoal) - new Forestry

Code.

Attachment IIIPage 3 of 5

SENEGAL: Country Assistance Strategy Matrix (FY98-2000)

Diagnosis/Lessons from Experience Strategy/Actions Progress Benchmarks IDA/IFC InstrumentsTransport

Non-lending* Further institutional strengthening * Further reductions in public service * ESW: Medium-Term Strategy for the

of companies or parts thereof that obligations and/or redefined Transport Sector (FY97).are expected to remain in public compensation mechanism for suchdomain (port authority, railroad obligations (e.g., rail, civil aviation). Lendingcompany, etc.). More coherent Development of corporate plans (plan * Ongoing operations (Transport SECAL,overall sector d'enterprise) for each entity. Better FY91 and Urban Transport, FY97).planning/programming and performance contracts (where * Transport 11 (FY99).simplified procedures. applicable). * Urban Transport II (FY99).

* Rural Transport (FY2001).* Support privatization/restructuring * Finalization of privatization of

efforts (Air Senegal, SOTRAC, SOTRAC andDakar/Bamako Railway, restructuring/privatization of AirASECNA-Senegal). Senegal, restructuring of ASCENA-

* Develop Dakar into both Senegal, and completion ofintemational maritime and air privatization of Dakar/Bamako railwaytransport hub. activities jointly with Mali.

* Implementation ofrecommendations of Port MasterPlan in progress. Modemizeairport infrastructure and adoptperformance indicators.

* Improved management of the * Establishment of a Road Fund on aRoad Fund to eliminate sustainable and transparent basis.impediments to efficient roadmaintenance.

* Better planning and programming, * Establishment of a comprehensiveespecially in the road subsector. database to facilitate better planning and

* An important constraint to * Development of relevant info on monitoring.promoting higher agricultural rural roads and other ruralgrowth is the poor quality of rural infrastructure and design ofinfrastructure (feeder roads, small- program to underpin planning,scale irrigation works, cold storage financing, development, andfacilities, etc.) maintenance of rural roads.

WaterLending

* Improvement in management, * Adoption of a new tariff structure, based * Ongoing Water Sector Project (FY95).pricing, and cost recovery for on analysis of willingness/capacity to * Long-Term Water Sector Projectindustrial, domestic, and irrigation pay. (FY2000), in coordination with IFC.water. * Eliminate water deficit of Dakar as from

* Private sector participation in the year 2000 until the year 2020. BOTmanaging urban water supply. contracts with a private partner.

Urban DevelopmentLending

* Urbanization is growing at the rate * Create a Municipal Development * Performance of MDA to work closely * Urban Development andof 3.7% per year. By the year Agency (MDA) under the tutelage with the various partners (central and Decentralization Project (FY98).2010, more than half the of the Ministry of Finance to work local authorities and the private sector).population of Senegal will live in directly with municipalities. * Signature of several municipalcities. Most of the investments contracts.have taken place in Dakar, which * Launch an intensive program open * Improvement in the use by localis expected to reach 2.3 million to the 60 municipalities of govemments of management andinhabitants by the year 2000. Senegal, aimed at identifying and programming tools.With the growing pressures on implementing a Priorityurban services and infrastructure Investment Program (PIP) and aand with the decentralization Municipal Adjustment Programtrends, more needs to be done in (MAP) under municipal contracts.secondary cities. This program has as its main

objective the strengthening of thecapacity of municipalities toefficiently program, finance,deliver, and maintain basic urbanservices.

* Support a reform program on: (a) * Improvement of the Fondslocal fiscal issues; and (b) d'Equipement des Collectivites Localesintergovemmental transfers. (FECL) allocation.

* Improvement in the mobilization oflocal resources.

Attachment IIIPage 4 of 5

SENEGAL: Country Assistance Strategy Matrix (FY98-2000)

Diagnosis/Lessons from Experience Strategy/Actions Progress Benchmarks IDA/IFC lnstruments4. Environmental Management*Risks to sustainability of long- * Better management of natural * Adoption of the amended Forestry Lending

term growth arising from fragility resources. Code. * Natural resource management issues beingof soils, low and erratic rainfall, * Better integration of agriculture, addressed through other sector projectsloss ofvegetation cover and forest livestock, and forestry activities. (water, agriculture, energy).resources. and reduction ofbiodiversity.

* Environmental degradation can Environmental Action Plan available Lendinghamper sustained economic by end 1997 provides strategic * Environmental issues to be addressed throughgrowth and increase poverty. framework for environmental a possible GEF project and in close

* Lack of environmental and social activities. coordintion with other development partners.indicators increase risk of seriousenvironmental and economicdisruptions.

* Enhance environmental * Revised legal framework.legislation.

* Increase capacity to enforce * Rehabilitation of criticallyenvironmental regulations. damaged areas such as the Baie de

Hann.* Implement environmental review * Environmental review

process (EA). systematically done on all largeinvestments having an impact onthe environment.

* Increase public awareness ofenvironmental issues.

* Establish a system to monitor and * Availability of environmentalreport on environmental indicators and State oftheindicators. Environment Report.

* Support decentralized * Local communities empowered tomanagement of the environment manage environmental resources.through an Environment Fund.

* Support policy reviews.* Loss of biodiversity. * Develop and implement Non-lending

management plans for coastal * Protection of marine environment andwetlands. biodiversity to be addressed using GEF

* Increase local participation in the funding.management of protected areas.

* Support National Action Programto Combat Desertification.

11. Social Sustainability

1. Education Sector

*Despite recent increases in the * Need to expand access to primary .I Non-lending

enrollment ratio, the gains remain education, particularly among e Increase in gross p .mary i PER Educaton Sector Financial Frameworkfragile., based largely on recourse girls. 1 t 65% by 59.to recruitment of voluntary * Expand access to other levels of 1997 to 65% by 2000.teacers 'Mee i a siftawayin ducaionwithn asustinale * Increase the share of girl's Lendingteachers. There is a shift away in education witha i a sustaunable enrollment in primary education * Education Sector Investment Projectsecondary and higher education financial framework, from 44% in 1997 to 46% by (FY2000).from math, science, and * Raise adult lteracy rates in rural 2000. * Ongoing Higher Education Project (FY97).technology towards the areas, particularly among women. * Reduce repetition rates in grades 5humanities. Recent gains * Promote the development of and 6 from 14% and 28% in 1997notwithstanding, tertiary education technical and vocational training. to 10% and 18%, respectively byis high cost, marked by grade * Involve private sector and NGOs 2000.repetition and frequent student in education. * Increase the number ofunrest. * Reengineer sector management beneficiaries of literacy programs

and business processes. b 000aya 7%wmn* Improve efficiency in the between 1997 and 2000(

allocation and use ofresources. * Rationalize higher education by* Improve conditions for reducing its share in the budget of

progressive development of the Ministry of Education toeducation quality. 20.3%, its enrollment to 20,500,

* Introduce technology as part of and the number of scholarships tomanagement and quality 9000 by 2000.improvement.

Attachment IIIPage 5 of 5

SENEGAL: Country Assistance Strategy Matrix (FY98-2000)

Diagnosis/Lessons from Experience Strategy/Actions Progress Benchmarks IDAQIFC Instruments2. Health Sector

Non-lending* Senegal's health status * Govemment has finalized its ten- * Increase share of health in total * ESW: Human Resource Development in the

characterized by a high burden of year health development plan recurrent expenditures from 6% Health Sector (FY96).disease and a high incidence of (1998-2007) along with a first (1996) to 9% by 2002, aspreventable and treatable diseases. five-year investment program for recommended by WHO.Inadequate and inequitable sector its implementation. Key elements * Reduce matemal mortality by 25% Lendingfinancing. Insufficiency of of the proposed reform include: from 510 per 100,000 births in * Ongoing Endemic Diseases Project (FY97).resources allocated. Weak expanded access to PHC and 1997 to 380 per 100,000 births by * Health Sector Investment Project (FY98).institutional base for health care referral services, management 2002.management. Minimum autonomy of hospitals, * Increase immunization coverageinvolvement by the private sector decentralization to the regions and from 60% in 1997 to S0%O byand NGOs. health districts, greater use of 2002.

beneficiaries and NGOs in the * Increase contraceptive prevalencefinancing and management of from 9%/a in 1997 to 16% by 2002.basic health care services, and * PHC use frequency rate toincreasing the share of health in increase from 0.4 visit pertotal recruitment expenditures. inhabitant in 1997 to 0.6 by 2002.

* Prenatal care coverage to increasefrom 40% in 1997 to 80% by2002. .

3. Population Planining, SocialProtection and Gender Issues

* Despite its adoption of the * Govenmment needs to redouble * Increase contraceptive prevalence LendingDeclaration of Population Policy efforts in this area. rate from 9% at present to 16% by * Health Sector Investment Project (FY98)in 1994, the Govemment's public 2002 among women ofstand on integrated family reproductive age.planning is lukewarm. Populationexpected to double to more than16 million by 2020.

* Many hurdles remain to the * Significant progress has been * Agreement with the Bank and Lendingevolution of women as equal made since the creation in 1990 of other development partners on a * Ongoing Female Literacy (FY96) and Humanpartners in the Senegalese society. a separate Ministry of Women, strategy covering: improved Resource Development (FY93) Projects.Illiteracy rates are higher for Children, and Family Affairs. In access of women to land, credit, * Social Development/WID Project (FY2000).women (66%) than for men (47%), close coordination with NGOs, and extension services; improvedthere are high female drop-out civil society, and development female access to education;rates, poorer health status, partners, the Ministry has strengthened health and planningproblems in access to land and completed the second National family services; and improvedcredit, etc. . Action Plan for Women. legal status for women.

* Based on caloric intake, one out of * Govemment put in place in 1994 a * No increase in % of malnutrition Non-lendingevery three Senegalese is poor. three-year social safety net in poor peri-urban areas. * ESW: Intensive support to the SenegalesePoverty is essentially a rural program aimed at mitigating price * Agreement with the Bank and key "think-tank" (Groupe de Rflexionphenomenon, although there is increases for basic necessities development partners on the rural Stratigique) in finalizing the rural sectorgrowing urban poverty also. (bread, rice, and pharmaceuticals). sector strategy. strategy (FY97-98).

* Government also now placinggreater emphasis on rural Lendingdevelopment. * Ongoing Community Nutrition Project

(FY95) and Small Rural Operations Project 11(FY89).

* Agricultural Services and ProducersOrganizations Project (FY98); AgricultureSector Investment Project (FY99).

* Local institutions (local * Prepare a program that alms at Non-lendinggovemment in rural communities, building the managerial and * ESW: Support for strengthening the PovertyCBOs and NGOs, and civil society technical capacity of these Monitoring System (FY99).groups) are managerially and institutions based on theoperationally weak, which understanding that the existence of Lendingseverely hampers their efforts to effective local institutions is an * Social DevelopmenttWID Project (FY2000).fight poverty at the grassroots important social factor inlevel. development.

* Proposal to continue preparing Non-lendingprojects that directly address * ESW: Support for the strengthening of thepoverty issues, such as the Poverty Monitoring System (FY99).AGETIP public works andemployment-creating projects that Leadingalso help in building private sector * Urban Development and Decentralizationcapacity. Project (FY98).

Attachment IVPage 1 of 3

Alternative Economic Growth Scenarios(Base Case)

Growth Rate of GDP 4.7% 4.8% 4.8% 4.8%Consumption Growth 4.3% 3.8% 3.7% 4.1%

Real Per Capita Growth Rates:Gross Domestic Product (GDP) 1.9% 2.0% 2.0% 2.0%Total Consumption 1.9% 1.0% 0.8% 1.2%Private Consumption 2.1% 1.4% 1.2% 1.2%

Import real growth rate (MERCH CIF) 0.6% 4.8% 5.3% 5.1%Export real growth rate (MERCH FOB) 1.5% 5.0% 4.5% 4.5%Current Account Balance as % of GDP -6.1% -5.8% -5.9% -6.0%

Debt and Debt Service (LT+ST+IMF):Total DOD (US$M) 3378.6 3287.7 3230.2 3244.3Total Debt as % of GDP 69.6% 63.3% 56.9% 53.2%Debt Service (US$M) 285.1 278.2 257.5 271.5Debt Service as % of Total Exports 17.5% 16.0% 13.8% 13.8%

Total Revenues as % of GDP- 15.3% 15.3% 14.8% 15.1%Total Expenditures as % of GDP 16.6% 17.2% 16.8% 16.7%Government Deficit excl all grants (-) as % of GDP -1.3% -1.9% -2.0% -1.7%

Investment as % of GDP 16.5% 17.3% 18.3% 19.0%Gross Domestic Savings as % of GDP 11.8% 13.1% 13.9% 14.4%

Attachment IVPage 2 of 3

Alternative Economic Growth Scenarios(High Case)

Growth Rate of GDP 4.7% 4.8% 5.8% 7.0%Consumption Growth 4.3% 3.0% 3.8% 6.2%

Real Per Capita Growth Rates:Gross Domestic Product (GDP) 1.9% 2.0% 2.9% 4.1%T'otal Consumption 1.9% 0.3% 1.0% 3.4%P'rivate Consumption 2.1% 0.6% 0.2% 2.9%

Irnport real growth rate (MERCH CIF) 0.6% 5.1% 6.1% ,7.2%Export real growth rate (MERCH FOB) 1.5% 5.0% 5.8% ,7.6%Current Account Balance as % of GDP -6.1% -5.8% -5.3% -4.9%

Debt and Debt Service (LT+ST+IMF):Total DOD (US$M) 3378.6 3254.5 3150.6 3098.1Total Debt as % of GDP 69.6% 62.6% 55.0% 49.3%Debt Service (US$M) 285.1 278.2 256.9 269.9Debt Service as % of Total Exports 17.5% 16.0% 13.5% 13.0%

Total Revenues as % of GDP 15.3% 15.3% 15.4% 15.6%Total Expenditures as % of GDP 16.6% 17.2% 16.7% 16.7%Government Deficit excl all grants (-) as % of GDP -1.3% -1.9% -1.3% -1.1%

Investment as % of GDP 16.5% 18,0% 19.3% 19.5%Gross Domestic Savings as % of GDP 11.8% 13.8% 15.2% 15.8%

Attachment IVPage 3 of 3

Alternative Economic Growth Scenarios(Low Case)

Growth Rate of GDP 4.7% 3.5% 3.0% 3.0%Consumption Growth 4.3% 4.5% 3.6% 3.3%

Real Per Capita Growth Rates:Gross Domestic Product (GDP) 1.9% 0.8% 0.3% 0.3%Total Consumption 1.9% 1.7% 0.8% 0.5%Private Consumption 2.1% 2.3% 0.9% 0.6%

Import real growth rate (MERCH CIF) 0.6% 2.7% 2.8% 3.1%Export real growth rate (MERCH FOB) 1.5% 1.6% 1.7% 1.7%Current Account Balance as % of GDP -6.1% -6.0% -6.1% -6.3%

Debt and Debt Service (LT+ST+IMF):Total DOD (US$M) 3378.6 3287.1 3223.4 3235.7Total Debt as % of GDP 69.6% 64.0% 58.5% 55.6%Debt Service (US$M) 285.1 278.0 257.3 271.0Debt Service as % of Total Exports 17.5% 16.3% 14.3% 14.7%

Total Revenues as % of GDP 15.3% 14.8% 14.9% 14.8%Total Expenditures as % of GDP 16.6% 17.3% 16.3% 16.0%Government Deficit excl all grants (-) as % of GDP -1.3% -2.5% -1.4% -1.2%

Investment as % of GDP 16.5% 15.8% 15.5% 15.5%Gross Domestic Savings as % of GDP 11.8% 11.5% 10.9% 10.6%

b : ::

AttachmentVPage 1 of 1

Senegal CAS Consultation Process

W0,,..... ., .... . . . ... . . ... "' :-" ,.,.,..'...'..'...,....., .X,'>.'..,','.' "..'.'..'.'.

March-April 1997 Design of the CAS Preparation Resident Mission and HQ Staff

ProcessMay 1, 1997 HQ CAS Workshop Resident Mission and HQ Staff

to identify the key issues facing Senegaltoday and the best niche for the Bank

May 12-June 17, 1997 Focus Group Discussions * Representatives of the privatein Senegal to obtain participants sector, the media, trade unions,perspective on key issues facing women's groups,Senegal's socio-economic development NGOs/CBOs/Local Governmentand the role of the World Bank institutions

* Resident Mission Staff* Government Representative

May-June 1997 Client Feedback Survey * Approximately 300 peopleto assess the views of its clients and including: key decision makers,partners technical ministers, donors,

representatives of private sectorand civil society groups* Resident Mission and HQ Staff

June 12-13, 1997 CPPR * about 91 people representingto review progress of all projects in the key technical ministries, the donorportfolio, identify their weaknesses and community, beneficiaries, non-strengths, and agree on plan of action to governmental organizationsimprove their implementation in order to (NGOs)attain the portfolio's development * Resident Mission and HQ staffobjectives. The outcome of this exercisemay be used in the formulation of thecountry assistance strategy.

June 27, 1997 Validation Workshop * Hosted by the Ministry ofto share and discuss results of focus Economy and Financegroup discussions * Co-Chaired by the Minister of

Budget and World Bank CountryDirector* Representatives of each focusgroup* Government officials* HQ and Resident Mission Staff

July-August 1997 Social Analysis Review * Conducted by a local consultantto study the social context in which itsprograms are formulated andimplemented

March 1998 Restitution Workshop * Representatives of focus groupto present the approved CAS to all discussionsstakeholders involved in the preparation * Govemnment officialsof the document * HQ and Resident Mission Staff

Attachment VIPage 1 of 7

Treatment of Cross-Cuttinz Themes: Gender. Capacity Building and Environment

1. This attachment provides some details on three specific cross-cutting themes: gender, capacitybuilding, and environment. This note describes the key issues in each of these areas and theGovernment's program to address these issues. Additionally, a matrix is attached to this note andoutlines how each of the Bank's proposed lending operations are expected to support theGovemment's efforts.

Gender

2. Many of the constraints faced by Senegalese women are common to most women in the Sahel.However, no other Sahelian country has been as active as Senegal in promoting the situation of women.Women's groups in Senegal outdo those of neighboring countries in numbers (3,600 groups) and indynamism, and the Government has been implementing programs to improve the condition of womensince the early 1960s. Senegalese-educated women in recent years have been able to make their markon the intellectual and cultural life of the nation. Women constitute one-third of the University ofDakar's total enrollment.

3. In spite of this, several hurdles remain to the evolution of women as equal partners in theSenegalese society:

* High female illiteracy rate (66 percent, compared to 47 percent for men). High female drop-outrates due to early marriage and the need for girls to help their mothers.

* Poor health status as a result of undernutrition, frequent pregnancies (median marriage age forwomen is 16.6 and median age at birth of first child is 19.4). High maternal mortality rate, highfertility rate; incidence of anemia; and female genital mutilation (see para. 5 below).

* Women's lack of access to land (especially irrigated land) and agricultural services (only 15-20percent of participants in extension activities are women).

* Women outnumber men in the informal sector, but owing to their lower levels of education, only 6percent of the female labor force is employed in the formal sector. Access to credit ispredominantly limited to credit clubs (tontines) which can only provide small credits.

* While the Constitution guarantees women equal rights and the statutory law does not discriminateagainst women, personal, business, and inheritance affairs are still largely conducted in accordancewith unwritten customary laws that disadvantage women.

4. The Govermment is well aware of the additional efforts needed to improve the condition ofwomen. The establishment in 1990 of a separate Ministry of Women, Children and Family Affairs hashad a very positive impact. The Ministry, working very closely with NGOs, civil society, and keydevelopment partners, has completed the second National Action Plan for Women which focuses onfive strategic areas: (i) development of economic activities for women, including improved access to

Attachment VIPage 2 of 7

land, credit, extension services, etc.; (ii) improvement in female access to education; (iii) strengtheningof health and family planning services; (iv) improvement of women's legal status; and (v) enhancedcooperation among organizations that promote the role of women.

5. In the specific case of female genital mutilation (whose prevalence is estimated at about 20percent, mostly in the Senegal River basin and parts of Casamance), the Government isincreasingly becoming aware of its negative impact on women's mortality, morbidity, andreproductive health, as well as on increasing their risk of contracting AIDS. The Government, inclose collaboration with the National Committee on Negative Health from Traditional Practices(COSEPRAT), other NGOs and women's associations, plans to organize a nationwideInformation, Education and Communication (IEC) campaign against such practices. It will alsoprovide support to NGOs programs such as those of ASBEF (Association Senegalaise de Bien-Etre Familial). Finally, the Government is examining the option of declaring these practicesillegal.

_apacitv Building

6. In June 1997, the Bank carried out a review, from a capacity building perspective, of itsprogram in Senegal. The objectives of the review were primarily to assess the capacity building impactof the program and to make suggestions for increasing this impact in the future. The conclusions of thereview apply much more generally than just to Bank-financed projects. The review concluded that,while nearly all-Bank supported activities address capacity building in some form or another, theirimpact has been somewhat less than anticipated. A significant causal factor has been weak stakeholderovmership. Furthermore, while the program has been relatively successful in promoting capacitywithin the private sector (both for and non-profit), largely by encouraging the administration to delegateimplementation to this sector, the impact on state capacity has been less than anticipated.

7. The Govemment is becoming increasingly concemed about weak administrative capacity, andthis is reflected in two activities in which the President of the Republic has taken a personal interest.The first is a National Consultation on Good Govemance and Civil Service Reform, which is beingsupported by an IDF Grant. The idea is to bring together some 200 people, from all segments ofSenegalese society over an extended period of time, to develop and build consensus on a program toreform the state so as to respond to client needs. The second activity is the establishment of a capacitybuilding focal point within the Ministry of Finance, in the context of the Partnership for CapacityBuilding in Africa initiative. This focal point has three main tasks: (i) to carry out a National CapacityAssessment and subsequently develop a National Capacity Building Strategy; (ii) to establish a formalNational Capacity Building Secretariat to coordinate capacity building efforts in Senegal; and (iii) toprepare a National Plan for Good Govemance, which focuses largely on civil service reform.

8. A critically important aspect of capacity building is the decentralization process underway inSenegal, particularly since 1990. The adoption of legislative reforms in February 1996, themodification of the Code of Local Govermments (Code des Collectivites Locales) and the efforts tosimplify the functioning of the Fonds d'Equipement des Collectivites Locales are initial efforts toensure that delegation of responsibilities to local authorities is backed up by transfer to financialresources to support municipal development. The Bank's Urban Development and DecentralizationProject (FY98) supports this decentralization effort and aims at gradually shifting responsibility and

Attachment VIPage 3 of 7

accountability in terms of delivery and maintenance of urban services and infrastructure tomunicipalities.

Environment

9. Senegal's development potential is rendered problematic by its harsh, arid climate, itsvulnerability to changes in rainfall amounts and the pressure placed by rapidly increasing populationlevels on the fragile and increasingly scarce resource base. This demographic pressure, coupled withthe effects of a continually shrinking forest and vegetal cover and the insufficient or inappropriate useof fertilizers has contributed to the degradation of already-fragile soils, with consequent decline inagricultural yields. Natural forests have shrunk over 7.4 percent over the past ten years. Degradationof water resources, especially from saline intrusion and pollution of subterranean waters by pesticidesand other pollutants, has increased steadily. The difficulties of maintaining a productive existence inrural areas has contributed to the rapid swelling of urban centers, where environmental problems arecharacterized by the near total absence of systems to manage urban solid and liquid waste and toensure adequate sanitation.

10. In an attempt to confront this nexus of problems, the Government of Senegal has justcompleted the preparation of a National Environmental Action Plan (NEAP). The NEAP provides ananalysis of the environmental difficulties facing Senegal, on a national as well as on a regional andecogeographic basis. It also details the points of synergy between the principal environmental concernsand the wealth of sectoral plans already prepared in Senegal. The NEAP has a number of strategicobjectives around which implementation will be organized:

- sustainable management of environmental resources, including drylands management activities,proper management of urban and industrial environmental concerns, and improved institutional andlegal instruments for environmental management;

* improved performance of the public sector in the provision of basic services and infrastructure,such as sanitation and waste disposal;

* coordination and effective implementation of the international environment-related conventionswhich Senegal has ratified;

* focus on decentralized execution and management of environmental activities through integratedregional development plans, which include the regional and local environmental action plans aswell as the decentralization of development planning activities.

11. These broad strategic objectives are translated into a series of tables which identify Senegal'sprincipal environmental problems region by region. They identify the priorities which should guidecooperation with Senegal and the design of a future environmental support program (ESP). They are:

* degradation of soils through erosion, desertification, and salinization;

* loss of forest and vegetal cover;

Attachment VIPage 4 of 7

* loss of faunal biodiversity due to habitat destruction;

* lack of basic infrastructure, particularly in urban areas, and resultant decline in social health;

* reduction in water resources and inadequate access to water; and

* coastal zone management problems, in particular reduction in maritime resources.

12. Based on the respective ranking of the above priorities by region, as expressed in the regionalenvironmental action plans, the Government plans to call donors and international agencies together todevelop, on the basis of the above, a coherent program to support those elements deemed as prioritiesby each region. They intend for NEAP implementation to be done in a way which will support thedecentralization program, empowering local development agencies to implement ESP activitiesspiecific to each region.

Attachment VIPage 5 of 7

SENEGAL

Cross-cutting Issues to be addressed with IDA Lending Instruments(FY98-FY2000)

Project Gender Capacity Building Environment

Urban Dev. & Enhance health centers, community centers, Provide opportunities for consultants and Facilitate sustainable improvements in living and workingDecentralization maisons de lafemme directly targeted at entrepreneurs to strengthen their technical and environment of Senegal. Ensure that physical components have(FY98) women. Also markets and infrastructure for administrative skills. Also train a pool of a positive impact on urban environment. Include an

beneficial impact on women. local consultants to carry out financial/urban environmental impact checklist in the preparation of theaudits elaborated during project preparation. municipal contract. This checklist has the dual advantage of: (a)Establish a training program for small scale screening sub-projects in a more operational manner than with anenterprises to improve performance of public environmental assessment; (b) enhancing the pedagogical valueworks enterprises. Finance revenue- of raising local governments' awareness of the environmentalgenerating facilities, i.e., markets and bus soundness of their investment programs; and (c) promotingstations, if sound management of the facilities greater local involvement in the management of natural andis included in the municipal contract. environmental resources.

Integrated Health Address gender issues through reproductive Support to academic and continuing training Indirectly, address environmental causes.(FY98) health activities including maternal and child activities, recruitment of personnel and

health, family planning, AIDS and STD management system design and operation.prevention, and management of high riskpregnancies.

Energy Sector These projects address three gender issues: Projects will build community capacity for Promote environmentally sustainable supply and consumption ofAdjustment Credit women's time constraints, women's health, resource management. woodfuel and charcoal.(FY98) and women's low income-generating capacity.and Energy Sector The project will reduce women's timeInvestment constraints by reducing the need to collect(FY99) fuel; it will improve their health by supplying

cleaner fuel; and it will increase women'sincome by increasing theircontrol over fuel management.

Agric. Export No gender issues addressed. Support to private producers and their Assess potential impact on natural resources.Promotion professional organizations, mastery of product(FY98) quality, and focused training would lead to

important capacity building benefits.

Ag. Services This project addresses the specific The project will strengthen the capacities of The project will induce holistic range-land management withProducer Org. technological needs of women farmers. producer organizations, of the Ministry of herders' associations; it will generate and transfer technologies to(FY98) Agriculture, and of research and extension control land and water degradation, restore forest cover, and stop

services through training, communication, and the depletion of marine resources.consultant services.

Attachment VlPage 6 of 7

SENEGAL

Cross-cutting Issues to be addressed with IDA Lending Instruments(FY98-FY2000)

Project Gender Capacity Building Environment

Transport II This project addresses the limited access of Modernization of sector; promotion of small Integrated environmental consideration in road management.(FY99) women farmers to market places: and medium construction enterprises. Develop capacity to monitor impact on environment.

1. The rehabilitation and periodic Training center will provide skill training inmaintenance of rural roads opens up farm-to- all aspects of construction as well as seedmarket roads which benefits women because money for small associations to undertakemost of the farmers and most of the market initial activities.vendors are women.2. This project includes the preparation of theRural Transport Project. Representatives ofwomen's groups and associations willparticipate in preparatory workshops at thevillage, regional, and national level.

Ag Sector The project will support village level The project will strengthen the rural The project will finance land and water degradation controlInvestment investments in agroprocessing infrastructure. communities' capabilities and support the infrastructure (for example, antisalt small dams).(FY99) These mostly benefit women. Government's strategy of decentralization.Private Sector No gender issues addressed. Support to Competitiveness Review Group An ongoing project will help review government regulations for(FY99) (CRG) as well as to government institutions protecting environment from industrial pollution. The new

already provided under an ongoing private project might build on this review to strengthen environmentalsector capacity building project will continue protection.under the new operation.

Urban Transport Women are important users of public transport Will help in strengthening capacity of leasing Will help reduce traffic pollution in urban centers.Reform Project for access to markets and of health and social companies.(FY99) services. The increased efficiency of the

urban transport system will therefore benefitwomen.

Attachment VIPage 7 of 7

SENEGAL

Cross-cutting Issues to be addressed with IDA Lending Instruments(FY98-FY2000)

ProJect Gender Capacity Building Environment

Education Sector In basic, middle, and secondary education, Intensify capacity building in the areas of Support many literacy programs which include environmental(FY2000) target increased female enrollment and management and monitoring and evaluating protection/education components.

academic performance, in particular, the learning outcomes.performance of girls in basic education inrural areas.

Long-term Water - Project would ensure women's participation - Involve community based organizations - Support measures of groundwater and surface water protection,(FY2000) in decision-making process. (CBOs) in selection process, design, and in particular for non point pollution by fertilizers and pesticides

- Women would be primary target audience implementation of water supply and sanitation of the Lac de Guiers.for hygiene and sanitary education program. technologies. - Support environmental health education programs, including- Women would be actively involved with - Strengthen capacity in following areas: (i) public hygiene education, targeting on the positive effect ofNGO related activities. regulatory capacity to monitor private sanitation facilities on property values and on reduction of

operators; (ii) long term financial management prevalence of waterborne diseases.of sector; and (iii) water resourcemanagement.

Social Sector/WID Main target group will be women's groups. The project will help to address weak To be decided.(FY2000) Project will support the implementation of institutional capacity of entities dealing with

part of the Government's' five-year Action social actions. It will also help to build up thePlan for Women's Development. One project institutional capacity to manage the collectioncomponent will support income-generating and analysis of poverty and social data and theactivities of women's groups. establishment of an appropriate monitoring

system.Trade Adjustment No gender issues addressed directly. Project will have a component for training ofCredit trade officials, customs, and exporters.(FY2000)

Attachment VII

SENEGAL

Country Assistance Strategy

Standard Annexes

Annexes

Al Senegal at a GlanceB2 Selected Indicators of Bank Portfolio Performance and ManagementB3 Bank Group Program Summary, FY98-2000B4 Summary of Non-lending ServicesB5 Poverty and Social Development IndicatorsB6 Key Economic IndicatorsB7 Key Exposure IndicatorsB8 Status of Bank Group OperationsB9 CAS Summary of Development Priorities

i

Annex AlPage I of 2

Senegal at a glance 11t5197

Sub-POVERTY and SOCIAL Saharan Low-

Senegal Africa Income Development diamond,

Population mid-1996 (nimNons) 8.7 600 3,229GNP per capita 1996 (USS) 560 490 500 Life expectancyGNP 1996 (billions USS) 4.9 294 1,601

Average annual growth, 1990-6

Population (%) 2.7 2.7 1.7Labor force (%) .. 2.6 1.7 GNP / .0 Gross

Most recent estimate (batestyearavailable since 1989) per primarycapita enrollmentPoverly headcount index (% odpopulaIon)Urban population (% o totab populafton) 42 31 29Life expectancy at birlh (years) 50 52 63Infant mortality (per 1,000 MWm births) 62 92 69Child malnutrition (% of childen under 5) 20 .. .. Access to safe walerAccess to safe water (% ofpopulaton) 51 47 53Illiteracy (% of populaton age 15+) 67 43 34Gross primary enrollment (% orsdchoo-ae populatfon) 57 72 105 Senega/

Male 64 78 112 Low-IncomegtoupFemale 50 65 98

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1875 186 1996 1996

GDP (bilions US$) 1.9 2.6 4.9 5.2 Economic ratlosGross domestic InvestmentlGD1 17.8 10.5 15.6 16.5Exports of goods and services/GDP 36.6 29.7 31.7 30.8 Openness of economyGross domestic savings/GDP 12.5 -0.7 10.4 11.4Gross national savings/GDP 9.1 -5.9 9.5 10.0

Current account balance/GDP -10.2 -17.4 -6.1 -6.5Interest payments/GDP 1.0 2.0 1.2 1.9 Savings InvestmentTotal debtGWP 18.4 99.4 79.0 71.5 SvnTotal debt service/exports 5.8 20.7 17.6 14.5Present value of deWGDPPresent value of debt/exports

Indebtedness19769S 1988-96 1996 1996 1997-06

(average annual gowth)GOP 2.0 1.9 4.8 5.6 4.4 SenegalGNP per capita -1.1 -0.7 2.3 3.1 1.9 -Low-incorne gmupExports of goods and services 2.2 3.0 9.4 4.8 4.6

STRUCTURE of the ECONOMY1975 1986 1996 1996 Orowth rates of output and Investment (%)

(% of GDt'JAgriculture 26.9 16.5 18.0 18.5 30..Industry 20.3 15.6 17.1 16.9 20

Manufacturing 16.4 11.3 11.8 11.5 10Services 41.8 56.0 55.7 54.4 *0

Private consumption 72.2 83.9 78.4 78.2 20 2General govemment consumption 15.2 16.8 11.2 10.4Imports of goods and services 41.8 40.9 36.9 35.9 -G D --- GDP

(average annual growth) 197S-85 1986-96 1996 1996 Growth rates of exports and Imports (%)

Agriculture -1.4 1.5 -0.2 6.2 20 Industry 2.1 2.9 8.5 5.7 15'

Manufacturing 2.5 2.7 8.7 3.6 10\Services 3.1 1.8 3.5 3.3 5 \

Privateconsumption 3.0 1.0 3.1 6.1 0General govemment consumption 5.3 -2.7 -4.7 -0.8 -5 \ S 9204 95 9tGross domestic investmed -4.8 4.5 14.6 10.6 .10*Imports of goods and setvices 3.3 -0.3 5.5 6.5Gross national product 1.7 2.2 4.9 S.9 *-Expts -Imxorts

'The diamonds show four key Indiators In the counitry in bokd) compared with its income-group average. If dala are missing, the diamond willbe incomplete.

Annex AIPage 2 of 2

Senegal

PRICES and GOVERNMENT FINANCE

Domestic prices 1976 1985 1995 1996 Inflation (%)

(% change) 40

Consumer prices 31.7 13.0 8.1 2.8 30Implicit GDP deflator 11.5 9.1 7.6 2.8 20

Govemment finance 10j

(% of GOP) 0

Current revenue 18.9 18.2 16.9 15.6 -10 91 92 93 94 ss se

Current budget balance 2.6 -0.5 3.8 3.8 GDP der. C PI

Overall surplus/deficit -0.4 -3.5 -1.0 -1.1

TRADE

1976 1985 1995 1996 Export and import levels (mnill. USS)(miltins US$)

Total exports (fob) 503 515 969 986 1.60Fish 209 53 102 80 1400

Fuel #NIA 58 33 38 1 200

Manufactures 13 36 45 104 10001

Total imports (cif 612 904 1,383 1,440 S00

Food 190 197 394 398 am

Fuel and energy 46 173 138 176 .Capital goods 129 83 180 186 a3

Export price index (1987=100) 83 74 90 91 90 91 92 93 94 95 9g

Import price index (1987=100) 48 75 125 131 OExports rimportsTerms of trade (1987=100) 173 99 72 69

BALANCE of PAYMENTS

1975 1986 1996 1996 Current account balance to GDP ratio (%)(Millions US$):

Exports of goods and services 688 851 1,544 1,588 0

Imports of goods and services 782 1,165 1,797 1,852 90s 91 1921 93 94 95 96

Resource balance -94 -314 -253 -264 2

Net income -76 -127 -155 -130 |4

Net current transfers -24 -6 110 58

Current account balance,before official capital transfers -194 -447 -298 -337

Financing items (net) 189 434 380 390 .10

Changes in net reserves 5 14 -82 -54 -12

Memo:Reserves including gold (mill. USS) ... 16 283 303Conversion rate (localUS$) 214.3 449.3 499.1 511.6

EXTERNAL DEBT and RESOURCE FLOWS1976 1986 1996 1996 1,

(M011ons US$) Composition of total debt, 1996 (nill. USS)

Total debt outstanding and disbursed 349 2,563 3,845 3,686IBRO 10 89 35 24IDA 43 232 1,126 1,240

Total debt service 42 190 296 251 F 120 G: 48A: 24

IBRD 1 10 16 13 V .e1240IDA 0 4 14 17

Composition of net resource flows E: 1255Official grants 44 96 371 0Official creditors 39 130 48 96Private creditors 19 -5 -25 -30Foreign direct investment 23 -16 1 0 C c318Portfolio equity 0 0 0 0 0:6 82

World Bank program 3 2 2Commiments 31 25 219 42 A - IBRO E -Bilateral

Disbursements 19 33 70 89 B-IDA 0-Other mulrlateral F - PrivatePrincipal repayments 0 6 17 18 C-IMF G - Short-tern,Net flows 19 27 53 71

Interest payments 1 8 12 12Net transfers 18 19 41 59

Development Economics 12115197

Annex B2Page 1 of 1

Senegal - Selected Indicators ofBank Portfolio Performance and Management

Indicator 1995 1996 1997 1998

Port'olio Assessment

Number of Projects under implementation' 17 19 20 17Average implementation period (years)b 3.64 4.16 4.15 2.98Percent of problem projects"

by number 5.88 21.05 5.00 5.88by amount 5.43 29.36 2.76 3.15

Percent of projects at risk8 d

by number 29.41 62.50 7.14 5.88by amount 33.92 74.15 4.26 3.15

Disbursement ratio (/o)e 15.31 15.81 30.44 3.69

Portfolio Management

CPPR during the year (yes/no) YES (June 12-13, 1997) 6/97Supervision resources (total US$ thousands) 781.07 1,305.17 1,055.87 260.56Average Supervision (US$/project) 45.95 68.69 52.79 18.61

Memorandum item Since FY80 Last five FYs

Projects evaluated by OEDby number 57 20by amount (US$ millions) 1036 485

Percent rated U or HUby number 32 30by amount 28 38

a. As shown in the Annual Report on Portfolio Performance (except for current FY).b. Average age of projects in the Bank's country portfolio.c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP).d. As defined under the Portfolio Improvement Program.e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the

year: investment projects only.

Annex B3Page 1 of 3

Senegal - Bank Group Program Summary, FY 1998-2000

Proposed IBRD/IDA Base-Case Lending Program, FY 1992000'

Strategic rewardb ImplementationbFY Project USs(M) (HAM) risks (HML)

1998 ENERGY SEC. ADJ. 100.0 H HINTEGR.HEALTH S.DEV. (APL) 50.0 H MPILOT AG.EXP.PROMOT. 8.0 M LURB DEVT & DECEN PRO 75.0 H MAGRSERVICES&PROD.ORGS (APL) 47.0 H M

Subtotal 280.0

1999 AG. SECTOR INVEST. (APL) 30.0 M MENERGY SEC. INV. PRO (APL) 30.0 M LTRANSPORT II (APL) 55.0 M LURBAN TRANSPORT II 15.0 M LPRIVATE SECTOR DEV. 35.0 H L

Subtotal 165.0

2000 EDUCATION SECTOR (APL) 20.0 H MLONG TERM WATER SECT (APL) 40.0 M MTRADE REFORM ADJ. 35.0 H MSOCIAL DEVELOPMENT/WID 20.0 M M

Subtotal 115.0

Total, FY 1998-2000 560.0

a. This table presents the proposed program for the next three fiscal years.b. For each project, indicate whether the strategic rewards and implementation risks are expected to be high (H),

moderate (M), or low (L).APL = Adaptable Program Loan

Annex B3Page 2 of 3

Senegal - IBRDIIDA Lending Program

Past Current Planned'Category 1995 1996 1997 . 1998 1999 2000 2001

Commitments (US$m) 218.9 41.9 39.0 280.0 165.0 115.0 25.0

Sector (%)b

Agriculture 20.6 6.7 4.6 19.6 18.2 0.0 0.0Education 0.0 93.3 0.0 0.0 0.0 17.4 0.0Electric Pwr & Engy. 0.0 0.0 26.9 35.7 18.2 0.0 0.0Environment 0.0 0.0 13.3 0.0 0.0 0.0 0.0Multisector 19.7 0.0 0.0 0.0 21.2 30.4 0.0Popultn, Hlth & Nutn 8.3 0.0 38.2 17.9 0.0 0.0 0.0Public Sector Mgmt. 5.7 0.0 0.0 0.0 0.0 0.0 0.0Social Sector 0.0 0.0 0.0 0.0 0.0 17.4 0.0Transportation 0.0 0.0 16.9 0.0 42.4 0.0 100.0Urban Development 0.0 0.0 0.0 26.8 0.0 0.0 0.0Water Supply & Santn 45.7 0.0 0.0 0.0 0.0 34.8 0.0

TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Lending instrument (%)Adjustment loansc 40.3 6.7 4.6 42.9 0.0 24.1 0.0Specific investment loans and others 59.7 93.3 95.4 57.1 0.0 75.9 0.0

TOTAL 100.0 100.0 100.0 100.0 0.0 100.0 0.0

Disbursements (US$m)Adjustment loansc 35.0 34.8 22.5 0.0 0.0 0.0 0.0Specific investment loans and others 35.5 54.4 90.9 * 12.3 43.9 32.6 20.7

Repayments (US$m) 17.2 17.1 15.5 6.4 0.0 0.0 0.0Interest (US$m) 12.2 11.3 10.5 4.7 0.0 0.0 0.0

* Ranges that reflect the base-case (i.e., most likely) Scenario. For IDA countries, planned commitments are not presented by FY but as athree.-year-total range; the figures are shown in brackets. A footnote indicates if the pattern of IDA lending has unusual characteristics(e.g., a high degree of frontloading, backloading, or lumpiness). For blend countries, planned IBRD and IDA commitments are presentedfor each year as a combined total.

b For future lending, rounded to the nearest 0 or 5%. To convey the thrust of country strategy more clearly, staff may aggregate sectors.C Structural adjustment loans, sector adjustment loans, and debt service reduction loans.

Annex B3Page 3 of 3

Senegal - IFC and MIGA Program, FY95-98

PastCategory 1995 1996 1997 1998

IFC approvals (US$m)a 0.00 1.37 18.85 0.00

Sector (°/O)

0.00 0.00 0.00 0.00Financial Services 0.00 100.00 0.00 0.00Food & Agro-Business 0.00 0.00 10.00 0.00Infrastructure 0.00 0.00 90.00 0.00Manufacturing 0.00 0.00 100.00 0.00

TOTAL 0.00 100.00 100.00 0.00

Investment instrument (°)Loans 0.00 0.00 80.00 0.00Equity 0.00 13.00 8.00 0.00Quasi-Equity b 0.00 0.00 8.00 0.00Other 0.00 87.00 4.00 0.00

TOTAL 0.00 100.00 100.00 0.00

MIGA guarantees (US$m) 0.00 0.00 0.00 0.00MIGA commitments (US$m) 0.00 0.00 0.00 0.00

'Excludes AEF projects.bIncludes quasi-equity types of both loan and equity instruments.

I II

AnneLB4Page 1 of 1

SenegalSummary of Nonlending ServicesProduct Coœyleron Cost Aidience" Objective"

FY (USooo)

Underway

Country Assistance Strategy 98 136.1 Bank, Government, Donors, Knowledge generation, problem solving,publicdissemination public debate

Consultative Group 98 78.6 Bank, Government, Donors Knowledge generation, problem solvingPublic Expenditure Review 98 156.2 Bank, Government, Donors Knowledge generaion, problem solvingSenegal-The Challenge of Intemnational Integration 98 8.2 Bank, Govemment, Donors, Knowledge generation, problem solving,

public dissemination public debateThe Costs of Trade Reform 98 40.0 Bank, Government, Donors Knowledge generation, problem solvingRural Poverty Alleviation (Food Security) 98 42.2 Bank, Govemment, Donors Knowledge generation, problem solvingNational Environmental Action Plan (NEAP) 98 22.0 Bank, Government, Donors Knowledge generation, problem solvingIDF Civil Service Reform 98 37.5 Bank, Government Knowledge generation, problem solvingCountry Dialogue/General Economic Workd 98 133.8 Bank, Government, Donors Knowledge generation, problem solving,

policy dialogue

Planned in FY99

Financial Sector Reform 99 110.0 Bank, Government Donors Knowledge generation, problem solvingPoverty Monitoring System Support 99 80.0 Bank, Govemment, Donors Knowledge generation, problem solvingSocial Risks and Women in the City of Dakar 99 15.0 Bank, Government, Donors Knowledge generation, problem solvingCountry Dialogue/General Economic Work 99 150.0 Bank, Government, Donors Knowledge generation, problem solving,

policy dialogue

Planned FY2000

Promotion of Private Investment 2000 110.0 Bank, Govemrnent, Donors Knowledge generation, problem solvingIDF Support to Environmental Action Plan 2000 60.0 Bank, Government, Donors Knowledge generation, problem solvingPoverty Monitoring System Support 2000 40.0 Bank, Goverment Donors Knowledge generation, problem solvingCountry Dialogue/General Economic Work 2000 175.0 Bank, Govenmment, Donors Knowledge generation, problem solving

a. Government, donor, Bank, public dissemination.b. Knowledge generation, public debate, problen-solving.

Annex B5Pag, I of 2

Senegal - Poverty and Social Development Indicators

Most Sane regiondncome group NextLatest singleyear recent Sub- higher

Unit of estimote Saharan Low- incomeIndicator measure 1970-75 1980-85 1989-94 Africa income group

Priority Poverty Indicators

POVERTVUpper poverty line local curr. . _ _ _ _

Headcount index % of pop. _ _ Lower povertv line local curr. -- -

Headcount index % of pop.

GNP per capita US$ 380 370 610 500 390 1,670

SHORT TERM INCOME INDICATORSUnskilled urban wages local curr.Unskilled rural wages -- - -- _ _Rural terms of trade

Consumer price index 1987=100 40 98 128 -- -- --Lower income -- _Food - 21 -- -- -- -- --

Urban -- -- 102 95Rural

SOCIAL INDICATORSPublic expenditure on basic social services % of GDP - -- --Gross enrollment rationsPrimary %schoolagepop. 41 56 58 71 105 104

Male -- 48 67 67 77 112 105Female -- 34 46 50 64 98 101

MortalityInfant mortality per thou. live births 122 97 64 92 58 36Under 5 mortality - 99 161 101 47

ImmunizationMeasles % age group - 40.0 45.0 51.4 86.2 77.4DPT - 54.0 54.0 53.5 89.1 82.0

Child malnutrition (under-5) - - 20.1 - 38.2 -Life expectancy

Total years 43 45 50 52 63 67Female advantage - 2.0 3.3 2.0 3.5 2.4 6,4

Total fertility rate births per woman 6.5 6.7 5.8 5.9 3.3 2.7Maternal mortality rate per 100,000 live -- - 510 - - -

Supplementary Poverty Indicators

Expenditures on social security % of total gov't exp. 5.3 6.9 -- -- --Social security coverage % econ. active pop. - - - --Access to safe water: total % of pop. - 52.7 49.0 -

Urban -- 56.0 79.0 84.0 - --Rural -- - 38.0 26.0 - - --

Access to health care _ - 40.0 -

Population growth rate GNP per capita growth rate Development diamondbi 6_ (average annual. percent) I (avergeannual,percent) Life expectancy

4 , 1 1~~~~~~0 IT (average percent

14

| i r-4 RH I O i i * | ~~~~~~~~~~~~~~~~GNP pGnrossy

I L............J ~ ~~ ~~~~~~~~~L_j perpray

i o LL l ' l { i 2 l | -5 capita enrollment

0~~~~~~~~~~~~1

l 970.5 Access to safe water1970-75 1980-85 1989-94 1970-75 1980-85 1989.94

z Senegal - SenegalLow-income - Low-income

b. The development diamond. based on four key indicators, shows the average level of development in the country compared with itsincome group.

Annex B5Page 2 of 2

Senegal - Poverty and Social Development Indicators

MOet Sm regionfmcemerop NdLtesingleear recen Srb- hiha

Unkof Saaran Lo% incomeIndictor mems" 1970-75 198945 1989-94 Africa nco gre

Resources and Expenditures

HUMAN RESOURCESPOpulation (mre-1994) thousands 4,806 6,375 8,263 571,902 3,182,221 1,096,881Age dependency ratio ratio 0.94 0.94 0.96 0.94 0.66 0.63Urban % of pop. 34.2 37.9 41.8 30.6 28.3 55.9Population growth rate annual %K 2.9 2.9 2.6 2.8 1.7 1.3

Urban - 3.4 4.0 3.8 4.9 3.2 2.7

Labor force housands 2,242 2,823 3,630 254,250 1,590,533 4SS,647Agriculture % of labor force 82 79 77 65 67 36Industry - 6 7 8 9 14 26Femnle - 42 42 42 41 39 40Labor participation rates

Total % ofpop. 47 45 44 44 50 45Female - 20 19 19 37 41 36

NATURAL RESOURCESArea thou. sq. kn 196.72 196.72 196.72 24,273.83 40,391.42 40,594.43Density pop. per sq. km 24.43 32.41 40.94 22.90 77.44 26.66Agricultural land % land area 28.31 28.31 28.31 50.61 52.42 41.05Ch.ange in agricultural land annual % 0.00 0.00 -0.02 0.01 0.16 -1.38Agricultural landunder iigation % 1.43 1.65 1.30 0.86 17.84 11.40Forests and woodland thou. sq. km - 80.63 75.44 5,323.14 7,632.00 5,969.25Deforestation (net) % change, 1980-90 - - 0.00 - - -

INCOMEHousehold income

Share oftop 20% of households % of income - - 59 - -Share of bottom 40% of households - - - 10 - -Share of bottom 20% of households - - - 4 - -

EXPENDITUREFood % of GDP - 42.4 - - - -

Staples _ - 13.0 _ _ _ _Meat, fish, milk, cheese, eggs - - 14.3 - - -

Cereal imports thou. metric tonnes 220 557 579 14,051 36,922 68,936Foodaidincereals - 27 131 71 5,079 8,516 5,771Foodproduetionprcapita 1987=100 158 82 78 102 115 102Fertilizer consumption kg/ha 8.7 3.8 4.6 5.3 58.5 46.3Share of agriculture in GDP % of GDP 30.2 18.8 17.2 19.5 27.6 14.0Houing % of GDP - 9.8 - - - -Average household size persons per household - -

Urb - 7.6 - - _ _ _Fixed investment: housing %ofGDP - 3.9Fuel and power % of GDP - 3.6 - - - -Energyconsumptionpercapita kgofoilequiv. 137 123 102 251 373 1,602Households with electricity

Urban % of households - - - - - -Rural

Transport and conmusuteatlon % of GDP - 4.7 - -Fixed mvesmenit tansport equipment - - 1.3 - -Total road length thou. kn 14 14 15 -

INVESTMENT IN HUMAN CAPITALHealthPopulationperphysician persons 16,278 13,038 31,903 - - 3,064Populationper nurse - 1,675 2,024 4,246 - -Population per hospital bed - 775 - 13,306 1,316 1,034 592Orl rehydration therapy (under-5) % of cases - - 27 37 38 -EduationGross enrollment ratiosSecodary % of schoolage pop. 10 14 11 24 48 63

Female - 6 9 7 23 42 62Pupil4eacher ratio: prinary pupils per teacher 42 46 59 40 39 -Pupil4acherratio:aecondary - 29 35 34 - 20Pupils reaching grade 4 % of cohort - 90 92 -Repeaterrate: pnmary % oftotal enrolL I8 16 16 - -Illiwacy %of pop. (age 15+) - 68 62 53 35

Female %offem. (age 15+) - 81 77 54 46 -Newspaper circulation per thou. pop. 5 S 6 12 - 236

World Bank Inenional Economics Departt, April 1996

Annex B6Page 1 of 3

Senegal - Key Economic Indicators

Actual Estimated ProjectedIndicator 1993 1994 1995 1996 1997 1998 1999 2000

National accounts(as % GDP at currentmarket prices)

Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Agriculture 17.2 18.4 18.0 18.5 17.3 17.2 17.2 17.1

Indastrya 16.6 16.7 17.1 16.9 17.1 17.3 17.4 17.5

Services 56.7 56.6 55.7 54.4 54.7 54.5 55.3 55.0

Total Consumption 95.1 92.6 89.6 88.6 88.2 86.9 86.1 85.6Gross domestic fixed 13.2 13.7 15.6 16.3 16.7 17.3 18.3 19.0investment

Government investment 4.1 4.6 4.8 4.8 5.1 6.2 5.5 5.5Privateinvestment 9.1 9.0 10.8 11.4 11.3 11.1 12.8 13.5

(includes increase instocks)

Exports (GNFS)b 21.5 32.8 31.7 30.8 30.8 30.7 30.1 29.7Imports (GNFS) 29.8 39.0 36.9 35.9 35.4 34.8 34.6 34.3

Gross domestic savings 4.9 7.4 10.4 11.4 11.8 13.1 13.9 14.4Gross national savingsc 3.0 7.2 9.5 10.0 10.3 11.5 12.4 13.1

Memorandum itemsGross domestic product 5603 3882 4868 5156 4856 5197 5680 6101(US$ million at currentprices)Gross national product per 720.0 610.0 580.0 540.0 570.0 580.0 590.0 620.0capita (US$, Atlas method)

Real annual growth rates(%, calculated from 1987prices)Gross domestic product at -2.1% 2.0% 4.8% 5.6% 4.7% 4.8% 4.8% 4.8%market pricesGross Domestic Income -2.8% 1.8% 4.2% 6.0% 5.2% 5.1% 4.7% 4.7%

Real annual per capitagrowth rates (%/o, calculatedfrom 1987 prices)

Gross domestic product at -4.6% -0.6% 2.3% 2.8% 1.9% 2.0% 2.0% 2.0%market pricesTotal consumption -3.8% -5.7% -1.3% 2.2% 1.9% 1.0% 0.8% 1.2%Private consumption -2.4% -3.8% -0.3% 3.1% 2.1% 1.5% 1.2% 1.2%

(continued)

A=ex B6Page 2 of 3

Sene8d - Key Economic Indicators

(Coti#ned)

-Actual Estimate ProjectedIndicator 1993 1994 1995 1996 1997 1998 1999 2000

Balaince of Payments(US$m)

Exports (GNFS)b 1203.6 1272.0 1543,8 1587.5 1494.0 1593.S 1711.8 1814.4Merchandise FOB 707.4 790.9 968.$ 986.2 937.9 1006.6 1079.4 1142.1

Imports (GNFS)b 1668.0 1514.6 1796.8 1851.6 1719.3 1808.4 1964.2 2093.2Merchandise FOB 1086.7 1022.0 1217.2 1267.5 1179.4 1245,7 1355.2 1445.7

Resource balance -464.4 -242.6 -253.1 -264.1 225.3 -214,9 -252.4 -278.7Netcurrenttransfers 27.5 133.8 110.2 57.9 41.6 21.9 22.9 24.2(including official currenttransfers)Current account balance -279.3 3.2 25.4 63.7 -47.2 -49.8 -71.3 -94.2(after official capital grants)

Net private foreign direct .1.0 95.1 28.7 8.2 129.9 18.9 18.8 20.0investmentLong-term loans (net) 4.9 -22.8 10.8 66.3 82.7 49.5 92.8 127.0Official 100.3 18.5 48.0 95.9 103.3 77.2 121.5 .154.7Private -95.4 -41.3 -37.2 -29.6 -20.6 -27.7 -28.7 -27.7

Other capital (net, including 163.5 164.9 68.3 43.0 13.1 0.0 0.0 0.0errors and omissions)Change in reserves 112.0 -240.5 82.3 -53.8 -178.4 -18.6 -40.2 -52.8

Memorandum itemsResource balance (% of -8.3% -6.3% -5,2% -. 1°% -4.6% -4.1% -4.4% -4.6%GDP at current marketprices)Real annual growth rates(1987 prices)Merchandise exports -4.6%0 8.1% 7.7% 5.4% 1.5% 5SQ% 4.5% 4.5%(FOB)Primary -4.5% 17.4% 7,3% 4.0% -1.8% 4.8% 3.9% 3.90/oManufactures 22.0% 17.3% 9.9%/0 0.0% 5.5% 4.0% 4.0% 4.0%

Merchandise imports -4.6% -5.8% 1.8% 4.4% 0.6% 4.8% 5.3% 5.1%(CIF)

Public finance(as % of GDP at currentmarket prices)eCurrent revenues 16.2 16.5 16.9 15.6 15.3 15.3 14.8 15.1Currentexpenditures 15.7 14.8 13,0 11.9 11.5 11.0 11.3 11.2

(Continued)

Annex B6Page 3 of 3

Senegal - Key Economic Indicators

(Continued)

Actual ~~~~~stimate ~~~~Projected-Indicator 1993 1994 1995 1996 1997 1998 1999 2000

Current account surplus (+) 0.5 1.7 3.8 3.8 4.2 4.3 3.5 3.8or deficit (-)Capital expenditure 4.1 4.6 4.8 4.8 5.1 6.2 5.5 5.5Foreign financing 1.5 10.1 4.5 2.5 1.7 2.3 2.8 1.5

Monetary indicatorsM2/GDP (at current market 21.2 21.5 20.5 20.5 20.9 21.3 2-1.3 21.3prices)Growth of M2 (%/0) -12.6 37.8 7.7 8.4 9.3 9.6 7.1 7.5Private sector credit growth l 670.0 143.2 ., 130.6 -16.5 125.0 222.7 264.9total credit growth (°/0)

Price indices (1987 =100)Merchandise export price 77.5 80.2 91.2 88.1 82.8 84.6 86.8 87.9indexMerchandise import price 107.3 107.1 125.2 124.9 116.3 117.2 121.0 122.9indexMerchandise terms of trade 72.3 74.9 72.8 70.6 t1.2 72.2 71.7 71.5indexReal exchange rate 81.8 53.1 57.6 57.9 65.5 65.5 64.5 64.6(US$1CFAF)Real interest ratesConsumer price index -0.6% 32.0%/e 8.1% 2.8% 2.4%/o 1.9% 2.7% 2.5%(% growth rate)GDP deflator 0.4%/o 33.2% 7.6Y% 2.8% 2.5% 2.5% 2.5% 2.5%(% growth rate)

a. GDP components are estimated at factor cost, To add up to 100, taxes should be added.b. "GNFS" denotes "goods and nonfactor services."c. Includes net unrequited transfers excluding official capital grahts.d. Includes use of IMF resources.e. This refers only to the central governnent.

Annex B7Page 1 of 1

Senegal - Key Exposure Indicators

Actual Estimate ProjectedIndicator 1993 1994 1995 - 1996 1997 1998 1999 2000

Total debt outstanding and 3765.6 3658.7 3845,3 3685.7 3378.6 3287.4 3229.7 3243.2

disbursed (TDO) (US$m)a

Net disbursements (US$m)a 70.3 84.0 54.2 42.3 60.8 -24.3 47.8 91.1

Total debt service (TDS) 119.9 222.8 255.3 295.1 285.1 278.0 257.3 271.0

(US$m)'

Debt and debt service indicators

(%/0)TDO/XGSb 274.7 261.4 227.7 212.6 207.8 188.7 173.0 164.8

TDO/GDP 67.2 94.3 79.0 71.5 69.6 63.3 56.9 53.2

TDS/XGS 8.7 15.9 15.1 17.0 17.5 16.0 13.8 13.8

ConcessionaYlTDO 0.0 0.0 0.0 0.0 69.0 72.0 74.6 77.8

IBRD exposure indicators (°/0)

IBRD DS/public DS 16.8 7.8 6.8 4.6 3.6 3.0 2.4 1.1

Preferred creditor DS/public 89.9 90.5 71.2 52.1 58.4 56.6 50.9 42.8

DS

IBRD DS/XGS 1.2 1.1 0.9 0.7 0.6 0.5 0.3 0.2

Share of IBRD portfolio

IFC (lJS$m)

Loans 3.0 3.0 3.0 3.6 4.6 17.7

Equity and quasi-equity /c .. .. 0.3 0.7 1.1 4.1

MIGA

MIGA guarantees (US$m) .. .. .. .. .. ..

a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short-

term capital.

b. "XGS" denotes exports of goods and services, including workers' remittances.

c. Includes equity and quasi-equity types of both loan and equity instruments.

Annex B8Page 1 of 2

Status of Bank Group Operations in SenegalIBRD Loans and IDA Credits in the Operations Portfolio

(as of November 30, 1997)

Difference Betweenexpected

Original Amount in US$ Millions and actual Last ARPPLoan or Fiscal disbursements a/ Supervision Rating b/

Project ID Credit No. Year Borrower PurposeIBRD IDA Cancella- Undis- Orig Frm Rev'd Dev Obj Imp Prog

tions bursed

Number of Closed Loans/credits: 90

Active LoansSN-PE-2339 IDA 18680 1988 REPUBLIC OF SENEGAL INDUSTRY SECTOR 0.00 33.00 0.00 5.60 3.96 3.77 S S

SN-PE-2327 IDA 19920 1989 GOVERNMENT OF SENEGAL SMALL RURAL OPS. II 0.00 16.10 0.00 5.74 5.50 0.00 U U

SN-PE-2331 IDA21080 1990 REPUBLIC OF SENEGAL AG. SERVICES 0.00 17.10 0.00 1.50 .53 .53 S S

SN-PE-2342 IDA 22660 1991 GOVERNMENT OF SENEGAL TRANSPORT SEC. SECAL 0.00 65.00 0.00 14.91 9.27 9.04 S S

SN-PE-2357 IDA 24730 1993 GOVERNMENT OF SENEGAL HUMAN RES DEV'T 11 0.00 40.00 0.00 14.75 -5.54 0.00 S S

SN-PE-2376 IDA 27590 1995 GOVERNMENT OF SENEGAL PRIV.SCTR.CAP.BLDG 0.00 12.50 0.00 7.84 2.90 .13 S S

SN-PE-2346 IDA 27580 1995 REPUBLIC OF SENEGAL WATER SECTOR 0.00 100.00 0.00 81.85 57.48 41.49 S S

SN-PE-35615 IDA27230 1995 GOVERNMENTOFSENEGAL COMMNUTRMON 0.00 18.20 0.00 13.04 8.51 4.48 HS HS

SN-PE-35621 IDA 28730 1996 GOVERNMENT OF SENEGAL PILOT FEMALE LITERAC 0.00 12.60 0.00 9.57 -1.93 0.00 S S

SN-PE-2373 IDA 28720 1996 GOVERNMENT OF SENEGAL HIGHEREDUCI 0.00 26.50 0.00 22.86 .70 0.00 S S

SN-PE-46648 IDA 29720 1997 OMVS REGIONAL POWER 0.00 10.50 0.00 10.50 0.00 0.00

SN-PE-46768 IDA 29630 1997 GOVERNMENT OF SENEGAL SUST.PART.ENGY.MGMT. 0.00 5.20 0.00 5.18 0.00 0.00

SN-PE-41567 IDA29510 1997 GOVERNMENT OF SENEGAL ENDEMIC DISEASES 0.00 14.90 0.00 14.15 .25 0.00 HS HS

SN-PE-44383 IDA N0240 1997 REPUBLIC OF SENEGAL URBAN TRANS REF TA 0.00 6.60 0.00 6.68 0.00 0.00

SN-PE-2369 IDA 29850 1998 GOVERNMENT OF SENEGAL INTEGR.HEALTH S.DEV. 0.00 50.00 0.00 48.96 0.00 0.00

SN-PE-2365 IDA 30060 1998 GOVERNMENT OF SENEGAL URBAN DEV.& DECENTR. 0.00 75.00 0.00 75.28 0.00 0.00

SN-PE-51610 IDA 30170 1998 GOVERNMENT OF SENEGAL PILOTAGEXPORT PROM. 0.00 8.00 0.00 8.00 0.00 0.00

Total 0.00 511.20 0.00 346.41 81.63 59.44

Active Loans Closed Loans TotalTotal Disbursed (IBRD and IDA): 155.00 1,187.68 1,342.68

of which has been repaid: 0.00 170.21 170.21Total now held by IBRD and IDA: 511.20 974.62 1,485.82Amount sold 0.00 5.46 5.46

Of which repaid : 0.00 5.46 5.46Total Undisbursed : 346.41 6.30 352.71

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.b. Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system was introduced (HS = highly satisfactory, S =satisfactory, U = unsatisfactory, HU = highly unsatisfactory): see proposed Improvements in Project and

Portfolio Performance Rating Methodology (SecM94-90 1), August 23, 1994.

Annex B8Page 2 of 2

SenegalSTATEMENT OF IFC's

Committed and Disbursed PortfolioAs of 30-Nov-97

(In US Dollar Millions)

Committed IDisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic1980 BHS 0.00 .46 0.00 0.00 0.00 .46 0.00 0.001981/88 ICS 3.00 0.00 0.00 0.00 3.00 0.00 0.00 0.001994/96 SOGECA 0.00 .33 0.00 0.00 0.00 .28 0.00 0.001996/97 AEF SERT .63 .43 0.00 0.00 .63 .39 0.00 0.001997 SEF NBA SA 1.87 0.00 0.00 0.00 1.87 0.00 0.00 0.00

Total Portfolio: 5.50 1.22 0.00 0.00 5.50 1.13 0.00 0.00

Approvals Pending Commitment

Loan Equity Quas Parti1997 GTI DAKAR 13.09 1.50 1.51 0.00

Total Pending Commitment: 13.09 1.50 1.51 0.00

Notes:BHS = Bank Habitat du Senegal (financial)SOGECA = Societe generale de credit automobiles (financial)SERT = Societe d'exploitation des ressources thonneres (fishery)ICS = Industrie chimiques de S6negal (Fertilizer)AEF = Africa Enterprise Fund

Annex B9Page 1 of 1

Scuegal-CAS Summary of Development Priorities

Poverty Reduction &Economic Management........................... . . . ....._..............-....................................................................* Poverty reduction fair Essentiall rurl poverty, but high urban high high

-.. . . . . . . .. . . .. . . . . . ..unemployment.

* Economic policy very good I Taxation system that hampers competition high high(private sector) and affects economic growth.New tariff reform to simplify trade regime andreduce protection.

* Public sector good Public savings to release financial resources-to moderate moderate IeF leadingprivate sector and address poor social indicators. on macro & fiscal

reforms* Gender iverygood LFemaleaccess toIeducation,IhealthF& planning high high

family services, and legal status of women.

Human DevelopmentDepartment......... .............. ....... ........ . .._.......* Education ygood Accesstoprim &yotherlevelsofeducation high high

within a sustainable financial framework..................... ......................................................................... _ . .........................* Health,nutritiont & good Institutional base for health care. Access to basic high high

population health care and referral services.'------------- -- ----- -- -----.- -4 , .............. ....,............... ..... ......... .......................* Social protection , fair ,Effortsinsocialprotection. Integrated family .moderate i moderate

planning............................ ........................................................................................... ........................ ............. .........................

Environmentally & *Socially SustainableDevelopment..... i i w ;i .................................................................................. ........................4,;j * Ruraldevelopment .fair jImprove quality of ruralinfrastructure. Extend moderate o

use of safe water and electricity.* Environment i good Improve management of natural resources. moderate moderate Other donors taking

Increase capacity to enforce environmental the lead but Bankregulations. fully involved.....................................................................................................................................................................................

I * Social development * very good I Improve health services and education sector. I high I high

...................................................... .................----.-.-----------'---------------------. ............................................................... ............. .... .....

Finance, Private Sector& Infrastructure

* Firancial sector good Reinforce financial instruments & services. high high................ ................. ............... I.................................................................................... . ......................................... 4:::

* Private sector jifair to good Government arrears that hamper Private Sector moderate highactivities.

* En;ergy & mining 3 very good Deficit of power generation capacity. Subsidies high high. .i.of uneconomic refinery, and costs of energy........... ...................... ........................... ............................................

* Infrastructure . ... good . Poor quality of rural infrastructure. Planning, . high highfinancing, development and maintenance of ruralroads. Poor management of Road Fund.

a. Use "excellent," "good," "fair," or "poor.'b. Indicate principal country-specific problems (e.g., for poverty reduction, "'rural poverty;" for education, "female secondary completion;" for

environment, "urban air pollution").c. To indicate priority, use "low," "moderate," or "high."d. Give explanation, if priorities do not agree; for example, another MDB may have the lead on the issue, or there may be ongoing dialogue.

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