Tunisia - Agricultural Credit Project

Document of The World Bank TOR OFFICIAL USE ONLY Report No. 2497 PROJECT PERFORMANCE AUDIT REPORT TUNISIA FIRST AGRICULTURAL CREDIT PROJECT (Loan 779/Credit 263-TUN) May 11, 1979 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOR OFFICIAL USE ONLY Project Performance Audit Report TUNISIA FIRST AGRICULTURAL CREDIT PROJECT (Loan 779/Credit 263-TUN) TABLE OF CONTENTS Page Preface i Basic Data Sheet i Disbursement Table 111 Highlights iv PROJECT PERFORMANCE AUDIT MEMORANDUM I. Project Summary 1 II. Main Issues 3 A. Replacement versus Investment 3 B. Deficiencies in Project Design 5 1. Lack of Extension Services 6 2. Tractor Hours 8 3. Shortfall in Dairy Farm Development 7 C. The Project's Agro-industrial Component 8 PROJECT COMPLETION REPORT I. Introduction 11 II. Background 11 III. Project Implementation 13 IV. The Institutional Objectives of the Project 22 V. Benefits and Justification 25 VI. Bank Performance 29 Annexes 1-5 Map This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Project Performance Audit Report TUNISIA FIRST AGRICULTURAL CREDIT PROJECT (Loan 779/Credit 263-TUN) PREFACE This report presents the results of an audit of the Agricultural Credit Project in Tunisia for which the World Bank Group granted a loan of US$5 million (Loan 779-TUN) and a credit of US$3 million (Credit 263-TUN), signed in July 1971 and fully disbursed on July 22, 1978, thirty-four months after the original closing date. The audit was based on interviews with Bank staff and on a reading of the appraisal report, supervision reports, project files and the Proj- ect Completion Report (PCR) prepared by the Europe, Middle East and North Africa Regional Office in February 1978. An OED mission visited Tunisia in May 1978. A field trip to visit some participating farmers and the new dairy plant was made and discussions held with staff of the Ministries of Finance and Agricul- ture, the Banque Nationale de Tunisie (BNT) and other organizations involved in the project. The results of that mission were used to test the validity of some of the conclusions of the PCR and are also reflected in the audit memorandum. The audit finds the PCR comprehensive and accurate with respect to the project's principal achievements and shortcomings. The points discussed by the audit mission have been selected because of their rele- vance to this as well as other projects. The PPAM also focuses on the issue of financing machinery replacements instead of new investments. The valuable assistance provided by the Government of Tunisia, BNT, and their staff met during the preparation of this report is gratefully acknowledged. No comments were received on the draft report from the Government.  PROJECT PERFORMANCE AUDIT REPORT BASIC DATA SHEET TUNISIA FIRST AGRICULTURAL CREDIT PROJECT (LOAN 779/CREDIT 263-TUN) KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost (US$ million) 15.0 27.4 Overrun (%) - 82.7 /1 Loan/Credit Amount (us$ million) 5.0/3.0 5.0/3.2/2 Disbursed ) - 8.2 Cancelled - Repaid to ) November 30, 1978 - 0.9 Outstanding to ) - 7.1 Date for Completion of Physical Components 09/30/75 06/30/76 Proportion Completed by Appraisal Target Date (%) - 70 Proportion of Time Overrun (%) - 65 Incremental Financial Rate of Return (M) 22 30 OTHER PROJECT DATA Original Actual or Item Plan Revisions Current Estimate First Mention in Files or Timetable 05/14/69 Government's Application 04/70 Negotiations 03/25/71 03/25/71 Board Approval 05/27/71 07/01/71 Loan/Credit Agreement Date 07/12/71 07/12/71 Effectiveness Date 10/05/71 11/15/71 12/15/71, 01/25/72 01/15/72, 01/31/72 Closing Date 09/30/75 07/22/78 Borrower Government of Tunisia Executing Agency Basque Nationale de Tunisie (BNT) Fiscal Year of Borrower January I - December 31 Follow-on Project Name Second Agricultural Credit Loan Number 1340-TUN Amount (uS$ million) 12.0 *Loan Agreement Date 12/17/76 MISSION DATA Month, No of No. of Date of Item Year Weeks Persons Manweeks Report Preparation 02-03/70 2 3 6 Appraisal 06-07/70 4 4 16 Total 22 Supervision 1 08-09/71 2 2 4 093071 Supervision Il 02-03/72 2 2 4 04-10-72 Supervision 1 7 08-09/72 2 2 4 10/0372 Supervision IV/3 10-11/72 2 2 4 Supervision V 02-03/73 2 2 4 04-16-73 Supervision VI/3 10/73 2 2 4 01-08-74 Supervision VII/3 06/74 2 2 4 07-22-74 Supervision VIII/3 11/74 2.5 1 2.5 01-29-75 Supervision Ia/3 05-06/75 1 2 2 07-07-75 Supervision XA 11/12/75 3 2 6 Cd Supervision XI3 06/76 2 3 6 07-12-76 Supervision XII3 02/77 2 2 4 03-28-77 Supervision XIII/3 06/77 2 1 2 07-08-77 Supervision XIV/3 11/77 2 2 4 02-15-78 Total 54.5 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Dinar (D) Year. Appraisal Year Average Exchange Rate: US$1 D.5250 Intervening Years Average US$1 - pO.4331 Completion Year Average US$1 DO 4290 /1 Project was scaled down. /2 Plus exchange adjustment of 0.67/0.15. /_3 Including work for other projects. Apr Including 0ppraisal for follow-on project  - 111 - Project Performance Audit Report TUNISIA FIRST AGRICULTURAL CREDIT PROJECT (Loan 779/Credit 263-TUN) DISBURSEMENT TABLE Actual as Period ending Appraisal Estimate Actual Disbursements of Estimate 06/30/72 0.1 - 0 12/31/72 0.8 0.4 50 06/30/73 1.4 1.3 93 12/31/73 2.8 1.7 61 06/30/74 4.1 2.5 61 12/31/74 5.6 2.6 47 06/30/75 6.7 3.3 49 12/31/75 7.6 4.4 58 06/30/76 8.0 5.6 70 12/31/76 - 7.0 06/30/77 - 7.6 12/31/77 - 7.8 07/22/78 - 8.0  - iv - Project Performance Audit Report TUNISIA FIRST AGRICULTURAL CREDIT PROJECT (Loan 779/Credit 263-TUN) HIGHLIGHTS The First Agricultural Credit Project in Tunisia was signed in July 1971 for US$8 million; Bank funds supported a medium-term credit program administered by the Banque Nationale de Tunisie (BNT) which provided loans for agricultural machinery and dairy cattle to farmers, as well as investment capital for date palm plantations and a dairy plant owned by a semi-private company. As appraised the project would have permitted financing of 830 tractors/combines, 1,800 dairy cattle, and 900 ha date palms. The project encountered difficulties mainly due to competition with another credit scheme offering loans at lower interest rates and delays due to project management's unfamiliarity with ICB procedures. Because of cost overruns due to inflation only 55% of the farm machinery and 50% of the dairy cattle compared with appraisal estimates could be financed under the project. The date palm acreage was in line with appraisal projections and in addition the project assisted the construc- tion of a new dairy plant. Due to higher date prices and favorable returns on the dairy plant investments, the rate of return has been recal- culated at 30% - about 8 percentage points above appraisal estimates. Points of special interest are: - Farm machinery financed under the project was mainly for replacement and not new investment (PPAM paras. 8 to 13); - Lack of extension support did not permit maxi- mization of project benefits (PPAM paras. 14 to 16; PCR paras. 3.31, and 6.02); - Unrealistically large number of tractor hours used in farm models could lead to distortion of project benefits (PPAM paras. 17 to 19); - v - - Bank's weakness in handling agro-industrial project components (PPAM paras. 27 to 32; PCR paras. 3.16 to 3.18). Project Performance Audit Report TUNISIA FIRST AGRICULTURAL CREDIT PROJECT (Loan 779/Credit 263-TUN) I. PROJECT SUMMARY 1/ The Project 1. The project was appraised in 1970 and the Loan Agreement was signed in 1971. It was to follow up the Cooperative Farms Project (Loan 444/Credit 99-TUN) which aimed at consolidating and creating production cooperatives. The Agricultural Credit Project aimed at the private sector: through the Banque Nationale de Tunisie (BNT), it financed on- farm investments for mechanization of grain production, dairy development and date palm plantations, as well as providing technical assistance for BNT's Credit Division. STIL, a semi-private company, was the subborrower for the date palm development component. In July 1974 BNT requested the Bank to amend the Loan and Credit Agreements; amendments were duly made in order to enlarge the project scope and include an agro-industrial com- ponent for cereal and dairy production. The project's total cost was US$15.0 million equivalent, of which the US$8 million foreign exchange cost was contributed by the Bank. The overall economic rate of return is over 30% compared to 22% at appraisal; the increase is mainly due to the increased rate of return for the date palm plantations and the addi- tion of a milk plant component. Principal Project Results 2. Grain Farms. This component was to increase grain production by making subloans to about 830 farmers with farm sizes large enough to justify investments in farm machinery. The last disbursement was made at the end of 1976; the amount totalled US$4,401,571 or 73% of the amount projected during project appraisal. Loan requests declined due, among other reasons, to competition from other fund sources and BNT's obliga- tion to scrutinize applicants' creditworthiness and subsequent economic and financial viability; in 1977 the uniformity of subloan conditions was assured by Government legislation as a result of the negotiations of the Second Agricultural Credit Project. Increased cereal production, diver- sified cropping patterns, and reduced fallow land were in part results of mechanization. Two representative farm budgets showed financial rates of return of 49% and 35%. 3. Dairy Farms. 908 dairy cows were financed in 99 subloans to 83 dairy farmers, representing only 50% of the total envisaged at appraisal. 1/ Adapted from the PCR. - 2 - Difficulties set in early; farmers were disinclined to establish 8 ha of irrigated fodder crops to qualify them for a loan to buy 12 in-calf heifers. In 1973 the Bank agreed that ensilage feeding could comprise a lending criterion, provided that the farmers dispose of about 45 ha of land for forage production. However, other factors contributed to a continuing decline in loan applications although all funds under the dairy production category were fully disbursed. This was due to the later inclusion of a dairy plant, due to start operating in 1978, whose financial rate of return would be about 23%. 4. Date Palm Plantations. This subcategory has had a strong impact on agricultural development. Desert lands in Nefzaoua and Djerid, of 300 ha and 600 ha respectively, were planted with date palms receiving water from extension aquifers. The overall target for planting was met with a two-year delay, resulting in higher investment costs and postponed production; this component will serve as a model to be repeated in the Second Agricultural Credit Project. STIL continues to carry on works on the plantations. The increase in export prices for high quality dates is the cause of a greater financial rate of return than forecasted - 22; compared with the appraisal estimate's 14%. 5. Support Services. Extension services, to have been provided by the Ministry of Agriculture, were largely ineffective. Funds for extension vehicles and BNT staff were not used. Only US$72,000 were used for expatriate services in BNT. 6. Institutional Objectives. BNT needed to develop its lending activities in the agricultural sector. A systematic appraisal of loan applications was introduced in 1972 by establishing a Technical Unit in BNT. It was to appraise all subprojects, submit recommendations and undertake regular supervision. Since 1976 the need to reinforce the Unit and expand at branch levels became evident; additional staff are being recruited. BNT's general management was good but further decentralization should continue during implementation of the Second Agricultural Credit Project. BNT followed the financial requirements provided for in Schedule 6 of the Loan Agreement. It has maintained an aggregate of capital and reserve equivalent to not less than 10% of its sight and fixed term deposits. Two issues were eventually resolved: (a) Interest Rate, which was not strictly adhered to by BNT - in 1977 Government enacted legislation to ensure uniform lending terms; and (b) Audit, which was unsatisfactory between 1972-75 - as a result of a condition of effectiveness for the Second Agricultural Credit Project, improved credit arrangements have been made. Bank Performance 7. Supervision was adequate. Experience shows, however, that closer attention could have been paid to certain details such as ad- herence to interest rates, supervision of subloans, and monitoring of BNT's quarterly reports. These details should be recalled during imple- mentation of the Second Agricultural Credit Project. An important benefit -3- has been the establishment of uniform lending terms which are now applied to the nature of the investment and means of the farmer. II. MAIN ISSUES A. Replacement versus Investment 8. When the project was prepared and submitted to the Board for approval the subcomponent assisting mechanization of grain farms was presented as "About 850 grain farmers in Northern Tunisia would be expected to invest in a mix of mechanized equipment, including about 135 crawler tractors and 465 wheel tractors and about 240 grain combines." (Appraisal report, para. 3.04). The impression was given that these investments would be new investments leading to an incremental output of 85,000 tons of wheat at full development (Appraisal report, para. 5.01). 9. The President's Report in its definition of the project purpose stated that the Loan/Credit proceeds were "to help finance development of cereal and dairy farming..." It would have been, however, more correct to specify that the project also included substantial financing of tractor and farm machinery replacements. Following an extended period of Govern- ment support of collective farming, a change in official policy permitted extension of financial assistance to large/medium-sized commercial farms which had been excluded from Government programs in previous years. These farms had succeeded in prolonging the useful life of equipment but their machinery was getting close or had even reached the point where repairs were no longer feasible. By replacing obsolete equipment no incremental production could have been anticipated, but equally important no further decline in grain output was likely to happen.l/ This situation was never brought out in any appraisal, President's, supervision report or, as a matter of fact, in the PCR. 10. During a field trip the audit mission visited several grain farms which had obtained loans for farm mechanization. On all farms visited obsolete tractors indicating previous use on the farms could be observed. Further investigation by the mission revealed that out of a total of 344 tractors financed only 88 were "new investments", introducing mechanized farming on participating farms. According to BNT an even smaller number of combination harvesters financed under the project could be considered as new investments. Although no accurate numbers were 1/ The Central Projects Staff disagrees with this use of the term incre- mental production: "...if 'no further decline in grain production was likely to happen as a consequence of the project' it follows that some incremental production could have been anticipated". Their point is that incremental production is the difference between estimated production without the project and that with the project and not the difference between current production and production with the project. See also PPAM para. 13. available, BNT considered most of the combines as replacements of obsolete machinery previously available to the farmers. 11. Based on assumed yields per hectare and total area expected to be served by project financed tractors and combines, the appraisal report as mentioned above, conveys the impression that all investments would generate incremental production. There is no discussion of any replace- ments which would - in the case of this project - prevent a loss of production and would not increase yields and/or production on partici- pating farms. Although pointing out the fairly high degree of pre-project mechanization (Appraisal report, Annex 4, para. 13), no differentiation was made in the appraisal between "first" investments and replacement of obsolete equipment. During supervision this issue was either never dis- covered or not mentioned in any report. Even in the PCR the impression of new investments is upheld, since the report's assumptions on incremental grain production are based on the area cultivated by all tractors financed under the project. 12. Financing of machinery replacements under the project made economic sense. However, with 50% of total Loan/Credit funds used to finance replacements, the project should have been correctly presented as a rehabilitation cum development project. During the interviews it was disclosed that staff felt uneasy about the issue of machinery replace- ment financing due to the absence of a precise Bank policy on this issue. The Bank's Operational Manual, in its Operational Policy Memorandum 2.61, dated March 31, 1971 stipulates certain considerations governing lending to agriculture. Para. 1 of this Memorandum states that "the Bank is pre- pared to finance agricultural projects.. .significantly contributing to the economic development..."Further on when dealing with "Eligibility" for Financing" the Memorandum suggests that only inputs - and agricultural machinery is an input - used in the development of new cropping areas can be regarded as "capital" - eligible for Bank assistance, as opposed to "current" expenditures - excluded from Bank financing. On the other hand the Bank has been involved in agricultural rehabilitation projects (Chile, Loan 1119) that provided explicitly for machinery replacements. 13. Due to a reduction in the number of tractors and combinesl/ financed under the project and also due to a more conservative estimate of yield increases attributable to mechanized land preparation (PCR para. 5.05) total project attributable production of grains reached only 34,500 tons as compared to the appraisal estimate of 85,000 tons. Since replace- ments accounted for 75% of all tractors financed, the project's incremental production is at best 8600 tons. The 25,900 tons, i.e. the difference to the 34,500 tons is the volume of grain production which would have been 1/ Completion of bilateral assistance for tractor purchases and provi- sion of other credit funds at lower rates of interest were the main reasons for the shortfall in the number of participating farms (see PCR paras. 3.01, 3.07, 3.09). - 5 - lost without the project.l/ 2/ 3/ By financing tractor or combination har- vester replacements it can be said that the project succeeded in preventing a likely drop in production which would have occurred with obsolete machinery becoming inoperational. But this should have been pointed out in the Bank reports. B. Deficiencies in Project Design 1. Lack of Extension Services 14. As far as development of grain farms was concerned the project concept had assumed a number of substantial changes in farming practice. The cropping pattern was to be changed. Soft wheat, chick peas and forage acreage was to be expanded by about 40 to 50%, fallow land to be reduced commensurately. New Mexican wheat varieties, higher fertilizer rates and herbicide applications were to be introduced. 15. While the appraisal correctly recognized that introduction of high yielding dairy cattle, development of irrigated forage production and silage making,would require concentrated extension efforts - a density of one extension officer for 10 dairy farms was suggested - no attention was paid to providing proper extension services to grain farmers. The appraisal report does not discuss existing services and/or the need for improving or expanding extension activities to promote the input packages mentioned. Also during supervision this aspect seems to have received little or no attention. Only the PCR reports on the disappoint- ing cultivation of improved Mexican wheat varieties: "The lack of extension agents also played a role in this respect" (PCR para. 5.02). 1/ Since there is no change in volume, costs or returns of project gen- erated grain production, the PCR's rate of return remains unchanged. 2/ The Region does not agree with this assumption since the incremental production estimated for the project (34,500 t) was calculated ex post and provides for replacement of tractors. The PCR findings are derived from a sample survey of farmers who had owned tractors previously and whose average production yields were 38% higher than the average national yields as the time of their appraisal. The audit finds this increase in output unrelated to Bank assisted investments. Yield increases were due to the introduction of improvements not covered by project activities and not to replacement of old tractors by new ones. 3/ The Central Projects Staff had this comment on estimated project bene- fits, "...the situation without the project cannot be assumed to be characterized by total lack of replacement, since presently some replacement would occur even in the absence of the project. Therefore the conclusion that '...The 25,900 tons...is the volume of grain pro- duction which would have been lost without the project' is probably an overstatement." - 6 - 16. During recent audits, OED has come across a number of Agricul- tural Credit Projects 1/ where only superficial or even no attention was paid to provision or upgrading of extension services required to assist farmers in implementing far-reaching innovations or bring about drastic changes in traditional farming patterns. Yet, in this particular case benefits accruing from better seed, fertilizer and herbicide application were claimed at appraisal as project induced although neither short term financing for these seasonal inputs nor extension services promoting them were assisted by the Bank, nor were their costs included in the ROR calculations. 2. Tractor Hours 17. Questions can be raised about the number of hours the appraisal had assumed each tractor would work on an average project farm. On well managed farms in the U.S./Europe a tractor does not log more than 800 hours on average per annum. The appraisal assumption of 1500 working hours/year would mean that each tractor would work on almost 200 days (8 hours/day) of the year. Bearing in mind that the project was dealing with grain farms where soft wheat cultivation was predominant, there is hardly any useful work tractors could do during the six months' growing season of soft wheat.2/ 18. Using unrealistically large numbers of hours to be worked by a tractor is likely to lead to a distortion of financial and economic returns of projects with a farm mechanization component. In the case of this particular project the correct farm model for a 200 ha grain farm should have allowed for a second tractor or work to be undertaken by a contractor to permit land preparation during the time limits imposed by Tunisia's climate. During the audit mission's field trip it was found that most farms corresponding in size to the appraisal model were using two tractors. 19. The number of working hours for a tractor are determined by a seasonal time frame. Plowing and harrowing are not activities which can or should be carried out on a year-round basis. In Tunisia soils have to be worked when friable and plowing has to be timed for optimum moisture conservation. These considerations considerably narrow down the time 1/ Jamaica First Agricultural Credit (Loan 719-JM), Report No. 1898; Kenya First Agricultural Credit (Credit 105-KE), Report No. 834; Kenya Second Agricultural Credit (Credit 344-KE); and Morocco Second Agricultural Credit (Loan 861/Credit 338-MOR) for which audit reports are under preparation. 2/ Assuming two plowings and four harrowings per year and the tractor horsepower indicated in Annex 4 of the appraisal report, only 750 hours of tillage work are required for an average 200 ha cereal farm, but this has to be accomplished in a time span of less than two months. - 7 - available for using tractors. The audit mission is aware that unrea- listic tractor hours have been used in other projectsl/ and more attention needs to be given to this issue in new projects to avoid distortions of financial and economic project benefits. 3. Shortfall in Dairy Farm Development 20. Implementation of the project's dairy farm component was ham- pered by lack of interest by Tunisian farmers. Purchases of dairy cattle financed under the project reached only 50% of the expected number and credit for on-farm irrigation development was 97% below appraisal esti- mates (PCR, para. 3.13). From the US$0.98 million allocated for dairy farm development, only US$0.43 million (44%) have been actually used. 21. The factors likely to hamper dairy development could have been identified at the time of appraisal. These factors are the farmers' atti- tude vis-a-vis cattle, alternative possibilities of farm production, and the Government's policy on dairying which are discussed in the following paragraphs. 22. Tunisian farmers regard their cattle's primary function in providing manure for their intensive vegetable/fruit gardens.2/ If cattle produces also milk and beef it is welcome but only of secondary importance. There is and was a readily available market for fruit and vegetables, either for the supply of the urban population or for export. Milk marketing, however, was not organized and production in excess of demands of neighbors was difficult to dispose of economically. 23. The appraisal was correct on technical grounds to suggest intro- duction of adequate fodder production on participating farms. On average a minimum of 8 ha irrigated fodder was considered necessary to supply forage for a herd of 20 high yielding cows. This approach proved to be unattractive to farmers because putting irrigation to a more remunera- tive use as described below, offered better returns to them. Following requests by the borrower the pre-condition of 8 ha irrigated fodder land was later dropped and replaced by silage production from a larger (45 ha) non-irrigated area.3/ 24. By insisting on using irrigation for fodder production the apprai- sal demonstrated a considerable lack of appreciation of the economics of 1/ Kenya Group Farm Rehabilitation (Loan 1093-KE) and Tanzania Geita Cotton (Credit 454-TA) both not yet fully disbursed. 2/ Source: BNT and farmers visited by audit mission. 3/ Production of fodder from non-irrigated land is lower and would not be available on a year-round basis. Fodder conservation through making of silage would secure fodder also during the off-season. The larger acreage required is due to lower fodder quantities pro- duced on dry land. - g - alternative crops under irrigation. Since rainfall is insufficient for most crops in almost all regions in the country additional water has to be provided through irrigation. Tunisia has only one perennial river and has to rely to a large extent on groundwater for irrigation purposes. In addition to the scarcity of groundwater resources, these waters are fre- quently saline. Because of these problems, farmers allocate scarce water to the most remunerative crops on their farms, i.e. vegetables and fruit. Based on the appraisal's evaluation of tomato production (intercropped with date palms) with a net return of D1300/hal/ it is obvious that the D300/ha net return for dairy farms was not competitive. Actual develop- ments during project implementation proved that farmers were better in calculating possible profits and better prepared to adjust their farming systems to prevailing markets than assumed by the appraisal mission. 25. The Government's policy on dairy development should also have been more closely scrutinized. Local milk production had to compete in the past and still is competing with reconstituted milk produced from imported milk powder. Despite repeated urgings by the Bank, milk prices to local producers were not changed in a way to provide for necessary incentives to dairy farmers. Due to depressed world markets for dairy produce, powdered milk can be imported at extremely low prices, and low cost milk can thus be provided to large segments of the country's low income population. Furthermore, export earnings from irrigated lands not used for fodder production but for growing vegetables and fruit more than offset costs of milk imports. 26. The audit considers that the evaluation of alternative lines of production, or country specific policies, need to receive more attention during appraisal. C. The Project's Agro-industrial Component 27. By early 1974 it became apparent that demand for dairy farm loans was falling behind appraisal estimates and loan requests for grain farms also declined due to competition from other credit funds offering softer terms (PCR, para. 3.07). The Bank started to look for other financing possibilities that would make use of the Loan/Credit proceeds. In April/June, 1974 BNT suggested financing of an industrial poultry scheme, a dairy plant and a flour mill. 28. While the poultry venture was turned down - it was suggested that the proposed scheme would be more in line with IFC lending opera- tions - the dairy plant and flour mill were considered eligible for assistance under the project. The flour mill project was later dropped by BNT. 1/ Due to differences in vegetation periods between Tunisia's southern and northern production areas, a slightly lower return is likely from vegetable production in the northern parts of the country. - 9 - 29. At about the same time a Bank supervision mission (July 22, 1974) reported that information available was insufficient to evaluate the soundness of the proposed dairy construction. Nevertheless, the Bank informed BNT that it was prepared to finance the dairy as well as the mill "...if the investments proposed are economical and sound financially." (Letter August 6, 1974). 30. A feasibility study for the dairy plant was received in August 1974. There is no indication that this study was comprehensive enough to carry out an appraisal of the investment's technical, economic and financial aspects; and there is no record of the dairy plant having been appraised. This was also confirmed in staff interviews. 31. When first identified as a possible subcomponent for Bank financing, costs given were in the region of US$1.0 million (Supervision mission 1974). In March 1975 BNT, in a letter to the Bank, mentioned a total cost of D1.5 million (US$3.8 million). During the next few months costs continued to increase. The 1975 supervision mission reported a cost of D3 million (US$7.5 million); the 1976 supervision mentioned costs of D4 million (US$9.3 million). The PCR mentions D5.2 million (US$12.1 million) and the audit mission was informed by the management of the dairy plant that final cost will reach D6 million (US$15.0 million). 32. The PCR (para. 3.18) attributes these cost increases to a sub- stantial expansion of capacity and a redesign of the water supply system. The dramatic cost increases of the dairy plant support the recent OED findingsl/ that agro-industrial components in Bank projects do not receive adequate attention. It seems clear that this component was insufficiently prepared and evaluated. The Borrower would have gained from Bank assistance on technical, economic and financial aspects of the planned investment before this was undertaken. 1/ Benin Hinvi Agricultural Project (Report No. 2053 of May 1978); Benin Zou-Borgou Cotton Project (Report No. 2034 of April 1978); and Indonesia Second North Sumatra Estates Project (Credit 194-IND) audit report under preparation.  - 11 - PROJECT COMPLETION REPORT TUNISIA AGRICULTURAL CREDIT I (Loan 779/Credit 263-TUN) I. INTRODUCTION 1.01 This report is based on the findings of supervision missions between 1972 and 1977, Quarterly Progress Reports, BNT's draft Completion Report of November/December 1977, and on the findings of a project completion mission. II. BACKGROUND 2.01 The Agriculture Credit I Project was designed to follow up the Cooperative Farms Project (Loan 484/Credit 99-TUN), which was aimed at consolidating existing, and creating new, production cooperatives. In September 1969, largely as a result of opposition of private farmers to production cooperatives, the Government decided to reestablish the former rights of the private sector in agriculture and to make cooperative membership entirely voluntary. The Bank agreed to proceed with a project directed toward the private sector. BNT started detailed preparation in February/March 1970 with the help of FAO/CP. Appraisal took place from June 17 to July 10, 1970, but negotiations were carried out in Washington only on March 20 to 25, 1971 because a number of issues, such as repayment of cooperative loans to BNT, had to be resolved first with the Government. The Loan was finally signed on July 12, 1971. It became effective on January 25, 1972, after three postponements. The postponements were caused mainly by delays in the ratification of the Loan documents by the Tunisian Parliament and in the preparation of legal opinions. 2.02 The Project components proposed by BNT to the Bank following the visit of a preparation mission in February 1970 are sumarized in the table in Annex 1. The table shows, apart from orchard development, that the appraisal mission has retained all the components proposed by BNT. 2.03 The total cost of the Project as proposed by BNT was estimated at Din 9.4 million (US$18.1 million) including a technical assistance compo- nent of Din 150,000 (US$286,000). BNT anticipated that the Bank/IDA would participate by a financing of approximately US$10 million. Because of changes made by the appraisal mission the cost of the project became Din 7.8 million (US$15.0 million) distributed as follows: - 12 - Cost Foreign Item Local Foreign Total Local Foreign Total Exchange -----(Din'000)----- _-----(US$'000)------- % Lending Program Grain Farms 1,680 3,150 4,830 3,200 6,000 9,200 65 Dairy Farms 580 510 1,090 1,110 980 2,090 47 Date Palm Plantations 1,280 430 1,710 2,450 810 3,260 25 Subtotal 3,540 4,090 7,630 6,760 7,790 1 54 Support Services 120 110 230 240 210 450 47 Grand Total 4,200 7,860 7,000 8 15,000 53 The Bank finally contributed for the foreign exchange cost of the Project, i.e. Din 4.2 million (US$8 million). The final project cost is shown in Annex 2. Project Scope 2.04 The Project was designed to benefit medium and large farmers with typical farm sizes of 100-200 ha for the grain farm component and about 90 ha for the dairy farm component. STIL, a semi-private company with long experience in date production and export, was the sub-borrower for the date palm development component. The orientation of the Project toward medium and large size farmers was justified at that time by the overall objective of realizing a rapid production increase of cereals, meat and dairy products. Furthermore, credit to small farmers was considered too risky and BNT had yet to develop its lending activities in the agriculture sector in general. This was one of the institutional objectives of the Project. It was thought that the establishment of a Technical Unit in BNT would help achieve this objective although it would handle, in a first stage, a limited number of farmers' applications. 2.05 The negotiations took place in March 1971 and the Loan/Credit Agreements were signed in July 1971. BNT was the Borrower for a Loan of US$5.0 million at an interest rate of 7.25% and the Government was the Borrower for a credit of US$3.0 million at an interest rate of 0.75%. The Government passed on the Credit funds to BNT at an interest rate of 1% for 15 years. This has allowed BNT a sufficient spread to cover cost of its additional staff, the cost of the audit and sufficient provisions for bad debts. It was the first time that BNT assumed lending risks in the agriculture sector. The cost of funds to BNT for both the Loan and Credit averaged 4.9%. BNT was expected to make available Din 1.3 million (US$2.5 million) from its own resources under the Project. Because of the revolving character of all Bank funds, however, the highest outstanding - 13 - portfolio of BNT's own resourceshas not exceeded Din 913,000 (US$1.7 million) at the end of the third project year. 2.06 Early in the implementation phase of the Project it became evident that disbursements under Category I(B) for Dairy Farms would be difficult to keep up at the pace envisaged at appraisal. The difficulties encountered under the Livestock Category and the measures taken by the Bank to improve disbursements are examined in detail in Chapter III. About 30 months after effectiveness,in July 1974,BNT requested the Bank for an official amendment of the Loan and Credit Agreements. The changes were intended to enlarge the Project scope geographically and to include an agro-industrial component for cereal and dairy production. A flour mill and a dairy plant were to be financed as a result of these changes. The flour mill could not be financed because the promoters could not assemble the necessary equity for its operation but the dairy plant was eventually financed (paras. 3.12 to 3.22). The modification of the Project description required an amendment of Schedule 2 of the Loan/Credit Agree- ments on allocation of proceeds (Annex 3) and a revision of Schedule 5 on procurement providing that ICB procedures will be used for procuring processing facilities whose costs exceed US$150,000 equivalent and for all contracts for the drilling and construction of deep wells for date palm plantations. III. PROJECT IMPLEMENTATION A. Grain Farms 3.01 The principal objective of the grain farm component was to increase grain production by making subloans to about 830 farmers with farm sizes large enough to justify investments in farm machinery. Farm mechanization was to contribute to a better preparation of soils, increased utilization of farm inputs, and improvement of the cultivation system. At the same time it was hoped-that farmers would gradually replace local soft wheat with improved local and Mexican varieties. The category was initially funded with US$6.0 million and anticipated the financing of 460 wheel tractors, 130 crawler tractors, and 240 combine harvesters in three years. This funding was reduced in 1974 to US$5 million because of a bilateral loan which financed the purchase of Steyr tractors in Tunisia. 3.02 Duration of disbursements under this category was four-and-a-half years instead of the three years envisaged in 1971, and the last disburse- ments were made at the end of 1976. The amount disbursed for farm mechanization reached a total of US$4,401,571 or 88% of the amounts pro- jected in 1974 at project revision. The number of subloans disbursed was 639 for 636 farms. The total picture of disbursements under this category is as follows: - 14 - Number Number Number of Loan of Sub- of Sub- Amount of Amount of Amount of Applications loans loans Subloans Subloans Bank Year Received Approved Disbursed Approved Disbursed Disbursement kDin'000) (Din'000) (US$'000) 1972 243 206 167 700 629 945 1973 118 101 113 389 433 782 1974 169 123 59 495 239 295 1975 246 210 212 862 793 1,481 1976 108 53 88 236 381 898 Total 884 693 639 22752 22475 41401 3.03 The number of items of farm machinery financed in 1972-1976 is shown below. Total Number Actually Estimated at Item 1972 1973 1974 1975 1976 Financed Appraisal Combine Harvesters 54 30 8 19 4 115 240 Wheel Tractors 66 44 35 94 60 299 460 Crawler Tractors 22 13 6 2 2 45 130 Total 142 87 49 45 66 459 830 Various Material 194 126 110 346 196 972 - 3.04 The two tables show that the number of machinery items financed reached only 55% of appraisal estimates, whereas 88% of the anticipated amounts were reached. This demonstrates the price increases of material since 1972 and also the relative importance of the tractor attachments sold with the tractors, an average of four per tractor. The Project financed virtually only 65% of the number of wheel tractors expected to be financed, 48% of the combine harvesters and only 35% of the crawler tractors expected to be financed. The price increases for wheel tractors on the average were 12% per annum, for combine harvesters 13% per annum, and for crawler tractors 15% per annum. These price increases have made it more and more difficult for the farmers to assemble the 30% equity required for obtaining BNT financing under the Project. The prices of agricultural commodities have not always kept pace with these cost increases and farmers were discouraged from making medium or long term investments. 3.05 The regional picture shows that 125 machinery items have been financed in the area of Tunis and Fahs, 113 in Le Kef, and 40 to 60 each in the areas of Beja, Mateur, Medjez, Teboursouk, Jendouba and Siliana. Of the total number of clients, 54% had more than 300 ha, 33% had 150 to 300 ha, and only 13% had less than 150 ha. - 15 - 3.06 The table regarding loan requests in para. 3.02 indicates that 15% of the loan applications were rejected. In comparison with other lending institutions this is not an abnormally high rate given the condi- tions attached to the loan approval (financial viability, credit worthiness and securities). The percentage of rejections was greater only in 1976 when the funds neared exhaustion and certain applications were reoriented toward other sources of finance. About 92% of all loans approved were disbursed. This difference can be explained by the difficulty encountered by the farmer to assemble the necessary equity or by the unavailability of the equipment desired at the time of the loan approval. In some cases the slow administrative procedures are partly responsible because they led to loan proceeds being available only after the planting or harvesting seasons. 3.07 The marked decline of loan requests in 1973 was essentially due to the competition of other sources of funds, with generally softer lending conditions than those offered under the Project. Another reason was the fact that BNT, assuming under the Project the repayment risks, had to scrutinize more thoroughly the credit worthiness of applicants for IBRD/IDA funds. The Tunisian Government bore the total risk for subloans disbursed under FOSDA or other funds made available to BNT. 3.08 During the period 1972-1976 the loans disbursed under the various funds were as follows: Funding 1972 1973 1974 1975 1976 Total Sources D'000 % D'000 % D'000 % D'OO % D'000 % D'000 % FOSDA 340 26 865 57 451 29 675 36 548 38 2,879 37 FSA 341 26 210 14 863 56 262 14 314 22 1,990 26 IBRD/IDA 629/a 48 434 29 239 15 792 42 381 26 2,476 32 BNT - - - - - - 154 8 202 14 356 5 Total All Funds 1 310 100 1_509 100 1,553 100 1,884 100 1,445 100 7,701 100 /a Containing some retroactive financing for Category I(C). 3.09 In 1974 a temporary solution to the competition of funds was found. The Ministry of Agriculture instructed BNT to discontinue as of January 1, 1975 financing under FOSDA of farmers with more than 100 ha of land. The final solution to be adopted in 1977 was the uniformity of the subloan conditions for Government funds and those offered by the Bank (para. 4.05). - 16 - 3.10 Since 1975 the interest of medium and large size farmers in mechanizing their farms has been increasing as a result of the increasing shortage of labor. With the development of standard of living and scholar- ization, young people started migrating to foreign countries and to centers in search of steady employment and better living conditions. 3.11 In summary, it can be said that Category I(A), Farm Machinery, was relatively successful at least with respect to the number of investments made in comparison to those envisaged at appraisal. A brief assessment of the agricultural impact of farm mechanization is in Chapter V. B. Dairy Farms 3.12 Against the background of the rights of the private farmers just having been reestablished (see para. 2.01), this Project category aimed at increasing milk and meat production to help overcome the serious shortages in the country. This was to be attained by increasing the number and the quality of dairy cattle and by better use of water resources to produce fodder crops. 3.13 A total of 908 dairy cows were financed under this category in 99 subloans for 83 dairy farmers representing 50% of what was envisaged at appraisal, i.e. 1,800 head for 150 dairy farmers. The funds disbursed for cattle were 87% of what was allocated, but the funds for other items of the component were considerably lower than expected--3% for irrigation equipment and well digging, 57% for harvesting equipment for fodder crops, and 27% for cattle barns. Of the dairy farmers who obtained loans under the category, 24% had no previous experience with dairy farming, 37% already had local or cross-bred cattle, and 38% already had imported dairy cattle. Disbursement by component item is summarized below: Funds Envisaged Funds Item at Appraisal Actually Disbursed (Din'000) (US$'000) (Din'000) (US$'000) Dairy Plant, Sidi Bou Ali - - 281 66/a Purchase of Dairy Cattle 180 350 156 360 Irrigation Equipment and Well Digging 270 520 7 16 Harvesting Equipment for Fodder Crops 30 50 17 35 Cattle Barns 30 60 8 19 Total 510 980 469 1,090 /a Differences,due to rounding. - 17 - 3.14 The implementation of this subcategory had difficulties from the beginning, as can be seen from the table below: Loan Subloans Applications Approved Disbursed Bank Year Received Number Amount Number Amount Disbursements/a (Din'000) (Din'000) (US$'000) 1972 133 65 139 38 71 64 1973 37 24 59 21 48 124 1974 18 13 27 6 16 33 1975 48 31 1,6411b 27 24i/c 65 1976 20 5 58 7 22L/d 759 1977 - - - - 26; 45 Total 256 138 1,924 99 625 1,090 /a Discrepancy with Din dibursements due to differences of timing between BNT disbursements and Bank reimbursements. /b Of which Din 1,520,110 is for the dairy plant in Sidi Bou Ali. /c Of which Din 158,849 is for the dairy plant in Sidi Bou Ali. 7- Of which Din 190,272 is for the dairy plant in Sidi Bou Ali. Te Total paid to Sidi Bou Ali plant. Although the start in 1972 was already below expectations (about 150 farms were to be reached in three years), things got worse in 1973-1974. Already BNT's first progress report, covering the period until June 30, 1972, mentioned the difficulties in convincing farmers to abide by the obligation to establish 8 ha of irrigated fodder crops before disbursements for the purchase of about 12 in-calf heifers. At this point, BNT indicated that a study would be prepared to look into the possibility of including non-irrigated farms into the cattle breeding program if they would base their cattle feeding on ensilage. The next supervision mission to visit Tunisia (fall of 1972) noticed this lack of interest and indicated that only a few farmers would be willing to fulfill the conditions in order to qualify for a subloan. A Bank mission concluded in March 1973 that under the agricultural conditions prevailing in the project area, about 45 ha of dry land would be required to carry the same size herd as on 8 ha of irrigated land. Already at the end of 1972, however, the Bank had approved the eligibility for financing livestock applications under IBRD loans on the basis of ensilage on the condition that the total number of subloans granted by BNT should not exceed 10 to 15. This decision was based on the receipt of BNT's study on ensilage. 3.15 In spite of this widening of the project base for Category I(B) the number of loan applications continued to decline, and new reasons for this decreasing trend were given. In October 1973 BNT complained about - 18 - the competition of FOSDA funds with Bank funds and indicated that an addi- tional negative point was the increase in the price of in-calf heifers from Din 300 to Din 420. Another reason for the malaise was given by a Bank mission in January 1974, namely, a flood in the Project area in March 1973. To alleviate the problems in the livestock sector the Bank also approved the inclusion of improved local braed dairy heifers in the Project. Hope was expressed by BNT that about 200 dairy cows each could be financed in Bou Salem and Nebhana areas where bilateral technical assistance projects were under implementation. This, however, did not materialize. Subloans disbursed decreased further from 21 in 1973 to six in 1974. While all the factors, mentioned above, have played a role in the low commitments of Project funds under this category, two factors have, however, prevailed in this role, namely, the differences of lending conditions between various sources of financing and the continuous deterioration of the terms of trade for dairy production especially under the rigid investment condi- tions required by the Bank loans. 3.16 It was in 1974, when demand for dairy farming investments was at its lowest and a Second Agricultural Credit Project, including agro-industrial components, was being identified and prepared that BNT requested in a letter of June 1974 an amendment of the Loan/Credit Agreements (para. 2.05) and the financing of a dairy plant under Category I(B) in Sidi Bou Ali near Sousse. 3.17 The financing of this plant, as well as a flour mill plant under Category I(A), were intended to build in financing experience in the agro- industrial subsector within &NT.The dairy plant would be constructed by Tunisie Lait and would be owned mainly by STIL and BNT. As practiced before by STIL in other areas of the country, the production of the plant would be based on a blend of fresh milk and milk reconstituted from imported milk powder. The financing of the dairy plant was approved by the Bank on the condition that it should be economically and financially viable; it can be assumed that these conditions will be fulfilled as soon as the plant starts production. A total of US$570,640 was finally used for partial financing of the dairy plant, which represented 53% of the total amount of funds used under Category I(B). 3.18 During construction the plant ran through various stages of financing difficulties. The reason for this was substantial cost overrun (first mission estimate of investment cost was Din 3 million; estimate at present is Din 5.2 million), which was partly due to changes in the design because of the decision to increase the planned processing capacity of the plant from 100,000 to 200,000 liters per day. The cost of the plant was also significantly affected by the fact that only at a very late stage in the construction process it was discovered that the city water supply was not sufficient for the plant. Plans were therefore changed to tap water from a nearby irrigation dam. This necessitated construction of an entirely new treatment plant. Test runs for the dairy plant were planned for - 19 - January 1978. The plant was to start operating at a daily throughput capacity of 100,000 liters, to increase soon after to a capacity of 200,000 liters daily. Most of the equipment available is already laid out for this capacity. 3.19 The profitability calculations mane available by the management of Tunisie Lait made the assumption that no fresh milk would be used in the production process in the foreseeable future. In this way, however, no incentive would be given to dairy farmers in the area to increase their herds and their milk production. This was one factor that the Bank took into account in approving financing of this plant. BNT was requested to use its influence with Tunisie Lait to have it start purchasing fresh milk at the earliest possible date. 3.20 After more than one year of discussion on the interest rate issue and differences of lending terms for similar investments and categories of farmers, the Government informed the Bank on January 30, 1975 of its decision to cease financing on FOSDA terms to any livestock farmer who would be eligible for IBRD/IDA financing, i.e. who would be owning more than 8 ha of irrigated land or farming more than 45 ha of dry land. This decision, which does not solve the problem of 2% interest rate subsidy (farmers were receiving across the board a rebate of 2% over the official rate of 8%), does, however, introduce the uniformity of lending conditions as called for in para. 6, Schedule 7 of the Loan and Credit Agreements. 3.21 To increase Project impact the Bank, in the meantime, allowed the expansion of the Project to the whole country as long as the invest- ments proposed are viable and justified. A request to include,in the financing of the dairy component, local cattle was denied however, as this would forfeit a major objective of the Project, which is to improve the breed of livestock in Tunisia. 3.22 The livestock component of the Project was the least successful of all, although all funds under dairy production category were fully disbursed. This was due mainly to the subsequent inclusion in this category of a dairy plant which would eventually enter into operation only in 1978. In retrospect one could question the decision to add this investment to the dairy component, especially when Bank financing has been slightly over 5% of the costs of the dairy plant. On the latter, it was thought at that time that the Bank could contribute more substantially through a piggybank financing which would be arranged under the Second Agricultural Credit Project. This was not necessary as Tunisie Lait could secure appropriate financing from other sources. Bank participation intro- duced BNT into agro-industrial financing and new appraisal methods which will become routine under the Second Agricultural Credit Project. - 20 - C. Date Palm Plantations 3.23 The principal objectives of this component were the utilization of suitable desert lands in the Djerid and Nefzaoua areas, to make use of the artesian aquifers flowing at depths of 600 m in the Djerid area and 200 m in the Nefzaoua area, and to increase the production and export of high quality dates. Because of the easier access to these aquifers in the Nefzaoua area it was decided to establish 600 ha there and 300 ha in the Djerid area. The increased production of date palms of the deglat variety was intended to substantially increase the export of dates, which stood at about 3,300 tons in 1969. The plan was to plant about 900 ha of date palms in three years. 3.24 The overall target was fully reached with a two-year delay. The planting aims for Nefzaoua and Djerid were reversed to 300 ha and 600 ha, respectively, because of Government's difficulty in clarifying land tenure. Government ownership of a large part of the land was contested by private landowners in Nefzaoua. This prompted STIL to acquire more land in the Djerid area instead. 3.25 Amounts disbursed under this category are as follows: Applications Amounts Received Amounts Amounts Disbursed Year and Approved Approved Disbursed by Bank --- -(Din'000)------ (US$'000) 1972 3 328 97 157 1973 3 444 199 248 1974 2 528 406 616 1975 1 175 298 748 1976 - - 216 357 1977 - - 171 312 Total 9 1,475 1,386 2,438 3.26 The total investment in the nine main areas where plantations have been established as oi June 30, 1977 is shown below: - 21 - STIL's BNT's IBRD's Total Plantation Contri- Contri- Contri- Invest- Site Area bution bution bution ment (ha) 30% 17.5% 52.5% 100% --(Din'000) -- Nefzaoua Messaid 25 22 13 38 73 Tarfaya 125 68 40 118 226 H. Salhia 60 49 28 85 162 R. Bahri 70 47 28 83 158 Dierid Mekmen AB 100 58 34 101 193 Makmen CD 200 104 61 183 348 Mrah Lahouar I 100 86 50 151 287 Mrah Lahouar II 100 38 22 67 127 Sedada 125 122 71 214 407 Total 905 594 347 1,040 1,981 1J87 3.27 The program started sluggishly in 1972 with the establishment of 222 ha against 250 ha planned. The planting increased in 1973 and 1974 but always remained under the targets set, with 300 ha in the second year and 350 in the third. Disbursements remained behind because of STIL's managerial difficulties and delays of certain works such as successful drilling. The slow administrative procedures (ICB) to which STIL and BNT were not yet accustomed also contributed to the delay. Drainages are completed to only 25%, and the hangars for fruit storage and packaging are not yet 100% completed. The latter is due to the financial difficul- ties of the company building the hangars. 3.29 STIL has continued to complete the necessary works cn the plantations as can be seen from information dated November 30, 1977,which shows that from June 30 to November 30, 1977 an additional investment of Din 47,669 has been made (Annex 4). The same table also gives a breakdown in eight different categories of investment expenditure. The total investment at that date of Din 2,028,708 is about 19% higher than the investment envisaged at appraisal. More investments for adding or replacing windbreaks, irrigation and drainage canals, and buildings will have to be made as the Project advances. STIL, BNT and other banks in Tunisia would have to finance these if they occur. 3.29 At project appraisal it was envisaged to intercrop about 20% of the area in order to increase the income in the years before plantations become productive. This target of 20% has not been reached, but due to the sharp increase in export prices for high quality dates the financial rate of return for the date palm plantations is still higher than anticipated (Chapter V). - 22 - 3.30 This component was successfully implemented and met its major objectives despite the delays in establishment of the plantations which have resulted in higher investment costs and postponed production. The component generated over 1,000 jobs for farm laborers and nomads and has been the forerunner of a similar component in the Second Agricultural Credit Project. D. Support Services 3.31 According to the Appraisal Report, BNT had US$180,000 earmarked for experts' services, of which only US$72,000 were used because the agri- cultural expert in charge of STIL's date plantation, who was expected to be recruited abroad, was recruited locally. The US$30,000 for vehicles for extension and BNT staff has not been used. BNT may not have wanted to give preference to a few branch and extension agents over others; it presently gives loans to employees for the purchase of cars and then pays a mileage allowance when the cars are used for official duty. It is not known whether the Din 100,000 of local funds for dairy extension services have been fully used. But it can be assumed that in view of the limited lending activity under the livestock component, extension under the Project was weak and sometimes almost inexistent. BNT technical staff and veterinarian provided most of the services in this respect. IV. THE INSTITUTIONAL OBJECTIVES OF THE PROJECT 4.01 Most of the major covenants of the Loan and Credit Agreements relating to the institutional objectives of the Project have been observed. These covenants were related to the staffing of BNT, the lending policies and-procedures, BNT's financial structure and audit. 4.02 Staffing and Lending Procedures of BNT. The staffing and lend- ing procedures of BNT are referred to in Sections 3.02 and 3.03 and Schedules 6 and 7 of the Loan Agreement. They related mainly to the establishment and operation of a Technical Unit designed to strengthen BNT's capabilities in technical and financial project evaluation and assessment of investment effectiveness. The Technical Unit was to appraise all subprojects and submit recommendations and undertake regular supervision of the subprojects approved. Technical staff was to periodically visit farmers and investors in order to ensure that proper use of funds is being made. A Technical Unit was established within BNT in 1972. For the first three years it was headed by an expatriate farm management specialist. In 1975 this expert was replaced by a Tunisian agricultural economist. In addition, the Unit consisted of two agriculturalists, one specialized in farm machinery and one in livestock, and one irrigation engineer advising BNT on the establishment of date palm plantations. They were assisted by - 23 - one agriculturalist employed by STIL for the implementation of Category I(C), and by administrative staff at headquarters level. For the first time the Project introduced a systematic appraisal of loan applications. Formerly, appraisals were based solely on a desk review of borrowers' credit worthi- ness. Hence, appraisal methods of an acceptable standard were introduced with the aim of calculating the incremental return and the financial viability of each subproject. Agricultural technicians (adjoints techniques) were employed at BNT's larger branch offices to advise the farmers in the use of agricultural equipment, establish cropping patterns and undertake agricultural investments. They were also to follow up on project imple- mentation. But until recently these technicians did not participate in fieldwork but were solely engaged in administrative procedures. The Technical Unit at headquarters was alone to supervise the farmers. This was possible as long as the Unit was in charge of only the subloans financed under IBRD/IDA projects (980 customers). 4.03 Since 1976, when the Unit was incorporated into the Credit Depart- ment of BNT to review all agricultural loan applications received by BNT for medium and long term loans, the need to reinforce it at headquarters as well as at branch levels became evident. BNT's management decided that the agricultural technicians in Beja, Le Kef, Kairouan, Mateur and Kaserine should be actively involved in project evaluation and supervision, and started recruiting additional staff. One agriculturalist was recruited in 1977 for headquarters and two additional agricultural technicians for other branches. 4.04 Management. BNT's management has always been of a high caliber. However, one major deficiency is the over centralization of medium and long term lending activities at headquarters. This has led to excessive red tape for loan approval and disbursement and has resulted in substantial limitation of the number of loans processed each year. Although BUT's management indicated in 1974 that a decentralization of lending procedures was under consideration, the branches until now had limited respon- sibility with respect to short-term loans only. Subloan evaluation in the case of Government funds (FOSDA, FOSEP, FSA, etc.) is done in the Ministry of Agriculture. The dialogue with BNT's management regarding further decentralization has continued throughout the implementation of the Project and will have to be continued during the implementation of the Second Agricultural Credit Project. 4.05 BNT's commercial business seems to grow faster than'its agricul- tural business (Annex 5). Lending in agriculture is connected with much higher risks which have determined BNT to finance with its own funds and IBRD/IDA funds only those of the investors which are judged fully credit worthy. Others are financed with Government-managed funds for which BNT does not assume any risk. Since 1971 BNT has also greatly increased its participation in enterprises that are active in different sectors of the economy (industry, mining, hotels, agro-industries, etc.). Under these circumstances, and in order to preserve the agricultural banking aspect of BNT, it could be worthwhile to consider at a later date the transformation of BNT into a holding company which would own an agricultural development bank and perhaps another bank for commercial purposes. This would have the advantage that the agricultural staff would be able to fully concentrate on lending to agriculture and agricultural industry. - 24 - 4.06 Financial Structure. BNT has, in general, followed the finan- cial requirements provided for in Schedule 6 of the Loan Agreement. These requirements concern the extent of BNT's commitments in any single enter- prise and its financial structure. The debt equity ratio of BNT evolved from 7:1 in 1971 to 6.3:1 in 1974, then to 7.2:1 in 1976. This ratio, which is about 3 points over the suggested ratio of 4:1 in Schedule 6 of the Loan Agreement, is however adequate especially since at least 70% of the outstanding debts are government managed funds. Fixed assets of BNT including participation, which was not to exceed 75% of BNT's net worth, i.e. paid up equity plus free reserves, has evolved from 46% in 1971 to 50% in 1974 and 67% in 1976. BNT has, in general, complied with the financial ratio prescribed for banks by the Central Bank of Tunisie; it has, in particular, maintained an aggregate of capital and reserve equi- valent to not less than 10% of its sight and fixed term deposits. 4.05 The issue of the interest rate has, however, been a matter of concern and discussion during practically the whole of project implementa- tion. Although BNT has adopted and put into effect the statement policy proposed in the Loan Agreement prior to effectiveness of the loan, the interest rate covenant included in Schedule 7 of the Loan Agreement has not been followed. The covenant provides that "interest rates charged by the Borrower on subloans and all similar loans to farmers who would qualify under the Project would be at least 8% per annum and would not be lowered without prior approval of the Bank and the Association". Because the minutes of negotiations recognize that the Government intends to pay to participating farmers a subsidy of 2% of interest to soften the impact of the interest rate increase from 4% to 8% and although this step was considered transitory, BNT has in fact continued to subsidize interest rate throughout the life of the Project. Progress was, however, made when in 1975 the Government decided to discontinue financing under FOSEP and FOSDA farmers who would be eligible for Bank financing. The question of interest rate was resolved only after the negotiations of the Second Agricultural Credit Project (para. 6.07). 4.06 Audit. The second legal difficulty that arose in the course of Project implementation has been the quality of the audit. As a condition of Board presentation, BNT was required to submit to the Bank an acceptable audit of its accounts for the year ending December 31, 1970. The Tunisian firm Soci6t6 Internationale de Conseil et d'Audit (SICA) in cooperation with the Paris office of Peat, Marwick, Mitchell & Co. audited BNT and submitted their report which was acceptable to the Bank in June 1971. Thereafter, BNT appointed Soci6t6 Internationale Maghrebine du Management et d'Audit (SIMMA) which, in collaboration with Price Waterhouse, audited the 1971 accounts. Starting with the 1972 accounts SIMA did the audit alone. Its reports for 1972 through 1974 were submitted to the Bank,after long delays and insistence. The reports were found to be of limited score anA unsatisfactory. Hence, BNT was required in 1975, as a condition of loan effec- tiveness for the Second Agricultural Credit Project, to make new satisfactory - 25 - arrangements for its audit and provide the Bank with an audit report for 1975 in such scope and detail satisfactory to the Bank. The 1975 audit report was finally submitted at the end of 1976 and satisfactory arrange- ments were made on September 30, 1977 with SIMMA and Coopers & Lybrand to undertake the audits for FY76 and FY77. The report for FY76 is expected to be submitted by February 1978 and the report for FY77 by May 1978. V. BENEFITS AND JUSTIFICATION 5.01 The Loan Agreement did not provide for a monitoring system, which would have enabled the Bank to measure the agricultural impact of the Project. Paragraph 8 of Schedule 7 to the Loan Agreement merely states that BNT would have to supervise all subloans by periodic visits, but these were not made due to the lack of experienced staff. Clients were visited only if they applied for a repeater loan. It is therefore difficult to indicate precisely the agricultural impact of this Project. The assess- ments made below are based on the overall findings of BNT reflected in its draft Completion Report of November 1977 and are the result of the exten- sive field visits made by the Bank completion mission which visited Tunisia in November 1977 and interviewed a total of 14 farmers, eight grain farmers in the areas of Le Kef, Beja and Teboursouk, five dairy farmers in the greater Tunis area, the dairy plant management staff and promoters in Sidi Bou Ali, and the date palm plantation managers in Tozeur, Nefta, Kebili and Daouz. The farms visited were picked at random and detailed farm budgets were made for two grain farms and two livestock farms. Financial rate of return calculations were run for the grain and dairy farms, and for one of the date palm planting areas, and for the dairy plant in Sidi Bou Ali. Different assumptions were made for each case. A. Grain Farms 5.02 The total production of cereals in Tunisia developed from 678,000 tons in 1967/68 to 1,210,000 tons in 1971/72 (a year with excep- tionally good climate), and reached an estimated 1,382,000 tons in 1975/76. The percentage of durum wheat in this total figure was approximately 63% in 1967/68, reached a low of 52% in 1969/70, and from then on -rose steadily to reach about 66% in 1975/76. In the same period the percentage of .soft wheat rose from about 11% in 1967/68 to a high of about 31% in 1973/74, and fell again to 17% in 1975/76. At appraisal it was hoped that producti- vity would increase in cereal cultivation by the gradual replacement of local soft wheat varieties with Mexican wheat seed. According to information received from a number of farmers, they lost interest in the use of these varieties which were much more dependent upon favorable climatic conditions and their cultivation presented more risks for them. The lack of extension agents also played a role in this respect. - 26 - 5.03 The increase in cereal production is mainly due to increases in yields per hectare and in cropping intensity. Both are made possible by farm mechanization which allows for better timing of field operations and extension of cultivation on fallow land (one-third of total arable land). Other factors contributing to the production increase are use of more fertilizer and improved seeds made available through short term credits by BNT. 5.04 The subproject has financed the purchase of the agricultural equipment, mainly farm tractors and combine harvesters, for 636 farm families owning approximately 275,000 ha. The mechanization fostered by the project contributed to a better farm operation by diversifying crop- ping patterns and reducing fallow land. The total agricultural area suitable for cultivation is estimated by BNT as follows: Without With Crop Project Project Change (ha) Cereals 140,000 145,000 5,000 Fodder Crops on Rainfed Land (400 mm) 37,000 40,000 3,000 Pulses 23,000 29,000 6,000 Other Crops 12,000 15,000 3,000 Fallow Land 26,000 9,000 -17j000 Total 238,000 238,000 0 Average cultivable land per beneficiary farm is 374 ha. The decline in fallow allowed for an increase of the cropping intensity from 89% to 96%. 5.05 Average yields of cereal increased from 1.1 ton/ha to 1.3 ton/ha, fodder yields from 2.5 ton/ha to 3 ton/ha and pulses yields from 0.7 ton/ha to 0.9 ton/ha. Some farmers indicated during the interviews that their cereal yields had doubled since the beginning of the Project to as high as 2.2 ton/ha. Part of this yield increase can be attributed to farm mechani- zation due to the fact that without the Project farmers had harrowed only once, and had used only 50-100 kilos of ammonium nitrate (34% n) in spring- time at the plant tillering stage. With tractors they were able to carry out three to four harrowings and used 100 kilos of ammonium nitrate at seeding, 100 kilos of ammonium nitrate at tillering and 100 kilos of super- phosphate at seeding. Assuming that the grain farms served by the Project have a production of 1.3 ton/ha, a total quantity of 188,500 tons of cereals are produced under the Project. This represents 13.6% of all cereal pro- duction in Tunisia in 1976. About 34,500 tons annually produced are estimated to be incremental. 5.06 Two farm budgets were established for two representative farmers who have acquired with Project funds a tractor and one combine harvester in one case, and one tractor only in the other case. In the first case, the financial rate of return is 49%. The incremental income expected from - 27 - this 350 ha farm (200 ha owned and 150 ha rented) is about Din 5,600 (US$13,000). Based on the information obtained from the second farmer that his wheat yield has doubled from 1.1 tons to 2.2 tons per hectare, the financial rate of return would be over 100%. Assuming a more con- servative yield of 1.4 ton/ha, the rate of return would be about 35%. 5.07 While it is difficult to estimate the repercussions of farm mechanization on employment, it can be assumed that mechanization has been prompted by shortage of labor force in the rural areas as a result of urbanization of the country (rural labor force has dropped from 69% of the total labor in 1960 to 37.4% in 1976), the development of tourism, and expatriation. The direct effect of mechanization was mainly on the increased cropping intensity by about 8-10% and indirectly on the yields by farming with more and better farm inputs (fertilizer and improved seeds). B. Dairy Farms 5.08 It is less difficult to assess the agricultural impact of the livestock subsector loans because the exact number of dairy cows financed is known. Nevertheless, due to the limited follow-up of the Project, it is hard to know the proportion of the farmer-beneficiaries who have retained the cropping pattern that was proposed to them at the time of approval of their loans. Many farmers have not expanded their herds over the original number of dairy cows obtained under the loan. Few others gave up dairy farming altogether, and others who went along initially with the establishment of 8 ha of irrigated fodder crops in order to obtain the loan, changed back to their initial cropping pattern after they obtained their financing. Because of the subsidy element, many preferred to buy their concentrates or simply let the cattle graze on the fallow land. Under the least favorable conditions of milk production farmers have tended to consume their production on the farm. The mission found that hygienic conditions need improvement in many cases; brucellosis and mortalities due to piro- plasmosis are still common. 5.09 Nevertheless, loans under this component have had a certain impact with regard to: (a) the establishment of modern dairy farms with integrated fodder production in many instances; (b) the relative availability of livestock extension and technical agents from the Ministry of Agriculture, who helped farmers adopt rational techniques of production and utilization of feed; (c) the establishment of permanent relations between the financing agency (BNT), the farmers, and extension service; and - 28 - (d) the promotion of semi-agricultural industries, such as processing of dairy products, collection centers, and cold storage. 5.10 Among the farmers who obtained financing for dairy farming, 24% had no prior experience, 37% already had livestock of local or improved breeds, and 38% already had pure-bred cattle, either imported or born in Tunisia. A total of 910 dairy cows was financed, of which 500 were imported and 410 were born locally. This number should have been deve- loped to approximately 1,500 to 1,800. Extrapolation made from the farms visited at Project completion, however, shows that only approximately 1,200 dairy cows were added to the stock existing before the Project, i.e. the 910 dairy cows financed have increased only by 31% in the project period up to the end of 1977, which corresponds to an annual herd increase of about 6% instead of 10-15% normally expected. This was due mainly to the attitude of the farmers toward fodder cropping development under the Project (para. 5.05). 5.11 Two representative farm budgets were prepared for dairy farmers financed under the Project. They show rates of return of about 17% and 32%; the latter, however, includes additional income from poultry. Dairy operation, as such , has proved to be less profitable than expected (26%) because of price relationships. Farmers have, in fact, rarely specialized in milk production. 5.12 The expected financial rate of return for the dairy plant ranges from 13% for a plant with 100,000 liters throughput to 27% for a plant with 200,000 liters capacity, both without purchase of fresh milk. For the calculation of the overall economic rate of return of the Project, it was assumed that the plant would operate at 200,000 liters capacity and purchase of fresh milk will be restricted to the production of cheese only. The financial rate of return under this assumption would be about 23%. C. Date Palm Plantations 5.13 This subcategory had the greatest impact on the agricultural development of the country. In a desert area, 900 ha of new date palm plantations were created. As a result of this success more than 20 Socift6s Civiles de Mise en Valeur (SCMV) constituted of individual farmers were formed and have filed loan applications with BNT to establish date palm plantations for which the Government would make land available. Although only three of these SCMVs are in operation the members of the remaining ones are standing by to observe the success of the plantations established by STIL. Existing groundwater sources in the form of artesian aquifers have been tapped and employment for over 1,000 permanent workers has been created, thus contributing to the settlement of the nomadic population in the area. Although the plantations are not yet in full production, the basic productioa assumptions made by the appraisal missions - 29 - were correct. Only the percentage envisaged for intercropping was not reached. In 1977 only 20 ha of the total area were intercropped instead of the 180 ha estimated at appraisal. According to the explanations given by STIL, this deficiency was caused by lack of labor. All permanent workers had to work the first six years on the establishment of the plantations. From 1978 on, however, they will be able to increase the area under inter- cropping. The financial income accounted for at appraisal by the additional income from intercropping was more than compensated by increased export prices for dates from the existing STIL farms. STIL's experience on the new plantations was that they start bearing in the third year instead of the fifth because of adequate irrigation and feeding. In Sedada, for instance, STIL has harvested on 75 ha in the third year 2.4 tons of dates equaling 0.5 kg per tree. The yield increases annually until year 15 when the final yield of approximately 40 kg/tree is reached. STIL saves on its operating costs by selling or using the offshoots from the planted trees, up to 5 per tree, until approximately the tenth year of development. These offshoots are used to replace dead plants (approximately 10%) and to establish new plantations. STIL intends to supply the cooperatives being established in the Djerid and the Nefzaoua areas. 5.14 The date palm component shows a financial rate of return of 22% as compared to 14% at time of appraisal. This is due to an increase in export prices for dates that was proportionally higher than the increase in investment and operating costs. 5.15 The overall economic rate of return of the Project at constant 1971 prices is over 30% as compared to 22% at appraisal. The increase is mainly due to the increased rate of return for the date palm plantations and the addition of a milk plant component in the -Project. VI. BANK PERFORMANCE 6.01 Given the situation in agriculture at the time of appraisal (1970), the components of the project have been correctly identified. The exclusion of the citrus financing in Cap Bon was justified. Funds for the dairy farm component were overestimated if one considers the conditions attached to the subloans and the existing terms of trade in this subsector. 6.02 It would have been logical to include also BNT's support services in the Project Cost Table just as the cost for the dairy extension services. It might have been even worthwhile for the Bank to participate in the financing of local staff for BNT and extension services, since BNT and the Ministry of Agriculture have not provided all the necessary technical support to the Project (paras. 3.12 to 3.22). A direct Bank involvement would have helped reinforce the services. 6.03 A table showing the staff on preparation mission is in Annex 7, and the staff on supervision missions in Annex 8. Fourteen missions - 30 - supervised the Project between August 1971 and November 1977. The mission frequency was 5.4 months, which can be considered sufficient. In the 14 missions, 12 different staff members were involved but one staff member supervised the Project six times, another four times and six others between two and three times. It is estimated that the average time spent in the field supervising the Project is 16 man-days with a declining rate towards the end of the Project. All missions included a financial analyst or a credit specialist or an economist because of the nature of the Project and the institution set-up that it involves. 6.04 Mission ratings in general seemed to be justified (Annex 8), although in some instances it was a little too optimistic given the diffi- culties encountered in Category I(B) of the Project and the permanent deficiency with respect to auditing requirements. Perhaps the lack of subloan supervision should have been more emphasized not only by super- vision missions but also in follow-up correspondence and management travel. 6.05 BNT's quarterly reports were satisfactory and were received by the Bank regularly though sometimes late. Very seldom, however, did the Bank give any comments on the quarterly or annual reports apart from a mere confirmation of receipt. Here also there is room for improvement under the Second Agricultural Credit Project. 6.06 In negotiations and discussions with BNT and the Government, the Bank does not seem, in retrospect, to always have been very consistent and firm. The interest rate question addressed at negotiations and many times thereafter was treated in a very vague way in the beginning. The Loan Agreement specified an interest rate of 8%, but the minutes of negotiations allowed an interest subsidy of 2% for a transitory period for which a limit was not specified. It could have been foreseen at negotiations that this would unavoidably lead to difficulties later. 6.07 On the other hand, one of the project's biggest achievement was to have led after a long dialogue to the uniformity of lending terms for agriculture in Tunisia. It was through this continuous dialogue that Government has enacted a legislation in 1977 by which the lending terms are no longer directed by the sources of funds but by the nature of invest- ment and the quality of the farmer. PROJECT COMPLETION REPORT TUNISIA Agricultural Credit I Loan 779/Credit 263-TUN Project Components Proposed by BNT, Retained at Appraisal, and Actually Financed Recommendation of Items Actually Financed Under Recommendation of BNT Appraisal Mission the Project Envisaged Envisaged Envisaged Category Item Investment Item Investment Item Investment ----- -- ------------------- (Din. Million) --------------------------- Farm Machinery 1100 tractors 5.5 460 wheel tractors 4.8 299 wheel tractors 3.5 130 crawler " 45 crawler " 1 240 combine harvesters 115 combine harvesters 972 loans for acces- sories Dairy Farms 1000 imported heifers /a 0.7 1800 heifers 1.1 908 heifers 0.4 Date Palm Pldntatlons 1300 ha 2.1 /- 900 ha (600 ha in 1.7 900 ha (300 ha in 2.0 Nefzaoua, 300 ba in Neftaoua, 300 ha in Bjerid area) Djerld area) Orchard Development 1550 ha 1.1 Deleted 0 Deleted 0 Dairy Plant Not included 0 Not included 0 Dairy Plant 5.6 Support Services Experts 6 vehicles 0.2 Experts & vehicles 0.2 Experts 0.1 Total 9.6 7.8 11.6 /a Preparation mission of Bank/CP recommended 9,000 heifers lb Including Din. 350,000 for irrigation /c Including Din. 750,000 for irrigation February 1978 ANNEX 2 - 32 - UZ-WZCT COMPLETION REPORT AGRICULTURAL CREDIT I Loan 779/CrcdLt 2b3-T'JX Cmparison of Total Project Cost at Time of Appraisal, at Project Revision, and at Closing Date At Appraisal At Revision At Closing Date (6/10/77) Item in 1971 {n 1974 In Current Prices rn 1971 Prices (Di7000) (US$'000) (Din'000)a (US$'000)L (Din'00)o (US'000)O (Din'000)L (US$1000)Lt Lending Prozram I(A) Grain Farms 4,830 9,200 4,036 9,524 3.536 8,345 2,898 6,839 I(B) Dairy Farms 1,090 2,090 ) 8 ) 2*358 845 297 701 Dairy Plant ) ) 2,95 5,601 13,218 3,636 8.581. 1(C) Date Palm Plantations 1710 3 1.372 3,238 1.981 4,675 1.5323 Subtotal 7,630 14,550 6,296 14,857 11.476 27,082 8.363 19,736 Sypport Services 230 450 180 425 151 35511 123Lf 290 CRAND TOTAL 7.860 15,000 6.476 15,282 11.627 2743 8,486 20,026 Percentage as Compared with Figures at Appraisal 148 183 108 134 fa Calculated by using the financing ratio that was actually applied for disbursements; 52.5. of investment cast for Category 1. For Category II the ratio ac appraisal of 47 has been taken L Using the average exchange rate of Din 1 - US$2.36 c Calculated in relation to amounts actually disbursed by BNT representing 70% of investment cost except dairy plant. Based on BVT's disbursement figures for each year and deflated with GDP deflator taken from CPP. Exact figures for amounts spent by ENT for Project Unit and by the Ministry of Agriculture for dairy extension not known. It is estimated, however, that the amount of Din 120,000 has been fully spent. /f Estimated February 1978 - 33 - ANNEX 3 PROJECT COMPLETION REPORT TUNISIA AGRICULTURAL CREDIT I Loan 779/Credit 263-TUN Allocation Loan/Credit Proceeds At Time of Appraisal At Project Revi- Actual Disbursements Category (in Loan Agreement) sion in 1974 at Closing Date (US$ '000) ------ - 1(A) Farm Machinery 6,000 5,000 4,402 I(B) Dairy Farms 980 1,100 430 Dairy Plant - - 660 I(C) Date Palm Plantations 810 1,700 2,436 II Technical Assistance 210 200 72 Total 8,000 8,000 8,000 Average Exchange Rate 1.905 1.905 2.36 (Din 1 . US$2.36) February 1978 PROJECT COMPLETION sEPORT IIs TA ACRICULJRAL CREDIT I Loan 779/Credit 263-TUN STII Investments up to November 30, 1977 (Amounts in Din) Breakdown by Type of Work Land Date Palm IrriBation and Name, of Plantation Water Supply preparation Windbreaks Planting Drainage Canals Buildings Farm Equipment Generst Cost ML Budgeted 15,368 1,620 3,458 7,923 6,192 7,200 5,330 4,709 51,600 MESSAD Spent 22,585 1,165 4,749 31,465 7,354 814 4,359 8,627 81.117 0 Budgeted L 42,101 9,30 15,309 39,612 28,896 37,000 10,660 18,304 201,342 TA"FATA spent 23,349 11,936 8,022 114.552 22.616 14,319 10,624 30,269 235,67 Budgeted L 39,960 10,000 7,280 35,300 13,800 27,500 3,300 12,060 150,000 , u-2CUIR LBHRI spet 45,327 9,251 3,226 69.962 8,243 12,207 9,386 15,127 172,729 Budgeted a 30,200 7,200 6,580 35.300 13,000 27,500 3,3O 11,120 135,0,00 n HDICti SALiflA Spent 28,568 13,025 3,522 77,094 10,57 17,467 3,990 16,403 170,65e Budgeted 89,300 5,400 8,564 24,126 20,640 37,000 10,660 19,568 215,.53 RMTA AB spent 49.017 1,913 7,087 88,678 11.110 6 9,632 26.953 194,596 A bldgCred L 4,250 11,250 6,250 98,250 15,000 38,000 12,600 27,400 350,CCO MaxT CD Spent 120,049 7,196 3,118 124.799 15,685 28,220 15,921 34,007 348,j5 goigeLed La 141,600 91750 7,500 97,500 15,000 40,000 to,000 32,650 354,00 Rus LlUoUA I Spent 110,176 395 2,335 100,853 9,732 17,200 14,726 24,996 268,413 Budgeted L 153,500 24,750 9,250 105,000 24,000 61,000 11,000 11.500 400C0J SDADAspent 145,010 13,646 2,421 163,903 22,483 38,256 4,908 16,496 400,129 B'Aget.ed LA 01,500 6,300 5,300 57,200 12,600 37,000 13,000 17,100 250,C00 itAll L&HOUAIt II s1nt 64,6437 - 1,351 40,666 397 - 14,635 6,676 128,386 budgeted L 754,779 e6.450 69,571 500.211 149,928 312,200 79tu50 154,411 2,107,400 1 0 T A L Spent 617,568 58,727 35,B17 611,972 108,207 128489 al5e 179,548 2,028,708 L BuAgeted In 1977 for tie entire aomponent Source: BirT February 1978 - 3- ANNEX 5 PROJECT COMPLETION REPORT TUNISIA AGRICULTURAL CREDIT I Loan 779/Credit 263-TUN BNT Comparative Balance Sheet 1967-1976 (in thousands of Dnars) ASSETS 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 Cash in hand. Post Office Account and Issuing Bank 606 1.306 915 968 2.564 1.883 1.960 2.322 1.460 1.340 Banks and correspondents 1.020 1.665 3.056 2.473 3.966 6.293 3.838 7 300 7.257 5.075 Discounted bills 5.933 13.966 11.533 11.809 17.268 20.874 20.626 28.235 31.769 30948 Debit current accounts 3.558 2.442 10.434 13.077 19.610 23.176 23.610 37.498 56.738 55.073 Loans under special apprcpriations 6.487 10.338 13.470 14.920 17.154 20.478 26.227 32.736 39033 41.533 Syndry debtors 737 946 671 617 769 475 244 393 237 93 Debtors on sureties and acceptances 4.180 6.005 6.724 4.948 7.255 9.943 25.130 45.399 58.141 45.513 Gouvernment bonds and other stock 3.714 3.719 3.913 3.902 3.271 3.989 7.646 9.160 10.153 16.072 Investment stock 285 329 337 485 511 641 1.046 1.141 1.705 3.504 Other 19.198 18.445 14.716 13.391 11.884 13.170 15.624 27.184 Z3.067 35.575 Fixed assets and non-productives assets exclusive of depreciation 439 533 530 525 965 1.246 1.447 1.862 2.058 2.198 Recoverable Government claims 3.578 3.740 3.537 3.394 3.345 3.149 3.023 2.918 2.767 2.694 TOTALS 43.735 63.434 69.916 70.529 88.562 105.317 130.471 196.148 244.435 239.718 LIABILITIES Sightdeposits 12.325 14.449 18.162 17.938 27.086 33.065 34.729 58.494 58.225 61.249 Bonds and time accounts 4.736 4.476 5.835 7.145 5.308 6.304 9.562 12.346 18.505 29.559 Banks and correspondents 2236 4.829 5.466 4.548 5.625 8.373 6.727 7.767 20.745 7.5S Syndry Creditors 7.147 8.157 2.059 2.045 2.833 6.001 6.520 2.692 8.941 10.630 Special resources and resources for over 1 year 9.464 12.686 14.869 17.695 21.988 22.826 25.549 36.197 41.445 44.436 Commitments on sureties and accept. 4.180 6.005 6.724 4.948 7.255 9.943 25.130 45.399 58.141 45.513 Other 2.733 4.171 7.421 6.475 8.277 8.081 10.281 19.338 22.407 22.991 Tunisian Government Accounts for recoverable claims 3.578 .3.740 3.537 3.394 3.345 3.149 3.023 2 9!8 2.767 2.694 Provisions 1.882 2.745 2.943 3.117 3.287 3.633 4.272 4 642 5.014 5.598 Reserves 597 442 709 967 1.186 1.418 1.683 1.595 2.269 3.129 Welfare fund 155 188 232 278 335 414 494 606 721 858 Capital 400 1.200 1.600 1.600 1.600 1.600 1.600 3.200 4.000 4.000 Profits for the year 302 346 359 379 437 510 9o 904 1.255 1.433 TOTALS 49.735 63.434 69.916 70.529 88.562 105.317 130.471 196.148 244.435 239.718 OPERATING ACCOUNTS Net operating profits 1011 1.199 1.340 1.291 1.452 1.899 2.633 3.206 4.011 4.531 Overheads 709 853 981 912 1.015 1.389 1.732 2.302 2.756 3093 Net balance 302 346 359 379 437 510 901 904 1.255 1.433 DIVIDENDS 5% 5% 5% 7% 8% 10% 10% 8% 9% 10% Date of Annual General Meeting 18/5168 23/3/09 21/3170 10/4/71 6/5/12 21/4/73 25/5/74 315/75 17/4/70 16/4/77  기