Rwanda - Water Supply Project

Document of The World Bank FI LE COP.Y FOR OFFICIAL USE ONLY Report No. P -34 9 5-RW 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$13.0 MILLION TO THE RWANDESE REPUBLIC FOR A WATER SUPPLY PROJECT March 24, 1983 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.  CURRENCY EQUIVALENTS US$1.00 Rwandese franc (Rf) 92 RF 100 US$1.09 FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS AfDB - African Development Bank AIDR - Association Internationale de Developpement Rural (Belgium) BCEOM - Bureau Central d'Etudes pour les Equipements d'Outre Mer (France) CCCE - Caisse Centrale de Cooperation Economique COFORWA - Compagnons Fontainiers du Rwanda EDF - Electricite de France Electrogaz - Etablissement Public de Production de Transport et de Distribution d'Eau, de l'Electricite et de Gaz FED - Fonds Europeen de Developpement Government - Government of Rwanda GTZ - Gesellschaft fur Technische Zusammenarbeit (Association for Technical Cooperation) KfW - Kreditanstalt fur Wiederaufbau MPW - Ministry of Public Works SAUR - Societe d'Amenagement Urbain et Rurale (France) UNDP - United Nations Development Program WHO - World Health Organization MEASUREMENT EQUIVALENTS 1 meter (m) = 39 inches = 3.28 feet 1 kilometer (km) = 0.62 mile 1 square kilometer (km2) = 0.386 square mile 1 hectare (ha) = 0.01 km = 2.25 acres 1 cubic meter (m3) = 35.3 cubic feet (cu ft) 1 liter (1) = 0.26 US gallon 1 cubic meter per second (m3/sec) = 35.3 cubic feet per second 1,000 cubic meters per day (1000 m3/d) = 0.26 million gallon (US) per day lcd = liters per capita per day  FOR OFFICIAL USE ONLY RWANDA WATER SUPPLY PROJECT Credit and Project Summary Borrower: Rwandese Republic Beneficiary: Electrogaz Amount: SDRs 12.0 million (US$13.0 million equivalent) Terms: Standard Relending Terms: Government would onlend the IDA credit to Electrogaz for a period of 25 years, including 5 years of grace at 10.97 percent. Electrogaz would assume the foreign exchange risk. Project Description: (i) Objectives. To (a) strengthen the capability of Electrogaz in the planning, administrative, financial and technical areas; (b) improve the efficiency of Electrogaz operations and maintenance; and (c) expand access to potable water in rural areas. (ii) Components: The project would provide for: (a) improvement and expansion of water supply facilities in the five secondary centers of Cyangugu, Kibungo, Kibuye, Ruhengeri and Rwamagana; (b) improvement of the organization and management of Electrogaz, including the establishment of a system for the management of inventories and of cost accounting, construction and equipping of a training center (including the supply of training equipment), and the carrying out of a training program for Electrogaz personnel; (c) acquisition and distribution to primary and secondary schools of text books on hygiene and training of primary school teachers to teach courses in hygiene; (d) a study on tariffs (for water, gas and electricity) covering policies and tariff structure, a detailed engineering study for water supply in the northern (lava) regions and an organizational and management study for rural water supply operations on the national level, including cost-recovery mechanisms. 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.  (ii) (iii) Benefits: The project would satisfy water dCiLk. in the project areas up to 1988 and provide safe water to about 40,500 additional people and improved service to about 20,000 people; needs cof governmental institutions, commerce and industry would be met. Electrogaz's water supply consumers would benefit from improved management and staff capabilities expected to result from the project;s technical assistance/training components. (iv) Risks: The main project risks relate to Electrogaz's capacity to properly implement projects, operate facilities once constructed, and recover charges. However, as detailed design of the project would be practically completed by Board presentation, the risk of delayed start of implementation is minimized. Other risks are minimized since Electrogaz would be required to continue to use consulting engineers for supervision of project construction, to hire a management assistance team and to implement a training program. ESTIMATED COSTS 1/: Local Foreign Total (US$ millions equivalent) Secondary Centers Cyangugu 0.6 0.8 1.4 Kibuye 0.2 0.4 0.6 Kibungo 0.6 0.9 1.5 Ruhengeri 0.9 1.2 2.1 Rwamagana 1.0 1.5 2.5 Electrogaz General Training/Health Education/ Consultant Services 1.2 2.8 4.02/ Total Base Costs (Jan. 1983) 4.5 7.6 12.1 Physical Contingencies 0.4 0.8 1.2 Price Contingencies 1.9 1.7 3.6 Total Project Costs 6.8 10.1 16.9 1/ Materials and equipment imported directly for the project will be exempt from custom duties and import taxes. Taxes included in the project costs are negligible (0.6 percent of total project costs, or about US$87,000 equivalent). 2/ Includes US$1,000,000 from the Project Preparation Facility to finance master plan and feasibility studies and detailed design studies for the proposed project and the first audit of the Electrogaz accounts.  (iii) Financing Plan: Local Foreign Total (US$ millions equivalent) IDA 2.9 10.1 13.0 Electrogaz Internal Cash Generation 3.8 - 3.8 Totall/ 6.7 10.1 16.8 Estimated Disbursements: IDA Fiscal Year (US$ millions equivalent) 1984 1985 1986 1987 1988 Annual: 2.5 3.0 3.0 3.0 1.5 Cumulative: 2.5 5.5 8.5 11.5 13.0 Appraisal Report: No. 4145-RW of March 10, 1983. Economic Rate of Return: 4.9 percent based on incremental water revenues which do not fully measure unquantifiable health, environmental and social benefits. Map: IBRD 16722. 1/ See footnote 1/, page ii for explanation on taxes.   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE RWANDESE REPUBLIC FOR A WATER SUPPLY PROJECT 1. I submit the following report and recommendation on a proposed credit to the Rwandese Republic for the equivalent of SDRs 12.0 million (US$13.0 million) on standard IDA terms, to finance a Water Supply Project. Government would onlend the IDA credit to Electrogaz for a period of 25 years, including five years grace, at 10.97 percent. PART I - THE ECONOMY _/ 2. A report, "Memorandum on the Economy of Rwanda" (No. 1108-RW), was distributed to the Executive Directors on July 27, 1976. Rwanda was visited by an economic mission in February 1979 and again in November/December 1981. The major findings of this last mission are reflected below. Country data are provided in Annex I. 3. Rwanda is a small landlocked country, surrounded by Uganda, Tanzania, Burundi and Zaire. It has the third highest population density of low income countries, at 210 persons/km2 (following Bangladesh and Sri Lanka), and its GNP per capita is among the lowest in the world, estimated at about US$240 in 1981. Rwanda's population of 5.5 million in 1982 is predominantly rural (with only 4.5 percent in urban areas), and lives in small individual farms scattered over hilly terrain. The balance between food production and population is precarious, as potentially arable land is scarce, yields of most foodcrops have been stagnant, and population is expanding at an estimated 3.6 percent annually. Twice recently (1974 and 1980), Rwanda had to resort to emergency food imports. Agriculture (coffee, tea, pyrethrum, cinchona) provides most of the country's foreign exchange earnings from merchandise exports. Coffee is by far the most important source (55 percent) followed by mining products (20 percent), mainly cassiterite and wolfram. Rwanda's manufacturing base is narrow, and growth of modern manufacturing is limited by the small size of the market and by the lack of raw materials, marketing facilities, entrepreneurial 1/ Part I of this report is substantially the same as that in Report No. P-3487-RW on the BRD III Project to be considered by the Executive Directors on April 5, 1983.  - 2 - skills and skilled manpower. The country, consequently, imports capital goods, steel, petroleum products, cement and other construction materials, and virtually every modern consumer product. Its merchandise trade is hampered by high transportation costs and dependence on neighboring countries for access to the seaports at Mombasa and Dar es Salaam. 4. A quantitative assessment of Rwanda's economic performance can only be tentative, as the national accounts estimates are based upon data of dubious reliability. These estimates suggest that during the period 1977-81 the rate of growth of real GDP averaged over 5 percent per annum, on the strength of reasonably good performance by most sectors, except those engaged in production for export. The recent growth of the agricultural sector can be explained, to a significant extent, by good weather conditions, increased world coffee prices in the late 1970s, improvement of the road network, and the rapid growth of urban and project-induced demand. Official production data indicate that foodcrop output (36 percent of GDP) increased at an average annual rate of about 5 percent in the period 1977-81, but this estimate may prove to be overstated. In any event, it is the judgment of informed observers that the balance between food production and population remains precarious, as food production is vulnerable to weather conditions and population is increasing rapidly. With the exception of tea, the production of export crops was disappointing during 1977-81. Largely influenced by weather, and in spite of substantial increases in 1978 and 1981, coffee production tended to stagnate. Absolute declines were recorded for the country's two other export crops, pyrethrum and cinchona. After having expanded at an average rate of 11 percent per annum, tea production also declined in 1982, and the industry has experienced difficulties in obtaining sufficient quantities of green leaves to process for export (due to competition from other crops and lack of fertilizers). 5. Mining production also declined during 1977-81, at an average annual rate of 4 percent, and Rwanda failed to profit (until recently) from reasonably favorable international prices, particularly of cassiterite (by far the most important product). This poor performance has been a consequence of various factors, among them management problems at SOMIRWA (the mining company), equipment obsolescence, and substantial increases in production costs (mainly the wage bill) while world market prices have fallen and the Rwandese franc (which is linked to the United States dollar) has appreciated vis-a-vis the country's major trading partners. 6. Manufacturing growth was, on average, 6 percent during 1977-81, largely reflecting agricultural performance as an estimated three-quarters of manufacturing output consists of the transformation of agricultural products, mainly banana and sorghum, into beer, and agro-industries (coffee, tea, sugar). Modern manufacturing has been limited to import substitution industries such as shoes, textiles, soap, plastic utensils, corrugated iron sheets, all of which rely on imported raw materials. A cement plant located in Cyangugu (southwest Rwanda) is due to start operations in the next two years and is expected to make Rwanda self-sufficient in cement.  - 3 - 7. Tertiary sector activities experienced a fairly rapid expansion during 1977-81. Commerce and transportation increased at an average annual rate of 7 percent reflecting increases in marketed foodcrop production, manufacturing output, and imports (especially of consumer and intermediate goods). Traffic on c Rwandese roads is estimated to have expanded at about 7 percent per annum, the fleet of pick-ups more than doubled during 1979-81, and imports of transport equipment increased at nearly 11 percent in real terms, albeit all from a very small base. 8. Traditionally, the Government has pursued prudent fiscal policies. A principal indicator of this was the budget surpluses incurred during 1977-81 (on average, 2.5 percent of GDP). The Government's ability to sustain these surpluses was aided by favorable terms of trade, which served to raise export duties (particularly in 1977-79, following the rise in coffee prices) and import duties (insofar as Rwanda's exports financed a relatively large volume of imports, upon which the revenue structure is highly dependent). Also, substantial capital inflows facilitated the growth in imports, thereby adding to government revenues. In 1977-81, nearly 50 percent of central government revenues (which averaged 10 percent of GDP) came from import and export taxes, with coffee exports alone contributing 21 percent; taxes on beverages, and on income and property accounted for most of the remainder. Expenditures were distributed mainly among administrative services (25 percent), education (26 percent), and defense (20 percent). Expenditures on agriculture and public works have expanded faster than total expenditures in recent years. 9. The fiscal situation, however, has deteriorated since 1981. In contrast to the preceding years, increases in revenue have fallen short of increases in expenditure. Budgetary receipts from coffee export duties have stagnated at lower levels than those of previous years as a result of declining coffee prices and in spite of higher export volumes. At the same time, there has been a significant expansion in government expenditures reflecting, inter alia, the impact of the general wage awards granted in September 1980, the addition of a new Ministry of Higher Education, and implementation of the education reform. In an effort to expand the revenue base and increase revenue, the Government introduced a new business tax in 1981 which, however, has not yielded sufficient revenues to compensate for the decline in revenue from coffee. As a result of these developments, the overall budgetary balance has shifted from a surplus of RwF 1.2 billion in 1980 (equivalent to 1 percent of GDP) to deficits of RwF 2.2 billion and RwF 2.6 billion in 1981 and 1982, respectively. In an attempt to arrest the fiscal deterioration, the Government increased import tariffs in January 1982 and taxes on beer and cigarettes, in January 1983. 10. The Government has been traditionally conservative in its monetary and credit policies. Inflationary pressures have arisen mainly from supply shortages caused by frequent disruptions of supply routes through neighboring  -4- countries, increased international transport costs, and increased prices of imports and domestic foodstuffs. Inflation averaged 10.6 percent per annum during 1977-81; it peaked at 15.8 percent in 1979, primarily as a result of the closing of the Uganda border, but also reflecting higher transport costs following the 1979-80 oil price rise. The inflation rate fell to 7.3 percent in 1980 and declined further to 6.5 percent in 1981, as trade flows through Uganda were back to normal, and the rate of increase of import prices decelerated. 11. Rwanda's increased export earnings (until 1980) and large inflows of foreign grants and loans enabled the country, during 1977-81, to increase imports substantially and to build up international reserves. In real terms, imports of goods and non-factor services expanded at an average annual rate of 5 percent and averaged 27 percent of GDP. At the same time, Rwanda's gross international reserves reached, at end-1981, an amount equivalent to nearly seven months of estimated 1982 imports of goods and non-factor services. In 1982, however, Rwanda suffered its first reserve loss in many years, as coffee export receipts remained at about the same (depressed) levels of the previous two years, foreign grants and loans declined, while imports continued to expand rapidly. At end-1982, gross foreign official reserves were down to the equivalent of five months of projected 1983 imports of goods and non-factor services. 12. Rwanda's Third Development Plan, like its predecessor, remains essentially a qualitative document which provides a broad statement of national development priorities 1/ but lacks a multi-year sectoral investment program, key input and output targets (in physical as well as financial terms), and an agenda of policy and institutional reforms for implementing the overall strategy. Other important weaknesses of the planning process are: the absence of a mechanism for periodically assessing the changing outlook regarding resource availabilities and the feasibility of the projected levels of investment and the weak linkage between the planning and budgetary processes. In consequence of these deficiencies, Rwanda's plans have not served as effective instruments of economic management. Nevertheless, the Government has made serious efforts to pursue the Plan's objectives. The limited success of these efforts has been largely due to the country's structural constraints (among them the critical population problem), institutional weaknesses (stemming largely from lack of skilled personnel), and insufficiency of domestic financial resources. At the same time, the lack of skilled personnel, fragmentation of institutional responsibilities, and poor coordination among concerned agencies have limited the country's capacity to absorb external resources. 1/ As in the Second Plan, five of the six main goals of the Third Plan aim at the satisfaction of basic needs: (i) food self-sufficiency; (ii) job creation, to ensure an adequate family income; (iii) education and training; (iv) improvement of basic health services; and (v) provision of minimum standard housing.  - 5 - 13. The Government has taken steps to address these problems. Of particular importance have been actions concerned with the extremely rapid population growth, and the lack of education and training. In 1980 it established the National Population Office (ONAPO) to plan, coordinate, and monitor all population activities. ONAPO has started to sensitize the population about the implications of excessive demographic pressure on the country's limited resources, a few pilot family planning programs have been set up, and a nationwide fertility survey is scheduled to start in mid-1983 which is expected to provide valuable information on the potential demand for family planning. Obviously, the impact of these measures will only be felt in the long-run. Meanwhile, the population is growing at 3.6 percent annually and expected to double by the year 2000. To address the problem of lack of education and training, the Government introduced an education reform in 1979 whose objectives are appropriate to the country's needs, but whose implementation has been hampered by financial constraints and the lack of teachers. 14. As mentioned earlier, external aid (of US$25-30 per capita) was an important catalyst to the country's favorable economic performance during 1977-81. This aid has been mainly for infrastructure and technical assistance, most of which (58 percent) has benefitted agriculture, education, and health care. These three sectors, together with transport and communication, received nearly 64 percent of the aid extended to Rwanda in 1981, an emphasis which is in line with the country's objectives and priorities. The principal sources of foreign assistance and their average share during 1977-81 were Belgium (27 percent), the European Development Fund (14 percent), the Federal Republic of Germany (8 percent), IDA (7 percent), and France (6 percent). 15. Economic management in recent years has been prudent, as evidenced by relatively low inflation rates, low debt service ratio, and avoidance of projects of dubious economic justification. This was undoubtedly facilitated by substantial aid inflows and favorable terms of trade in the early part of the period. The terms of trade have deteriorated since 1980 and are projected to continue to deteriorate during the 80s. It is thus evident that the country's need for external assistance will increase substantially. Its external debt is still manageable. At end-1981, the medium- and long-term external debt outstanding (disbursed only) amounted to US$172 million equivalent, or 15 percent of GDP, and the debt service ratio was equivalent to only 1.8 percent of exports of goods and non-factor services. Hence, there remains scope for further borrowing. However, given the poverty of the country, its overwhelming constraints and vulnerability, and its unfavorable medium-term prospects, external funds should continue to be provided in the form of grants or loans at highly concessionary terms, and include a high proportion of local cost financing and non-project assistance.  - 6 - PART II - BANK GROUP OPERATIONS IN RWANDA _/ 16. Bank Group assistance started in 1970 and initially focused on the improvement of the road network and the strengthening of agriculture production. Rwanda has received eighteen IDA credits totalling US$188 million, of which five (totalling US$69.0 million) were for roads, seven (US$80.6 million) for agriculture, two (US$9.2 million) for DFC projects, two (US$18.0 million reduced to US$16.4 million) for education, one (US$7.5 million) for telecommunications and one (US$5.0 million) for technical assistance. There have been no Bank loans. An IFC loan of US$535,000 for a tea factory was signed in 1976; a second IFC loan of US$226,000 and contingent equity commitment of up to US$60,000 to expand the tea factory were signed in September 1980. Annex II contains a summary statement of IDA credits, IFC investments and notes on the execution of ongoing projects. 17. The first three highway projects are completed and totally disbursed. A fourth credit for a highway maintenance project (Credit 769-RW), which became effective in August 1978, is three-quarters completed and is progressing satisfactorily. A US$25.9 million credit for a Fifth Highway Project became effective December 8, 1982. 18. The first agricultural development (Mutara) project was completed in July 1979 and funds have now been completely disbursed. A second credit of US$8.8 million, which supports the second phase of a long-term development for the Mutara region, was declared effective in May 1980, experienced start-up problems due to difficulties in recruiting technical assistance but is proceeding satisfactorily now. The Cinchona Project (US$1.8 million) is nearing completion and has progressed well. The Bugesera/Gisaka/Migongo mixed farming and rural development project (BGM I) is about completed; construction, procurement and budgeting have proceeded satisfactorily though the results of foodcrop and plant improvement components are below appraisal estimates due to a lack of appropriate technical packages for the relatively dry project area. For this reason, the BGM II project, for which a US$16.3 million credit was approved July 13, 1982, emphasizes research for semi-arid crop development. A project to support reforestation programs in Kigali, Butare and Gisenyi Prefectures (IDA Credit 1039-RW for US$21.0 million) became effective on November 11, 1981; the project includes a study of renewable energy sources for Rwanda. A US$15.0 million credit for a coffee improvement/foodcrops project in the Lake Kivu region became effective January 18, 1982; all staff have been recruited, the first year extension program has been completed successfully, and research activities have commenced. A credit for an education project (US$8.0 million) became effective in 1975; physical implementation has been complicated by procurement problems (para. 19 below). The first credit of US$4.0 million to the Rwandese Development Bank (BRD) has now been fully committed. BRD's 1/ Part II of this report is substantially the same as that in Report No. P-3487-RW on the BRD III Project to be considered by the Executive Directors on April 5, 1983.  - 7 - performance under the credit has been highly satisfactory. A second credit of US$5.2 million to BRD became effective in January 1980. The credit is nearly fully committed. A third BRD credit will be considered by the Board shortly. A credit for a telecommunications project (US$7.5 million) which aims at reducing Rwanda's geographic isolation from other countries and at improving internal telecommunications facilities, became effective July 7, 1981, and is proceeding satisfactorily. 19. In fiscal years 1979-81, disbursements for Rwanda totalled US$28.9 mllion compared to new colnmiLrlelits of US$42.4 million. In the same period, the average annual disbursement rate (ratio of change in disbursements to undisbursed balance) was 20 percent; this is about average for countries of the Eastern Africa Region. While disbursement performance in general is satisfactory, notable difficulties have arisen in the case of the First Education Project. The lack of acceptable record keeping caused significant delays in the processing of disbursement requests. However, following a UNESCO-assisted final inspection and evaluation mission for the workshops financed under the project, disbursements have resumed. Implementation of the Second Education Project, approved June 15, 1982, should be less affected by similar weaknesses given the familiarity with Bank Group procedures now acquired in the Ministry of Primary and Secondary Education. 20. One of the major constraints to Rwanda's development is the shortage of technical/managerial capacity. This affects all sectors and inhibits project preparation and implementation. Intensive technical assistance and on-the-job training of Rwandese staff are therefore a salient feature of the Bank's program for Rwanda, either under individual projects in the various sectors or through the Technical Assistance Project (declared effective November 22, 1982). 21. For the future, the primary emphasis of Bank operations will remain on rural development, the main objective being to increase food production as well as export crops, while maintaining soil fertility. A major emphasis will also be placed on the development of human resources, focusing on population planning and support to basic education and skills training to improve agricultural productivity, provide skilled manpower, and influence attitudes on the population issue. Further investment is also justified for infrastructure (including critically needed water supply facilities) and, in particular, for roads to reduce the country's isolation and provide incentives to further intensification of agriculture as well as increased specialization and diversification through better marketing. Another area requiring our special attention is energy to lessen the demand for fuel imports and mitigate their impact on the balance of payments. A study of renewable energy sources is being financed under IDA credit 1039-RW (para. 18) and a regional hydroelectric power project on the Ruzizi river is being prepared.  - 8 - PART III - THE WATER SUPPLY AND WASTE DISPOSAL SECTOR General 22. Health standards in Rwanda are comparable to low-income African countries south of the Sahara and reflect the poor availability of safe water. Life expectancy at birth is 45.2 years and infant mortality is about 137 per thousandl/. Water-borne diseases, such as typhoid, enteritis, amebiasis, diarrhea and viral hepatitis, are widespread. Hospitalized cases of diarrheal diseases have increased from 25,000 cases in 1975 to 39,000 in 1979, with infant mortality related to diarrhea increasing from 17 to 30 per thousand over the same period. 23. Water Resources. Rwanda has relatively good water resources. The rainfall ranges from 730 mm to 1,600 mm per year. Surface water occurs extensively throughout the central and western portions of the country. The eastern portion is somewhat drier, with scattered lakes along the border. Groundwater exists in most areas of the country. In the hills, springs are numerous. 24. Sector Organization. Water supply in Kigali, the capital, and in secondary centers is the responsibility of the state corporation, Electrogaz, which also produces and distributes electricity in the country and operates a pilot plant extracting methane gas from Lake Kivu. Electrogaz is responsible to the Ministry of Public Works (MPW). 25. Water supply in rural areas is under various institutions. The operation and maintenance of large aqueducts are generally entrusted to a Belgian institution, Association Internationale de Developpement Rural (AIDR), which is contracted to the Ministry of Public Works. Protected springs and wells, with their handpumps, are entrusted to the local communities as also some 20 small gravity aqueducts recently constructed by volunteer organizations. Fifty other rural water supply systems are operated by other institutions, mainly religious or agricultural. For their water supply operations, agricultural institutions report to the Division of Rural Engineering in the Ministry of Agriculture. 26. Collection and disposal of waste and drainage systems are under the Urban Division of the MPW. The Hygiene Division of the Ministry of Health is responsible for overseeing the health aspects of the water supply and sanitation sector. 1/ Infant mortality is 102 in Madagascar, 33 in Mauritius, 20 in Europe and 15 in North America.  -9- 27. Sector Objectives. Initiated by the Drinking Water and Sanitation Decade, a national Water Supply and Sanitation Committee was created in early 1981 and is headed by the Secretary General of the Ministry of Natural Resources, Mines and Quarries, and includes representatives of all the Ministries involved directly or indirectly in the sector. The Committee has only a consultative role. It should advise the Government on all matters relating to water and sanitation, especially the organization of the sector and the coordination of different activities. So far, its main achievement has been to inform top Government officials of the sector needs and constraints, and to study alternatives for reorganization of the rural water supply subsector. The Government, however, has no comprehensive sector development plan. The water decade objective of providing clean water for all by 1990 is not realistic as domestic and foreign resources are not expected to be sufficient. In the sanitation sub-sector, Government priorities are to provide a public sewer system for part of Kigali and to stimulate the construction of individual facilities for the rest of the population through health education related to sanitation. Levels of Service 28. Water Supply. Only about 37 percent of the total population has access to piped water. The percentage is about the same in urban areas (41 percent) as in rural areas (37 percent). In urban areas (Kigali and eleven secondary centers), Electrogaz supplies 25 percent of the population through private connections and another 16 percent is estimated to be served through public standpipes or neighbours' private connections. About 3.5 million m3/year are sold to about 4,300 customers. The water supply is often unsafe. Service is intermittent except in Kigali and Butare where production facilities have been recently extended. In rural areas about 65,000 families are served through public standpipes in turn supplied by the 58 aqueducts operated by AIDR; about another 350,000 families are supplied through 8,000 protected springs and about a dozen aqueducts entrusted to local communities. 29. Sanitation. Public sewer systems do not exist in Rwanda. In urban areas, 20 percent of the population is served through private sewer systems (hospital, soap factory, hotels, etc) or through septic tanks with soak-aways, and 80 percent of the population is served through too few pit latrines. In Kigali, population density is too high in certain areas to permit the construction of pit latrines. The water table and small streams are polluted. This causes concern as the Kigali public water system and part of the population use these sources of water. To remedy this situation, waterborne sewerage is required in the administrative and commercial areas in the center of the city, and it is necessary to upgrade and expand individual sanitation systems in the low-income residential areas of the city. In this regard (and with a view to preparing a future project) feasibility studies have been carried out by the Government. In rural areas, only about one-third of the population is estimated to be served through pit latrines often used by several families. The rest of the rural population lacks formal waste disposal facilities.  - 10 - Sector Development and Constraints 30. In spite of the limited absorptive capacity and the institutional weakness of the sector, several water supply projects are under construction or under preparation. Water systems in Kigali and Butare, representing 65 percent of Electrogaz water activity, have recently been developed under a project financed by the African Development Bank (AfDB). External funds have been identified (CCCE and KfW) and projects prepared to rehabilitate and extend water supply systems in ten secondary centers. In rural areas, water supply is being actively developed under a number of projects. Projects near completion include rehabilitation of 5,600 small springs (cost: US$3 million--UNICEF assisted); construction of six gravity aqueducts by Dutch volunteers and a number of small gravity systems by the Compagnons Fontainiers du Rwanda (COFORWA) and other non-Governmental organizations; and the construction of two rural water supply systems (Belgium and FED assisted). Other projects expected to be constructed soon (total cost: US$13.2 million) include systems for the Bugesera north central region (FED assisted), the Mutara northeast region (IDA assisted), and the construction and rehabilitation of aqueducts in the north eastern and volcanic (extreme northwest) regions of the country. In parallel with construction of water supply systems, training of water supply operators is carried out under a UNICEF-assisted small springs project and a program of health education related to water supply and sanitation is being undertaken with the assistance of the World Health Organization (WHO). 31. Virtually no development has occurred in the sanitation sub-sector. The first priority is in Kigali where a small sewerage system should be constructed, existing pit latrines improved, and new septic tanks and pit latrines constructed. This is estimated to cost about US$30 million to cover needs up to about 1985. The feasibility report for this project was recently completed and Government is seeking funds to implement the report's recommendations. 32. Sector Constraints. The main constraints in the water supply sector are: (a) the shortage of qualified staff in the ministries responsible for the sector, resulting in insufficient planning, inadequate attention to the economic aspects of projects and resistance to low-cost technology, poor supervision of consultants and operating agencies and slow or no decision making on organizational and cost recovery aspects. (To help relieve this constraint, German aid (GTZ) is providing a technical adviser to the Ministry of Natural Resources, Mines and Quarries; however, more help is needed); (b) the inadequacy of Electrogaz staff resources, especially at the managerial level, and the lack of training of the existing staff; and (c) the lack of suitable institutional arrangements in rural areas for adequate programming, construction, operation, maintenance and cost recovery.  Previous Bank Involvement 33. In 1978, a water supply and sanitation sector study and a water tariff study were carried out under the WHO/IBRD Cooperative Program. This helped in the identification of the present project and in the improvement of the structure and level of Electrogaz's water tariffs. The Bank has also been indirectly involved in the sector through the Phase II Mutara Agricultural and Livestock Development Project (Cr. 937-RW--see para. 18) which includes a rural water supply component. PART IV - THE PROJECT 34. The proposed project originates in a Government request of the Bank to identify a project in the water supply/sanitation sector. The identification mission took place in September 1977 and was followed by a detailed IBRD/WHO Cooperative Program analysis of the rural water subsector. Appraisal took place in May 1982. Negotiations were held in Washington from February 25 to March 1, 1983; the Rwandese delegation was headed by Mr. Andre Nzabandora, Secretary General of the Ministry of Finance. A Credit and Project Summary, highlighting the main features of the project, is at the beginning of this report. A detailed description of the project components is in the Staff Appraisal Report (No. 4145-RW), dated March 10, 1983, being circulated separately to the Executive Directors. Special conditions of the Credit are summarized in Annex III. Project Area 35. The project areas comprise five secondary centers--Cyangugu, Kibungo, Kibuye, Ruhengeri and Rwamagana--which are spread throughout the country (Map IBRD 16722). Their 1982 populations range from 3,300 (Kibuye) to 19,480 (Ruhengeri); 1982 growth rates range from 3.5 percent (Kibungo) to 6.7 percent (Rwamagana). The population of the five centers totalled 44,000 in 1982 and is growing at an average rate of 5.4 percent p.a. Although considered as urban according to the local definition (communities of more than 3,000 people) the five secondary centers are mainly rural in their economies; all are administrative centers at the level of "Prefecture" except Rwamagana which is a "sous-Prefecture". The centers are the focus of agro-industrial activities (related to pyrethrum in Ruhengeri and rice in Rwamagana), livestock activity (pig-farming in Cyangugu and slaughter-houses in Ruhengeri and Kibungo) or are the headquarters of agricultural/forestry projects. The lack of villages in Rwanda leaves these secondary centers as the main distribution, transport and employment points for the surrounding regions. Efficient provision of services in these centers is therefore important for improving off farm services and rural productivity. Objectives and Description of the Project 36. The project objectives are to improve (a) the capability of Electrogaz in the planning, administrative, financial and technical areas, (b) the efficiency of Electrogaz operations and maintenance, (c) the level of service  - 12 - in the five secondary centers identified (para. 35) and (d) the institutional and cost recovery arrangements for the rural water supply systems. The project will comprise: (a) improvement and protection of springs, construction of intakes in streams and a lake, and construction of one test well; (b) construction of a water treatment plant for spring water in four centers and lake water in one center, all of a simplified type because of the remoteness of the centers and the need to keep maintenance uncompli- cated; (c) construction of four small pumping stations wdith a total of eight groups of electric pumps of about 30 m3/h capacity each; (d) construction of ten reservoirs of between 30-600 m3 capacity each; (e) supply and laying of about 32 km of 50-200 mm transmission pipes, 64 km of 50-300 mm distribution pipes and construction of about 100 public standpipes with meters and one or two taps; (f) a local training program for Electrogaz personnel covering both water and electricity; construction of a small training center of about 360 m2 of covered area; supply of training equipment and materials; training of personnel abroad (local training officers and advanced professional training); and provision of books on sanitary education for primary schools and training of teachers in delivery of the courses; (g) completion of detailed design studies and construction supervision in the five secondary centers; and (h) a study on tariffs for water, gas and electricity covering policies and tariff structure, a detailed engineering study for water supply in the lava regions, and an organizational and management study for the rural water supply subsector in Rwanda, including cost-recovery mechanisms. Detailed Features 37. Upgrading of Production and Distribution Facilities for Potable Water. In the five secondary centers concerned, production and distribution facilities need to be rehabilitated, reinforced and extended. Water resources for the project areas consist of springs and stream water in Ruhengeri and Kibungo, and lake water in Rwamagana. Although the springs are often conveniently located at high elevation so that they can supply the centers by gravity (Kibuye, Ruhengeri, Cyangugu), some springs are located lower than the centers (Kibungo, Rwamagana, Cyangugu) and pumping is necessary. Spring flows are usually adequate to meet medium-term water demand except in Kibungo where spring water would have to be complemented by stream water and in Rwamagana where springs are too small and water has to be taken from a lake located about 5 km away. Although water resources are adequate to meet demand, production is inadequate  - 13 - and there are frequent interruptions in the water supplies in all the centers except Kibuye. Interruptions are due to poor design of the water intakes in Cyangugu, clogged collection pipes in Kibungo and poor condition of the pumping facilities in Ruhengeri and Rwamagana. 38. Moreover, water from the springs is corrosive and the water from the lake in Rwamagana is turbid (which tends to deposit incrustations) and is polluted because of lack of protection around the existing water intake. Even though chemicals are available to treat the water, operation and maintenance at the water treatment facilities are poor because of lack of supervision and training. 39. Training. Electrogaz, the proposed project's implementing agency, had a staff of 898 in mid-1982 of whom 28 were university graduates. All categories of staff are in need of training. Under the project, about 463 medium-level technical, administrative and clerical staff would take refresher courses in skills related to the construction, extension, inspection, operation, maintenance and repair of water supply and electricity power production and distribution systems, including techniques of leak detection. Selected senior administrative, financial and technical staff will participate in short-term courses overseas financed by the Project. 40. To enable broader understanding of the benefits of improved domestic and community water and sanitation facilities, the proposed project would also finance the acquisition and distribution of text books on hygiene and the training of primary school teachers to teach courses in hygiene. 41. Audit. An external audit has never been undertaken of Electrogaz's accounts and financial statements. Checks have been made by the Commissioners of Accounts (para. 45) but the doubts that persist on the accuracy and validity of the asset and liability estimations support the view that these checks are inadequate. It was therefore agreed that the first audit of Electrogaz be carried out this year, financed by the PPF, and executed by a firm of auditors acceptable to IDA. In February 1983, Electrogaz appointed Price Waterhouse and Company, Africa for this purpose. Submission to the Association of this audit would constitute a condition of credit effectiveness (Section 5.01 (b) of the Development Credit Agreement). Thereafter, Electrogaz would have the annual accounts audited by independent auditors acceptable to IDA and submit them within six months of the end of each fiscal year. Electrogaz would also have the external auditors verify that the actual cost and disbursements of the project are properly recorded in the progress reports for the proposed project at the end of each fiscal year; the audit and the reports would be submitted to the Bank within three months of the end of each fiscal year (Section 4.02, Project Agreement). Project Cost and Financing 42. The total cost of the project is estimated at about US$16.9 million of which about 60 percent, or US$10.1 million, represents foreign exchange costs. Cost estimates are based on January 1983 prices and on the consultants' (BCEOM) detailed design studies which were well advanced (more than 50 percent completed) at the time of negotiations (February/March 1983). Physical contingencies of 10 percent have been added to base costs, which is reasonable  - 14 - in view of the relatively simple works. Provision for inflation of 27 percent of base costs plus physical contingencies has been included, calculated on the following basis: local costs at 12 percent per annum for 1983 to 1987; foreign exchange costs at the rate of 8 percent per annum in 1983, 7.5 percent per annum in 1984, 7 percent per annum in 1985 and 6 percent per annum in both 1986 and 1987. Materials and equiment imported directly for the project will be exempt from custom duties and import taxes. 43. The base cost estimates for consulting and training services total about US$2.78 million. Consulting services for the first external audit of Electrogaz (para. 41) is estimated at US$100,000 and would require about 7 staffmonths of high level experts at an average staffmonthl/ cost of US$14,300. Engineering consulting services for topographical and geotechnical works, detailed design and construction supervision for the five secondary centers would require about 80 staffmonths of professional services and 83.5 staffmonths of technicians, surveyors, draftsmen, secretaries, provision of local labor and some surveying and reproduction equiment. Detailed engineering design for the northern rural aqueducts is estimated at US$700,000 and would require about 80 staffmonths of engineering services. The average cost for engineering services is US$8,800 per staffmonth. Management consulting services for the institutional and cost recovery study in the rural water supply subsector, estimated at US$300,000, would require 30 staffmonths. Expert training services estimated at US$149,000 would require 15 staffmonths. The average cost for management and training services is US$9,900. An advance from the Project Preparation Facility (PPF) of US$500,000 financed the master plan and feasibility studies which led to the proposed project. A supplemental PPF advance of US$500,000 was approved in September 1982 to start up preparation of the detailed design studies and to carry out the first external audit of Electrogaz. Detailed design studies and detailed survey and geological works are underway. 44. Financing of the project costs would be shared by Electrogaz and IDA in the respective proportion of 23 and 77 percent. The proposed IDA Credit of SDR's 12.0 million (US$13.0 million equivalent) would finance 100 percent of the foreign costs (US$10.1 million equivalent) and about US$2.9 million equivalent (43 percent) of local costs. Government would onlend the proceeds of the Credit to Electrogaz for a period of twenty-five years, including five years of grace at 10.97 percent. Execution of a Subsidiary Loan Agreement between Government (the Borrower) and Electrogaz constitutes a condition of credit effectiveness (Section 5.01 (a) of the Development Credit Agreement). Electrogaz would assume the foreign exchange risk. Project Implementation 45. Electrogaz, a parastatal organization which is wholly owned by the Government, has a monopoly for the generation, production, transmission and distribution of water in urban areas and electricity and gas throughout the country; it would be the implementing agency for the proposed project. Electrogaz is governed by a Board of Directors comprising five members including a Chairman appointed by the President of the Republic. A state representative, the Commissioner, oversees the activities of Electrogaz and monitors decisions of the Board. The Board of Directors has all the authority needed to administer 1/ Staffmonth cost includes salary, costs, fees, international travel and subsistence.  - 15 - Electrogaz, including the authority to issue regulations governing operations. Tariffs are fixed by the minister responsible for the economy with the agreement of the minister of public works, on the basis of recommendations made by Electrogaz. Two part time Commissioners of Accounts have the responsibility of overseeing the accounting and financial operations of Electrogaz. 46. Proposals have been made by consultants that two separate organizations be created to cover water and gas, and electricity, and that the water and gas organization should include rural water supplies. However, maximum use of available staff and the need for economies of scale make it desirable that water, gas and power operations remain under Electrogaz. Water and electricity consumers number about 4,300 and 4,700 respectively, occupying the same premises in the majority of cases. Many of the secondary centers have less than 100 consumers in total. A split in the operations would therefore be uneconomical. Although the need to address problems in the rural water supply subsector is urgent, the current management and organization situation of Electrogaz precludes assumption of rural water responsibilities until a capability to operate the urban supplies has been developed. During negotiations agreement was obtained that IDA would be consulted prior to any changes in Electrogaz's organizational structure and responsibilities (Section 3.02 of the Project Agreement). 47. Electrogaz is currently organized into three departments: (a) Water and Gas; (b) Electricity; and (c) Administration and Finance. The three department heads overseeing each of the departments report to the General Manager of Electrogaz. Management effectiveness, which itself needs to be improved, is hindered by a shortage of adequately qualified and experienced personnel as well as by a lack of financial resources with which to operate efficiently (para. 32). 48. The Chief of the Water Department of Electrogaz, assisted by consulting engineers, would be responsible for project implementation in the five secondary centers. Electrogaz's management needs to be improved in all areas--technical, financial management (including tariff studies), accounting, inventory management, procurement and planning. A management assistance team to support this improvement will be financed by CCCE and will consist of experts experienced in public utility management. As management improvement in Electrogaz is a pre-requisite to the success of the proposed project, IDA has been consulted and has approved the terms of reference of the management assistance team. It was agreed at negotiations that the Bank would reserve the right to suspend disbursements if financing of the team is terminated prematurely (Section 4.01(e)(i)(A), Development Credit Agreement). The management team is expected to be drawn from SAUR, the third largest water utility in France. 49. Accounting, Billing and Collection. Electrogaz has a very detailed accounting system which produces useful information on annual operating costs. However, the accounts are compiled in a manner which makes it difficult to obtain an overview of the operations. No accounting system exists for capital works: costs of projects are obtained from estimates by the planning unit of the Water Service and the Ministry of Public Works, estimates that are often  - 16 - incomplete. Detailed information is available on receivables but other asset and liability data in the balance sheet need verification work that Electrogaz staff has begun. Since 1982 consumer billing is carried out on a mini-computer. Water and electricity are billed together and although sales quantities and revenues are separated, receivables are not. Improvement of metering over the next few years and imposition of stricter disconnections policy should clarify client obligations and expedite bill collection. However, a large number of meters need replacement. About 4,000 new meters were recently bought by Electrogaz to replace existing worn-out meters and to equip new connections. This should allow full metering of all connections, old and new, for the next several years. In time, payroll, stores and general accounting will be transferred to the computer with expected improvement in the accounting efficiency of these systems. A financial management/accounting expert will be included in the proposed management assistance team (para. 48) to improve the financial management and accounting of Electrogaz and install a capital expenditure accounting system. 50. Management Systems. Currently, there is no systematic reporting to management regarding Electrogaz's operations. Progress reports are produced for AfDB financed projects when supervision missions require them; otherwise reports related to physical and financial progress are not produced regularly. Annual reports covering the technical and financial aspects of operations are produced too long after the end of each year to be useful to management. Monthly, quarterly or half-yearly financial reports are not produced. The management assistance team (para. 48) is expected to establish a more relevant management information system and accelerate production of the annual reports and accounts. Although separate financial reports are produced annually for water, gas and electricity operations for operating income and expenditure, separate balance sheets and funds flow statements are not provided. The allocation of common expenditures among water, gas and electricity operations is also rather arbitrary. Electrogaz agreed at negotiations to produce income statements, cash flow projections and balance sheets separately for water, gas and electricity before December 31, 1986 (Section 4.03, Project Agreement). 51. Consultant Services. To carry out the detailed design studies in the five secondary centers, including detailed surveys and geotechnical works, assist in evaluation of tenders and drafting of contracts, and supervise construction of the works, Electrogaz has appointed BCEOM (France) as engineering consultants under conditions acceptable to IDA. During negotiations assurances were obtained that for assistance in project implementation, Electrogaz would continue to retain engineering consultants whose qualifications, experience and conditions of employment are acceptable to IDA (Section 2.02, Project Agreement). 52. Training Component. To implement the project training component (para. 39), Electrogaz would establish a training section within the personnel department and hire training experts to develop a manpower planning and training unit and assist in the implementation of the training program. During negotiations, assurances were obtained that for implementation of the training program, Electrogaz would obtain the assistance of training experts whose  - 17 - qualifications, experience and conditions of employment are acceptable to IDA (Section 2.02, Project Agreement). Preparation of books and training of teachers for health education related to water supply and sanitation would be carried out through services of the Ministry of Health in coordination with Electrogaz and the Pedagogic Office of the Ministry of Education. 53. Schedule and Completion. Engineering services for detailed survey and geotechnical works started in August 1982. It is expected that detailed design p would be completed by July 1983, all major bids would be invited by November 1983 and all major contracts would be awarded by July 1984. Construction of the project will be substantially completed by November 1986. Procurement 54. Goods: Water treatment, pumping and training equipment totalling US$1.8 million, including contingencies, would be grouped in appropriate packages and procured under international competitive bidding in accordance with Bank guidelines. It is expected that all equipment would come from abroad. Miscellaneous items of training equipment, in contracts for less than US$20,000, would be awarded in accordance with local procedures which are acceptable to IDA; total expenditures under such contracts would not exceed US$100,000. 55. Works. Civil works and installation of pipes and public standpipes totalling US$10.6 million including contingencies would be procured under international competitive bidding in accordance with Bank guidelines. Construction of 99 percent of the works would involve only two contracts, one for construction of treatment and pumping stations, reservoirs and the training center and one for supply, transport, and laying of pipes including earthworks. Works of the same nature that are beyond the capability of local contractors would be grouped in the same package in order to attract foreign bidders and stimulate the competition which is necessary in the case of a small, landlocked and isolated country like Rwanda. Miscellaneous works in contracts less than US$50,000 would be awarded in accordance with local procedures which are acceptable to IDA; total expenditures under such contracts would not exceed US$200,000. Disbursement 56. Credit funds would be disbursed as follows: for materials and equipment (excluding pipes), 100 percent of foreign and 90 percent of local expenditures; for pipes (supply and laying), 65 percent of total expenditures; for civil works, 60 percent of total expenditures; and for consultants' services, 100 percent of foreign expenditures. All disbursements would be fully documented. The proposed closing date is June 30, 1988. The PPF advances totalling US$1.0 million for project preparation (para. 43) would be refinanced from the proposed Credit. Financial Aspects 57. Financial Performance. Electrogaz's past financial performance has been poor. Physical equipment, transport, and operating funds have been lacking, and there have not been enough qualified and experienced managers to improve  - 18 - efficiency of operations. The annual accounts for FY80 reveal that Electrogaz suffered a net deficit of US$1.2 million equivalent after charging US$1.3 million for depreciation which, however, was based only on the historical value of the assets. This deficit shows that tariffs were too low and cost recovery inadequate. No debt service was paid during the year because Government had not charged interest on the foreign loans onlent to Electrogaz, and repayment on the first of these loans was only due to begin in 1981. As indicated above (para. 49), Electrogaz's financial accounts are, in general, poorly kept and are not sufficient to permit a comprehensive financial appraisal. Schedules of assets and projects in progress are not available. Neither could supporting schedules be produced to provide details on the total long-term debt. Historical funds flow statements are meaningless in view of the fact that Government has paid directly to suppliers all capital costs, and the sums expended cannot be ascertained with any degree of accuracy. In view of these shortcomings, an audit of Electrogaz accounts to provide the major financial statements in support of future operations and to verify medium-term projections is a condition of effectiveness of the proposed credit (para. 41). 58. Receivables had declined from the equivalent of one year's water and electricity billing at end 1980 to seven months at end 1981. The total receivables at end 1981 included 26 percent or US$0.7 miLllion for outstanding Government bills. In addition to the receivables for water and electricity billed, US$1.0 million was unpaid for the cost of contract and connections works already billed. At negotiations, Electogaz informed the Association that receivables at end 1982 were reduced to the equivalent of four months of water and electricity billings due to the greater efficiency introduced with the new computer installed at the beginning of 1982 and with the appointment of a new head of the Administration and Finance Department also in early 1982. It was agreed at negotiations that total outstanding private and Government accounts, including the most recent month billed, would be kept below the equivalent of four months billing for electricity, water and gas. It was also agreed that payment for contract and connection works would be made for at least 60 percent of such works with the balance to be paid at the end of construction. For particularly poor customers, however, the advance payment would be 30 percent, with the balance to be paid by installments over six to twelve months (Section 4.06 (a) and (b), Project Agreement). 59. Financing of Future Investment. The capital that Electrogaz is expected to invest to meet the demand for water, gas and electricity through FY88 is estimated at US$169 million equivalent at current prices including interest during construction. Of this amount, US$35 million equivalent or 21 percent would be provided from internal cash generation, and Government is expected to provide US$23 million equivalent or 14 percent as equity. The rest, US$111 million equivalent or 65 percent, would be obtained abroad. 60. Electrogaz's debt/equity ratio is projected to increase from 17/83 in FY82 to 34/66 in FY88, a satisfactory position. No difficulty would arise in servicing debt as the annual debt servicing ratio would not fall below 2.1 through the seven year period of the forecast. However, to safeguard Electrogaz's financial position and to ensure that future borrowings are for economically justified projects, it was agreed at negotiations that the Bank would be consulted on the incurrence of any debt if internal cash generation for  - 19 - the year prior to the incurrence, were less than 1.5 times the estimated maximum debt service on all loans including the loan to be incurred in any future year (Section 4.04 of the Project Agreement). 61. Water sales are expected to increase from 3.82 million m3 in FY82 to 11.0 million m3 in FY88, or at an average annual growth rate of 19.3 percent. This growth rate arises from new water production installations in Kigali and Butare (completed in FY81), the proposed project production facilities and expanded supplies to be provided in four secondary centers by CCCE and one secondary center by KfW. The expanded supplies will be made available primarily to customers who previously suffered from intermittent and sparse water supplies. Over the six-year period, total revenues are expected to grow from US$12.8 million equivalent in FY82 to US$39.6 equivalent in FY88 at an annual average growth rate of 20.8 percent, while total operating expenses are expected to increase from US$11.5 million equivalent for FY82 to US$33.8 million equivalent for FY88, an annual growth rate of 19.7 percent. The financial position of Electrogaz is thus expected to improve substantially in the future. Electrogaz would be able to finance internally a large proportion of its needs in local currency, relieving the Government budget of the greater part of the local cost financing that it now provides. 62. Tariffs were trebled on average from January 1, 1982 for water, from US cents 22.3 to US cents 73/m3 and doubled on average for electricity, from US cents 5.6 to US cents 12.0/kWh. These tariff levels are expected to yield revenues adequate to provide the cash generation that Electrogaz will require to assist in funding the total investment program through 1984. Thereafter, assuming that Electrogaz will be able to borrow 65 percent of capital expenditures, average tariff levels should be increased at the rates necessary to provide about 25 percent of the capital expenditures from internally generated funds, with the balance coming from Government as equity. To achieve this objective, it was agreed at negotiations that Electrogaz shall adjust the structure or level of its water, electricity and gas tariffs as required to produce, for each of its fiscal years after its fiscal year ending on December 31, 1982, funds from internal sources equivalent to not less than 25 percent of the annual average of Electrogaz's capital expenditures incurred, or expected to be incurred, during that year, the previous year and the next following fiscal year (Section 4.05 of the draft Project Agreement). 63. The average level of water tariffs in Rwanda is already relatively high in comparison to other African countries. Despite the projected increase of 6 percent in real terms during the period through 1988, water consumption would still be affordable since a family of six consuming 15 lcd would pay US$1.17 per month at the lowest block rate, which for a poor family with an income of US$38/month represents 3 percent of income. However, studies of the marginal cost of water, electricity, and gas provision in urban areas are required in order to recommend appropriate tariff policies and structures to the Government. Assurances were therefore obtained at negotiations that the management assistance team (para. 48) would carry out such studies by December 31, 1984, and Electrogaz would implement recommendations agreed with the Association by December 31, 1985 (Section 2.05 of the Project Agreement).  - 20 - Uniform tariffs throughout the country necessarily result in some degree of cross-subsidization of consumers in the project areas by consumers in Kigali and Butare, which is acceptable because consumers in small centers are generally poorer than consumers in Kigali and Butare. 64. Although a financial rate of return (FROR) on net revalued fixed assets in operation would be preferable as an earnings convenant to that described in para. 61 above, the uncertainty that exists regarding the accuracy and validity of the recorded fixed assets renders use of the FROR impracticable at the present time. However, it was agreed at negotiations that, starting in FY86, Electrogaz would revalue net fixed assets in operation annually in accordance with methods of revaluation acceptable to the Bank (Section 4.07 of the Project Agreement). In the long run, this should enable Electrogaz to have a better basis to determine its tariff levels. Economic Analysis 65. Benefits. The project would satisfy the water supply demand in the project areas up to 1988. It would improve service to about 20,000 people; meet the needs of domestic consumers whose water consumption would be increased by about 250 percent (by provision of safe water to about 40,000 additional people); and meet the needs of governmental institutions, commerce and industry whose water consumption would be increased by about 230 percent. By providing piped water to people in the five secondary centers, the project is expected to reduce the incidence and risk of diseases attributable to lack of safe water. In general, all Electrogaz's water supply consumers would benefit from improved management and staff capabilities to be brought about by the project's training component. Through its institutional and financial covenants, the project is expected to improve Electrogaz efficiency which should benefit not only Electrogaz's consumers but also all tax payers in the country by reducing Government contributions. 66. In estimating the economic rate of return (ERR) of the project, capital and operating costs and benefits of Phase II of the development program in the five secondary centers for which common investments are included in the project, were taken into account in the cost and benefit streams. The incremental water revenues were taken as a best proxy of the benefits attributable to investments. The ERR using the average selling price which will apply in 1987 (at 1981 price levels), the year the project will be operational, of US cents 79.5/m3 is 4.9 percent which is not out of line with similar projects Bankwide. The ERR would be higher if the unquantifiable health, enviromental and social benefits could have been included in the calculations and the consumers' surplus could have been estimated. The rate of return is sensitive to a 10 percent increase in costs or a 10 percent reduction in water revenues by about 1 percentage point. 67. Risks. The main project risks relate to Electrogaz's limited capacity to implement properly projects, operate facilities once constructed, and recover charges (paras. 57 and 58). As detailed design of the project would be practically completed by Board presentation, the risk of delayed start-up is  - 21 - minimized. In order to alleviate the other risks, Electrogaz would be required to continue to use consulting engineers for supervision of project construction, to hire a management assistance team from a reputable utility company (para. 49), and to implement a training program. PART V - LEGAL INSTRUMENT AND AUTHORITY 68. The draft Development Credit Agrement between the Rwandese Republic and the Association, the draft Project Agreement between Electrogaz and the Association, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 69. Special Conditions of the Project are listed in Section III of Annex III of the Report. 70. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATIONS 71. I recommend that the Executive Directors approve the proposed Credit. A. W. Clausen President Attachments Washington, D. C. March 24, 1983  - 22 - ANNEX I Page 1 of 5 TABLE 3A RWANDA - SOCIAL INDICATORS DATA SHEET RWANDA REFERENCE GROUPS (WEIGHTED AVEYACES AREA (THOUSAND SQ. KM.) O- ST RECENT ESTIMATE)- TOTAL 26.3 MOST RECENT LOW INCbAlE MIDDLE INCOME AGRICULTURAL 14.5 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA AFRICA SOUbTH OF SAHARA GNP PER CAPITA (USS) 70.0 100.0 239.0 250.8 1053.2 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 14.5 15.9 28.3 66.5 610.1 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 2858.0 3695.0 5530.0 URBAN POPULATION (PERCENT OF TOTAL) 2.4 3.2 4.3 17.8 28.3 POPULATION PKOJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 10.4 STATIONARY POPULATION (MILLIONS) 38.1 YEAR STATIONARY POPULATION IS REACHED 2110 POPULATION DENSITY PER SQ. KM. 108.5 146.3 210.0 27.7 54.7 PER SQ. KM. AGRICULTURAL LAND 189.3 240.7 393.0 86.7 129.9 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 44.3 45.7 46.7 44.8 46.0 15-64 YRS. 53.0 51.6 50.6 52.3 S1.1 65 YRS. AND ABOVE 2.7 2.7 2.7 2.9 2.8 POPULATION GROWTH RATE (PERCENT) TOTAL 2.6 2.6 3.4 2.7 2.8 URBAN 5.4 5.4 6.3 6.2 5.2 CRUDE BIRTH RATE (PER THOUSAND) 51.2 .. 53.3 47.3 47.2 CRUDE DEATH RATE (PER THOUSAND) 27.2 22.3 20.1 19.5 15.7 GROSS REPRODUCTION RATE .. .. 4.1 3.2 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) USERS (PERCENT OF MARRIED WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 81.0 102.0 105.0 88.7 90.7 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 83.3 95.6 94.2/c 90.2 93.9 PROTEINS (GRAMS PER DAY) 50.7 61.0 57.o0 53.1 54.8 OF WHICH ANIMAL AND PULSE 25.6 34.0 29.lT1 18.4 17.0 CHILD (AGES 1-4) MORTALITY RATE 32.0 30.5 29.0 26.7 23.9 HEALTH PIFE EXPECTANCY AT BIRTH (YEARS) 37.2 42.1 45.2 45.6 51.0 INFANT MORTALITY BATE (PER THOUSAND) 147.0 142.0 137.0 129.9 118.5 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. 31.014 23.9 URBAN .. .. 41.0/7 54.9 RURAL .. .. 37.0O 18.5 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 53.0 57.0/e 25.8 URBAS .. 83.0 87.07i 63.1 RURAL .. 52.0 56.07o 20.2 POPULATION PER PHYSICIAN 143285.7/f 59596.8 38791.7/c 32097.3 14185.2 POPULATION PER NURSING PERSON 11617.87? 8818.6 10460.77T 3264.6 2213.2 PUPULATION PER HOSPITAL BED TOTAL .. 790.4 650.0/c 1225.0 1036.4 URBAN .. 45.9 45.27i 249.5 430.8 RURAL . . 3097.0 1599.77E 1712.1 3678.6 ADMISSIONS PER HOSPITAL BED .. 21.2 21.3/5 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. .. URBAN .. .. RURAL .. .. 4.5/e AVERAGE NLMBER OF PERSONS PER ROOM TOTAL .. .. URBAN .. .. RURAL .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN RURAL ''  ANNEX I - 23 - Page 2 of 5 TABLE 3A RWANDA - SOCIAL INDICATORS DATA SHEET RWANDA REFERENCE GROUPS (WEIGHTED AVE .AGES - MOST RECENT ESTIMATE)- MOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 49.0 73.0 70.0 63.2 83.3 MALE 68.0 83.0 74.0 72.7 96.1 FEMALE 30.0 64.0 67.0 50.3 80.4 SECONDARY: TOTAL 2.0 2.0 2.0 10.2 15.3 MALE 2.0 3.0 3.0 13.2 19.4 FEMALE 1.0 1.0 1.0 6.6 11.3 VOCATIONAL ENROL. (X OF SECONDARY) 39.9 12.2 16.7 7.9 4.7 PUPIL-TEACHER RATIO PRIMARY 38.8 59.7 53.2 47.4 38.6 SECONDARY 14.2 13.3 15.3 26.2 23.4 ADULT LITERACY RATE (PERCENT) 16.4/f 23.0/h 49.5 34.0 35.6 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.4 0.9 1.5/e 3.0 31.9 RADIO RECEIVERS PER THOUSAND POPULATION .. 8.1 30.1 34.8 71.8 TV RECEIVERS PER THOUSAND POPULATION . .. .. 1.7 17.9 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION .. .. 0.04/c 2.9 19.1 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. 14.6/ei 1.1 0.6 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1617.8 2007.1 2679.8 FEMALE (PERCENT) 49.1 48.6 48.4 34.1 36.5 AGRICULTURE (PERCENT) 95.0 93.0 91.0 78.4 56.5 INDUSTRY (PERCENT) 1.0 2.0 2.0 9.2 17.7 PARTICIPATION RATE (PERCENT) TOTAL 56.6 54.3 51.8 41.4 37.0 MALE 58.9 56.9 54.7 53.9 46.9 FEMALE 54.4 51.9 49.1 29.1 27.2 ECONOMIC DEPENDENCY RATIO 0.8 0.9 1.0 1.2 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. HIGHEST 20 PERCENT OF HOUSEHOLDS .. .. LOWEST 20 PERCENT OF HOUSEHOLDS .. .. LOWEST 40 PERCENT OF HOUSEHOLDS .. .. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 148.O/c 134.3 507.0 RURAL .. .. 85.078 82.9 200.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. 96.4 523.9 RURAL .. .. 43.0/c 60.4 203.6 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 30.0/c 39.3 RURAL .. .. 90.07 69.0 Not available Not applicable. NOTES /a The group averages for each indicator are populatior-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. lb Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970. between 1969 and 1971; and for Most Recent Estiimate, between 1978 and 1982. /c 1977; /d 1976; /e 1975; /f 1962; /& 1974; /h 1973. May, 1982  -24- ANNEX I Page 3 of 5 DtPfNfTIwtI fY SOCLAL ifliCAIVtS kan ithoogh fta datLar drac fro sonrcs eneall Jadsd thes auth-iriratby ad -lebiai. ft hboaid at be ootcd tha tihny may oar be iv.r.- aaialyowrhe a oto h acpfcadrie dtiiit o ooot cdb ifeetcnr a L.oleto h at.Tn aaae t i..ecfL bo docbhoresfmantd. dicb brees.1nd harcinnic cetaf maor.iffrenes oraencottec itorsernc goinsae 1)rhcaecootygceolthanijei ootrco (2) acatryropL bcmaaniinr 'eaeIt ne... iecocryr of, niec-..oor.eratfr 'g noe i ootr ro or fdi onNot fiasdtdl Lac loicao Lh.coo ctoog sac ic-coitorci aft ititiec I. in the re fereore groep data rho aoeragec are popolatico esighted arithmetic macc for each bed boater ord cocan only ahe..n1- ph"ti- MIhifM maorfr f hecoonba o too hsdaa o tatro caor boa hecveag o ocnie tngrh odicrrsAronsonco naidelc o dt gadisnotattoa. acin ta h eeroicd o rlain antaeeof nero icro toatthr. traaaceags ye of iefo to ctoin te claic '!l of i.dit.l.c ~~~~~~~~~~~~byalasccphict. fab cncr yro idfg rncpll ec AILA pig. CAiAfhl-Ot a aiaetift tcreterarpie.el il tar ar o nldd eo opnl,hae,bceehat celate hr cme ronata m methodas bo -d i.lA 6 ....c (198 1i97ai9 dt60. arid medical 'd'! ce dtee no th.neclys-afPea inJ hyibc(htb Ti97. ca 190dt.mdfaYeitc. ne ds saie etc.). ohcc -fIe i- patbc_j_ Agtic.11-.1 - E.,~~~~~~- of nIj-Il-I -I-atictaed pocideaPilmped dcge.o medIalbin i ofi i =s.tor satdbe and ligite -erota. arrl gas andh. hyIdr- . otla uod gieot mf e- n.1rbhepti.ftl rne"lspias'nledl admtent TarafdbyfZ Oocitin Mid-Ya fthooada(. -.I At of Jly. 1;1976-0. 1970. 1acd.. ihOG itfilbyIhIfEi-(b. b daa Acrghaefteedlfect prOdoacd-oa,ra.orr OratPocator(ereo f oil -rai o etntncaI oplt ce hcchodceait c agoo o ndcbcl iOto hoeIdcirqortr ametacnebtres; 1960. YOb. acd 190 daca. th hPtarOd ir snboth isnPa iorcart. .cpj/1I ProjectL. ion parameter for tniaf ydrttoprs cchon lvei tao.-etccei- SareLl.d-P di1lo fentiiiaccrdigto ncoe lcefaodPac- ce plannic pdt1979mlyncd. tech cecotry is thee acs igoed one of theseP tine cosbed- Tat.bane,cifmdrtail bLtyOt OilTI-gi POUiTaIONAND VITcAL,SAITo-InCS ifnr nplib hr cgot ic Priar scineo -~ tda. malteao t fei - ratta,maean eml dinfthe year 200.- and th Aaro ieo etiiyrt orpae hceayshol-ta,mlendeaLI optds aoa eodr sicoaii heaacid. cealy-o ilto 0 yers f-ae;-brnlpcnrncrcoret te gnergli ?cyelatter Oeoy45yd eac.dILad ..eAb..dd.,I - I- 11 -IddL total ariea; 196. 1970an i979h. daa..nloetrhebef. _iodoi_l.o te pccsaihoprt need Pt s -A. arcoitOre1bn optdooeefrancloa adenco adprmoco aetendedy i _t_tlea (anin; 160. 970 and lYt data1.d Adol-t , o f,ill -. literac P'r(ecn iearoolo(tl cra n be Loemain; 1960.-l 1970, andg180 daa. al i-b- leoitl-1 ni t7rrt;l isoally fo ic-eraeae cdn i 90 90 n 9 tscotnac elIshd cetii Ptati . yrlnnn-AcrtraAcoi(hcand(-ocanc_re ccptr iiercaa pr hotndrroano(-0hrnier orr-daa fbt h 18'NT.pTi- -eho rdayI if itippearsPa eOct fooyni-metoce ldrek. inatad f saer)chi of ar.dhe n etic noyiat e.gh....fe and = l d.1d 1 Igh f,J, cI.;f natoni= aerged rdce -pic eigt;Ih-O.17.edfdOdt.Ttl anrPre toansc lOfcaiall acicap-rons ioidn ecehrgy.eoiaet20i dlb of d-lon opiir cilaboe fincccty par 1 capita. ceeigpoeaitofolae. bedlftlo1be-c inpcrets coorrbe. ar per gap.Anailabl corn le ceetrit domestc predec ion, imorta lea cot ccparainln 1960. 170 and i80 cant enpits and chab vece tnsribee oeaia ed ae-d.hFmal (prcet) -7 female lite goc a a g c i- total... labor fore P-ets l, acr esidated-n P p aed on .. khy ilol-gcr ed for0 normal. acfi tithing aa lerentag ofn aic foce -16..17. ad190daa h.oeseo1 fene;190 197105 190d n 97 77d data. 1960. lhPicand198 idata-.l'. hc . .d ne ccpi f ed e day -e COr-ny cI.foo id-ia as -dne it-aIniy rseaar coImpare as total, ma.lt,edfml ae ca poice pr9tin- 1 atOhc 19 rmtoldh nmiprti9mc stan- relect- lo %ae-e attInr of te pod,yi -Ti. oo..d bon timetredL.A a6 saeberta toeo 75_mama o total potein an 23 gram,. offa siatsat-rm aioa oeb Wend,, Pond homey; 191 190adit?dt,to the tota ILaho force.)-L-I d1 .bet bd- i. Pee eaita trreit apri from animal an -rl ce-Prti -pIr of feed1 ide-p-el.o L. l P. .- ,d15y- d age groopi 1t-A pleoo tochlde in tlhiod agCro,oNa doipagno- S peTeoc,rcen2 ecn.poetd ecn.adpoei6 ecn trli.. daa erve tram60 life70 nanlc 1960, 190 a1M0dta f ooedls Life ttac baon at irth lcara)- Aneragli toter P of y ..r . di life rmbidgyThe P" lle" o esiercae apaprti maeeeoPovry'eec an hi_rh;1960, i70 cod 1960 data. end h- l -hke bnortd0t enieal atin Intact tsrclt Rat e (ta Aheao -_ taofl d..heanh ofi llnoe one, yea Istimed _bslee Oner in Ooelvl(hproia -Irha androai,- pcrcsatage oftereapcieppoait.Iaa a aeanific persoat inoeo ffothe d... y rhtier iOsy'-= dtone foa th rr yooeaorcad yc ae totmet that g. OARdeien from 0 a70 hoc map0 bleiaILI adjoatm hedtfrhga oio lnn nbb aes Freiy PI.abisj scAmetold. imlyI thtthe ..... if or mate atb th ccch TVaa Rorci .. jjpeenact at. papolatien f -rh -an r fra) eto ate5abaat family' PZ cect-an . .meded T doceac o Mootta gosecal (poneat f oneattien) tc_ai tordbaa. coed Zrparalnl- -- . g I Lstta erafaa.ed O ehao.cad reraf) ofsrdedlyhy earrada diaPpecad am ihe amiltras aad diepotai, mathb or dem-idbbiently oiemettdffI n.t.atO 1. -edsta IrealbIas tar Podtymi. pet -Ctpolata d1969d71d1hy I.d.r of pecttCi-Absg phyadb- ,ClpteoP mi ted, bota Raa Oi!b tacicge eat lO, ao era tog1ltbsfgode hy , mt fdrabida lpi mal ca tcaiagraaag gatam aaiata art.trmi dtca Icad- i marcbag cod I_bertat.;I1IE. ...:ikt.l  -25- ANNEX I Page 4 of 5 COUNTRY DATA--RWANDA AREA POPIJLATION DENSITY (1982) 26.3 thousand sq. km. 5.5 million (mid-1982) 210 per square km. Rate of Growtlh: 393 per square km. of 3.6% (from 1978 to 1982) arable land POPULATION' CIHAPACTERISTICS (1978) HEALTH (1977) Crude Birth Rate (per 1,000) 54.0 Population per physician 38,792 Crude Death Rate (per 1,000) 21.0 Population per hospital bed 650 INCOMF DISTRIBUTION ENERGY CONSUMPTION PER CAPITA X of national income, highest quintile .. (Kilograms of coal equivalent) 28.3 lowest quintile ACCESS TO SAFE WATER (1976) ACCESS TO ELECTRICITY Vof population-total 35.0 % of population - total - rural NUTRITION (1977) EDUCATION (1980) Calorie intake as % of requirements 94.2 Adult literacy rate % 23.0 Per capita protein intake 57.0 Primary school enrollment Z 60.0 (grams/day) GNP PER CAPITA IN 1961 (1): US $239 CROSS MOMESTIC PRODUCT IN 1981 (2) ANNUAL RATE OF GROWTH (Z, constant 1976 prices) (3) US $ Mln. % 1977-81 GDP at Market Prices 1,257.8 100.0 5.8 Gross Domestic Investment 282.4 22.5 8.0 Gross National Saving 109.8 8.7 Current Account Balance -172.6 -13.7 Export of Goods, NFS 150.9 12.0 -3.9 Import of Goods, NFS 332.0 26.4 5.0 GOVERNMENT FINANCE Central Government (RwF Mln.) % of GDP 1981 (2) 1981 (2)- 1972 Current Receipts l4Z827 12.7 8.3 Current Expenditure 14,040 12.0 10.7 Current Surplus 787 .0.7 -2.4 Capital Expenditures -2,562 2.2- 1.2 Overall surplus (4) -2,241 -1.9 -3.0 (1) The Per Capita GNP estimate calculated by the same conversion technique as the World Bank Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. (2) Provisional. (3) Trend rates based on least squares estimates. (4) The overall surplus is not equal to the difference between current savings and development expenditures because the consolidated surplus or deficit of the Treasury special accounts is not shown in this table. not available. not applicable.  - 26 - iLA . COUNTRY DATA - RWANDA Page 5 of 5 MONEY, CREDIT and PRICES 1977 1978 1979 i980 1981 (Million RwF outstaniding end period) Money Supply (1) 10,175 11,204 14,185 15,331 16,331 Bank Credit to Government (net) 363 23 -1,350 -2,929 -1,939 Bank Credit to Private Sector 4,389 5,134 4,563 6,515 8,171 (Percentage or Inlex Numbers) Money as % of GDP 14.0 13.8 14.6 14.4 14.2 Consumar Price Index (Jan-Mar 1976=100) 116.7 131.3 152.1 163.2 173.8 Annual percentage changes in: Consumer Price Index 14.5 12.5 15.8 7.3 6.5 Banik credit to Government (net) -77.4 -93.7 -5970.0 -117.0 33.8 Bank credit to PrJvate Sector 60.1 17.0 -11.1 42.8 25.4 BALANCE OF PAYMENTS - MRCHANDISE EXPORTS (AVERAGE 1978-81) 1978 1979 1980 1981(2) US$Mln. Z (US$ Millions) Exports of Goods, NFS 126 227 166 161 Coffee 79.5 54.8 Imports of Goods, NFS -261 -309 -323 -332 Tea 10.6 8.0 Resource Gap (deficit-) -136 -82 -157 -181 Cassiterite 17.6 13.1 Wolfram 5.5 4.1 Factor Services (net) -5 -2 5 12 Pyrethrum 1.3 0.9 Net transfers - 5 -1 -3 Cinchona D.9 1.5 Balance on Cur. Account -141 -79 -155 -172 Other 23.9 17.6 Total 177.3 100.0 Official Grarts 95 128 106 106 Direct Private For.Invest. 10 13 17 19 Net MLT Loans 19 40 33 25 EXTERNAL DEBT, DECEMBER 31, 1981 Other M & LT (net) 1 -22 -2 2 USSMin. net Short-Term Capital 21 -10 22 20 Public Debt, incl.guaranteed 172.1 Capital Flows, NEI -6 1 -2 -9 Non-Guaranteed Private Debt Errors & Omissions 5 -1 -6 1 Total cutstanding & disbursed Increase in Reserves (-) -4 -70 -13 -1 Gross Reserves (end year) 100.0 177.6 208.8 199.2 NET DEBT SERVICE RATIO for 1981 (4) Petroleum imports (3) 17.0 23.0 30.0 32.0 _ Petroleum Exports (3) . . . . Public Debt incl. guaranteed 1.8 Non-guaranteed Private Debt Total outstanding & disbursed RATE OF EXCHANGE Annual End IDA LENDING,(July 31,1982)(US$Mln.) Averages Period IDA 1974-80 Sept. 1982 Outstanding & Disbursed 74.96 USS 1.00- RWF 92.84 92.84 Undisbursed 40.08 RwF 1.00 - US$ 0.011 0.011 Outstanding incl. Undisbursed 115.04 1) Includes Money and Quasi money 2) Provisional. 3) Crude and derivatives. 4) Debt Service net of interest earned on foreign exchange reserves as a percentage of Exports of Goods and Non-Factor Services. not available * not applicable -- less than US $ 0.5 million  - 27 - ANNEX II Page 1 of 5 THE STATUS OF BANK GROUP OPERATIONS IN RWANDA A. Statement of IDA Credits (As of February 28, 1983) Amount US$ million (Less cancellations) Credit No. Fiscal Year Borrower Purpose IDA Undisbursed (Five credits have been fully disbursed) 45.90 567-RW 1975 Rwanda Education 6.38 2.06 655-RW 1977 DFC I 4.00 0.13 656-RW 1977 Agriculture Cinchona 1.80 0.01 769-RW 1978 Road Maintenance 15.00 2.11 896-RW 1979 DFC II 5.20 4.13 937-RW 1979 Mutara Agricultural and Livestock Development 8.75 4.56 1039-RW 1980 Integrated Forestry and Livestock Development 21.00 15.36 1057-RW 1981 Telecommunications 7.50 6.87 1126-RW 1981 Coffee/Foodcrops 12.86 11.15 1217-RW 1982 Technical Assistance 4.69 4.66 1250-RW 1982 Fifth Highway 25.40 25.32 1263-RW 1/ 1982 Second Education 9.81 9.81 1283-RW 1/ 1982 Phase II Bugesera/ Gisaka/Migongo 15.80 15.80 Total 184.09 101.97 Principal Repaid 2.71 Total Held 181.38 1/ Not yet effective. Note: a) Rwanda has received no Bank loan. b) US dollars amounts equivalent for IDA VI credits (expressed in SDRs) are calculated at the rate as of February 28, 1983.  - 28 - ANNEX II Page 2 of 5 B. Statement of IFC Investments (As of September 30, 1982) In 1976, IFC made a loan of US$535,000 for a tea factory. A second IFC long-term loan of US$226,000 and contingent equity commitments of up to US$60,000 for an expansion of the tea factory were signed in September 1980. C. PROJECTS IN RWANDA 1/ (As of September 30, 1982) Credit No. 567-RW Education Project; US$8.0 Milion Credit of June 30, 1975; Date of Effectiveness: December 1, 1975; Closing Date: December 31, 1982 As now constituted, the project includes construction, equipping and furnishing of 250 primary-school workshops, a school-textbook printshop, and an office building for the School Financing and Construction Services (SFCS) as well as furnishing and equipping of the Rural Agricultural Training Center of Gitarama. The project also provides technical assistance, vehicles and operating expenses for the SFCS. The project has been hampered by implementa- tion difficulties centering on two misprocurements (an amount of US$130,000 was cancelled because of misprocurement of certain construction materials; a second amount of US$1,491,000 was cancelled due to misprocurement of paper). Most of the 250 workshops are nearly completed. The lack of acceptable record keeping, however, has impeded the processing of disbursement requests. There- fore, a final inspection and evaluation mission for the workshops, organized by the Government (with IDA approval) was undertaken successfully in November 1981 with UNESCO assistance. Disbursements have resumed. The printshop is now operational and construction of the office building for the SFCS completed. The original Closing Date (June 30, 1982) was extended to December 31, 1982 by which time the project is expected to be completed. Credit No. 656-RW Cinchona Project; US$1.8 million Credit of August 20, 1976 Date of Effectiveness: March 2, 1977 Closing Date: March 31, 1983 The project provides over a five year period inputs and extension services to grow cinchona for export. Progress is satisfactory and there is still a demand from farmers for planting material. World market prices for cinchona derivates, however, remained low during 1979 and 1980, and OCIR (the implementing agency) had to reduce the farm gate price for cinchona bark 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding they do not purport to present a balanced evaluation of strengths and weakness in project execution.  - 29 - ANNEX II Page 3 of 5 and abolish the export tax and the OCIR levy. In September 1980 it was decided to establish a cinchona bark processing plant in the Kirambo area, and construction has since started and the factory is scheduled to be open in early 1983. This should give Rwanda a stronger position in the future to compete with cinchona derivates on the world market. The original Closing Date (June 30, 1982) was extended to March 31, 1983 by which time the project is expected to be completed. Credit 769-RW Fourth Highway Project; US$15.0 Million Credit of April 21, 1978; Date of Effectiveness: August 4, 1978; Closing Date: June 30, 1984 Implementation of the Fourth Highway Project (a US$15.0 million Credit for road maintenance) started in January 1978. Specialists financed under the technical assistance program are performing satisfactorily. Procure- ment of equipment is completed. On the suggestion of the Association, an expert on labor intensive methods visited Rwanda for three weeks in June 1978 and recommended that one mechanized unit be replaced by one unit utilizing labor intensive methods. Following the consultant's recommendation, the Government has introduced labor-intensive methods for road maintenance. Although the project is about one year behind schedule, implementation is now at its anticipated progress rate and the project is proceeding satisfactorily. Credit 896-RW Second Rwandese Development Bank Project; US$5.2 Million; Credit of July 13, 1979; Date of Effectiveness: January 4, 1980; Closing Date: June 30, 1983 The Project aims at providing further assistance to the industrial sector by supporting the activities of the Rwandese Development Bank. It includes two components: (a) a second line of credit of US$5.0 million (which is now about 90 percent committed) to finance BRD-s foreign exchange require- ments and (b) a feasibility study for the establishment of an auditing firm in Rwanda (US$0.2 million). Government has just finished reviewing the audit study and its comments are currently under consideration by the Association. Credit 937-RW Mutara Agricultural and Livestock Development Project; US$8.75 Million Credit of July 13, 1979; Date of Effectiveness: May 30, 1980; Closing Date: December 31, 1983 The project is the second phase of a long-term development program for the Mutara region. It aims at developing techniques, procedures, and an institutional environment which will make it possible to preserve the production potential of the area, make a rational and more intensive use of available resources, improve farming and ranching techniques, and integrate the project into the local administration. Settlement of cattle owners has proceeded in an orderly way and pasture production has improved, but destocking activities and credit recovery have been disappointing due to lack of clear policies and enforcement mechanisms.  - 30 - ANNEX II P-g-;e 4 of 5 Credit 1039-RW Integrated Forestry and Livestock Development Project; US$21.0 Million Credit of July 7, 1980; Date of Effectiveness: November 11, 1981; Closing Date: September 30, 1986 The project is the first phase of a long-term program to develop the forestry resources of Rwanda and to strengthen the livestock industry. Technical assistance personnel and key local staff have been recruited and start-up activities are progressing satisfactorily. Credit 1057-RW Telecommunications Project; US$7.5 Million; Credit of August 13, 1980; Date of Effectiveness: July 7, 1981; Closing Date: June 30, 1985 The project aims at improving the quality of existing telecommuni- cations services, while extending the coverage to geographical areas and segments of the population which at present do not benefit from such services. In addition to improving international and domestic telecommuni- cations (telephone and telex) the project provides technical assistance and training to the Ministry of Post and Telecommunications. The project is cofinanced with FAC and CCCE (US$3.9 million equivalent) and CIDA (Can$4.95 million) and is proceeding satisfactorily. Credit 1126-RW Lake Kivu Coffee Improvement and Foodcrops Project; US$15.0 Million Credit of April 29, 1981; Date of Effectiveness: January 18, 1982; Closing Date: December 31, 1986 The project aims at building up an effective extension service which would assist farmers in increasing foodcrop and coffee production using field-tested techniques and also helping OCIR-Cafe (the implementing agency) improve its financial management. Technical assistance personnel and key local staff have been recruited and start-up activities are progressing satisfactorily. Credit 1217-RW Technical Assistance Project; US$5.0 Million Credit of April 5, 1982; Date of Effectiveness: November 22. 1982: Closing Date: December 31. 1986. The project aims at increasing Rwanda's absorptive capacity, improving interministerial coordination in project preparation and monitoring, and strengthening the Ministry of Planning (MINIPLAN). The project credit agreement was signed April 5, 1982. The Project Economist to be assigned to the Programming Directorate in the MINIPLAN has been recruited and has been at his post since mid-June 1982.  ANNEX II - 31- Page 5 of 5 Credit 1250-RW Fifth Highway Project; US$25.9 Million Credit of June 1, 1982; Date of Effectiveness: December 8, 1982; Closing Date: December 31, 1986 The Credit became effective on December 8, 1982. Bidding on the project road is in progress. Credit 1263-RW Second Education Project; US$10.0 Million Credit of June 30, 1982; Date of Effectiveness: March 1, 1983; Closing Date: September 30, 1987 The Project Implementation Unit (PIU) is established and the architect for the PIU employed. A remaining condition of effectiveness is employment by the PIU of the project accountant. Effectiveness is set for March 1, 1983. Credit 1283-RW Phase II Bugesera Gisaka Migongo (Phase II) Project; US$16.3 Million Credit of September 28, 1982; Date of Effectiveness: April 1, 1983; Closing Date: December 31, 1988 Project start-up activities inluding the family planning component, are proceeding satisfactorily under the PPF advance. Effectiveness is scheduled for April 1, 1983. (  - 32 - ANNEX III RWANDA Supplementary Project Data Sheet WATER SUPPLY PROJECT I. Timetable of Key Events (a) Origin of Project: Bank/WHO Cooperative Program study of priorities in the sector. (b) Identification Mission: September 1979 (c) Appraisal Mission: May 1982 (d) Negotiations: February 25-March 1, 1983 (e) Planned Date of Effectiveness: September 1983 II. Special Implementation Action None. III. Special Conditions None. IV. Conditions of Effectiveness (a) The Subsidiary Loan Agreement will have been executed on behalf of the Borrower and Electrogaz (para. 44); and (b) The Association shall have received the report of the auditors on the financial statements of Electrogaz for the fiscal year ended December 31, 1981 (para. 41).  280 290 300 RWA N DA U G A N D A FIRST WATER SUPPLY PROJECT Mb.-e, Kampla/re PROJECT AREAS Kibungo Project Cities Main Roads . N~~ Rivers rx )ZRbno%/ International Boundaries X ,aW W 0 10 20 30 40 50 Km 0 A 20 30 L vu IGI ) X2.0, 's rsls --- e a a <4 W" >e~~~~~~~~~~~~~~~~~~~~~~Q~'2- 28' UGNA KENYA | r 0 _ K N y ,4 X A </~~ ~~ ~~~~~~~~~~~~~ ~ ~~~~~~~ cy 0 ,ooa 3 i ,,, \ 9?NIu Xf pWReTo Dar es 35l/oo BUR NDI Cyongugu - TANZANIA < ~~~~~Ocean N 0 ZAMBIA T B usas6o T of- th--0d Xe ,eades of the pon to td h d t sd i e bod-ite th- e -o this -ar dono - -ply, nlthe pais tt the Wocd Sank-ad it 7MOZAMBIQUE B U R U N D I a J |MALAWI To Bgui,mbura 30'