Statement by Lewis Holden at the meeting of November 30, 2000

86583 International Bank for Reconstruction and Development International Development Association International Finance Corporation Multilateral Investment Guarantee Agency FOR OFFICIAL USE ONLY CONFIDENTIAL EDS2000-402 November 29, 2000 05:18:08 PM Statement by Lewis Holden Date of Meeting: November 30, 2000 Burkina Faso: Country Assistance Strategy and Community-Based Rural Development Project Country Assistance Strategy I endorse this CAS which builds on and supports Burkina Faso’s Poverty Reduction Strategy. The CAS also appropriately reflects many of the issues raised in the recent CAE. Burkina Faso is a landlocked country with a high incidence of poverty. As the PRSP acknowledged, sustained economic growth is necessary to achieve lasting poverty reduction. The major impediments to growth include depleted social and human capital, weak physical infrastructure, high input costs, severely constrained institutional capacity, and a relatively closed economy exporting small amounts of raw materials and labour. The proposed programme as outlined in the CAS addresses these issues by supporting broad-based growth, improved financial management and more effective public spending, with particular emphasis on improving social services. I consider both the lending and non-lending programs appropriate. Poverty Reduction Strategy Credits make up approximately 30% of the proposed lending program. These credits, in particular, will need clear triggers, given the very low level of public service capacity. However, I am encouraged by the ongoing effort to improve service delivery and governance, including the use of PERs and the decentralization program. The CAS's emphasis on the need for improved donor coordination is also pleasing given that this has not been effective in the past. I look forward to AIDS Disaster Response Program and trust that it will specifically address the relatively high rate of HIV infection amongst Burkinabe women. Generic Issues This is only the second CAS to follow a country's PRSP. As such it provides useful insight into how we might refine our thinking about the relationships both between PRSPs and CASs and between the projections, benchmarks and indicators contained in each. Increasingly, and appropriately, CASs are seen as the Bank's strategy in support of the country's poverty strategy. Given this, it is important that the CAS is fully consistent with the PRSP. But a concern for consistency does not necessitate either uncritical adoption of PRSP projections, or a simple transfer of targets and benchmarks from one document to the other. From my perspective, this CAS has done a good job of balancing the Bank's assessment as to what is realistic with the rather ambitious goals articulated in the PRSP. The PRSP is predicated on high rates of economic growth and significant increases in government revenues. Sensibly, the CAS base case scenario is based on more modest levels of progress - Burkina Faso will not be penalised for its ambition. At the same time, the CAS allows for the possibility of higher growth rates if Burkina Faso is able to remove constraints to private sector development and accelerate the pace of the country's economic reform and regional integration. In such event the Bank stands ready to provide additional resources. However, I am less satisfied with the way in which the CAS has handled the delicate issue of reconciling PRSP objectives and targets with the lending scenario triggers outlined in Table 5 of the CAS. To my mind, the proposed set of core benchmarks for monitoring and evaluating the implementation of the CAS lack specificity, and instead rely too heavily on actions outlined in the PRSP. It is understandable that staff are concerned to avoid a sense that they are ignoring or deviating from the strategy as described in the PRSP, but there are risks the other way as well. Straight duplication of indicators is especially problematic when - as explicitly noted in the Burkina Faso Joint Staff Assessment - the PRSP consciously focuses on particular issues rather than addressing in depth all aspects of the Government's economic and social strategy. [The possibility that the CAS will sometimes address issues beyond those detailed in the PRSP is evident as well in the Tanzania PRSP where the JSA notes that the document "has focused on poverty-specific reforms" rather than emphasizing the broader macroeconomic and structural reform context.] There will also be cases where the PRSP indicators are insufficiently vague to serve as CAS triggers. For example, one trigger for the base case is "Enhanced external and internal competition through actions to liberalize utilities and reduce input and factor costs as outlined in the PRSP". Yet Burkina Faso's PRSP is not as detailed or specific here as it is in relation to the health and education sectors. It outlines what is necessary, without providing any timetable or monitorable indicators. Given the CAE's finding of disappointing progress in this area there would seem to be a compelling case for more robust and monitorable indicators here. Community-Based Rural Development Project I support the rural development project, which not only provides funding for demand-driven and community-managed rural infrastructure but also supports the ongoing decentralization process. This project combined with the Agricultural Service II and Private Irrigation operations should significantly enhance the rural sector and have a major impact on the poor. I encourage the Bank to be flexible in determining which projects qualify for assistance under the Local Investment Fund. A major objective of the project is to support the development of local institutions. Being overly prescriptive on what can or cannot be supported will only serve to discourage local communities.