Senegal - Irrigation Engineering Credit Project

, CIRCULATING CGPY FILE COPY Fl~~~~~~~~~T LE RE CORNPYT REPRTS DESK DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Rbport No. P-1576a-SE REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON,A PROPOSED CREDIT TO THE REPUBLIC OF SENEGAL FOR AN IRRIGATION ENGINEERING CREDIT April 17, 1975 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Gioup authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS Currency Unit - CFA Franc (CFAF) EXCHANGE RATES Currency Unit Official Floating (as of December 31. 1974) US$1 CFAF 230.21 CFAF 225.0o CFAF 1,000 US$4.20 US$4.hh CFAF 1,000,000 US$4,200 us$.h44 The CFA Franc is officially valued at the equivalent of FF 0.02. As the French franc is now floating relative to the US dollar, the US dollar/ CFAF exchange rate is subject to change. The exchange rate on December 31, 1974 of US$1 - CFAF 225 was retained for conversions made in this report. FISCAL YFAR July 1 - June 30  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF SENEGAL FOR AN IRRIGATION ENGINEERING PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Senegal for the equivalent of US$1.0 million to help finance an irrigation engineering project. The credit would have a term of ten years, including two years of grace, with a service charge of 3/4 of one percent per annum. The credit would be refinanced under any later loan or credit that the Bank Group might make for the irrigation pro- ject itself. PART I: THE ECONOMY 2. A report entitled "The Economy of Senegal" (212-SE) was distributed to the Executive Directors on September 10, 1973. Country data appear in Annex I. Past Development 3. During the 1960s, the Senegalese economy experienced virtual stagna- tion, as real output increased less rapidly than population, and per capita GNP declined. Two factors were responsible for this situation. First, with independence, Senegal lost its privileged position as the center of French West Africa and therefore had to adjust to reduced economic, administrative, and political dimensions. Secondly, the difficulties of adaptation to the new situation were compounded in the latter part of the decade when ground- nut production fell by 50 percent due to unfavorable weather and falling export prices. In 1971, a combination of several favorable factors includ- ing the recovery of weather conditions, increased incentives for rural pro- duction, promising results of rural diversification, and a successful drive to promote industrial exports seemed to mark the beginning of a period of considerably higher growth. As it turned out, the economic upturn was brief as 1972 brought the Sahel's most severe drought in this century. 4. In 1972, agricultural and livestock production fell by more than 25 percent, setting back the standard of living of the rural population (representing 70 percent of the total) below the level reached in the early 1960s. Food emergency operations helped avoid widespread starvation, but notwithstanding this aid both the fiscal and balance of payments situations sharply deteriorated in 1973 and early 1974.  - 2 - 5. During 1973, the balance of payments situation was characterized by substantial reserve losses. At the end of the year, net reserves stood at minus US$28 million, the lowest level since independence. The main under- lying factors in 1973 were a sharp drop in groundnut production and exports and a continued increase in imports, mainly of foodstuffs. Even unusually high aid inflows, including substantial food aid, were not sufficient to fin- ance the deteriorating trade balance. In 1974, both imports and exports in- creased markedly, by an estimated 37 and 57 percent respectively, following rapidly rising prices and slightly higher quantities of Senegal's major exports (groundnuts, phosphate and petroleum products) and imports (food, petroleum and general imports). The more rapid climb in exports resulted in a nar- rowing of the goods and non-factor services deficit from an all-time high of US$88 million in 1973 to an estimated US$50 million in 1974, still a high figure for Senegal. With the help of a US$18 million drawing under the IMF oil facility, the net reserve position of Senegal is expected to have remained unchanged in 1974. 6. During 1972 and 1973, under the impact of the drought public fin- ances also took a serious turn for the worse. Public savings net of amortiza- tion, whiclh had substantially improved during the preceding years, were all but wiped out in 1972/73 and 1973/74 as revenues were affected by the decline in economic activity and recurrent expenditures were further increased by the consequences of the drought. Thus, at mid-1974 and in spite of a 70 percent increase in groundnut export prices, a large part of which was transferred to the Stabilization Fund, the public finance situation was more difficult than it had been since 1960. A marked increase in salaries to compensate for the rapidly increasing cost of living, substantially higher debt service payments and perhaps most importantly, heavy consumer subsidies which resulted from maintaining low domestic prices in the face of sky rocketing food import prices, were mainly responsible for this situation. Prospects 7. Weather conditions will remain critical to Senegal's growth pros- pects. But with the rapid development of irrigated agriculture which started in the 1960s, the agricultural development of areas less affected by rainfall fluctuations (Casamance, Eastern Senegal) and substantial gains in industry, tourism and fisheries, by 1980 weather conditions should be a less decisive factor than today. The Fourth Development Plan (1973/74-1976/77) continues to give highest priority to rural development (36 percent of the total), housing! public utilities (18 percent) and transport infrastructure (16 per- cent). Industry and tourism, quite justifiably, see their share increase from 5 to 10 percent of the total. Assuming average rainfall conditions, Senegal's growth in real terms in the remainder of the 1970s will be of the order of 4.5 percent or about 2 percent per capita, which is still a consid- erable improvement over the past decade. 8. The balance of payments will continue to be under pressure during 1975, and will remain weak in the medium term. In 1975, the effects of the good 1974/75 harvest will be largely offset by the expected deterioration in the terms of trade. For the period 1976-78, it is estimated that the terms of trade index for Senegal will continue to fall, mainly as a result of an  -3- expected drop in groundnut oil and phosphate prices of about 20 and 30 percent respectively between 1975 and 1977. Therefore, as no major increase in the export volume is anticipated, Senegal's exports are expected to stagnate in the coming years. After 1978, a new phosphate mine is expected to come into production, while phosphate prices are expected to resume their upward trend. These prospects combined with a more favorable long-term outlook for ground- nut production could result in a healthier balance of payments position towards the end of the seventies. 9. Faced with the difficult situation in public finance, the Government took a number of steps in November 1974 which are expected to put public finances on a sounder footing. Consumer prices for rice, sugar, and groundnut oil were raised to bring them more closely in line with world market prices. Thus, the rice subsidy was completely eliminated (an increase of 70 percent in the consumer price), the price of sugar was increased by 90 percent (leav- ing a subsidy of about 20 percent) and that of groundnut oil was raised by 43 percent (leaving a subsidy of about 20 percent). The remaining subsidies are to be eliminated at a later date. At the same time, producer prices for groundnuts, rice, and cotton were increased substantially (40 percent for groundnuts, 35 percent for cotton and 20 percent for rice) to stimulate production and offset the effects of accelerating inflation. Also, Govern- ment salaries were raised by 16 percent on the average, but ranging from 60 percent for the lower salaries, to 3 percent for the higher salaries, to compensate for the rapid increase in basic commodity prices. In addition, following the five-fold increase in world market phosphate prices and the revision of the tax agreement between the Government and the major phosphate mining company in the country, Government revenues from this sector will be considerably increased in the coming years, while the good 1974/75 harvest will improve the Government revenue picture further during FY76. These developments are expected to raise net public savings after debt service to about $14 million and $45 million in FY75 and 76. 10. During FY75 the increased domestic resources available to finance public investment will be mostly absorbed by debt service and payments for the Government's purchase of a 50 percent interest in the phosphate mining enterprise, which is the main source of this additional income. In the following years through 1980, projected trends in revenue and expenditure would permit the generation of investable surpluses (after foreign debt ser- vice) equivalent to 20-25 percent of public investment, assuming the public development program grows at about the same real rate as the overall economy. Yet, there is considerable scope to expand the development effort and to raise the share of public investment above its historically low level of 5-6 per- cent of GDP. Moreover, while the improvement in domestic resource mobilization will ease the balance of payments situation - particularly import demand - moderately, it will not be enough to restore overall equilibrium in the medium-term. Given our assumptions on gross capital inflows, an annual over- all gap of $25 to $30 million will emerge in the years 1976/77. Part of this could probably be financed through access to the IMF facilities including the second oil facility. However, additional foreign exchange resources will still be needed and in order to accomplish the needed resource transfer,  - 4 - external lenders should be prepared to finance not only all foreign exchange costs but also a high proportion of local costs in priority projects having a low foreign exchange component. Creditworthiness 11. The terms of foreign aid to Senegal have been progressively harden- ing over the years. The proportion of grant aid declined from 85 percent in the mid-sixties to 50 percent in FY72. Faced with a severe shortage of public savings, the Government borrowed heavily on the Eurodollar market in the past two years, in order to avoid a slowdown in public investments and to finance acquisitions and participations by the public sector. Starting in FY74, this led to a substantial increase in the public debt service which is expected to absorb about 60 percent of public savings in FY75. This ratio should decrease again in the coming years, following the marked improvement expected in the public finance situation. Senegal's external debt service is still very low, at about 5-6 percent of export revenues, but because of low foreign exchange reserves and heavy dependence on one crop, Senegal should exercise great care in its public debt management. PART II: BANK GROUP OPERATIONS IN SENEGAL 12. The Bank Group has had 20 operations in Senegal to date. Total lending amounts to US$99 million (net of cancellations), including twelve IDA credits, four Bank loans, one blend of Bank and IDA funds, two IFC opera- tions, and one blend of Bank and IFC funds. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of February 28, 1975 and notes on the execution of ongoing projects. 13. Execution of these projects, apart from the Railway Project and the Site and Services Project, is moving forward without undue delays. The procurement for the railway has been slow due to time consuming contract approval procedures, but most project components have now been received or ordered. The railway's operating and financial deterioration has been stopped and measures taken by Government have resulted in a slight improvement. The Site and Services Project is about one year behind schedule, although physical execution is now progressing satisfactorily. Terracing of the first sub-site for Dakar was finished in November 1974 with an unexpected cost saving. However, the Bank Group and Senegal will hold discussions in the near future on delays in reorganizing the executing agency, Office des Habitations a Loyer Modere (OHLM), and in implementing Government's commitment to reorient its housing policy in favor of lower income groups. Some of the agricultural projects, such as the Terres Neuves Project and the Casamance Rice Project, were hampered by delays in receiving the Government's counterpart contribu- tion; however, owing to efforts of the project authorities, physical implemen- tation of these projects is proceeding generally according to schedule. The two agricultural credits (140-SE and 404-SE) also provided for technical assis- tance for the reorganization of ONCAD; this activity has been unsuccessful and the Government and IDA are examining steps to remedy the situation.  -5- 14. In view of Senegal's need for substantially higher capital inflows, the scale of Bank Group lending is expected to increase significantly in the future. The Bank Group share of foreign aid disbursements is expected to increase from 10 percent in 1969-71 to 33 percent over the 1973-80 period when the Bank Group is likely to be the largest aid donor. This will lead to a share of about 24 percent of the outstanding and disbursed debt by 1980. IBRD/IDA accounted for about 2.2 percent of total public debt service payments in 1973. This ratio is expected to increase slowly in the coming years to reach about 13 percent by 1980. 15. The objectives of Bank Group project lending in Senegal fall under four main headings. Top priority will continue to be rural development, in- cluding development of irrigation in the Senegal River Valley and in the Casamance region (e.g., the Debi-Lampsar engineering credit and a proposed second stage of Credit 252-SE), intensification of groundnut production and diversification into new crops and new regions (e.g., the proposed Sine Saloum and Livestock Projects). As in the past, our agricultural lending is expected to exceed one-third of the total. Secondly, we shall assist diversification of the economy by lending for the growing sectors of tourism and industry (e.g., the proposed tourism infrastructure project on the Petite Cote and a possible Ship Repair Project, based on studies financed under Loan S-3SE). Thirdly we shall continue investment for modernizing and expand- ing the country's infrastructure (e.g., two proposed highway projects and a proposed fishing wharf at Dakar Port). Finally we shall continue lending to reorient and expand the country's education system, as in the Second Education Project. PART III - THE AGRICULTURAL SECTOR 16. Agriculture plays a central role in Senegal's economy, employing over 70 percent of the total labor force. Although. it contributed only 38 percent of GDP in 1974, the sector's leverage on the economy is and will remain considerable through its impact on exports and its purchasing power for locally-produced goods and services. Groundnuts and millet are the country's main agricultural products, and groundnuts are the country's princi- pal export. During the last four years groundnuts have comprised between 35 and 55 percent of total exports and generated about 60 percent of value-added in the agricultural sector. Millet continues to be the staple food grain although rice and wheat consumption are increasing rapidly, particularly in urban areas. Since 1968 Senegal has suffered from a series of severe droughts and in 1968, 1970 and 1972 abnormally large food imports were needed to meet demand. The 1972 drought was the worst and during it agricultural and live- stock production fell by more than 25 percent. Weather has been better in the last two years, but even in years of normal rainfall, domestic agricultural production meets only about 60 percent of the country's food requirements, and food imports absorb 15-20 percent of total export earnings. This situation is due to the extreme variability of rainfall in Senegal, where not only sharp annual variations in total rainfall occur, but where there is wide variation between years in the distribution pattern of rainfall.  - 6 - 17. Small-scale rainfed farming accounts for 95 percent of production, and there is a limited though growing amount of irrigated development in the Delta of the Senegal River and in the Casamance Region. Commercial farming is restricted to a few vegetable-growing operations and a large sugar cane plantation in the Delta. The small farm sector consists of about 360,000 farms most of which range in size from 3 to 10 hectares and there are practically no landless agricultural laborers. The cropping pattern is very similar throughout the country with millet/sorghum and groundnuts each occupying about half of the cropped area. Simple animal-drawn equipment is widely used and there is virtually no mechanized farming. Per capita annual incomes from agriculture average about US$85, less than 1/3 of the nationa]. average. Rural incomes are significantly lower in the undeveloped areas of the Senegal River Valley, the northern area of the Groundnut Basin and in the relatively undeveloped area of eastern Senegal. The use of improved seeds, fertilizers and pesticides is slowly expanding assisted by government subsidies, but despite this, production remains low because of poor soils anid erratic rainfall and the country is increasingly unable to feed its growing urban population. Imports of cereals have amounted to 400,000 - 440,000 tons in recent years, of which 150,000 to 200,000 tons have been rice. 18. Population densities and agricultural development potentials differ between regions. The bulk of the rural population is concentrated within about 100 miles of Dakar in the heavily populated Groundnut Basin where population densities vary from 20 to 80/km2. In this area the combination of population pressure, poor soils, and low rainfall makes the potential for increasing production and incomes very limited. The potential for increasing and diver- sifying crop production is greater to the south and southeast where rainfall is better, and population density is lower. Even in these areas, however, soils are generally shallow and poor and in some areas river blindness is a problem. In the north and east of the country, climatic conditions are suit- able only for extensive livestock production. The Senegal River Valley has a great potential for irrigation development, but requires the construction of major infrastructure to regulate the river. 19. In the years immediately following Independence, Government assigned low priority to the agriculture sector in allocating public investment and recurrent expenditures. Since then, however, increasing priority has been given to agriculture. Thus while only 4-6 percent of the current budget now goes to agriculture, the sector's share of the investment budget has increased steadily and currently amounts to between 20 and 25 percent. In November 1974 Government raised the producer prices for groundnuts (by 40 percent), millet and sorghum (7 percent) and rice (20 percent) as incentives to their in- creased production. The consumer subsidy on rice (which cost the Government about US$30 million in 1973/74) was abolished at the same time. These actions illustrate Government's determination to increase domestic production and reduce reliance on imports of food. 20. Two Bank Group projects (140-SE, 404-SE) have provided medium-term credit through the National Development Bank of Senegal to help farmers pur- chase draft animals, animal-drawn equipment and fertilizer. In 1974 the Bank  -7- appraised a project in the more fertile southern part of the Groundnut Basin that would involve crop diversification and the introduction of improved cul- tivation techniques. The Terres Neuves Project (254-SE) was a pilot scheme to test the most effective methods of settling farmers in the southeast of the country where climatic conditions are more favorable than in the Groundnut Basin. A second project was appraised in 1974 that will build on the expe- rience gained during implementation of the first project. A Livestock Project has been prepared with UNDP assistance for Bank Group consideration in the Eastern Region and is expected to be appraised in 1975. 21. The Casamance Project (252-SE) is improving extension and credit services to 5,000 farmers in order to expand rice cultivation by 12,000 ha. Government has indicated its desire to expand the scope of this successful project and a follow-up project will be appraised late this year. The Bank Group has also assisted the private sector by financing through IFC a ferti- lizer factory (SIES), and a small irrigated truck farmer operation producing vegetables for the export market (BUD Senegal). 22. A Bank Group sector mission visited Senegal in 1974 to assist Govern- ment in assessing the relative merits of its various agricultural development options. One of the mission's conclusions was that by adopting currently available technology and improving pricing policies, incomes from rainfed farming can be increased by about 30 percent on the average, but that even with this increase, farm incomes and standards of living will remain low by any criteria and that population growth will rapidly absorb such incremental benefits. The mission pointed out that scope for significant increases in productivity and for developing a small farm structure capable of generating acceptable incomes existed through harnessing the country's water resources, primarily the Senegal River Valley, but also those of the Casamance region. The River Polders Project (Credit 350-SE) and other similar projects financed by other donors have demonstrated the viability of large-scale irrigation on the Senegal River and this type of development has been given highest priority by Government. Irrigation in the Senegal River Valley 23. Regulation of the Senegal River in order to permit irrigated development is an objective sought jointly by Senegal, Mauritania and Mali which have set up the Organization for the Development of the Senegal River Basin (OMVS) to pursue this goal. OMVS, helped by UNDP, has prepared an ambitious, long-range development program that ultimately would permit develop- ment of year-round irrigation on 430,000 ha along the river of which about 220,000 ha would be in Senegal. The program provides also for power genera- tion and the improvement of navigation on the river. Two potential regulatory dams have been studied by OMVS: a large multipurpose dam at Manantali on the Bafing, a tributary of the Senegal River, in Mali; and a much smaller dam at Diama near the mouth of the Senegal River (estimated to cost US$40 million at 1974 prices). The latter dam would prevent salt water intrusion from the sea  - 8 - at low river flows, and provide sufficient water storage to irrigate about 30,000 ha in Senegal and Mauritania. Most of these 30,000 ha are already equipped for single-crop irrigation and can be converted relatively quickly and cheaply for double-cropping. 24. Since July 1974, the Bank has been actively involved with other donors in assessing the merits and feasibility of the OMVS program. At this stage, subject to the results of detailed feasibility studies for each of the various components, the Bank's position is that while hydro-power and naviga- tion aspects may be important potentially, their value at this time cannot readily be assessed, and for this reason the economic justification of the program should and could rest basically upon agricultural development. Given this situation, early construction of the Diama Dam appears justified. Fonds d'Aide et de Cooperation of France (FAC) is financing the engineering studies for Diama, and France and several other donors including the Bank Group have indicated they would be prepared to finance its construction. The irrigated development at Debi-Lampsar, involving 5,000 ha for double-cropping that would be the subject of the engineering studies which comprise this project, would be a substantial part of the area that would be served by Diama, and would be constructed to make use of the Diama reservoir potential as soon as it becomes operational, as now planned, in about 1980. In March 1975 the People's Republic of China completed a master plan for the Manantali dam which was approved by OMVS's Council of Ministers. PART IV: THE PROJECT 25. The proposed engineering project was appraised in December 1974 by a mission composed of Messrs. A. Meimaris, J.C. Brown and J. Pelissier (IDA). Negotiations were held in Dakar, Senegal on March 24 and 25, 1975. The Senegalese delegation at these negotiations was led by Mr. Madieng Diakhate, Director of the Cabinet in the Ministry of Plan and Cooperation. A credit and project summary is attached as Annex III. There is no separate appraisal report for this project. 26. The Senegal River Polders Project. In 1973, IDA approved a credit (350-SE) of US$4.5 million to assist the Government of Senegal with the development of irrigation in the Senegal River Delta. The US$7.4 million project consisted of: (i) developing a new polder with full water control permitting double-cropping on 2,730 ha in the Dagana area; (ii) improving flood irrigation for single-cropping over 1,780 ha in the Debi and Lampsar polders; and (iii) strengthening the project authority, Societe d'Amenagement et d'Exploitation des Terres du Delta (SAED) with extension staff, training facilities, equipment and agricultural research. Dagana polder, following completion of construction design, was expanded with IDA agreement to 3,200 ha. However, in July 1974 Government requested the Association to reformulate the overall project because (i) inflation and exchange rate changes had increased costs of the Dagana polder sub-project alone to US$8.7 million, and (ii) the water storage of the proposed Diama Dam, which is now likely to be in opera- tion by 1980, would allow Debi and Lampsar to be used for double-cropping.  -9- The Association subsequently approved the reallocation of the entire River Polders Credit to the Dagana polder (IDA/R74-88 of October 10, 1974). 27. The Reformulated Debi-Lampsar Development Scheme. The reformulated scheme entails a change from developing a single-crop controlled flooding system to developing fully controlled irrigation with double-cropping. The reformulated scheme would consist of irrigation and drainage networks to serve about 5,000 ha of which: (i) 1,500 ha in Debi for double-cropping of rice and wheat; (ii) 2,500 ha in Lampsar for double-cropping of rice, wheat and toma- toes; and (iii) 1,000 ha in Diagambal near Lampsar for year-round sprinkler irrigation of high value crops (mainly tomatoes and onions). The water supply for Debi would be secured by pumping from the Senegal River, with dry season cropping possible only after the Diama Dam becomes operational. The Lampsar- Diagambal system would be served by the Ronq pumping station already operating on the Senegal River which now provides water for single-cropping and for the city of St. Louis. Hydraulic calculations to be firmed up at the final design stage show that the present and future requirements of St. Louis would not affect water availability for the project. In the event that Diama or some other regulatory structure were not built, only half of Diagambal would be developed and the cropping pattern for Lampsar would be modified to achieve double-cropping over only 50 percent of the area. 28. A preliminary feasibility study has shown that the total cost net of taxes (December 1974 prices) for development of the reformulated Debi- Lampsar project would be about US$12 million of which US$10 million would be for civil works and US$2 million for equipment, management, and operating costs during the construction period. Likely price increases during the con- struction period (FY77/78) are estimated at about US$5.5 million, bringing the total cost including engineering, to about US$18.5 million. Given the uncertainty attached to these preliminary cost estimates and current high rates of inflation, it was considered desirable that the Bank's appraisal of the Debi-Lampsar scheme should be undertaken only after completion of final engineering studies and the evaluation of bids for civil works construction such as would be financed under the proposed engineering credit. 29. The water supply for Debi-Lampsar development would be taken from international waters of the Senegal River and its tributaries, and the imple- mentation of any works substantially affecting the river requires the mutual agreement of Senegal, Mali and Mauritania. OMVS is in the process of estab- lishing a commission representing the three riparian states to deal with water use. An agreement on water rights for Debi-Lampsar would be a condition for appraising the eventual construction project. The Engineering Project 30. The Engineering Project would be carried out by SAED which, with the assistance of consultants, would: a. conduct topographic surveys and soil surveys; b. prepare final designs and tender documents for the irriga- tion development of 5,000 ha;  - 10 - c. prepare technical schedules, including cost estimates, for the operation and maintenance of the proposed irrigation and drainage networks with special attention to water distribution, and staff requirements and training; d. issue tender documents, evaluate bids and award contracts; e. study the impact of the proposed irrigated development on health conditions; f. study and prepare the relocation of Debi village; and g. study SAED's short and medium-term operations and organization needs. 31. Execution and Timing. SAED would carry out with its own services the topographic and soil surveys and the study of the relocation of Debi village. SAED has the necessary expertise, local and expatriate, to carry out these assignments. As the French consulting firm SCET International has satisfactorily carried out the engineering studies financed under Credit 350-SE, and has completed a preliminary feasibility study for the Lampsar irrigation development, Government has proposed that this firm be commissioned to assist SAED in carrying out the engineering and organization studies. It is proposed that the Government's choice be accepted by IDA. Government has also decided to engage the services of the Rumford Laboratories, a US consulting firm, for the health impact studies. This firm has satisfactorily conducted health studies as part of the Mauritania Gorgol Irrigation Engineer- ing Project (S16-MAU). Draft contracts have been drawn up between Government and SCET, and between Government and Rumford Laboratories which are acceptable to the Association. Both firms initiated work on the project when they were notified that Government had been invited to negotiate the credit. 32. It is estimated that the Debi-Lampsar engineering project including the consultants' assignment would be completed in 21 months (Annex IV). SAED has already begun carrying out topographic and soil studies. Design work by SCET would start immediately upon completion of the topographic survey by SAED. The design work would be carried out separately for Debi, Diagambal, and the two portions of the Lampsar polder, 1,500 and 1,000 ha respectively, which would be developed as individual sections. This would enable the issue of separate bid documents for each component of the project with a view to proceeding with implementation of Debi as soon as possible. Bid invitation through international competitive bidding in accordance with Bank Group guide- lines for Debi would be issued in March 1976 and bid evaluation could be completed by June 1976. This would give sufficient price information for the appraisal of the entire development project in the second half of 1976. 33. Cost Estimates and Financing. Total cost of the engineering pro- ject, net of taxes, is estimated at US$1.25 million with a foreign exchange component of US$1.0 million (80 percent). These estimates are based on quotations for the engineering and health study contracts, and quotations by SAED on the topographic and soil surveys and the study on village resettlement,  and include an allowance of 20 percent for physical and price contingencies. Detailed cost estimates are presented in Annex III. The proposed IDA credit of US$1.0 million would finance the foreign exchange costs of the project or 80 percent of total project costs, net of taxes. The credit would finance retroactively up to US$200,000 for expenditures incurred after January 31, 1975 on all items. 34. Disbursement. The credit would be disbursed against 100 percent of foreign expenditures for the engineering, health and organization studies, and 25 percent of total expenditures for topographic and soil surveys and the studies for village relocation representing the estimated foreign exchange component. 35. Benefits and Justification. Preliminary estimates indicate a satisfactory internal economic return of about 16 percent from a program of constructing the Diama Dam and developing the 30,000 ha of double-cropping irrigation that it would serve. The Debi-Lampsar project would represent one-sixth of the area to be developed for double-cropping. In the calcula- tion of the economic rate of return for the overall irrigation program associated with Diama it is assumed that Diama would become operational by 1980, and that double-cropping would be extended to the whole 30,000 ha commanded by the dam by 1985. Such a timetable is realistic since some 20,000 ha of the 30,000 ha are already operational under single-cropping systems which require relatively small investments to convert them for double- cropping. Sensitivity tests indicate that if investment and recurrent costs rise by 20 percent respectively, the internal economic return from the Diama program would be about 14 percent. 36. More specifically, the 5,000 ha of land to be developed under the Debi-Lampsar project would produce by about 1982 some 15,000 tons of paddy rice, 13,000 tons of wheat and other cereals, 30,000 tons of tomatoes (to be processed in a paste factory scheduled to be built by Government in the Delta area by 1977), and 7,000 tons of onions annually. Production projections are based on yields already obtained by farmers in the vicinity of the project area. The project would thus substantially contribute to a reduction of imports of grain and would eliminate the country's reliance on imports of tomato paste that now average some 10,000 tons annually. In the unlikely event that Diama is not built, only 1,750 ha of the project would be double- cropped and the remainder would be operated under a single-cropping system. Under such conditions the economic rates of return for the project would be 12 percent for Debi (single-cropping) and 14 percent for Lampsar-Diagambal (single and partly double-cropping). 37. Development of Debi-Lampsar would substantially raise the incomes of about 2,000 families with a total of some 20,000 persons who presently live at barely subsistence levels. The people of the Senegal Delta are among the lowest income segments in the country, and have been hit hardest by the recent droughts, when crop production outside the few irrigated schemes was reduced to practically nothing and substantial quantities of food had to be imported.  - 12 - PART V: LEGAL INSTRUMENTS AND AUTHORITY 38. The draft Development Credit Agreement between the Republic of Senegal and the Association, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association and the text of a draft Resolution approving the proposed Development Credit are being distributed to the Executive Directors separately. 39. The draft Development Credit Agreement provides that the effective- ness of the Development Credit is conditional upon the signing of a subsidiary loan agreement between Government and SAED and upon the signing of the con- tracts for the engineering, health and organization studies between SAED and the consultants. 40. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI: RECOMMENDATION 41. I recommend that the Executive Directors of the Association approve the proposed credit. Robert S. McNamara President Attachments W4ashington, D.C. April 17, 1975  ANNEX I PW 1 of 3 Poe mm an - ~ ~ mmo 196,192 km2 l.0 - 511w (mid-1972) -- Pm fd sarabl Lo e m nincaaa m)a .- 2~~~~~~~~~~~~~0La 3n~~~LiL SILtP MYL craf aba ub F pe r t= . 17 L 22 18( 23 7E lb Meet VIrtal11y rate (Par thmd flee births) .. 16L.iIl72 1016 Uife ~etaaeiy atbit (Years) 3 'a11/ '/b L27S 56 PbPlatu. gratb rae" - a . . age stretwe (w-scos) tfb yratto & . 1.1U' 6. - Th1. Orhee Ppeulation as percent of total 23 a 2 9 a/ 32 28 AI 61 Peellj plannigu N- of ecmptaore leflee (tbs.) .. ..f ..- 108 Nc. of seers ( of settled ). ..2 12 fern. (tisnauds) 1, CID Ig 1,600 /r.t 3,5w 0 2,i90) 1,500 ina e wined in agriwultore .. 73 55 ~C 18 5 NTOint.e .MWIoyd .7 9y Percent a'eor A iboicei reomind bjy b14.eat 5% -.30 Pbrat orf eatlal ionm re aed by highet 20% 6. 5.3. 9Obroart of national 1mm remives by loast 20 .. Percait of na mioa incone receved by loast 4 10 1 EKIniam Or LMn2oar SoeMed byp WIR fon . ... 53 /x I wdby emelIat l0E of ae .. .- ... O 7i ~ieUe per Ibjecia 20,000 IL 1.6,94.0 12,950 /4 1-2,1kG 5,950 Nmabpeer aarif Person . 2.41.10mc 1,70T 2,480/a 730 /a. fltpoletlcer t oqtal bad 760 Z5 ai 730 Lc 760 - 680 Zw 410 Em Per clLt. cdalrie smpp1 - % of reqaiemmt / 96/ad 86 /ues lU/ed 1./e htr capta protein sPP0., tota (grau par dayT& . 617 4.37w 59 72 63 7 Or ideb, eatd ad pe1las 28 62 ZEE 18 72 147 Deaah rate i-. pears /7 .... ..- 1.5 M.L Da3Z;d/ rnysho enrollmenl t ratio .. 3b/op 89 ?7 107 /e Ad_t~ !secoda 1 sholserollsoat ratio . i 725 laS 1-1 20The Teez or 1hoolreprovded,VLrm an secnd 1,3 is I5 1) 13 vocaticewalnrllomet as % of sec. oceoml mmorllmot 7 If 23 7 3. /e halat liteC7rac ate .. 10 7Maa .. 20 I. !9 55 AU h No. of perseme per ran (crbe.) 1.0 [.6 hlreattof occupied wdo its otut Piped sts,te 12 /i Aocoes e t lectricity (as % of total popalation) 96 17 . 241&. t PercenL of ftoal popultiton connctad to electricity*. .. - Rado P 100 Population 1.7 69 78 17 /c 77 Peaosqr caeP.r low pepe3atims i14 i 1 13 Electri p-esr -oc.equtbo (whe P...), 84. 321. 120 7 155 Newspint eoouc.spiio p.c. kg per year 0.06 0.08 0.1 - 0.2 0.1 Notee uFlguna ri,'r either to the latest periodo or to s0owut of asiioinwanal Unwaritere, boy a. t, 4 the latest yua-. Latast period. refer in Principle t. ~ dietr~ibotla. by A"e and aun of atlmal PopalatQM6. th. year 1956-60 or 1966-70; the latest year l.a pri.- &6 proten etwLarde (rgtEwdrnte) for all nouners aa etah- ciple to 1960 -nd 1970. Ithed by USDA Kosaceic Rlacao S.r-in Pro-Ide for a ail-i It The Per Cupita GNP eotiate is at earket prices for allcwance of 60 pea of totel protein per day, aol 20 pra.! yveru oth'.r then 1 ,calculsotd by the nse conersion Sd.nl aid pualse protein, of "hid.h 10 gre. Chould to steel techniquer as the i972 Wdrid beak Atlos. protein. These atandarda are emusurt ices thn tbme of 75 12 A-eag nuoere of daa$hters per mu of reproductive gro of total prtotin and 23 psr- of -animl protein as an aCge . avrag for~ the wol,propoed by FAD In the Third trld Food 'a ftpuflntto. growth retr are fur the decades ending in Survey.ofedw ildo end 197o. /7 oas etoies base eggeatad that crude death rate f hlde & Ratio of uader 15 and 65 end -e age brecketo to ages I throgh 1. aj to -ad a. a first approaleation inadex of thoe-1 I~ lbor f-rc bracket Of ages 15 thacugh 66,. selnutrition. PAID2 referesc stomdauri repreost ptWelologtca1 -. /ft Percentage enrolled of "Moorrnpdiug population of echool age ,plrcefenta for ncr-a acUtitY sad hruith, baking a.defined for oa.h owouty. ft 19~0-72. 'LT: ustirate, 19*.5rc; /C ZSttoate; /4 Registered onIy; /e 1968; If' 1969; /K 195'; .15-0 a907; L CZp-Ver region and aH cteofSilLouis, Theta, KalarlEV Dloarbe .Med Ziglunchor; / asis with a onplacsa of5,~ ol oer; 1 Ove 1,00 poalatsa; e 965 -ic /r, 1956-66; /o over 10,Wo population; pFitot of population -urer 15 cud Sreo over to total labor force; /q jnc_ae recpient; r EatLeete based on the resulats of a scaple surrey; as 1960-61; /t. 1970-71; /u 1971; ai 1965; 4w hce growth rote; Li.a-ring 1.5 million tect-aro of private laid, excluding 045. Ciblao hct.are is public owwnerhip, rand 2.1 ilIlion bectaree of scliectise lanq-; fy 1S9'3; /r Nuoaer on the register, not all working in the country; /e.a Pe-sos-el in gover- vent ser'ices -1ly; Thb 1*; 7ac Government hospital eutabjjshmrntu only; /ad 1961-66; foe 19g6-63; f Registered only; 4(f'r;In non /Ah 15 years and ovr; fa ead c7awri to; /aj fl~55, diota are [ro cuieof Zokar or -yedrfr~ uonoi~sfi ; /oak Percentage9 Of d tiga with electri Jig tieg 1e My&; fee unadjao Lcd; /an Iaer secundary bremd. g Tunisia has b-n *;s -. rcue of 9.e isart of its ocuawy with the Se,egale,, ,cohOy, incni-irg forl po-- pocts- for tte- duovb-Popst Of liureries an touriae.  ANNEX I UXIENG C INWEInnEE? InTl ~~~~Page 2 of 3 Pages tlrmta in millions of-VX.S. &flrT Actual Prjete 170 - 1974 - ~e ~1971 1975 19 79 91971 972i 197 1.974 1975 1979 1975 1979 3-Yea Aveage t 191 Pries &Exchnge es s AergeAnua Growth Rates As Percent of GTJY Irozr Damestic Product 882.1 904.9 919.9 9694 1033.0 1229.5 36 48101.1 99.6 100.5 (;:n.les 0 irOnTtsaOtf rdCt -9. -13.9 - 7.7 2.0 4.3 - 6.2 - -.-22 0- -. Gross Domestic Income 87251 10 ,Ii 7 oIf 1223.3 4.4 6.0 ioo.o 0 0.4 0.5. impo3rt (incl. NI'S) 289.0 290.1 290.5 287.0 293.1 336.6 0.4 3.2 33.1 28.3 27.5 (Impor ' t capait 265 2.. 2j6 2L79.3 103.8 344.6 3. 3_Q 4~' .29 28.2 +23.7 +33.1 +18.9 + 7.7 -10.7 - 8.0- - 2.7 1.0 0. Co,nuwptLo.n Frpendltures 729.5 722.2 750.9 792.3 865.9 1037.1 4.4 5.5 83.6 83.5 84.8 ins. stiment (inlad stocks) 143.0 168.8 161.3 179.1 Li 171.4 186.2 4.6 0.8 16.4 16.5 15.2 )s,mestle Savings 119.3 135.7 142.4 171.4 182.1 194.2 5.8 2.5 13.7 17.6 15.9 Ilnations.] S-avings 108.9 123.5 128.9 150.5 156.5 169.4 3.9 2.4 12.5 15.1 13.8 MEICHAICOSE TRAD)E Annual Data at par~rent Prices and Exc~hange Rates As Percent of Total Imports CapItal ponds ~~~~~~46.8 65.6 74.7 87.1 109.6 188.8 24.5 1672. 193 57 iNtArrw-iiate~ PPooB bc.fUals) 40.3 53.5 65.2 81.7 100.0 163.3 25.5 14.9 18.5 17.6 22.3 P,tTole-a 13.7 16.8 23.0 69.6 80.0 112.1 58.0 10.0 6.3 14.0 15.3 Cnnsz2 ,1pygoods 117.4 139.9 185.5 240.8 279.6 269.1 24.3 2.3 53.8 49.1 36.7 I.H.VIR1 Imprts (ci?) 218.2 2775.8 348.-4 4792 569.2 -7-33.3 27.0 8.9 100.0 100.0 100.0 Fxports Graundnuto 44.7 112.5 66.5 124.2 208.3 176.7 47.0 7.3 35.7 43.0 30.9 Phosphates 14.0 18.8 23.9 97.9 127.9 133.3 55.0 6.4 11.2 26.4 23.3 P,trotews products 6.8 8.6 10.9 21.7 24.2 33.3 30.0 8.9 5.4 5.0 5.8 otther 59.8 75.4 89.0 119.5 123.8 228.8 20.0 13.9 47.7 25.6 40.0 TT'tiI meceh. xpo_rts, (rob) f2" l 13.3 190.3 36 3.3 484.2 -572. 1 31.0 9.5 f5FTh $-0- iET Merchandise Trrade Indices 1971 IO1D Exrport Price Index 100 97 114 203 214 232 18.4 2.27 import PrIce index iO0 109 130 182 708 752 17.0 6.7- IT,rm or Trade Index 100 89 88 112 103 92 1.2 -3.8- - - Eprsvolume Index 100 162 110 123 156 181 3.5 8.0- - - VAUlYD ADDED( MY SECTOR Annual Data at 1971 Prices and Exch! aneRtsA rae nulGowhRates A ecnto oa Mrtcultur ~~~~~~ ~~289.5 222.7 256.4 296.7 320.8 368.7 7.6 4.5 31.2 31.0 30.1 Industry and Mining 153.4 169.2 173.2 185.8 198.4 263.9 6.5 7.3 16.5 19.2 21.5 Service AEL~~~~~~~408 AlA,4 _hfl..6 .A2L 2 A~L