Chad - An Economic and Financial Management Project

Document of The World Bank FOR OFFICIAL USE ONLY ca IY7 2- C-D Report No. P-4536-CD 9 MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 10.0 MILLION TO THE REPUBLIC OF CHAD FOR AN ECQNOMIC AND FINANCIAL MANAGEMENT PROJECT December 23, 1987 This document has a restricted disb on and may be used by recipients only in the perfonnance of eir official duties Its contents may not otherwise be disclosed wifthout World Bank authnorizaton.  Currency Uuiit - CFA Franc (CFAF) US$1.00 = CFAF 300 a/ WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS CAA Caisse Autonome d'Amortissements Debt Amortization Fund CEFOD Centre d'Etudes et de Formation pour le Developpement. Center for Development Research and Training COTONTCHAD Societe Cotonniare du Tchad Chadian Cotton Company EDF European Development Fund ENAM Ecole Nationale d'Administration et de la Magistrature National School for Administration and legal Training FAC Fonds d'Aide et de Coop4ration French Aid Agency MOCI Ministry of Commerce and Industry MOF Ministry of Finance tMP Ministry of Planning and Cooperation NGO Non-governmental organization OCAM Organisation pour la coop4ration Africaine et Malgache Organization for African and Malagasy Cooperation OMVSD Office de la Mise en Valeur de Sategui-Deressia Office for the Development of Sategui-Deressia SME Small and medium- sized enterprise FISCAL YEAR January I - December 31 a/ As of September 15, 1987.  FOR OMCAL USE ONLY CHAD ECONOMIC AND FINANCIAL MANAGEMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Government of the Republic of Chad Beneficiaries: Secretariat General of the Government, Ministrv of Planning and Cooperation, Ministry of Finance, Ministry of Commerce and Industry, Caisse Autonome d'Amortissements, Contr6le d'Etat, Ecole Nationale d'Administration et de la Magistrature, Centre d'Etudes et de Formation pour le D4veloppement. Amount: SDR 10.0 million (US$12.8 million equivalent) Terms: Standard, with 40 years maturity. Swiss Government grant of Swiss Francs 5 million (about US$3.0 million equivalent). Onlending Terms: Not applicable Financing Plan: Swiss Government US$ 3.0 million equivalent IDA US$ 12.8 million Chadian Government US$ 0.2 million TOTAL US$ 16.0 million Economic Rate of Return: Not applicable Staff Appraisal Report: Not applicable Map: IBRD 21014 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.  -34 4c  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF CHAD FOR AN ECONOMIC AND FINANCIAL MANAGEMENT PRCJECT 1. The following memorandum and recommendation on a proposed development credit to Chad for SDR 10.0 million (US$12.8 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms with 40 vears maturity and would help finance an economic and financial management project. The project would be cofinanced by the Swiss Government through a grant fcr Swiss Francs 5.0 million (US$ 3.0 million equivalent); this grant would be administered by IDA in accordance with a procedural arrangement dated April 9, 1987. 2. Background. With a per capita income of about US$160 in 1986, Chad is one of the world's poorest and least developed countries. In recent years, economic and social progress was significantly disrupted bv war, a severe drought, and a drop in the world price for cotton, Chad's main source of foreign exchange. Except for cotton, these problems are now past, and the Government has launched a successful program of national reconciliation. It has moved from ad hoc emergency operations to longer term development. It has made significant progress in rebuilding the country, while maintaining a basic policy of minimum intervention in the economy. Still, an absence of up-to-date data on population and other areas hinders planning. Resouree mobilization is a high priority, but little detailed information is available on the tax system as a wnole and on the impact of the various taxes on the economy. 3. The Government recognizes the need to develop a stronger and broader capability for economic and financial management at the national and sectoral levels in order to promote growth, derive the most benefit from its resources, and program its investments effectively. As first priority, it sees a need to expand on or initiate new efforts to upgrade the operations of the following organizations: the Ministry of Planning and Cooperation, the Ministry of Finance, the Ministry of Commerce and Industry, the Caisse Autonome d'Amortissements (CAA), the Controle d'Etat, the Ecole Nationale d'Administration et de la Magistrature (ENAI), the Centre d'Etudes et de Formation pour le Developpement (CEFOD), and certain parapublic enterprises. Many of these organizations are constrained by an absence of sufficient skilled staff, others are severely hampered by inadequate office space and equipment. The Government is small in size, but is likely to grow. It is important to review the organization of the Ministries of Planning and Cooperation and of Finance, at this stage, so as to prevent their administrations from becoming overly large and organizationally complex as a result of ad hoc expansion. 4. Rationale for IDA Involvement. The proposed project would further the Bank's current development strategy for Chad which, in keeping with the Government's Interim Development Plan and priority objectives, emphasizes institution-building and aid coordination. This strategy  -2- includes the strengthening of the Government's administrative, economic and financial management, as well as policy analysis capabilities. 5. Project Objectives. The objective of the proposed project is to strengthen the Government's overall capacity to define and implement its developmeut program, to carry out effective economic and financial management, to monitor economic performance and to improve the collection of revenues. More specifically, the project will help the Government to: (i) in key areas of economic and financial management, implement the policies and action programs outlined in the Policy Framework Paper (PFP) which was appro'red by the IMF and the World Bank in 1987, and in the proposed Financial Rehabilitation Credit (FRC); (ii) work with the IMF to improve the collection of revenues; (iii) supplement the work on economic and financial management being supported by other donors; (iv) support training in areas that constrain the management of economic development and Government operations; (v) re-establish the statistical data base; and (vi) provide physical facilities and equipment so as to permit the resumption of normal Government operations. The Ministries of Planning and Cooperation, and of Finance will be the principal beneficiaries, along with the Ministry of Commerce, the Controle d'Etat, CAA, ENAM, CEFOD and 16 Government-supported enterprises. 6. Project Description. The project will have four components: (i) a technical assistance fund for short-term studies and consultancies and for urgently needed equipment. Activities that the Government plans to propose to IDA for approval from the fund are: diagnostic studies of 16 Government-supported enterprises; strengthening of the capability of the technical Ministries to carry out feasibility studies for proposed investments; strengthening of fiscal administration; compilation of a national collection of legal and economic documentation; and a comprehensive study of the system of public administration; (ii) construction of two modest office buildings to house the staff of the Ministries of Planning and Cooperation and of Finance, and procurement of basic equipment and furnishings; (iii) training, both short and long-term, in critical areas related to economic and financial management; and (iv) a cost-effective sample population survey that will yield basic demographic data essential for economic planning as well as the sample base for surveys measuring the impact of the adjustment program on households and for health and education surveys. 7. The prolect, to be carried out over six years, provides funds for civil works; vehicles, furniture and equipment; training; technical assistance and studies; and operating costs on a decreasing basis. The total cost of the project is estimated at US$16.0 million equivalent, with a foreign exchange component of US$13.4 million (84%). A breakdown of the costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Chad are given in Schedules C and D, respectivelv. A map is also attached. Since there is no separate Staff  -3- Appraisal Report, more detailed information on the proposed project is provided in Annex I. 8. Agreed Actions. The Government has agreed on the following actions. As conditions of project effectiveness, it will: (i) set up a Higher Committee to manage the technical assistance fund and large components of the project, with assigned responsibilities acceptable to IDA, and to superv