Doum Of

The World Bank

FOR OFFICiAL USE ONLY

Ce ~~~~Le

Report No. P-4442-RW

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT OF SDR 5.9 MILLION

TO THE

REPUBLIC OF RWANDA

FOR A

SECTORAL AND PREINVESTMENT STUDIES PROJECT

April 23, 1987

IThis document has a restricted distribution and mkay bc used by recipients only in the performance lof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.|

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CURRENCY EgUIVALENTS

Currency Unit = Rwanda Franc (RWF)US$ 1.00 - RWF 89.90 (average first 8 months 1986)

WEIGHTS AND MEASURES

1 meter (m) = 3.28 feet1 kilometer (km) 0 0.62 miles1 square kilometer (km2) = 0.386 square miles1 square meter (m2) = 10.76 square feet1 cubic meter (m3) = 1.13 cubic yards1 metric ton (ton) = 2,204 pounds

FISCAL YEAR

Government of Rwanda : January 1 - December 31

GLOSSARY OF ABBREVIATIONS AND ACRONYMS

ADETEF Association for the Development of Technical Exchange inEconomics and Finance

BNR National Bank of RwandaBUNEP National Bank for the Study of ProjectsCEM Country Economic MemorandumCIC Interministerial Coordinating CommitteeIMF International Monetary FundMINIFINECO Ministry of Finance and EconomyMINIPLAN Planning MinistryMINIPRISEC Ministry of Primary and Secondary EducationNGO Non-Government OrganizationPE Public EnterprisePEP Public Expediture ProgramPIP Public Investment ProgramSOE Statement of ExpendituresSOMIRWA Mining Corporation of RwandaTA Technical AssistanceUN United NationsUNDP United Nations Development Program

FOR oMCUL USE ONLY

REPUBLIC OF RWANDA

Sectoral and Preinvestment Studles Project

Credit and Prolect Summary

Borrower: Republic of Rwanda

ImplementingAgency: Ministry of Planning

IDA Creditamount: SDR 5.9 million (US$ 7.4 million)

Term: Standard IDA Terms

ProiectDescription: The project consists of assistance to:

a) carry out the identification, preparation and executionof sectoral and preinvestment studies;

b) train selected staff in (i) the preparation,implementation and monitoring of a rolling PublicInvestment Program; and (ii) project preparation andappraisal;

c) complete installation of a Documentation Center; and

d) provide logistical support related to the above.

Benefits: The project would result in preparation of sector strategies,production of a portfolio of well prepared projects ready forsubmission to financing sources and avoidance of unviableinvestments. More importantly, through its formal trainingcomponent reinforced by systematic on-the-job training, theproject would improve local capabilities for preparation andappraisal of investment projects and for investmentprogramming so that after project completion, only highlyspecialized short term expertise would oceLsionally berequired. The mechanisms set up to prepare new projectsunder the Credit would help strengthen the institutionsinvolved across Government, better equip the Ministry ofPlanning to perform its coordinating functions, and shouldimprove, in the long run, the institutional framework foroverall investment programming. This would give Rwanda thecapacity and technical competence necessary to translate itsplanned priorities into coherent investment programs.

Risks: There are risks that some of these benefits will not fullymaterialize if the work of the General Directorate ofPlanning and the General Directorate of Projects within theMinistry of Planning is not well coordinated. These riskswere minimized through provision of assistance to thePrograms Directorate, which should help improve its specific

This document has a restcted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclmsd without World Bank authorization.

contribution to the planning and programming process, andthrough strengthening of the procedures for handlingpreinvestment studies, which should provide a reasonableframework for integrating the work of the two Directorates.Moreover, these risks are expected to diminish over the lifeof the project as procedures are further tested, modified andaccepted.

Estimated Costl(in US$ thousands)

Local Foreign TOTAL

a. Preinvestment Studies 1,079.0 6,765.0 7,844.0b. Training 100.0 150.0 250.0c. Documentation Center 10.0 40.0 50.0d. Vehicles and Equipment 10.0 80.0 90.0

TOTAL BASE COST 1,199.0 7,035.0 8,234.0

e. ContingenciesOf Which: Physical 2.0 14.0 16.0

TOTAL PROJECT COST 1,201.0 7,049.0 8,250.0

(15Z) (85Z) (100%)

Financing Plan Local Foreign Total(in USS thousands)

Government 854.0 854.0 (10%)IDA 347.0 7,049.0 7,396.0 (90%)Total 1,201.0 7,049.0 8,250.0 (100%)

(15%) (85%) (100%)

Disbursements(US$ millions)

IDA FY 1988 1989 1990 1991 1992 1993 1994

Annual 2.0 1.5 1.5 1.0 0.8 0.5 0.1Cumulative 2.0 3.5 5.0 6.0 6.8 7.3 7.4

Rate of Return: NIA

Staff Appraisal Report: No separate Staff Appraisal Report has beenprepared for this project.

11 All items would be exempt from import duties and local taxes.

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS

ON A PROPOSED CREDIT TO THE REPUBLIC OF RWANDAFOR A SECTORAL AND PREINVESTMENT STUDIES PROJECT

1. .1 submit the following report and recommendation on a proposeddevelopment credit to the Rwandese Republic for the equivalent of SDR 5.9million (US$ 7.4 million) on standard IDA terms to help improve Rwanda'spreinvestment capabilities.

PART I - THE ECONOMY

2. A Country Economic Memorandum (Report No. 6191-RW) was distributed tothe Executive Directors on November 21, 1986. Country data are provided inAnnex I.

A. Background

3. Rwanda's salient characteristics include its small size, an annualpopulation growth rate of 3.5 percent (ranking among the highest inAfrica), a population density (in terms of arable land) of up to 500 persquare km in some regions (ranking among the highest in the world), hillyterrain and high average altitude, a landlocked position, lack of naturalresources (including a serious shortage of arable land), underdevelopedphysical and institutional infrastructure, and a very low level ofdevelopment as measured by a variety of social as well as economicindicators. These indicators include a per capita income of about US$ 270(19B4), among the lowest in the world; an average life expectancy of 47years; and an adult literacy rate of 37 percent.

4. The country is heavily dependent on agricultural exports (coffee,tea, pyrethrum, cinchona), which provide 75 percent of its foreign exchangeearnings. Rwanda's manufacturing base is narrow, and the growth of modernmanufacturing is limited by the small size of the market and the lack ofraw materials, marketing facilities, entrepreneurial skills, and skilledmanpower. The country, consequently, imports capital goods, steel,petroleum products, cement and other construction materials, and virtuallyevery modern consumer product. Its merchandise trade is hampered by hightransportation costs and dependence on neighboring countries for access tothe sea ports of Mombasa and Dar-es-Salaam.

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5. Despite these constraints, Rwanda has wade a creditable effort towardeconomic and social development. During the 1976-80 period, the countrymanaged to satisfy its subsistence needs and to make important advances notonly in agriculture but in other fields such &A education, health, watersupply, and small-scale industry. It succeeded in building basic transportand communication infrastructure, and set in place a state administrativeapparatus serious about development. These achievements reflect theGovernment's commitment to economic and social progress, as well as itsprudent fiscal, balance of payments and debt management policies. At thesame time, Rwanda has been able to attract substantial volumes of externalaid from a great diversity of sources, confirming donor perceptions thatGovernment is indeed development-oriented and is pursuing generallyappropriate objectives. The Government's efforts during this period weresignificantly helped by favorable weather conditions and the coffee boom ofthe late 1970's.

6. Achievement and good fortune notwithstanding, development efforts inRwanda have not alleviated the fundamental problems which continue tocompromise development prospects: population growth, increasingly at oddswith land availability, an undiversified economic structure, Government'slimited capacity to provide social services, and the economy's inability togenerate jobs either outside or within the rural sector. Though foodcropoutput has, at least, kept pace with population growth, it has apparentlydone so at a cost to the land's long-term fertility. Agricultural land usein Rwanda has reached a point where there is little fallow or grazing arealeft. The rapidly growing population has resulted in serious deforestation,accompanying erosion, and has required the cultivation of marginal landswith a fragile ecology. Concomitant with these adverse trends has been adeterioration of nutritional standards induced by the shift to traditionalhigh-yield, high-calorie, but low-protein crops. The limited success ofGovernment's efforts has been largely due to the country's structuralconstraints (among them the critical population problem), institutionalweaknesses (stemming largely from a shortage of skilled personnel), and aninsufficiency of domestic financial resources. At the same time, theshortage of skilled personnel, fragmentation of institutionalresponsibilities, and relatively poor interagency coordination limited thecountry's capacity to absorb external resources.

7. The Rwandese authorities have taken steps to address these problems.The Government established in 19B1 the National Population Office in orderto formulate a national population policy and monitor developments. IDA-assisted Family Health Project is a full-scale effort to assist theGovernment to respond to its pressing population realities. To address theproblem of lack of education and training, the Government introduced aneducation reform in 1979 which -- after subsequent adjustment -- wasresponsive to the country's needs, but whose implementation has beenhampered by financial constraints and the lack of teachers. In theagricultural sector, the Government has undertaken a comprehensiveevaluation of research efforts to date. This has now been translated intoa detailed action program through an IDA assisted Agriculture ResearchProject.

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B. A quantitative assessment of Rwanda's recent economic performance canonly be tentative, as the national account statistics have seriousshortcomings. These estimates suggest that, compared to the period of1978-1980, during which the GDP grew by about 6 percent annually, economicgrowth in Rwanda slowed down during 1983-1984 -- GDP grew on average byabout 1 percent p.a. -- mainly on account of a downswing in tertiary sectoractivities, and the sluggish performance of food crop production followingthe 1984 drought. Notwithstanding this domestic recession, themanufacturing sector expanded its productive capacity and improved itscapacity utilization due, in part, to the import restrictions which limitedforeign competition. Mining continued the decline that started in 1980 dueto persistent financial and management problems of the major mixed-ownership company (SOMIRWA), which ceased its operations in late 1985.However, 1985 witnessed high growth after the economic slump of thepreceding 3 years, mainly on account of an increase in agriculturalproduction. Preliminary data for 1986 also indicate a buoyant year due toan increase in world coffee demand and prices.

9. Rwanda's external position came under strong pressure, as the volumeof imports continued to expand at a time when export earnings weredeclining. Since 1981, the total value of exports has been consistentlybelow their 1977-80 levels, reflecting the decline in world coffee pricesrather than a shortfall in export volume. The terms of trade deterioratedby about 24 percent between 1979 and 1984. In an attempt to arrest thedeterioration of the balance of payments, the Government adopted --beginning in 1983 -- what they expected would be temporary measures,including licensing, prior deposit import requirements and increased importtariffs. The restrictions aimed mainly at curtailing imports of non-essential consumer goods as well as those of locally-produced commodities.The Rwandese authorities also shifted the peg of the kwandese franc (inSeptember 1983) from the US dollar to the SDR, entailing a 5.2 percentdepreciation vis-a-vis the US dollar. These measures, coupled with someimprovement in the terms of trade in 1984 and 1985 (with respect to the1981-1983 period) helped to reduce the current account deficit to about 9percent of GDP both in 1984 and in 1985 as compared to 12 and 11 percent,respectively, in 1982 and 1983. Due to the coffee "boom" in much of 1986,the current account deficit is expected to decline further to about 72 ofGDP.

10. On the budgetary side, the authorities did not realize that the highlevel of tax revenues recorded in 1979 and 1980 was a temporary phenomenonnot justifying a permanent increa!;e in expenditures. As a result, thesharp decline in revenues from coffee export taxes beginning in 1981,together with increases in current outlays (in order to achieve the socialobjectives of the Plan), resulted in an overall budgetary deficitequivalent to about 2 percent of GDP in both 1982 and 1983 (as compared toa surplus of 0.9 percent in 1980.) Concern over the worsening budgetarysituation led Government to introduce corrective fiscal measures. Thegrowth of public sector employment was held under 0.5 percent -- theeducation sector was exempted in order to achieve the revised targets ofthe 1979 Education Reform. This represented a major break fromGovernment's past policy of practically "guaranteeing" employment to everysecondary-school graduate. Large reductions were also decided in nettransfers to parastatals. Thanks to the austerity measures and increased

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revenues from taxes on international trade both in 1984 and 1985, theGovernment has been successful in reducing the budgetary deficit to about 1percent of GDP. The Government is likely to experience a small budgetarysurplus in 1986 mainly because of the increase in world coffee prices.

11. Government has been traditionally conservative in its monetary andcredit policies. Inflationary pressures have arisen mainly from supplyshortages caused by frequent disruptions of supply routes throughneighboring countries, high international transport costs, and increasedprices of imports and seasonal fluctuations in the price of domesticfoodstuffs. Inflation averaged 10.6 percent per annum during 1977-82, itpeaked at 12.6 percent in 1982, reflecting mainly the substantial increasesin electricity and water tariffs and educational fees. In 1983 and 1984inflation was down to 6.6 and 5.4 percent, respectively. In 1985,inflation declined further to less than 2 percent.

12. Rwanda has been one of the most favored beneficiaries of foreign aidin recent years. Per capita disbursements of net official developmentassistance (ODA) have been above US$30, much larger than the average forSub-Sahara Africa. During the period 1981-85, grants comprised about 75percent of total external aid flows, and were provided mainly by Belgium,the Federal Republic of Germany, and France. In view of its level ofdevelopment, however, Rwanda will need external assistance for a long timeto come. While the world coffee price increase in 1986 has alreadyprovided temporary balance-of-payments relief, this is unlikely to continuebeyond 1987. Foreign assistance would have to continue at least at thecurrent level, given population growth and export constraints.

13. Rwanda's medium- and long-term external public debt is relativelysmall, estimated at US$304 million at end-1985, equivalent to about 16percent of GD?. Most of Rwanda's external debt was contracted on highlyconcessionary terms; the grant element was over 70 percent on averageduring the 1972-84 period. Due to the concessionary nature of these loans,the debt service payments on medium- and long-term debt are relatively low:about 8 percent of exports of goods and nonfactor services in 1985. Hence,there remains scope for further borrowing. However, given the poverty ofthe country, its overwhelming constraints and vulnerability, and its long-term unfavorable terms of trade prospects, external funds should continueto be provided in the form of grants or loans at highly concessionaryterms, and include a high proportion of local cost financing and non-project assistance.

PART II - THE BANK GROUP OPERATIONS AND STRATEGY

14. Bank Group assistance to Rwanda started in 1970, and was initiallyfocused on the improvement of the road network and the strengthening ofagricultural production. As of September 20, 1986, Rwanda has receivedtwenty-nine IDA credits totalling US$ 304.6 million: eight for agriculture(34 percent); six for roads (30 percent); four for DFC's (10 percent); twofor power (9 percent); two for education (6 percent); one for water supply(5 percent); two for technical assistance (4 percent); and one fortelecommunications (3 percent). In addition, Rwanda has also received a

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Special African Facility Credit of US$15.0 million for the Sixth Highwayproject. There have been no Bank loans. Three IFC investments (one ofUS$535,000 for a tea factory; a second of US$226,000 with contingent equitycommitment of up to US$60,000 to expand the tea factory; a third ofUS$249,000 also to expand the tea factory) were signed in 1976, 1980 and1985, respectively. Annex II contains a summary statement of IDA creditsand IFC investments as of September 30, 1986.

15. In fiscal years 1982-85, disbursements for Rwanda totalled LUS$49.1million, compared to new commitments of US$86.2 million. The annualdisbursement rate increased steadily over this period, to reach about 25percent in FY85 which is above the average for countries of the Eastern andSouthern Africa Region. There are no problem projects in Rwanda.

Country Assistance Strategy

16. The Bank Group lending has been based on a country strategy which hasemphasized: (i) agriculture and rural development, the main objectivebeing to increase food production as well as export crops, whilemaintaining soil fertility; (ii) human resources development, focusing onsupport to basic education and skills training to improve agriculturalproductivity, provide skilled manpower, and influence attitudes on thepopulation issue, and, more recently, on family planning programs per se;(iii) infrastructure development, particularly roads, to reduce thecountry's isolation and to provide incentives to further intensification ofagriculture as well as increased specialization and diversification throughbetter marketing; (iv) energy, to lessen the country's demand for fuelimports; and (v) development of small and medium-size enterprises inmanufacturing and other sectors.

17. One of the major constraints to Rwanda's development is the shortageof administrative and technicalimanagerial capacity. This affects allsectors and inhibits project preparation and implementation. Institutionaland human resource development through intensive technical assistance andon-the-job training of Rwandes-e staff have, therefore, been a salientfeature of the Bank Group program for Rwanda, both under individualprojects in various sectors, and through free-standing technical assistanceprojects (a second Credit 1565-RW became effective January 10, 1986).These projects have helped strengthen inter-ministerial coordination,provided training to staff in the studies units of concerned agencies, andcontributed to improve the preparation of the next five-year plan (1987-1991).

18. The Bank Group program has been pursued in a climate of goodrelations with the Government. In all nine sectors in which we are active,there exists a general willingness to take action where required. Inagriculture, improved sector management as well as more rigorous projectplanning and financial controls have been attained, with a shift away fromintegrated rural development schemes towards more directly productiveprojects and the strengthening of institutional linkages between centralGovernment and local levels. In the highway sector, our active dialoguewith the Ministry of Public Works and Energy is now focusing on the ways to

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reduce reliance upon expatriate expertise and develop a national roadmaintenance capacity. In industrial development, we have gainedGovernment's commitment to promote small-scale enterprises while startingto focus as well on rehabilitation and restructuring needs of some publicenterprises. In the education sector, we had difficulties due to twomisprocurements (some six years ago) and an overly ambitious educationreform proposal at the primary level. However, a positive dialogue with theMinistry of Primary and Secondary Education (MINIPRISEC) has emerged in thepast three years; the Ministry has since adopted a less costly and lengthyprimary cycle. A third education project was approved last spring (Cr.1683-RW). On population, our initially cautious approach to Government hasdeveloped into cooperative efforts to promote suitable family health andplanning programs (Cr. 1679-RW signed in May 1986).

19. The Bank Group strategy continues to center on the five sectorsmentioned above (para. 16), with special emphasis on agriculture andpopulation. For the former, we give priority to: (i) promotingintensification by developing and strengthening Rwanda's agriculturaladaptive research and extension capabilities; and (ii) reinforcing the keysector institutions -- the Rwandese Research Institute (ISAR) and theMinistry of Agriculture.

20. In addition, our dialogue with the Government has also had a macro- economic dimension and Rwandese authorities have recently received verypositively the grey cover Economic Memorandum recommendations.

PART III - SECTOR BACKGROUND

A. General

21. Overall economic management in Rwanda has generally been sound andprudent. There are nevertheless a number of important areas in whichimprovements in macroeconomic management will be necessary if Rwanda is toreturn to the healthier growth path which characterized its developmentuntil the early 1980s. Some of these issues have been identified by theGovernment in its 1985 Economic Recovery Program. Particular areas ofreform, on which the Government has discussed World Bank and other donorassistance, include: (i) overall restructuring of the industrial sector;(ii) support for rehabilitation of the mining sector; and (iii) technicalassistance in the preparation of a rolling public investment programmingsystem, and its perioO..c updating; (iv) strengthening of the agriculturalservices; and (v) management of Public Enterprises (PEs) in the energy,water supply, transport, education, telecommunications and agriculturalsectors. These subjects, all related to issues of medium and long-termeconomic management, have been addressed in recent Bank sector reports, the1986 Economic Memorandum, and are also part of the continuing dialoguebetween the Government and the Bank. Government has responded positivelyto the Bank's advice and is addressing these issues within the framework ofseveral Bank-financed projects, UNDP-financed studies, and with supportfrom bilateral donors.

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22. Bank assistance strategy to Rwanda aims at supporting continuedeconomic growth by: improving the country's ability to modify macro-economic policies in response to changes in external conditions;improvements in domestic resource mobilization; development of appropriatepublic expenditure programs; and promoting the financial autonomy ofparnstatals and mixed enterprises while increasing their accountability.

23. To achieve these goals, it is necessary to strengthen theinstitutions in charge of implementing the economic Development Plan and,more generally, to improve economic and financial management capabilitiesand processes. A first Technical Assistance project (Credit 1217-RW), nowalmost completed, launched the improvement strategy by providing TechnicalAssistance to the Ministry of Planning and setting up a preinvestmentapproval and financing mechanism. A second Technical Assistance project(Credit 1565-RW), approved in March 1985, addressed the needs forstructural and staffing improvements in the Ministry of Finance.

24. Regarding macro economic management, one of the principalrecommendations of the World Bank Economic Report (1986) was that theGovernment give priority to preparing a rolling Public Investment Program(PIP) covering a three-year period. The CEM also underlined the urgentneed for an Intensive effort through coordination between the Planning andFinance Ministries to develop a Public Expenditure Program (PEP). This isfurther discussed in Section D below.

B. Available Technical Assistance for Rwanda

25. Rwanda is receiving substantial Technical Assistance (TA) from bothbilateral and multilateral sources. It was estimated that, in 1985, suchassistance amounted to about USS 70 million, including about US$ 16.0million for Economic Management, mostly financed by the BankIUNDP. Inaddition to the assistance funded by bilateral donors (mostly Belgium,U.S.A., Canada, Germany, Switzerland, France and China), NGO's play animportant role in Rwanda's development.

26. There is a particularly close collaboration and complementaritybetween UNDP and IDA across sectors of lending in Rwanda: in many casesIDA-financed projects are complemented by UNDP-financed technicalassistance as a result of Government policy to obtain grant assistancewherever possible.

C. Previous IDA Technical AssistanceFirst and Second Technical Assistance Projects

27. When IDA made its first technical assistance credit in 1982, one ofthe major constraints on Rwanda's development was the shortage of anational technical and managerial capacity. This affected all sectors andinhibited project preparation and implementation. Activities financedunder the first technical assistance project (Credit 1217-RW of US$ 5.0million granted in April 1982) covered project preparation and relatedstaff training. The second technical assistance project (Credit 1565-RW,of US$ 4.8 million granted in May 1985) covered a broad range of needs,primarily related to public finance, including training of Ministry of

Finance staff, budgeting systems, financial managoment of PublicEnterprises and strengthening of Goverrnment capabilities for economicpolicy making. By responding to pressing neods, Bank Group-financedtechnical assistance (along with UNDP-financed, Bank executed technicalassistance) has proven useful. The experience gained under theAssociation's first credit is extensively reviewed below in view of Itsspecial relevance to the proposed project.

28. Assistance to the Planning Ministry. The objectives of the first IDATechnical Assistance project (and of the parallel UNDP TA "Study Fund"project, RWA/80O009, for which the Bank is Executing Agency) were toincrease the number and improve the quality of projr;ts submitted foroutside financing; to strengthen local project preparation capabilities;and to establish better coordination between technical ministries andMINIPLAN. Together the projects consisted of:

a) the financing of prefeasibility, feasibility, and detailedengineering studies;

b) training seminars in Rwanda on project preparation andimplementation; and

c) the services of four UNDP-financed long term advisors: (a) aproject economist assigned to MINIPLAN primarily to provideassistance for all activities related to preinvestmentfinancing; (b) a financial analyst assigned to the NationalStudies Bureau (BUNEP) to help it carry out studies financedunder the project and/or by other donors; (c) an investmentprogramming specialist; and (d) a documentalist assigned toMINIPLAN, to help organize and put into operation theDocumentation Center.

29. A Tripartite (Government/UNDP/Bank) evaluation of the performance ofthe UNDP-financed TA in August 1985, concluded that it had helped theMinistry of Planning initiate a new process for selecting and preparing newprojects through better coordination with the line ministries. At the sametime, the evaluation observed that IDA-financing of preinvestment studiesunder the first TA project had increased the country's absorptive capacity,qualitatively and quantitatively, by identifying projects and producing 27studiesl which otherwise might not have been proposed for externalfinancing (see Annex VI). At the present time, 23 of the studies carriedout have confirmed or probable external financing for the subsequentproject execution phase. IDA is the likely source of financing in eightsuch cases. Four studies demonstrated that proposed investments were notfeasible and thus saved Government from wasting resources in theirfinancing.

1/ The sectoral distribution of these studies is as follows: Transportation(6), Industry (4), Agriculture (5), Urban and Water (6), Telecommunica-tions (2), Eleciricity (3) and Financial (1).

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30. This joint assistance also helped to create the firstInterministerial Advisory Committee for Planning (C.I.C.). The Committee,essentially composed of national staff, has performed its tasks very welland demonstrated the value of effective coordination at both the workingand the policy making levels. The Planning Committee has served as a modelfor the other six committees subsequently established by Government forimproving coordination in economic management (see para. 36).

31. A number of factors have contributed to the success of the IDA-financed Project: (i) sound administrative management of the preinvestmentmechanism by MINIPLAN; (ii) an open consultative process involving theparticipation of the line ministries concerned with the studies as well asMINIPLAN staff (see para. 36); (iii) organization of well-targeted,practical training seminars on various aspects of planning; (iv) close IDAsupervision and a collaborative problem-solving approach with Government --both from headquarters staff and the Bank's Resident Representative in thefield; and (v) a positive external environment exemplified by the emergenceof an effective field-level coordination process among external aidagencies and Government, under the leadership of UNDP and the Bank.

The National Studies Bureau (BUNEP)2

32. At the Government's request and in order to strengthen localcapabilities to prepare and monitor projects, BUNEP was to carry outstudies financed under the first IDA credit. After BUNEP's technical andfinancial proposals to MINIPLAN and the technical ministry concerned wereaccepted by the CIC and approved by IDA, BUNEP was given the responsibilityto conduct the study. BUNEP executed four studies under this arrangement,but its performance was mixed. This is due to staffing weaknesses (e.g.,lack of financial expertise) and poor management. IDA has advised theMinister of Planning to carry out a financial and management audit of BUNEP(which is still to be done) and to request BUNEP to implement the followingrecommendations: (i) set up a new management structure; (ii) use thecritical path method to manage studies being carried out; (iii) enforcecompletion of timesheets by its staff; (iv) work out a staff training plan;(v) prepare a periodic work program; and (vi) introduce a cost accountingsystem. Under the proposed credit, and in addition to the above efforts tobe made by Government to develop their capabilities, Rwandese consultingfirms including BUNEP will continue, in accordance with the IDA guidelineson the selection of consultants, to be included in the short lists in caseswhere they have the required qualifications.

33. Assistance to the Ministry of Finance. Following Bank and IMF studiesof the fiscal and budgetary systems, and a Government reorganization inJanuary 1984, which significantly broadened the Finance Ministry'sresponsibilities, Government obtained Bank assistance for a second TAproject (Cr. 1565-RW), essentially directed to the Ministry of Finance andconsisting of the following:

21 BUNEP is a state enterprise, with administrative and financial autonomy,placed under the control and supervision of MINIPLAN.

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(a) training for HINIFINECO staff and for financial managers in otherministries and selected parastatal agencies through establishmentof a Training Center in MINIFINECO and provision of remedial on-the-job training for current staff;

(b) improvement of tax, customs, budgetary procedures (multi-yearprogramming and budgeting) and accounting practice3 through:

(i) long-ternm technical assistance (one budgetary proceduresand budget management specialist and one publicaccounting specialist) and short backstopping missions;

(ii) phased introduction of automated data processing;

(c) improvement of financial management of the parastatal sectorportfolio through the services of a business managementspecialist; and

(d) improvement of economic policy-making through provision of shortterm consultant services.

34. An innovative feature of this project is the delivery system fortechnical assistance which involved a twinning arrangement with theMinistry of Finance of a European country. Progress in the launching ofthe projet, however, has been slow. Measures have now been taken toimprove the situation; as a result, the needed specialists are now in post,accelerated training is being provided to local staff, and the Ministry'straining center is about to start operations.

D. Economic Management

35. A series of country economic memoranda (the latest in 1986) addresseda wide range of policy issues and formulated a number of recommendationsfor actions including, inter alia, the need for: (i) pursuing more activepolicy-making with respect to the appropriate setting and monitoring ofexchange, tax, tariff, interest and public sector wage rates; (ii)preparing a realistic public investment program; (iii) applying morerigorous controls on public sector employment; and (iv) improvinginstitutional and procedural arrangements to facilitate inter-governmentalcommunication and policy coordination. A number of these recommendationswere subsequently followed up with concrete action.

36. Since 1982, Rwanda has taken Important institutional steps in orderto improve its development planning and public sector management. Theseinclude: (a) streamlining of ministerial responsibilities along clearsectoral lines requiring that key sectoral ministries undertake formulationof sectoral strategies and programs; (b) broadening of MINIPLANresponsibilities for: (i) the overall planning process (mainly thepreparation of the Fourth Development Plan 1987-1991); (ii) investmentprogrnmming and its monitoring which includes alse the management of thepre-investment program and the operation of the preinvestment mechanismsupported by IDA; (iii) harmonization of sectoral strategies; and (iv) thepreparation and updating of economic and social statistics, includingnational accounts; (c) creation of seven interministerial coordination

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committees (CICs) to foster intersectoral coordination among institutionsdealing with development policy. These seven CICs are the following: (i)Rural Development and Health (Ministry of Agriculture as chair); (iL)Economic Policy (Ministry of Finance and Economy as chair); (iii)Industrial Policy (Ministry of Industries, Hines, and Crafts as chair);(iv) Housing, Urbanism, and Regional Development (Ministry of Public Worksand Energy as chair); (v) Political and Security Matters (Ministry ofInterior and Communal Development as chair); (vi) Training, Employment, andYouth Promotion (Ministry of Public Administration and Training as chair);and (vii) Planning and International Cooperation (Ministry of Planning aschair); (d) the establishment of a preinvestment mechanism, under theMinistry of Planning, which has resulted in an improvement in the pre-investment study capacity of the country (para. 29); and (e) Government hascommitted itself to the introduction of multi-year programming of PublicExpenditure and it has already launched a complementary program, financedby IDA (Credit 1565-RW), to strengthen its Public Finance management.

37. Nevertheless, a few key deficiencies in the planning process remain.Namely, (a) the uneven design of sectoral strategies whose comprehensive-ness and quality 'ary from one sector to another in relation to theMinistry's technical capabilities; (b) MINIPLAN has not yet developed theprocesses and the data base needed for the preparation of medium termmacroeconomic projections for the economy and still needs to improve itsinternal organization so as to perform its role as the leading institutionin developing planning; and (c) a lack of technical capacity in thePlanning, the Finance and the line ministries to link the planninglprogramming/budgeting process.

38. To remedy these deficiencies, Government needs to strengthen (a) thecapabilities of technical ministries to prepare sectoral plans, definesectoral objectives and determine appropriate strategies to achieve them;(b) coordination between MINIPLAN and MINIFINECO in the preparation andexecution of the progranninglbudgeting process; and (c) its capability toprepare adequate statistical data for economic menagement.

39. To that end, Government has called on both UNDP and IDA to financecoordinated projects of assistance to the Planning Ministry. They consistof the following:

(a) continuation for three years of UNDP assistance for economicanalysis of projects, investment programming and otherassistance as described in para. 28; in addition, UNDP wouldfinance assistance for the design and implementation of athree-year rolling investment program as an indispensable toolfor linking sectoral strategies and budget planning. Theestimated cost of this project is $ 1.6 million.

(b) continuation for three years of UNDP assistance for thestrengthening of Rwanda's macro-economic planning capacity; andplanning organization. The first of these objectives would bemet by helping Government to improve (i) the preparation of itsmedium-term economic development plan 1987-91; (ii) thecollection and analysis of economic data; and (iii) thepreparation of national accounts. The second objective would

- 12 -

be met by helping the Government to redesign, to the extentneeded, the structure, organization and functions of MINIPLAN.The cost of this UNDP project would be US$ 2.6 million and itwould finance the following: (i) long-term experts; (ii)training and fellowships; and (iii) vehicles and equipment;

(c) the proposed IDA project to replenish the "Study Fund",focussing on the practical aspects of decision-making inperforming the sectoral planning, preinvestment review andfinancing functions, building upon its earlier successfulexperience with the Credit 1217-RW (see para. 29 and Part IV,paras. 47 and 48). The cost of the IDA-financed project wouldbe about $ 8.3 million.

40. To ensure consistency among these three operations, Government andUNDP have approached the Bank to become the Executing Agency responsiblefor implementing the two UNDP projects for a period of three years by whichtime it is hoped that Government would take over their management.

41. The above program of three coordinated projects would addresscomprehensively the requirements of the Ministry of Planning and wouldcomplement other on-going efforts by Government in association with UNDPand IDA to improve its planning and programming function across sectors,and to strengthen its linkages with the budget process, namely under: (a)the IDA-financed TA project to the Ministry of Finance (Credit 1565-RW) inthe area of Public Expenditure; (b) the UNDP-financed project"Institutional Strengthenaing of the Agricultural Ministry" in the area ofagricultural planning; (c) the UNDP-financed Bank executed project"Planning and Management in the Transport Sector" in the area oftransportation planning; and (d) the UNDP-financed project "Assistance tothe Banque Rwandaise du Developpement" in the area of industrial projectappraisal.

42. To ensure success of this whole program of improvements, by the endof 1988 at the latest, Government will confirm to IDA the elements of itsinstitutional framework for the planning, programing and budgeting of itsinvestments (see Annex IV). These arrangements will include (a) themethodology and procedures for Public Expenditure Programming (which arebeing improved under the ongoing IDA project "TA to the Finance Ministry",Credit 1565-RW); (b) the linkages between the core economic ministries andthe line ministries (with an indication of the further support needed bythe latter to develop their project preparation capabilities, especially inthe industrial field); (c) the arrangements for coordination between theMinistries of Planning and Finance; and (d) the arrangements initiated byGovernment to ensure that all preinvestment proposals are reviewed by theappropriate interministerial committee (CIC).

43. Success of the program will also require the active cooperation ofthe Government agencies concerned and of the donors providing TA or otherresources in support of the continuum between macroeconomic, sector andproject management. To that end, Government has agreed that its MINIPLAN,

- 13 -

MINIFINECO and the technical ministries undertake jointly with IDA anannual assessment of progress in implementing the framework (in relationwith the proposed project) and in the coordination of all projects in placerelated to planning and programming. To the extent feasible such reviewwill be made in coordination with UNDP and relevant bilateral donors.

IV - THE PROJECT

A. Project Origin

44. In May 1985, the Ministry of Planning indicated to IDA their interestin obtaining further support for strengthening Government's preinvestmentcapacity, which had been previously assisted through Credit 1217-RW and itscomplementary UNDP-financed TA project with the Bank as Executing Agency.Project preparation started in October 1985, followed by appraisal in May1986. Negotiations were held in Washington D.C. from March 27 to March 31,1987. The Government delegation was led by H.E. Ambroise Mulindangabo,Minister of Planning. A Credit and Project Summary is provided at thebeginning of this report. Supplementary project data are contained inAnnex III.

B. Prolect Objective

45. The purpose of the IDA project is to support Government's objectiveto improve its investment/planning process by financing sector! subsectorstudies and feasibility studies for development projects so as to helpGovernment to (i) better define its development objectives and determineappropriate strategies to achieve them; (ii) continue to improve thequality of projects submitted for outside financing; and (iii) strengthenlocal project preparation capabilities. These improvements are expected toreinforce the decision-making process in matters of planning andinternational cooperation by building upon procedures established forselection of preinvestment studies under the first credit (see para. 48).

C. Project Description

46. The project would consist of the following:

a) assistance to carry out the identification, preparation andexecution of sectoral and preinvestment studies;

b) training of selected staff in (i) the preparation,implementation and monitoring of a rolling Public InvestmentProgram and (ii) project preparation and appraisal;

c) completion of the installation of a Documentation Center; and

d) logistical support (including vehicles) related to the above.

- 14 -

47. To coordinate review of the design of sectoral, subsectoral,prefeasibility, feasibility and detailed engineering studies and theapproval of their financing, Government has established a mechanism called"Fonds d'Etudes". Under the project, this mechanism would continue to be afocal point for coordinating the preparation of new studies and investmentprojects, and to finance the services of national and foreign consultants.

48. The preinvestmxent mechanism would continue to be managed by MINIPLANaccording to procedures set up, under the first project and revised on thebasis of experience acquired. These procedures are represented in graphform in Annex V. They include:

(a) preparation of a half-yearly "study program" consisting ofstudy proposals made by the line ministries, ranked accordingto priority, and to be considered for financing;

(b) review of such proposals by the Interministerial Conmittee forPlanning (CIC);

(c) issuance of standard letters of invitation, and processing ofconsultant selection according to a manual of instructions.

To accelerate decision-making, MINIPLAN tonfirmed during negotiations thefollowing:

(a) it would prepare the "study program" every four months (insteadof every six months);

(b) the Planning and the Projects Directorates of MINIPLAN (seechart of the Planning Ministry in Annex VIII) would review theseproposals and submit them to the technical level of the"Planning Committee" (CIC) for further review and recommendationto the Minister of Planning;

(c) the technical level of the CIC would be convened as often asnecessary, but at least three times a year to consider theproposals submitted by the line ministries;

(d) after receiving the technical CIC's advice, the Minister ofPlanring would select the proposals to be included every fourmonths in the "study program";

(e) each "study program" would be submitted to IDA, starting nolater than September 1, 1988, for its prompt comments andagreement.

49. Selection Criteria. To be approved for financing, Government alsoconfirmed during negotiations that the studies would need to meet thefollowing criteria:

- 15 -

(a) They should be sector studies, feasibility studies or deta.;ledengineering studies, consistent with the priorities of thePublic Investment Program objectives. In addition, thefollowing specific study criteria would need to be met:

(i) in the case of feasibility studies, only those intendedfor projects included in the PIP or in sector programsand for which a source of financing (national orexternal) has been identified;

(ii) in the case of detailed engineering studies, only thoserelated to projects the soundness of which has beendemonstrated by a feasibility study; and

(iii) in the case of rehabilitation studies, only thoseexisting public enterprises for which their potentialeconomic and/or financial viability have beendemonstrated;

(b) Their cost should be estimated at no more than US$ 250,000 (1987prices) unless otherwise agreed with the Association.

A tentative list of 19 studies for an amount of USS 4.7 million is alreadyavailable (see Annex VII for details).

50. To manage the preinvestment mechanism and ensure its administrativesustainability, Government has already designated the Director of ProjectsEvaluation of its MINIPLAN as national manager to be responsible full-timefor the work of the concerned expatriate and national staff. Furtherorganizational arrangements may be required as a result of (a) the need tobroaden use of the preinvestment mechanism procedures to all preinvestmentstudies irrespective of the sources of financing (para. 51, below); and (b)the UNDP financed organization study (para. 39).

51. Reinforcement of procedures related to planning and investmentdecisions. The decision-making path established for studies financed byIDA under the first project (see para. 4B and Annex V) proved theusefulness of the CIC as a mechanism for consultation and coordination ofinvestment decisions between the Planning ad line ministries. Governmenthas therefore decided that for the preparation of the next Development Plana unified decision-making path based on this experience and that with otherdonors would be applied not only for all preinvestment studies, regardlessof the source of financing, but also to all activities related to theplanning process itself. This decision would be set out in a set ofregulations ("Code de Conduite") already being drafted by MINIPLANinstructing the line ministries that all proposals made regarding sectoralplans and strategies, preinvestment studies, investment programming,financing of projects and their execution, and negotiation proposals forall projects would be reviewed by the technical level of the CIC "Planningand International Cooperation" before being submitted for approval to theministerial level of the CIC. Government has already provided IDA with asatisfactory draft of these regulations and progress in theirimplementation would be reviewed with IDA as part of the periodicevaluation of project impact. (paras. 42, 43).

_ 16 -

52. Financial sustainability. Measures are needed to enhance thefinancial sustainability of the preinvestment mechanism. To that end,Government agreed to increase the proportion of its present contribution tothe financing of studies under the project from an average of 3% at presentto 10 percent of each signed contract during the first three years ofimplementation and to 20% from the fourth year until the end of theproject. In addition Government and IDA discussed the possibility ofjointly looking for other ways to achieve that objective, includingconverting the preinvestment mechanism into a revolving fund replenished byresources generated by studies which have led to investment (as necessary,consideration would be given to measures concerning the fund'sorganization, the size of the Government's contributions, accounting andauditing provisions and how to interest other donors to contribute to thisrevolving fund).

53. Staff Training. Government and IDA have agreed on arrangements forcoordinating the key economic management processes, macroeconomic planning,sector studies, public investment planning, budgeting and monitoring (AnnexIV). In addition, a Government Task Force, assisted in part by UNDP, hasprepared a detailed plan for improving the organization of the Ministry ofPlanning, which is acceptable to IDA. To develop local capabilities, thecredit would finance an integrated training program in public investmentplanning and project preparation and appraisal focusing on: (i) localseminars for the national staff (see Annex VIII); and (ii) work placementsabroad for "on-the-job' training in planning institutions. The trainingprogram for the first year of implementation is already available andfurther programs will be periodically reviewed with IDA (para. 67). Theprogram is expected to provide about 30 staff months of training.

54. Documentation Center. The project would provide technical materials(books, specialized periodicals, studies and other reference materials) tothe documentation center attached to the Ministry of Planning andconstructed under credit 1217-RW. A list of such materials is beingfinalized by the Planning Ministry and its approval by IDA, together withthat of the procurement schedule for such materials, will be a condition ofdisbursement of the funds related to this component.

55. Logistical Support. The project would also finance vehicles andessential equipment for the Planning, Projects and Statistics Directoratesof the Planning Ministry for a maximum of $ 90,000.

D. Project Implementation

56. The Director of Proje.%ts Evaluation of the Planning Ministry would beresponsible for administering the project. All technical ministries havealready been informed by the Planning Minister of the procedures foradministering the preinvestment mechanism.

- 17 -

E. Project Cost

57. Project costs have been estimated at U.S. $ 8.3 million equivalent,net of taxes, of which about 85 percent are foreign costs (S 7.1 millionequivalent) and 15 percent local costs ($ 1.2 million equivalent). Itemsimported for the project would be exempt from taxes and duties. Projectcosts are expressed in March 1987 prices. A contingency allowance is notnecessary for the study fund in view of the fact that this is an open-endedfinancing facility: sub-projects will be added as long as funds areavailable. A small physical contingency is provided for the purchase ofvehicles and equipment. The project would finance approximately 750 staffmonths of consultant services; an indicative distribution being as follows:75 during the first year, 135 during the second year, 190 during the thirdyear, 200 during the fourth year and 150 during the fifth year. Nationalconsultants are expected to provide about a third of the expertise to befinanced under the project.

58. The following table shows the project cost:

Proiect Cost (by category, in U.S. $ thousands)

Local Foreign TOTAL Percent

a. Sector and Preinvestment 1,079.0 6,765.0 7,844.0 95.7Studies

b. Training 100.0 150.0 250.0 3.0c. Materials for 20.0 40.0 50.0 0.3

Documentation Centerd. Vehicles & Equipment 10.0 80.0 90.0 1.0

TOTAL BASE COSTS3 1,199.0 7,035.0 8,234.0 100.0

e. Contingencies (for c and d) 2.0 14.0 16.0(Physical only)

TOTAL PROJECT COSTS 1,201.0 7,049.0 8,250.0

(15%) (85%) (100%)

59. Financing Plan. IDA would finance about U.S. $ 7.4 millionequivalent ($ 7.0 million of foreign costs and 0.4 million of local costs)or 90% of total cost, and Government would provide the remaining U.S. 0.9million equivalent in local currency, making a total cost for the projectof $ 8.3 million.

Procurement, Disbursement, Accounting and Audits

60. The Government will recruit directly under individual contracts orthrough consulting firms, all consultants to be funded under the project.The qualifications, experience and terms and conditions of employment ofall consultants would be satisfactory to the Association. A form letter of

31 All items would be exempt from import duties and local taxes.

- 18 -

invitation has been agreed with Government and a short-list of consultingfirms will be cleared with IDA before inviting proposals for particularstudies.

61. Contracts for equipment and related items are expected to cost lessthan US$ 20,000 per contract and would be awarded following one of thefollowing procedures: (a) local competitive bidding (LCB); (b)international or local shopping; or (c) direct contracting in accordancewith Bank Group guidelines for procurement. Local procurement procedureswere reviewed and found satisfactory. Government would submit to theAssociation for prior review, the tender documents indicating the method ofprocurement proposed. Bid evaluations, awards and signed contracts wouldalso be submitted to the Association. Items would be grouped to the extentpractical to encourage competitive bidding (see also Annex IX).

62. In order to expedite disbursement and give the Government improvedcontrol over the timing of payments due under the credit, the Governmentwill establish a Special Account in the BNR under terms and conditionssatisfactory to the Association. Upon credit effectiveness and receipt ofwithdrawal application, the Association would make an advance deposit ofUS$ 200,000 into this account. The Association would periodicallyreplenish this account upon receipt and approval of withdrawal applicationstogether with satisfactory evidence that the expenditures paid out of theSpecial Account were eligible for financing out of this project.

63. Funds from the credit would be disbursed on the following basis:

a) 90 percent of foreign and 75 percent of local expenditures for thestudies contracted during the first three years and 802 of foreignand 75% of local expenditures for the next five years;

b) 5 percent of total expenditures for vehicles, equipment andtechnical materials;

c) 100 percent of foreign and local expenditures for seminars.

64. All disbursements would be fully documented except those for shortterm consultants, local training and payments against contracts of lessthan US$20,000 equivalent which would be made against statements ofexpendicure, documentation for which would not be submitted for review, butthe Planning Ministry would make these documents available for IDArepresentatives during project supervision. The standard disbursementprofile for Technical Assistance projects in the Eastern and SouthernAfrica Region has been retained (assuming commencement of projectactivities in 1987).

65. Auditing would be required on a yearly basis for expenditures relatedto the project with particular attention to expenditures reimbursed againststatements of expenditure and the Special Account. Auditing would beperformed by an independent auditor acceptable to the Association after theend of each fiscal year of the borrower and the auditor's report should bereceived by the Association withia. six months following the audit.

- 19 -

66. To ensure that Government counterpart funds would be made availablewhen needed, the Government would establish a Counterpart Fund Accountwithin the National Bank of Rwanda to finance expenditures incurred by theproject. Government would deposit at the beginning of each quarterUS$ 21,000 equivalent. The first Government deposit of US$ 21,000equivalent would be a condition of effectiveness of the credit.

67. Work Plans and Project Reviews. Government agreed duringnegotiations that it would prepare staff training plans every year to beupdated every six months and reviewed with IDA. The plans would be linkedwith progress reviews of the assignment of Government staff and theiradvisers.

68. Proiect Implementation Schedule. The first list of studies to befinanced by the project is available (Annex VII). Facilities for theDocumentation Center built under Credit 1217-RW have been completed.Training seminars on project preparation, appraisal and monitoring, andinvestment programming are expected to start in Fall 1987. The project isexpected to be completed by June 30, 1994. The closing date would beDecember 31, 1994.

69. Benefits and Risks. The project would result in preparation ofsector strategies, production of a portfolio of well prepared projectsready for submission to financing sources and avoidance of unviableinvestments. More importantly, through its formal training componentreinforced by systematic on-the-job training, the project would improvelocal capabilities for preparation and appraisal of investment projects andfor investment programming so that after project completion, only highlyspecialized short term expertise would occasionally be required. Themechanisms set up to prepare new projects under the Credit would helpstrengthen the institutions involved across Government, better equip theMinistry of Planning to perform its coordinating functions, and shouldimprove, in the long run, the institutional framework for overallinvestment programming. This would give Rwanda the capacity and technicalcompetence necessary to translate its planned priorities into coherentinvestment programs.

70. There are risks that some of these benefits will not fullymaterialize if the work of the General Directorate of Planning and theGeneral Directorate of Projects within the Ministry of Planning is not wellcoordinated. These risks were minimized through provision of assistance tothe Programs Directorate, which should help improve its specificcontri'jution to the planning and programming process, and throughstrengthening of the procedures for handling preinvestment studies, whichshould provide a reasonable framework for integrating the work of the twoDirectorates. Moreover, these risks are expected to diminish over the lifeof the project as procedures are further tested, modified and accepted.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

71. I am satisfied that the proposed credit would comply with theArticles of Agreement of the Association.

- 20 -

PART VI - RECOMMENDATION

72. I rocomnend that the Executive Directors approve the proposed Credit.

Barber B. ConableProsLdent

Washington, D.C.April 23, 1987

Annex I- 21 - Page 1 of 2

COUNMRh DATA - RWANDA

(Ml IlIe-ne Ref Outtend in4g fnd Periodl)

let. CREDfl AM PRICES 1960 t661 2962 2983 1914 1965.. ._..... __... _.............--- ..... ____ _,__ .__

Money SuAPI ./ 14117 1931 1825Ub 1ow4 sou1 23308Sank Crudit to Ooaern.nt (net) -n391 -2aea -o 20D9 1912 1731Blnk Credit to Privste Sector 6179 7724 6027 USd6 13e 6 l6S407laink Credit to Putbl Entorpriene 210 147 410 68 618 78

(percentege or Inde Nunbera)

Money aa t of CDP' 1.2 11.0 12.2 12.7 11.8 12.7CPI Avreram 2nd Qubtr 1982-100 65.0 900. 101.9 LO6.8 214.16 116.5

Annuat Percentage Changes in4Consommer Prica Index 7.3 J .5 12.6 6.6 5.4 1.7ferk Credit to Oowernent (not) 170.4 26.7 76.6 164.5 -4.9 -9.5Bank Credit to Priwate Sector 41.5 25.0 3.9 4.0 23.0 10.6Dunk Credit to Public Ennterpries -9.8 31.2 49.9 10J.3 -17.6 -3.1

BALANCE OF PAWOENS 198D 1981 1q92 1981 1914 10s NRCIND6 I E BDWS (AVWIACE 198-lW9--- --- ----- -- - ---- -- --- -- ---------- --- -- --- ---.. ... .. ... ... ..---

(US6 MILLIONS) WI3 Min. Perc nt

Ewarte (ge.fs) 165.7 110.7 142.0 162.2 174.6 161.2 Coffee 80.7 52.8Imports (g.nfo) 322. 331.9 336 6 312.4 312.3 336.1 Tee 14.9 11.1

Cn-iterit,TFin 19.0 14.8Resource Coa (deficit--) -157.1 -181.2 -196.6 -160.2 -137.7 -174.9 Wohfrer- 3.2 2.5

Other 10.7 6.3Factor Services (net) 5.0 11.5 0.0 -6.3 -S.0 -S.7 Total 126.5 100.0Private Transfere (not) -3.2 -J.0 4.7 5.5 1.6 4.3

Setance on Current Account -153.3 -172.7 -161.0 -161.0 -140.0 -276.3 EXTENAL OET AS Oe ODt. 31. 1* 8 USit kin.

Offlcial Grants 107,4 105.8 108.2 112.3 90.3 112.1 Pekl;c Debt. Ircl. c ".ermnteed 324.4Direct Private Foreign Inveatment 17.0 18.6 20.7 11.1 15,1 14.6 Mon Gueranteed Private Debt --

Net MLT Loans J1.0 2n.1 21.6 24.3 36.0 55.2 Total Dutetandino and Da-bhrnd 324.4Other Capital (net) 0.6 -2.1 -0.7 1.1 -0.1 2.8Short Term Capital (net) 21.8 19.9 8.6 -6 0 4.7 -6.0 DEBT S50VICE RATIO FDR 146i b/ PercentAllocation of SORe 3.1 2.7 0.0 0.0 0.0 0.0 --------------------- - ----Errors A Omision -12.4 10.4 -0.1 1.2 -0.6 -0.3

Public Debt. Inel. Cu_ranteed 9.5Incr see in Reervee( ) -1.32 -11.6 36.6 17.0 -13.6 -0.2 Non Guareateed Private Debt --

Total Outatanding and Disbursed 9.5Petroleum Imports 29.1 3J.5 39.1 44.3 51.1 51.5

IDA LEWNG AS OF ST. 10.296 US5 "In._ ___-- ----------------

RATE OF EXCHANOE Annual Avernags------------- ----- ------------------------------ O utstanding end Diabure 168

19e0 1961 1982 1983 168 1965 Undisbursed 112.9Outstand;in Inl. Undiehureed 316.6

L56 1.00 - Ref 92.84 92.84 92.64 94.34 100.17 101.26

a:/ inc ludee eoney and euaa-foney.e:/ Debt servie- a a percentage of oeporta of goods and non-feetr re Ies.

Annex I-22 -Page 2o

cOeMR DATA-ANAW

AM (Thomand aq. bim.) POPULATION WOZTY (I"!)....................... ........ ". ...........

K.' 0.5 IIIIen CnlJ-Ie2 210 par square km.Rln of orouthi .63 303 per equaere lm. 1 arable lend.

(fre 1976 t. 1962)

POPILATION CHAIACTEMIS7ICS (1076) WALT" (100)a"! "... . . .. . . .. . . .. . . .- " " X 9 9 * *-^ . . . . . . . . ......................... .......- -

Crude birth rate (per lO0) 82 Popuistlen per phyicalen 31840Crud, denth rets CPAr 3000) to Populatlon sar hosital bud "0Percent urba

INCOME OZEThIUIUTIE gOem CEUT EN mP CAPITA----------........... .. .^...........

S of natluel incene hih-lat qlutlia -- (KIllgreme o1f1 elalValeon 16forest uinbles --

ACC$ a TO MM WATER (1 im) ACCE To IaI cmTRT----------- ................................ ..

3-. populatlon - hotel 54 3 of ppltllon - tot al- rural

FM0 & NJTRITION fJCATION (10)= ._____ ---- ............ __._..

chalrie intaoe an S d requiremanta 11.0 Melt Ilito eray rte I a/ 7Per Capita PrOlsf Intae (on/day) 50.0 PrImary school enrollment I

GW PM CAPITA IN 1064 b/: 1270

OISS OISfTIC PRMJT IN 1W14 ANAIPIL NATE OF COW (I. CNSTAIr IMW tRCI)

us lN S 1979-US 1964.00

MP et mrket Prices 15680.7 100.0 a.6 0.5

Cross domestic investment 195.6 11.6 11.0 10.6

Crose notional savinga 106.2 6.3 -0.3 -2B6.

Currdnt aCcount bhmence -140.6 -6.4

Expoets (g.nfs) 174.5 10.4 0.3 -0.9

ImPorts (antsf) 200.6 17.3 6.4 11.1

CDP at fector coat 1449.4 100.0 6.0 -4.3

Primary sector 621.4 42,0 4.1 -14.7

Secondary sector 305.6 21.1 3.7 4.1Tertiary sector 522.6 26.1 7.0 2.0

CDvEdT FINANCE (Contral Covarnuent) (faf i a.) 2 .r CDP.- - - - - - - - - - - - - ........ ., . -- - -- - -- - - - - - --

19n 19e6 1979

Current roverul 9.10 10.6 12.7

Currant ewpond ;Lure 19,102 10.6 6.7

Current surpils 3 0.0 4.0

Oaelawp_nt appenditure 3.J00 c/ 2.0 2.2

o s According to eatimtes by the Ministry of Primary and Secondsry Educetion.

b:/ The per cuplts W est;imte calculated by the emme conversen technique as the world Bank Atlas. All other

cenersiona to dollarm in thia table are a the average sachenms rate prev*;I lg during the period iered.

* c:/ Ua~Mdgeb ost I metes.c / mat availahle.

.4 not spaleublIs.

-23-ANSX XII

Pae1 ot2

THE SAT OF BANK GMiP ORATIWSN RWAND

A. Statent of mA Credits(As of September 30, 1986)

Amnrt Is$ tilimaCcedit No. Fiscal Year Borroer Purpose (less csnoollatioo)

mA Urdisbarswl 5 /

(Ten credits tav been fully disbursel/ 77.49

937-g W2 31 1979 IEnda Mitara AgricultLral &Livestodc lrekqp'.t 8.75 0.40

1039-i 1980 Ig restryLivestock Dvelopmnt 21.00 0.14

1057-R 1981 TPein Catlws 7.50 1.461126-i 1981 D COffee/FoOdCezpe 15.00 3.481217-W 19B2 Teclical Assistance 5.00 2.6515-i 1982 Fifth FIgiay 25.90 8.621263-i 1982 - Second Fducatim 10.00 7.431283-W 1982 - Phase II Bugesera/

tsIaikaJHIgongo 16.30 6.42344WI 1983 a In 7.00 4.25

1345-iW 1983 Water Supply 13.00 2.651420D- 1984 azizi II Hydroeletric 15.00 10.281495-IR* 1984 Paer 9.00 3.861546-if 1985 R Agricu Research 11.50 12.451565- 1985 - Tbeciical Assistance II 4.80 5.461641-i 1986 -sixth HIW 11.00 12.98AO1-IW 1986 - Sit Hglga 15.00 17.591650-w 4/ 196 Fourth ERD 9.00 10.311669-l 1986 - itarama Agriculature & 12.70 14.20

14ngri Devt. Project1678-W 4h 1986 Fauly Health 10.80 11.891683-w V/ 1986 t Third Aruation 15.60 16.38

Total 321.34 152.92

of which has bem repaid 1.71Total rw outstaxlig 319.63Amhnt sold 4.10

of which has bem repaid 4.10Total nw beld by MI 319.63

Total undisbursed 152.92

1J Rwanda bas received no Bank loan.21 The DA credit was cmcxplrted by an EEC Special Artion Credit of U5$1.7 utUon.31 Ielrngirg a D Grant P of 4.4 mdl.lo.4/ Not yet effective.5/ Thmept Credits 937, 1039, 1057-M, th lisbursed lance of IDA 6 & 7 In USS

w calculated at the SE rate of 9/3D/86.

- 24 -

AMEX 11Pqt 2 of 2

S. 9aterat of IFC INwest= in iamda(as cf 3ime.30, 1986)

- I;C's edstiIg iMestments in Rlrda oOuip the tw inesmtents previoisy mde lnSoratbL a-d 1is predecessor cC1pwes, SIM and flE 1 . DIetais are as follws.

TotalImmstzmt PJ.scFLL Type of Held by

mer Year OSs Ln lt3 la btal _C Udisbursed

337-4I 1975 S&rnatbg) Tea pro- - 0.54 0.54 0.16 -

) essrg470-I:D 1979 SDrWathE) ard 0.06 al 0.23 0.29 0.11 -

764-1 1985 !art) - 0.25 0.25 - 0.25

Total 0.06 1.02 1.08 0.27 0.25

a/ Cacelled In July 1984

Annex III-25- Page 1 of 2

RWANDA

Sectoral and Preinvestment Studies Proiect

Supplementary Project Data Sheet

I. Timetable of Key Events

a) Identification: May 1985

b) Preparation: October 1985 - April 1986

c) Appraisal: May 1986

d) Negotiation: March 1987

e) Planned date of effectiveness: November 1987

II. Special Bank Implementation Action

None

III. Special Conditions

b) Condition of Effectiveness

(i) The deposit of US$ 21,000 equivalent into a Counterpart FundAccount established at the National Bank of Rwanda(para. 66).

c) Condition of Disbursement

(i) Receipt of an acceptable list of technical materials, and aprocurement schedule, would be a condition of disbursement ofthe funds related to the Documentation Center (para.54).

d) Other Conditions

(i) By December 31, 1988 at the latest, Government will provideIDA with a description of its institutional framework for theplanning, programming and budgeting of its investments.Annually thereafter it will evaluate in association with IDAthe impact of the methods and procedures adopted to carry outthe studies financed under the project on the functioning ofthe above framework and implement all necessary measuresarising out of such evaluation (paras. 42, 43, 51);

Annex III-26- Page 2 of 2

(ii) Government will follow procedures agreeable to IDA forselecting and financing preinvestment studies and willprepare and review preinvestment study proposals on a fourmonthly basis with the first program to be submitted to IDAno later than September 1, 1988 (para. 48). Selectioncriteria for the studies should be acceptable to IDA asprovided under para. 49;

(iii) Every six months Government will review with IDA, its stafftraining plans for the Ministry of Planning (para. 67).

-27 -ANNEX TVPage l of 1

M~~~~Mi

jjr^tSTIC} r oPERIOICODEUNITIOw OFMaM SEVELWMVG pib * g.

Consltattoe lmZlUTXS mDe G

Presses MACR ECUKMIC PRANECK

OECEIA q. \ P P-SNT

Pr~ ~ ~ ~ ~~~~~~~~~r

PIP Crelling) PE (roW I I no)

rCCNNICAL ~ ~ ~ ~ ~ ~~~~1 2f L '. 2 i 3ear

TO&

._ PLrR mEAN OIREC T PRtOJECT MEuuIr I U MoTDIST

51131 |II>OOF PRJT SIS -MMIU AL.

Submit Project for approerni-

.Prject luple nescti _E

1. Estahlish Plan ohjoctiweos S. Corersy otody. tL Evoluot. projocutosod sctokr end crsoss e..pesft* adjust osconseicsector priorities. Dwl lna 7. butter pregrem of devele peon pas sodoconosic peE Isln stais ewise methodelegila foe.roqaji red. project preperotes seed

S. APprotoe ond oppreve eppraisl.2. Prosoro sector otrtotglee Projejt te late " g

mnd identify project occemet recurrent cts). 14. |M ovoitohie toidese. Docuenotation Cantre,

0. Ester project ftote PIP copies of sectorS. Ricord ond mpdete prjet sod ecmtodee Its starstog proejos

idee s contrest tiles Impleentation. ctudis. oppreteel(incledlog Cost. ,rsndm%wtisetobbo.'progrome In It. P qropere i PeW islogIcal pepors.

isplmatatios). ~Expenditure Progas(PEP) sad propos

4. Scido to study project Ftnoeclsl plea to Ms. Fl.Ides oftoW ceseeltettos Note: Components of reformalte lntorolntouriol IL. Eosoro estorel finoocing program are identified

d uebt).by capital letters, A,

5. Roteod project Woe into B, C, D, E, F, Fa and Fb.PIP End periodically 12. Mon tor sod ea bePlrevlee portfolio of pre oclt epie etetihn

*dlp;. (end adjeot p edgeto,PZP/PU).

THE PREINVESTMENT PROCESS

OTHER ENITIES* ACTIVITIES TIME TECHNICAL STUDI DIR. PRGPAR. I DIX.

.PERIOD HINISTRY FUND PROJECTS STDIESIIVAL.1 MINISTER

I PROPOSE STUDY IDIA "IN. *_DECISION SUBMIT TO PLAN 1 DATY

TO EXAMINE IDEA MAX. ICARRT OUT CONSULT HIN. TECH 3 MONTHS X-STUDT SUBHIT IDEA TO CIC UNTIL -TCHNICAL CIC1 (1 NEtTINO

PREPARE REPORT AND RZCOHH. NEXT CIC _AGs qCARXTE)DECIDE (APPROVE OR NOT) NECTING

TRANSMIT DOSSIER ALL MINISTRIESPREPARE DOSSIERADVISE Z - 3

11 CONSULT POSSIBLE SOURCESS-X POTTIAL AiD DOPOIPREPARATION OF FINANCE FOR EVENTUALOF TOR AND PROJECTINVITATION TERIF" TOR, BUDGET, LISTOF TENDERS OF CONSULTANTS

DECIDE TO OFFICIALLYTRANSMITRECEIVE DOSSIERSUBMIT TO IBRD I -I-D (KCIALKJMASRINGTON) MREfCEIVE OPINION OF SRID X (01 OCAER S OFRCE OP IANCE) cAUTHORISE FINANCING BY

STUDY FUND

CALL FOR PROPOSALS IIX I RECEICtl PROP05ALS _IIFINECO

SELECTION EVALUATE PRDPOSALS X-- -- -- - - XnDEN CCmIIs 4AND SELECT CONSULTANrT

RhllINO OBTAIN APPROVAL FROH AID DMISor AID DONORS.

CONSULTANTS PREPARE CDONTRCTNEGOTIATE CONTRACT

. SIGN COINTRA

It MAKE PAThENTSIMPLEMENT ENSURE FOLLOW-U?

STUDY APPROVt RESULTS I mm HlR IINl S

20 members (16 minist., 4 parastat.) Z/ Temporary function 3/ or Dir. Synthesis andInterministerial Technical Consulting Committee Strategy (Sectorel Studies)(CIC), responsible for reviewing project studies

4 Tender Committee - Ministry of Finance -------- indicates two-vay consultations CsMinistry of PlanningTechnical Ministry concerned 0 c

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.

Annex VI-29 Page 1 of 2

LIST OF STUDIES FINANCED UNDER CREDIT 1217-iW(by sector)

Amounts Possiblefinanced sources ofor to bq financingfinanced by for

Cost the project execution(in US$) (in US$)

Transportation

Route (Kigali-Nyameta-Nemba)* 215,870 211,142Route (Bugarama-Mashyuza)* 158,593 146,197 BADCreation d'un reseau d'auto-ecoles 36,285 36,285 Private SectorCentre de controle technique automobile 128,895 86,052 Private SectorCentre &changes routiers 137,845 75,411Fonds Routier 115,618 115,618 IDA

Industry

Zones Industrielles Kigali Nord* 222,830 222,830Usine d'allumettes de Butare* 29,288 29,288 Private SectorD&veloppement d'activit;s de Konfigi* 25,745 25,745 GRET (France)Panneaux en bois 25,000 10,500 Private Sector

Agriculture

Amenagement Basse Valle Akagera* 374,777 299,444 Several DonorsPlan Directeur Nyabarongo* 41,498 41,498 IDAAmenagement des marais Mwogo* 338,941 71,015 FEDD3veloppement de la peche 443,360 211,198 Belgium

Urban and Water

Urban Sectoral Plan* 176,679 176,679 IDAChantier des jeunes* 69,526 47,130Programme de logements economiques 208,092 Z05,092 Saudi ArabiaRestructuration des quartiers spontanes 306,432 207,717 FENUP/IDA

a KigaliRehabilitation des adductions d'eau en 350,000 350,000 IDAIONGmilieu ruralSystemes d'assainissement 111,961 108,686 BADIIDAIRAF

Telecommunications

Preparation du projet Communications II* 88,389 88,389 IDADaveloppement institutionnel des postes 250,000 250,000 IDAet communications

Annex VI-30- Page 2 of 2

Amounts Possiblefinanced sources ofor to be financingfinanced by for

Cost the proiect execution(in US$) (in US$)

Electricity and Power

Mini-centrales Rukarara - Mukungura II 611,804 608,392 BADPlan Directeur Electrification Kigali -- an 2000 230,000 230,000 RAFIBADGaz Methane - Lac Kivu* 131,343 131,343 IDAlBelgium/CEPGLHydrologie Lac Bulera 120,000 120,000 (currently being

negotiated)

Financial

Craation d'un systueEpargne-Logement 17,700 17.700 Rwanda Banking

system

4,115,9001

* Completed studies

1/ At January 16, 1987, US$ 3.0 million of this total had been disbursed.

- 31 -

Annex VII

PRELIMINARY LIST OF STUDIES

Agricultural Sector

- Management of Agricultural Industries *- National Coffee Policy *- Leather and Animal Skins **- Livestock and Dairy Produce *- Pyrethrum **- Essential Oils **- Edible Oils Production **

Power and Energy Sector

- Methane Gas at Lake Kivu **- Peat **- Energy requirements of Cement Factory at Mashyuza **- Energy Saving *

Education Sector

- National Training Center *

Urban Sector

- Construction Materials **- Market Improvement **

Industry Sector

- Textiles **- Cardboard Production **

Other Studies

- Rehabilitation of the P.E. "Rwanda Paper Factory ***- Rehabilitation of the P.E. "SONAFRUITS" *- Environmental National Policy *

- * Sectoral Study-** Preinvestment Study*** Public Enterprise Rehabilitation Study

- 32 -

ANNEX VIIIPage 1 of 1

TRAINING PROGRAM

The credit will finance the following residential seminars:

1. Sectoral Planning2. Regional Planning3. The Project Cycle4. Project Appraisal5. Investment Programming6. Public Expenditure Programning7. Honitoring and follow-up of projects

- 33 -

Annex IXPage 1 of 1

PROCUREMENT TABLE

Item Amount Method(US$ thousands)

1. Preinvestment Studies 7,133.0 IDA Guidelines

2. Training 250.0 IDA Guidelines

3. Documentation Center 2.5 Direct from publisher(technical material)

4. Vehicles & Equipment 4.5 LCB, price quotation, ordirect contracting

TOTAL IDA Financing 7,390.0

AnnexX34 I- Pge of I

mImrIHIRY OF PLANNINGa - ORCANrZATIONAL CHART

DrRECTION DIVISION BUREAU

G ONT DES I

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z E_. |STAT. FlNd@NC.o S _lST^TISTZqUES _ ICltED~~~IT$. COM1. TRANSP._EZ: ICOURAtlTES U~~~~~~~STATISTICS

L) F;GS^ITQE DEMOCR, ET SERVTCES

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FINANCEMENT _ _ AIL U8IIAT RE . i1o X ELABORATIOH U a~~~IEURE 3NC

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