Upper Volta - Volta Noire Agriculture Development Project

Document of The World Bank PILE CO Y FOR OFFICIAL USE ONLY Report No. P-3361-UV REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO US $6.8 MILLION TO THE REPUBLIC OF UPPER VOLTA FOR A VOLTA NOIRE AGRICULTURAL DEVELOPMENT PROJECT July 8, 1982 Western Africa Region This document ha a restScted distHbudon and may be used by recipients only in the performance of .thfeir official duties. Its contents my not otherwise be disclosed witbout World Bank authorization.  CURRENCY EQUIVALENTS SDR 1 = US$1.12 = CFAF 336 US$1.00 = SDR 0.89 = CFAF 300 CFAF 1,000 = US$3.33 = SDR 2.96 WEIGHTS AND MEASURES Metric system ABBREVIATIONS AVV Volta Valleys Development Authority CCCE Central Agency for Economic Cooperation (France) CNCA National Agricultural Ciedit Bank FAC Fund for Aid and Cooperation (France) IRAT Tropical Agriculture and Foodcrops Research Institute lFAD International Fund for Agricultural Development MRD Ministry of Rural Development OFNACER National Cereals Agency ORD Regional Development Organization PY Project Year SOFITEX Voltaic Textile Fibre Company (Parastatal) FISCAL YEARS Government: January 1 - December 31 ORD: April 1 - March 31 IDA: July 1 - June 30 Project Year 1: July 1, 1982 - March 31, 1983 Project Year 2-5: April 1 - March 31  FOR OFFICIAL USE ONLY UPPER VOLTA VOLTA NOIRE AGRICULTURAL DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: The Republic of Upper Volta Amount: SDR 6.1 million (US$6.8 million) Terms: Standard Project Description: The main objectives of this project, which follows the first West Volta Agricultural Development E'roject (Cr. iW-Ys), but is confined to the Volta Noire area, are to raise domestic food production, increase cotton exports and improve the quality of rural life. Specifically it aims to: (a) encourage improved manual cultural techniques amongst traditional farmers; (b) promote the integration of livestock and agriculture, and the use of organic fertilizer and animal traction; (c) promote and monitor measures which may lead to cheaper alternative chemical fertilizers; (d) encourage the use of inputs including selected seeds to allow further production increases by more advanced farmers; and (e) foster further development of village groups, and test a small literacy program for some of these groups. Benefits: Agricultural extension and complementary services would directly benefit about 46,000 very poor farm families in the area resulting in crop production increases, higher farm incomes, better nutrition and more on-farm employment. The livestock vaccination component would benefit all livestock owners in the area by reducing animal disease incidence; the village group support program would bring greater self-reliance to the farmers in the area; while the technical assistance component would help improve local capability to operate and manage development projects. The anti-erosion component and use of organic fertilizers would counter the trend of declining soil fertility. Risks: There are no unusual technical risks associated with the proj- ect, although the northern part of the project area presents a generally higher risk due to lower rainfall and poorer soils. The proposed approach has already been tested within the area and elsewhere in Upper Volta. Potential risks are: inadequate use of inputs or a breakdown in the delivery system due to difficulties in financing fertilizer subsidies; possible constraints in the marketing system in providing an outlet for the increased cereals surplus; slow farmer responsiveness especially in the north; short-comings of measures to counter 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.  I  - ii - the decline in soil fertility and delays in funding of operat- ing expenses by Government. Recognizing these risks, particu- lar attention is being given to strengthening the role of village groups in marketing, adaptive research, monitoring generally, and to pursuing discussions with Government con- cerning a proposed Fertilizer Credit under which subsidies would progressively be reduced. Estimated Costs (net of taxes and duties from which the project would be exempted): Local Foreign Total --------US$ Million------- 1. Agriculture and Livestock 2.8 0.7 3.5 2. Village Groups 0.5 0.4 0.9 3. Supplies and Credit 4.2 3.3 7.5 4. Management, Monitoring and 0.3 2.0 2.3 Training of Senior Staff 5. Studies and Subprojects to be 0.3 0.7 1.0 Approved Total Base Costs 8.1 7.1 15.2 Physical contingencies 1.0 0.8 1.8 Price contingencies 3.0 2.1 5.1 TOTAL PROJECT COSTS 12.1 10.0 22.1 Financing Plan: Local Foreign Total --------US$ Million------ External: IDA 3.9 2.9 6.8 France 1.1 2.0 3.1 IFAD 5.9 2.0 7.9 Upper Volta: Commercial Banks 0.4 3.1 3.5 Beneficiaries 0.8 - 0.8 TOTAL 12.1 10.0 22.1  - iii - Estimated Disbursements: FY83 FY84 FY85 FY86 FY87 FY88 -- - US$ 4illion-------------- Annual 0.3 1.3 1.7 1.7 1.3 0.5 Cumulative 0.3 1.6 3.3 5.0 6.3 6.8 Rate of Return: 21 percent Appraisal Report: No. 3812-UV Map: No. IBRD-15914  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF UPPER VOLTA FOR A VOLTA NOIRE AGRICULTURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Upper Volta in an amount of SDR 6.1 million (US$6.8 million) on standard IDA terms to help finance a Volta Noire Agricultural Development Project. The French Government will contribute US$3.1 million equivalent (comprising loans from the Caisse Centrale de Cooperation Economique (CCCE) and a grant from the Fonds d'Aide et de Coopera- tion (FAC)). The loans available in a three-year tranche, followed by a two-year tranche, are expected to be on terms of 2 percent interest per annum with repayment over 20 years, following a 10-year grace period at 1.5 percent interest per annum. The International Fund for Agricultural Development (IFAD) will contribute a loan of US$7.9 million equivalent on standard terms of 1 percent interest per annum with repayment over 40 years, following a 10-year grace period. PART I - THE ECONOMY 1/ 2. An economic report entitled "Economic Memorandum: Upper Volta" (2146-UV) was distributed to the Executive Directors on March 14, 1979. An updating economic memorandum is presently under preparation, based upon a mission in February, 1982. Information obtained during that mission is incorporated in the section below. Socio-Economic Background 3. Upper Volta is one of the poorest countries in the world with a GNP per capita of US$210 in 1980. 2/ Over 80 percent of the population depend on agriculture or livestock for their livelihood. Soil quality and rainfall vary considerably across the country, in particular between the dry central plateau and the wetter zone of the southwest. Over half of the population of 6.1 million (1980) is concentrated in this central region, which has resulted in overcultivation of the already fragile soils and progressive erosion. The sharp annual fluctuation in rainfall, few mineral resources, scarcity of roads and other infrastructure, and long distances from the nearest seaports further constrain the country's development. 1/ Parts I, II and III have been substantially revised since the President's Report for the Third Telecommunications Project (Cr. 1235-UV, US$17.0 million, April 1982) and are identical to those in the Hauts-Bassins report. 2/ National income and population data quoted here are based on recent analyses and differ from figures in Annex I.  4. The impoverishment of the central region has given rise to net emigration to the coastal countries, mainly the Ivory Coast, of about 0.6 percent of the population each year, and spontaneous resettlement to the less densely populated southwest. While internal resettlement and emigration represent important avenues for many individuals to improve their incomes, Upper Volta will face for some time a difficult challenge to raise the pro- ductivity of food cultivation on the central plateau, which will continue to provide the livelihood for a very large share of the population. The opportunities for economic growth over the long term will not improve, however, unless special efforts are made to accelerate the development of human capital, in particular by raising the primary school enrollment rate and life expectancy which are among the lowest in the world, at 20 percent and 43 years, respectively. Past Economic Performance 5. Upper Volta's economic performance has in general reflected a relatively prudent economic management. The Government-s favorable record in this respect, however, reflects more its inclination against active interven- tion in the economy than a strong capability of policy analysis and execution. Indeed, a problem is that the Government has piovided only a limited degree of coordination and oversight of investment planning and budgeting, a weakness which extends to essential sectoral activities such as agricultural research. This weak administrative capability has been put under a special strain by the large inflow of foreign assistance and the proliferation of donor agencies which have become a feature of the Voltaic scene since the major drought of the mid-1970s. The present Government, which came to power in 1980, demon- strates an increasing inclination to proceed with some major investments which have weak economic justification and will place an undue burden on domestic r financial resources (especially for operating costs). It is also evident that the Government has made only limited progress in implementing reforms to strengthen financial management. 6. National Output. Recently revised estimates of GDP show an annual increase of 3.7 percent over the 1970-79 period, or about 1.8 percent per capita. Real output of the primary sector, which contributes almost 40 per- cent of total value-added, increased by about 1.5 percent annually, a perfor- mance which compares favorably to that of other semi-arid Sub-Saharan Africa countries and reflects the effect of development projects and reasonably good sectoral policies. The livestock subsector showed no overall growth in value-added from 1970-79. Industrial production, which accounts for about 13 percent of GDP, expanded by 4.1 percent per year over the same period. The main sources of growth in the economy were public administration and other services, which increased 6.0 percent annually. The greatest expansion in these activities reflected the substantial increase in externally-financed development projects following the drought. 7. National income fell by 5 percent in 1980 as a result of poor rains, which caused a decline in crop production of 15 percent, and the general slow- down in economic activity preceding the military coup. The economy rebounded in 1981, expanding about 9 percent above the previous year's low. 8. Total gross investment averaged about 17 percent of GDP over the past decade. The high incremental capital:output ratio (ICOR), which  - 3 - amounted to 6.4 percent for 1976-81, reflects the dearth of productive re- sources besides capital in the country and the lack of coordination of public investment which is almost entirely externally-financed. The resource gap has risen from 14 percent of GDP in 1970 to 24 percent in 1981, and domestic savings have remained strongly negative throughout the decade. Most of this excess consumption has arisen from the government sector. Because of workers' remittances, which largely supported private consumption, gross national savings have been only slightly negative or zero. 9. Overall, the economy's performance during the past decade was better than average for the lowest income countries in Sub-Saharan Africa. However, the dominant features of the Voltaic economy--the deterioration of soils on the central plateau, the predominantly illiterate work force, vulnerability to climatic variation and dependence on foreign capital--make it evident that the country still has a very weak basis for sustained economic growth. 10. Balance of Payments. The balance on the external account has shown a deficit for most years since 1976, in contrast to the pattern of surplus in the early decade. The overall shortfall was estimated at CFAF 2.3 billion (US$8.2 million) in 1981. Wide swings have been apparent in the export of cotton and sheanuts, the main export crops, partly as a result of variations in rainfall. Cereals, capital goods, and especially petroleum are the fastest growing imports - to a great extent, however, these are counterbalanced by grants (e.g. food aid) and loans for development projects. Although Upper Volta clearly has a structural imbalance with respect to foreign trade, it is likely that the availability of aid and remittances has enabled the demand for imports to grow disproportionately. The balance of payments situation therefore does not mark a need for policies to tightly restrict domestic demand, but constraints on petroleum imports and measures to ensure buoyant export sectors (especially cotton and livestock) will be important to achieve greater stability of the external account. 11. Public Finance. Although the Government pursued generally conserva- tive fiscal policies prior to 1975, this pattern changed with the expansion of foreign aid at mid-decade. Budget deficits averaging CFAF 3.0 billion (US$12.6 million) have appeared each year from 1976-80. A much larger gap of CFAF 8.8 billion (US$31.4 million), or 2.8 percent of GDP, is estimated in 1981, with another shortfall expected in 1982. 12. The deficitary trend has occurred despite a fairly buoyant perfor- mance in revenue mobilization. Civil service salary raises have been well below the rate of inflation, and the Government has recently tightened certain administrative expenditures. Financial losses of the parastatal sector, although they are beginning to reach an important scale for certain enter- prises, have not been a factor to date in the overall budgetary situation. Although there are specific areas where tax and expenditure reforms are needed, for the most part the deficitary trend has arisen from the widespread expansion of government activities in many sectors as a result of development investments. 13. As the first generation of development projects financed after the drought come into their operational phase, the Government is going to be faced increasingly with new recurrent expenditure obligations. Yet at present it  - 4 - has no consolidated investment budget, nor are the recurrent expenditures of investment projects taken into account in the preparation of the national budget. The Government and the Bank have for the past two years been discus- sing an institutional reform proposed by the Ministry of Plan to bring about a more systematic accounting for investment expenditure, and a technical assistance project to help implement the reform has been under preparation. Progress on the reform has been slow, owing to failure to reach agreement on the allocation of responsibilities between different ministries. The IMF also has a Standby Program under discussion with the primary aim of strengthening the public finance situation. 14. Foreign Assistance and Investment. Although three development plans have been prepared, the latest covering the 1977/81 period, the process of formulating the investment programs has involved little evaluation and selec- tion of projects by Government based upon economic criteria and development priorities. The 1982-86 plan is still in a very early stage of preparation. Despite the absence of a distinct investment program, foreign aid to Upper Volta has continued at a high level, with both commitments and disburse- ments of official inflows exceeding total budget revenues for the past several years. Most of this aid is on highly concessional terms. The prin- cipal foreign donors are France, the European Development Fund, Canada, the Netherlands, Germany, the United States, the Association, and the UNDP. Although a large degree of informal consultation among the donors exists, especially with respect to large infrastructural projects, increased coordi- nation will become more important to improve the efficiency of investment and ensure that the recurrent costs are sustainable, especially given the Government's own limited capability in planning and analysis. The Bank is discussing these issues with the Government. PART II - WORLD BANK GROUP OPERATIONS IN UPPER VOLTA 15. The Bank Group-s commitments in Upper Volta, as of March 1, 1982, amount to US$191 million and cover twenty-two IDA credits. IFC has one investment. About US$87 million have been disbursed. The IDA projects include eleven agriculture (including two supplementary credits), five transportation (including one supplementary credit), two education, two telecommunications, one small and medium scale enterprise, and one urban development project. The IFC investment is for plastic production. Of total IDA lending, the agriculture and transportation sectors account for 44 and 40 percent, respectively. Annex II contains a summary statement of IDA credits and IFC commitments as of March 1, 1982. It also includes inform- ation on the status of ongoing projects. 16. A few projects have experienced implementation delays necessitating extensions of closing dates, and world price inflation in others has led to cost overruns, requiring supplementary financing or eliminating lower priority components (Third Highway Project, Cr. 653-WJ, US$20.0 million, 1976, and EEC Special Action Credit 38, US$3.5 million, 1980; West Volta Agricultural Development Project, Cr. 706-WV, US$3.6 million (IDA) and Can.$3.0 million (Canada), 1977, and EEC Special Action Credit 49, US$3.0 million, 1980; Urban Development Project, Cr. 766-WV, US$8.2 million, 1978). Financial control  on some projects has been weak due in part to a lack of general financial standards or procedures. Budgets are nominally prepared, approved or con- trolled by a central authority, but the procedures are insufficiently rigorous. There are few official standards or procedures for setting expenditure norms. Furthermore, partly due to fiscal management problems the Government has had difficulty in promptly meeting its counterpart funding obligations. Future projects will address these issues by the provision of further project-related technical assistance and training, as well as at the central level through a proposed Technical Assistance Project to improve the financial management and investment planning and budgeting process. On the whole, however, past project performance has been generally satisfactory given the environmental, institutional and managerial constraints within the country. 17. Upper Volta's disbursement performance has been normal compared to other countries in the region. Recently, however, its performance has begun to deteriorate mainly due to lack of counterpart funds as a result of current budgetary difficulties and delays in project effectiveness (Highways IV). The Bank is helping to tackle these problems by ensuring that Government is aware of forthcoming counterpart obligations and by offering increased assist- ance from the Bank's Resident Representative during the period prior to project effectiveness. The proposed Technical Assistance Project would also help to address disbursement problems. 18. The Bank Group-s lending is in line with Government's priorities as expressed in its Third Development Plan (1977/81), and will continue to support Government's efforts to: (a) increase productivity in agricul- ture, from which most of the population derives its livelihood; (b) improve the human resource base; (c) strengthen basic infrastructure facilities; and (d) mobilize resources from co-donors. Government is currently working on a Fourth Five-Year Development Plan (1982/86) with UNDP assistance. Priori- ties are, however, not expected to differ from those of the Third Plan. 19. In the near-term (FY82-84), Bank Group operations are expected to include a pilot agricultural development project for the Regional Development Organization (ORD) of Koudougou; a second rail project to be executed with the Ivory Coast; a hydro-electric power project; a technical assistance project to strengthen Government-s investment planning and control procedures; and a credit to assist Government to deal with the policy aspects of fertilizer usage and food security, while phasing out subsidies on fertilizers. In the medium-term, Bank assistance strategy toward Upper Volta envisages combin- ing our present commitment to the promotion of food and export crop produc- tion with a new emphasis on agricultural research, development of human resources through basic education and health, and the strengthening of aid coordination. 20. Upper Volta's external public debt at the end of 1980 amounted to US$508 million (including US$185 million undisbursed) of which IDA credits accounted for about 25 percent. The ratio of debt service to exports of goods and nonfactor services was 9.2 percent in 1980, and the ratio is not expected to increase significantly over the next several years.  -6- PART III - THE AGRICULTURE SECTOR Sector Background 21. Economic growth in Upper Volta is necessarily closely linked to progress in the agricultural sector, which employs 80-90 percent of the population and comprises almost 40 percent GDP and almost all exports. However, soils are poor, rainfall is low and uncertain, and the potential for irrigation is economically limited, requiring costly investments to develop. Improving agricultural productivity as is necessary for maintaining food security and increasing national income is thus a challenging task. 22. Although the country is relatively flat, there are pronounced regional differences in climate and soils. The low and erratic rainfall in the north (600 mm) results in unreliable harvests and greater reliance on livestock for survival, and consequently low population densities. On the central plateau, crop farming is at a subsistence level because of population pressure, over-exploited soils and unreliable rainfall. In the southwest, soil and rainfall conditions (reaching 1,200 mm) are more favorable, popula- tion density lower, and production more market-oriented. 23. Agricultural production over 1961-79 has performed as well as could have been expected given the severe constraints. Foodcrop areas, which account for almost 90 percent of cultivated land, have increased less than the net annual growth in rural population. In contrast to most other food- crops, sorghum production has grown more rapidly than population, reflecting in part the residual effects of cotton fertilizer in crop rotation, as well as direct fertilization. Overall, the country has continued to satisfy all but a small share (5 percent) of its consumption of foodcrops from local production in years of normal rainfall. But this has only been achieved through increas- ing dependence on the southwest as a source of food surplus, which tends to limit the resources available in that region for growing the country-s major export crop, cotton. This dependence must continue, however, in the short term, whilst adaptive research attempts to develop improved approaches for increasing productivity over wide areas of the center. 24. Cotton yields have risen markedly in the last decade and output rose from 36,000 tons in 1970 to over 78,000 tons by 1979 due to cultivation shifting to more fertile areas and to the use of fertilizers and insecticides, coupled with extension programs. Since 1979, cotton acreage has fallen, indicating that close attention needs to be paid to the relationship of cotton and cereals prices, including reviewing whether current taxes on cotton, which are not high, should nevertheless be reduced. The Association's continuing policy dialogue with Government includes attention to this. 25. Because of the population pressure, there is considerable migration away from the central plateau, partly abroad, but mainly close to roads in other parts of the country, particularly the area immediately south of the central plateau, and the southwest. Government has sought to address migra- tion in an organized fashion through the Volta Valleys Authority (AVV), which has resettled families, previously at high cost, in areas freed from  - 7 - onchocerciasis. Government has recently adopted new policies, broadly in line with recommendations of the Association, aimed at reducing costs of AVV opera- tions. Under the proposed Hauts-Bassins project, funds are included for studies in AVV areas. Outside these areas, a low cost approach to migration was to have been tested under the West Volta Agricultural Development Project (Cr. 706-UV), but terms of reference for preliminary studies were not agreed between Government and Switzerland, the financing source involved, in time to permit execution; it is now intended that this component will be undertaken under the proposed project and that of the Hauts-Bassins. Principal Sectoral Institutions 26. The Ministry of Rural Development (MRD) is responsible for agricul- ture and livestock and related national support services, including adaptive research and seed production. It oversees parastatal marketing organizations and eleven decentralized Regional Development Organizations (ORDs). Except in the case of those ORDs in areas with externally-financed projects, the ORDs lack adequate budgetary allocations; however, the heavy cost of maintaining an ORD is most easily justified in areas where economical technological packages exist readily usable by farmers on a wide scale - that is, presently only in the southwest. 27. Agricultural credit is largely the responsibility of the National Agricultural Credit Bank (CNCA) established in 1980, which, in line with recommendations of the Association, has concentrated upon setting policy norms for agricultural credit, training, and control of funds, and has successfully completed its initial program in these areas. Day-to-day credit operations continue to be the responsibility of the ORDs. Commercial banks provide short-term credit for the purchase of annual inputs and for the marketing of cotton. 28. Marketing: Cereals are marketed mainly by private traders who purchase grains in producing areas and sell them in the main consumption points. The system works fairly efficiently, with most farmers being able to sell any excess production without difficulty. Government sets official consumer and producer prices, but does not enforce them as such; rather it attempts to influence market prices through the National Cereals Agency (OFNACER), which was able last season, to offer to purchase cereals at the official price throughout the country, and although it did not meet its purchase quotas, it may have induced traders to offer higher prices than they would have otherwise. The Association has advised Government that it considers that the role of private traders should be maintained, as at present, and that OFNACER-s role should be limited to marketing emergency stocks, selling food aid supplies to drought-stricken areas, and improving market information. Cotton marketing, ginning and export is competently undertaken by the Voltaic Textile Fibre Company (SOFITEX), owned by Government (63 percent), and by the French Textile Fibre Development Company (CFDT) (37 percent) which provide technical support and receive a commission of 1.5 percent on all exports. SOFITEX also imports fertilizers and insecticides for sale at subsidized prices, not only for cotton (fertilizers and insecticides) but for cereals (fertilizers) as well. The system which has worked successfully is under strain however, especially for areas not producing cotton, because of delays by Government in reimbursing SOFITEX for the subsidy element for fertilizers used on cereals.  - 8 - 29. An active program of agricultural research is undertaken by externally- supported specialist institutions for cotton, irrigated crops, sorghum and mil- let, and other foodcrops. However, the work has suffered from a lack of focus upon the need to produce recommendations valid at farmer level, which has arisen in part because of concentration by the institutions upon specific crops, and a resultant lack of attention to farming systems research. The recently created Voltaic Institute for Agronomic and Zootechnical Research intends to address these problems; the Association is discussing with Govern- ment possible support to the Institute. Seed production, a Ministry function, has also encountered problems of pricing policy, inadequate extension atten- tion and liaison with research, and lack of attention to farmers preferences. Under forthcoming Association-financed projects, particular attention is to be paid to seed production and the factors affecting uptake. Sector Strategy and Bank Group Lending 30. The Government s strategy in agriculture has given priority to (a) improving the productivity of rainfed agriculture; (b) promoting migra- tion from the densely populated and relatively infertile central plateau to the more fertile and less densely populated areas in the southwest; (c) expanding irrigation and swampland production schemes; and (d) ensuring national food security. In line with this strategy, Bank Group lending for Upper Volta has emphasized development of rainfed agriculture for food and cash crops in the southwest, small-scale land development schemes to expand the agricultural production base in the central plateau, and testing a larger scale swampland production scheme in the southwest. 31. Since 1970, IDA has financed eleven projects in the rural sector of which five have been completed. The Cotton Project (Cr. 225-UV, US$6.2 million, 1970) demonstrated that an improved technology, within the means of small farmers, could be spread widely and rapidly. The project's Audit Report noted substantial improvements in farming practices and yields. The First Bougouriba Agricultural Development Project (Cr. 496-UV, US$8.0 mil- lion, 1974) after a slow start also achieved satisfactory results in expand- ing cotton and cereal production. The project closed in December 1981 and a project completion report is being prepared. The Drought Relief Project (Cr. 442-WV, US$2.0 million, 1973) and the First and Second Rural Development Fund (RDF) Projects (Cr. 317-WV, US$2.2 million, 1972 and Cr. 640-LW, US$9.4 million, 1976) aimed at financing small discrete works with community partici- pation. The Project Audits described the Drought Relief and First RDF Proj- ects as highly innovative and successful in implementing diversified and scattered subprojects. The second RDF Project, completed in December 1981, continued the development of bottomlands, wells and anti-erosion works on the central plateau. A third RDF Project was approved by the Board on March 30, 1982. 32. The ongoing IDA-assisted agricultural projects are: the West Volta Agricultural Development Project discussed at para. 36 (Credit 706-LW, US$3.6 million, 1977, Credit 706-5-LW for Can.$3.0 million and Special Action Credit 49-UV for US$3.0 million equivalent); the Livestock Development Project (Credit 557-LW, US$6.0 million, 1975); the Forestry Project (Credit 982-LW; US$14.5 million, 1980); the Niena Dionkele Rice Development Project (Credit  1013-UV, US$6.5 million, 1980); and the Second Bougou -ibi Agriciilturc.l 7evel- opment Project (Credit 1097-UV, US$16.0 million, 1981). They are being implemented satisfactorily, although the swamp drainage Niena Dionkele Pilot Project has run into technical problems of water availability and rice varieties, and the Livestock Project had difficulties with its group ranch component which necessitated a redesign and a reduction in the credit by US$3.0 million. Future Orientations 33. The Association is currently discussing with Government an agricul- tural issues study resulting from recent sector work. The study confirms the broad orientations of agricultural policy discussed above but seeks to high- light some of the priority areas that merit attention if the four general goals are to be achieved. For rainfed agriculture, regional priorities need defining, in order to focus on the major constraints and areas of potential; in the west by continued promotion of food and export crop production and in the center, by encouraging erosion control, better husbandry, and animal traction, and undertaking research to improve drought-resistant varieties. It will be appropriate, in the more difficult regions, for pilot projects to be undertaken to test the suitability of promising approaches for wider adoption. For migration, the proposed project and that of the Hauts-Bassins include studies and implementation of pilot components aimed at testing low cost approaches to dealing with installation of arriving migrants. For irrigation/ swampland development, a study by the FAO Cooperative Program is currently underway to collect more data, in order to establish whether a potential for economically attractive investments exists, and if so, the priorities. For national food security, one of the key issues is how to assure a steady increase in fertilizer use, which is forecast to need to rise by some 3,000 tons/year over the next five years in order to meet food production requirements. Government is finding it increasingly lifficult to finance the subsidy, which in turn threatens adequacy of supplies.. ReccStizingr :7is an<.'. in line with obligations under the Second Bougouriba Agricultural Development Project, Government reduced the subsidy in June 1982 from 64 to 57 percent. It has also confirmed its strong interest to pursue discussions concerning a proposed Fertilizer Credit having an objective of a progressive reduction of the subsidy over five years to a level supportable without external finance. The Project would need to carefully monitor and take into account effects of price changes on output and consumer prices. The adjustment process which needs to be flexible will involve difficult political and economic judgments for the Government, as it seeks to maintain farm output in the face of rising input costs, whilst restraining to acceptable levels, increases in the prices paid by urban consumers who exercise a considerable degree of political power. PART IV - THE PROJECT 34. The proposed project fits into the general sectoral strategy by building upon the success of the ongoing project to raise further domestic food production and cotton exports in the southwest. It will also seek to increase farmer involvement in the input distribution and marketing system at  - 10 - the village level. Particular attention has also been given to the -rieed, in view of Government s difficult financial situation, for cost recovery measures in order to reduce the demand for Government support at the end of the project implementation period. 35. The project was identified in 1979, following Government's request for a follow-up proiect in the area, and appraised in October, 1981. Negotia- tions were held in Washington, D.C. from June 7 to 11, 1982; the Upper Volta delegation was led by H.E. the Minister of Rural Development. A reDort entitled "Staff Appraisal Report - Volta Noire Agricultural Development Project" No. 3812-UV dated June 28, 1982 is being distributed separately to the Executive Directors. Supplementarv project data are contained in Annexs Il. Bank Assistance in the Area 36. The West Volta Agricultural Development Project, which covered the Volta Noire and the Hauts-Bassins Regional Development Organizations (ORDs), has been successful in extending the work of the earlier Cotton Project; t-he Livestock Project, the Second Education Project, the Second Ruiral Development Fund Project and a French-financed Foodcrops Project have also assisted development of the area. The West Volta Project covered both cotton production and foodcrops. Cumulative incremental Droduction of cotton in the Volta Noire area over the five years of the project is 30,000 tons cowpared to 24,000 tons estimated at appraisal. Yields have risen from 700 kg/ha to 900 kg/ ha, largely through increased application of fertilizers and insecticides. Cereal yields have increased by 12 percent and Volta Noire production has risenr in 1981 by 17,000 tons/year (compared to 18,000 tons/year at appraisal). A recalculation of the rate of return gives a result of 22 perce it, compared to the appraisal estimate of 32 percent, which included the more ferti.le Hauts-Bassins area. Components not directly under the control of the t:o ORDs have been less successful; for example, only about 10 percent of the targets of the small irrigation component have been met. Organizationally, there is a need to simplify objectives and responsibilities, and to give increased attention to financial management, both as to control over expenditures, and in continuing cost recovery of input distribution costs. Description 37. The project, to be executed over a five-year period starting in September 1982, would cover the following components: (i) Agriculture and Livestock Development: comprising (a) extension services to about 46,000 farmers to increase further cotton andi foodcrop production, and integrate livestock themes into thie general extension message; (b) adaptive research. to test new varietal and husbandry recommendations and develop cheauer fertil