Senegal - Irrigation Technical Assistance Project

Document or The World Bank FOR OFFICIAL USE ONLY Report No. P 4127-SE REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT OF SDR 4.7 MILLION TO THE REPUBLIC OF SENEGAL FOR AN IRRIGATrON TECHNICAL ASSISTANCE PROJECT OCTOBER 4, 1985 This dnoumt ha s a rst;icted distribution and mnsy be used by recipients only in the perormmne of their offcial duei Its contents may not otherwise be disclosed without World Bank sutbonization.  CURREICY EQUIVALEN'TS Currency Unit = CFA Franc (CFAF) US$1.0 = CFAF 490 CFAF 1 millicn = US$2,040 SYSTEMS OF WEIGHTS AND MEASURES: METRIC Metric US Equivalents I hectare (ha) = 2.47 acres ABBREVIATIONS AND ACRONYMS CCCE Caisse Centrale de Cooperation Economique (French Aid Agency) CNCAS Caisse Nationale de Credit Agricole du Senegal (National Agricultural Credit Bank of Senegal) CPSP Caisse de Per,quation et de Stabilisation des Prix (Price Stabilization Fund) FAC Fonds d'Aide et de Cooperation (French Aid and Cooperation Fund) FAO Food and Agriculture Organization NPA Nouvelle Politique Agricole (Newi Agricultural Policy) OMVS Organisation de Mise en Valeur de la Vallee du Senegal (Senegal River Valley Development Organization) SAED Societe d'Amenagement et d'Exploitation des Terres du Delta du Fleuve Senegal et des Vallees du Fleuves Senegal et de la Faleme (Organization for the Equipping and Development of the Senegal Delta and Senegal and Faleme Rivers) SOMIVAC Societe de Mise en Valeur Agricole de la Casamance (Casamance Agricultural Development Company) SODEFITEX Societe pour le Developpement des Fibres Textiles (Textile Development Agency) SOFISEDIT Societe Financiare Senegalaise pour le Developpement de l'Industrie et du Tourisme (Financial Development Agency) UNDP United Nations Development Program USAID Urnited States Agency for International Development FISCAL YEARS SAED: July I - June 30 Government: JulY I - June 30  FOR OFCIAL USE ONLY REPUBLIC OF SENEGAL IRRIGATION TECHNICAL ASSISTANCE PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Senegal. Beneficiaries: - Societe d'Amenagement et d'Exploitation des Terres du Delta du Fleuve Senigal et des Vallees du Fleuve Senegal et de la Faleme (SAED). - Societe Financiare Senegalaise pour le Developpement de l'Industrie et du Tourisme (SOFISEDIT). Amount: IDA Credit of SDR 4.7 million (US$4.9 million equivalent). Terms: Standard. Relending US$4.4 million equivalent would be passed on to SAED Terms: and US$0.5 million equivalent would be passed on to SOFISEDIT, as grants. Project In line with the Government's policy of reducing the Description: responsibilities of public companies in the agricul- tural sector, the objectives of the proposed project would be to help the Government and SAED to disengage SAED from its production-related activities, and to turn these over to farmers and private enter,prises. This would be done within the period of the contract plan signed by SAED and the Government, which will end on June 30, 1987. In support of these objectives. the project would include the following components: (i) five studies to prepare and facilitate SAED's disengagement process; (ii) urgent maintenance works which have been postponed for lack of funds in spite of safety risks; (iii) financing SAED's public service activities; (iv) financing those of SAED's operational expenses that deal with production-related activities during a transitional period while the disengagement process is taking place. In addition, funds would be allocated to finance credit to former staff of rural development companies to help them set up their own businesses. e | 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 - Project Benefits: Given the present tight financial situation of Senegal and SAED, the first benefit of the project would be to avoid disruption of agricultural production in the Senegal river valley and the hardship for farmers which would result from SAED's bankruptcy. A second benefit would be to strengthen SAED to enable it to carry out a more comprehensive rehabilitation project, as well as subsequent irrigation expansion projects, in a sound financial, economic and social environment, with farmers in a position to manage their business themselves. A third benefit would be the reestablish- ment of market mechanisms in the Senegal valley wherebv goods and services would be exchanged on an economic basis: farmers would pay for inputs at their actual cost and would be able to sell their products at remunerative farmgate prices. The Government would also be led to devise a proper balance of rice prices in relation to production, import and consumption by keeping the production price at a level sufficient to stimulate or maintain production, and by raising the retail price in proportion to the production price to avoid draining its finances. It is not possible to quantify these benefits. Project Risks Project risks would be in the form of benefits not realized. Their realization depends on the way (speed, priorities, thoroughness) in which recommendations of the disengagement studies would be implemented. For example, private business might be reluctant or slow to take over SAED's activities, or Government's commitment to agricultural reforms could change. Any of these occurrences would affect or possibly jeopardize the project's implementation; IDA would endeavor to contain their adverse effects through close monitoring of project implementation, discussions and follow-up on the recommendations of the studies, and audit controls. The prospect of IDA participation in subsequent irrigation projects, conditional on the satisfactory implementation of the proposed project, would be an added inducement to Government and SAED to implement the project properly. However, if SAED's disengagement is slower than forecasc and SAED's continuing role in production-related activities is considered detrimental to the implementation of the follow-on project, such implementation would be delayed.  - iii - Estimated Project Costs (exempt from taxes) Local Foreign Total -US$ million- Disengagement studies 0.13 0.52 0.65 Maintenance works 1.70 1.22 2.92 Operating requirements 7.82 - 7.82 Working capital 0.82 - 0.82 Resettlement grants 1.80 0.20 2.00 Contingencies 0.60 0.30 0.90 Project cost 12.87 2.24 15.11 Financing Plan: Government of Senegal 5.93 - 5.93 IDA 4.51 0.35 4.86 CCCE/FAC 2.03 1.28 3.31 UJNDP - 0.41 0.41 USAID - 0.10 0.10 Others 0.40 0.10 0.50 Total Financing 12.87 2.24 15.11 Estimated Disbursements: FY86 FY87 -US$ million-- Annual 3.20 1.66 Cumulative 3.20 4.86 Rate of Return: not applicable. Staff Appraisal Report: not applicable Map: IBRD 19099  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF SENEGAL FOR AN IRRIGATION TECHNICAL ASSISTANCE PROJECT 1. I submit the following report and recommendation on a proposed development credit for the equivalent of SDR 4.7 million (US$4.9 million equivalent) on standard IDA terms to the Republic of Senegal to help finance a proposed Irrigation Technical Assistance Project. Additional external financing for the project would be provided by France, through a grant of Fonds d'Aide et de Cooperation (FAC) and through a loan from Caisse Centrale de Cooperation Economique (CCCE) in the total amount of US$3.3 million equivalent, and by a grant from the USA through the US Agency for International Development (USAID) in the total amount of US$0.1 million equivalent. The CCCE loan would be for a term of 15 years, including 5 years of grace, at an interest rate of 9.2Z per annum. PART I - THE ECONOMY 2. A report entitled "Senegal: Country Economic Memorandum" (5243-SE) was distributed to the Executive Directors on November 5, 1984. Country data appear in Annex 1. Economic Structure and Past Developments 3. Three-quarters of Senegal's territory lies in the Sahel, which suffers from low rainfall and periodic droughts. The mainstays of the traditional economy are millet cultivation and nomadic cattle-raising for domestic consumption, and groundnut cultivation for export. The modern sector of the economy is concentrated in Dakar, the capital, a city of over one million inhabitants, the economic base of which consists of excellent port facilities, an important industrial sector, and a small but fast-growing tourism industry. With a population of 6.2 million in mid-1983, Senegal's per capita GNP for 1983 was estimated at US$440. 4. At Independence in 1960, Senegal lost its privileged position as the center of francophone West Africa, and subsequently had to adapt to reduced economic, administrative and political circumstances. In the latter part of the 1960s, income from groundnuts (the principal export) fell due to unfavorable weather and lower export prices resulting from the loss of EEC special preferences. Throughout the decade, the Senegalese  -2- economy marked time as real output increased at a rate estimated at 2.5% per annum, hardly more than the estimated rate of population growth. 5. Economic management has become even more difficult since the 1970s as a result of the growing unreliability of agricultural production and its linked effects on domestic incomes and on fiscal and export revenues. During the 1970s, Senegal's groundnut production was hit by sharp climatic fluctuations, and despite higher rates of private and public investment, average GDP growth did not rise above that of the previous decade. The same pattern of sharp year-to-year fluctuations around a 2.5% growth trend has continued since 1980. However, the government no longer has the leeway to cushion these fluctuations by increasing its borrowing and expenditures. 6. Fluctuations in physical output are aggravated by the price volatility of Senegal's major exports and imports. For example, during 1974, the overall terms of trade improved by over 21%, due to exceptionally high prices for phosphate rock, Senegal's second export commodity; however, this improvement was almost entirely wiped out the following year by declines iu export prices for both groundnuts and phosphates. Increases in imported oil and rice prices in the late 1970s brought a further deterioration in the terms of trade, causing a total loss in national income of roughly 6% between 1974 and 1982. 7. This deterioration in terms of trade, along with two successive years of drought in 1979 and 1980, plunged the economy into an acute financial crisis, from which it is now only slowly recovering. The onset of this crisis led the Government to launch a five-year economic and financial recovery program, whose main objectives were to stabilize the economy during the first two years and to achieve an economic growth rate of 4% per annum in the following three years. This program was supported by an Extended Fund Facility (EFF) of US$243 million equivalent, approved by the IMF in August 1980, and a Structural Adjustment Loan/Credit (SAL) of US$60 million equivalent approved by the Bank in December 1980. 8. The recovery program consisted of an economic stabilization plan (agreed with and monitored by the I[F), introduction of new producer incentives, reorientation of the public investment program, a change in the national policy on parastatal enterprises, and a package of structural reforme in the agricultural sector. The objectives of this program were sound but the implementation schedule proved too ambitious. Despite delays caused by a record low 1980/81 groundnut crop and by the change of pres- ident in early 1981, the Government did achieve significant progress in financial arrears reduction, parapublic sector management and introducing new industrial incentive policies. However, in other areas, and especially in the reform of agricultural policies and institutions and in reduction o' the current account and fiscal deficits, the results were disappointing. The SAL second tranche of US$16.2 million was cancelled on June 30, 1983. Recent Economic Developments 9. The array of acute structural and financial problems from which  -3- Senegal had suffered for seven years was compounded in 1983/84 by the return of severe drought conditions. These reduced by almost 40% the volumes of agricultural crop production available both for export (groundnuts) and for domestic consumption (mainly cereals). The drought, probably the second most severe since 1972-73. had a negative impact on the level of economic activity in 1984, on Senegal's balance of payments and, indirectly, on its public finances. Despite these difficulties, the current account deficit was reduced in 1984, according to preliminary estimates. 10. While there are some encouraging signs of growth in sectors not directly affected by the drought (e.g. fishing and tourism), prospects for a sustained recovery in output and employment are still uncertain, not only because of climatic aberrations, but also as a direct result of the persistent financial crisis. Although the economy appeared to have recovered strongly in 1982 and 1983 from the effects of the two preceding drought-affected years, restoring real per capita income to its 1979 level, GDP fell by about 4.0% in 1984. It would have been even lower without the growth in fisheries, petroleum refining and other export-based industries, notably fertilizers, for which a 200,000 tpy phosphoric acid plant came on stream at mid-year. 11. Over the last two years, Senegal has pursued its adjustment program in close consultation with the IMF, with which credit outstanding at end-June 1985 was equivalent to 260% of Senegal's quota. In August 1983, following the announcement of measures to eliminate subsidies on petroleum, rice and other products, an IMF standby was agreed for 1983/84, with commitments to observe strict public employment limits and domestic credit ceilings. This program, which aimed at reducing the current account deficit by more than three percentage points of GDP and reducing the overall fiscal deficit from 9 to 4.8% of GDP, was successfully completed. A new standby covering an 18-month period to June 1986 was approved by the IMF Board in January 1985, and performance is judged satisfactory to date by the WMF. It is clear, however, that in future years Senegal's potential drawings on further IMF resources will largely be offset by repurchase and interest obligations due on outstanding IMF credit, requiring an increase in budgetary assistance from other sources. 12. A major constraint on the Government's finances and the balance of payments is the serious and growing burden represented by service of the external foreign debt. Over the past four years, debt has been rescheduled four times with the Paris Club, and as well as with the banks, and debt service is projected to average around US$250 million per year over the next four years, making it necessary to continue debt relief for a few more years until the adjustment program has had time to take effect on the economy. Producer and Export Incentives 13. The structural adjustment program addresses the need to improve Senegal's trade balance by adjusting relative prices in order to encourage  -4- export production and discourage growth in imports of food, energy and consumer goods. Since 1981, measures have been introduced to adjust the tariff structure, to correct for bias in the protection system against exports of specific products, and to fully reflect shifts in internal costs and international markets and currencies through internal price adjustments. (Senegal's currency has depreciated 20% in real terms, on an import trade-weighted basis, since end-1980.) The basic rate of import duties has been increased to 15% of c.i.f. value and fiscal duties on many products raised to punitive levels. An export premium system introduced in 1981 has had a positive impact on export and employment levels in some of the five industries to which it was first applied, especially fish processing. An extension to 20 other product lines, as well as a change in the payment system toward a value-added basis, was introduced in 1983. Between February 1982 and January 1985, the Government has doubled the retail price of rice, the main food staple in urban areas, in order to reflect higher import costs and to provide a measure of protection for domestic rice production. Cereals are marketed mostly through private channels; the offxcial floor prices for producer have been raised by about 10% for the 1984/85 season and again by around 20% for 1985186. There has also been a substantial increase announced in the producer price for groundnuts for the coming season, in order to maintain comparability with prices offered on the parallel market. Investment Program 14. The outlook for investment has deteriorated since the establishment of the structural adjustment program in 1980. While the latter imposed ceilings on the investment program to reestablish macroeconomic equilibrium, implementation of even the reduced program has become difficult. In the present climate, a careful screening of new investment projects is particularly needed, together with increased atten- tion to rehabilitation and maintenance needs. The necessary institutional reforms for improving the Government's programming, budgeting and monitoring of investment projects are expected to be put into place over the next year. In view of the difficult public finance situation, the Government's ability to generate public savings for financing its investment program will remain very constrained during the next four-year development plan covering fiscal years 1986-89, and the investment level itself will be largely determined by the availability of concessional foreign resources. Some public enterprises, however, should be able to generate funds for investment during this period and the share of private investment is expected to increase as the financial situation begins to improve. Parastatal Sector 15. Reform of the large parastaral sector in Senegal continues to be a high priority. Over the last year the Government has taken some significant steps to reduce the budgetary burden presented by non-viable or inefficient public enterprises. In the agricultural sector, a number of agencies are being "wound down" and about 1,500 staff have already been laid off. For others, a redefinition of tasks and a reduction in staff  -5- numbers has been decided. For some of the most important public enterprises, the Government has moved to improve performance by negotiating multi-year con.rats-plans which set out production and financial objectives for company operations and spell out the reciprocal obligations of the Government and enterprise managers. To date, the Government has signed seven contrats-plans, including two for SAED, and several others are well advanced. A comprehensive policy guidelines for parastatal reform is under preparation. Long-term Prospects 16. Senegal's long-term economic prospects very much depend on the success of its recently begun medium-term adjustment program for the period 1985-92. This program seeks to create an improved base for development both by correcting the unsustainable imbalances on the government budget and external accounts, and by structurally improving the institutional and incentive environment for economic activity, hence implying a general reduction in government involvement in the economy. The Government's development strategy continues to emphasize the promotion and diversification of agricultural and export-oriented activities. The agricultural program calls for the development of areas less susceptible to drought (Casamance and Eastern Senegal) where rainfed cash crops other than groundnuts can be grown, and increased incentives for domestic millet and maize production to replace imported rice. Agricultural research is being reoriented, with the objective of lowering the costs of yield-boosting agricultural techniques and better adapting them to local constraints. Irrigated cereal production is being developed in the arid northern part of the country along the Senegal River. Construction has started on the two large dams planned for the Senegal River by the Organisation pour la Mise en Valeur de la Vallee du Senegal (OMVS), and the first (Diama) should be completed in 1986. The Government's new agriculture policy aims to eliminate the present high level of state subsidies required on irrigated rice production, which otherwise would severely constrain the pace of new irrigation development. 17. The US$250 million ICS phosphoric acid/fertilizer project started commercial operations during 1984, and the combination of export subsidy/import duty increase and Senegal's attractive investment c'-.e should help to attract other export industries, once the international economy has improved. Export diversification is necessary to offset the uncertain prospects for groundnuts, still Senegal's main export commodity in terms of domestic value-added (fish exports from Senegal have a high import component). Senegal's groundnut oil exports suffer from increasingly irregular production due to recent drought conditions anJ f.orn an increased supply to EEC markets of competing vegetable oils, which has tended to narrow the price premium previously enjoyed by groundnut oil. 18. The assistance provided to Senegal in support of the Government's 1980-85 stabilization program has helped the country survive a period of extraordinary economic difficulty and to start to address some of its most difficult problems. However, the overextended public sector, as well as heavy domestic arrears and external debt service charges, continue to  -6- impose serious burdens on public finance and on the current account of the balance of payments. The Treasury will not be able to absorb additional recurrent cost charges from development projects for a few years and will continue to need exceptionally high shares of foreign financing for the investment program and budgetary assistance on concessional terms. The persistence of the financial crisis has already persuaded the country's planners wf the need to reassess the development strategy and to establish a new program of action to achieve the necessary structural adjustments. Such a program was presented to the Consultative Group meeting in December 1984 and endorsed by the donors. The Bank aims to strengthen its support for the Government's efforts to stabilize and restructure the economy, in coordination with the IMF and other donors. A second structural adjustment credit is currently under preparation, in support of the government's adjustment program, which we hope to present to the Board during the current fiscal year. PART II - BANK GROUP OPERATIONS IN SENEGAL 19. As of June 30, 1985, the Bank Group had approved 57 operations in Senegal for a total of US$544.6 million, including 32 IDA Credits, 12 Bank loans, five blends of Bank and IDA funds, five IFC operations, two blends of Bank and IFC funds, and one blend of Bank, IDA and IFC funds. Physical execution of projects is progressing reasonably well, although some operations are affected by the shortage of counterpart funds due to the Government's continuing difficult public finance situation. Annex II contains the Status of World Bank Operations in Senegal. 20. Until a few years ago, our assistance was mostly project-oriented with a strong emphasis on diversification of the economy and improvement and expansion of basic infrastructure. The acuity of the financial crisis of the past several years has led to a major shift in our strategy, which now has the following three main objectives: a) to pursue an economic policy dialogue with the government, supported where appropriate through technical assistance and policy-based lending operations, aimed at improving economic management and restoring in the medium-term a sound financial basis for development efforts; b) to promote the long-term development of the country by supporting well-prepared investment, rehabilitation and sectoral adjustment projects within a framework of appropriate sectoral policies and institutional reforms; and c) to contribute to improved aid effectiveness in Senegal by acting as the focal point for greatly increased aid coordination between donors and government, at the same time assisting the latter to strengthen its own planning and aid coordination ability.  -7- 21. In agriculture, operations have aimed at improving the productivity of traditional food and cash crops, supporting diversification into new crops and regions, and enhancing forestry outputs and agricultural research. In FY84, the Board approved a cotton/food crop project for the rainfed regions of Eastern Senegal and Upper Casamance which is progressing well. At the core of the Government's development program in agriculture is the exploitation of the irrigated rice farming potential in the Senegal River Valley along the northern border of the country; this is described iu Part III of this report. 22. Diversification has also been supported by lending to the growing industrial sector through the Societe Financiare Senegalaise pour le Developpement de l'Industrie et du Tourisme (SOFISEDIT), a development finance company established with Bank assistance in 1974, in which IFC is a shareholder and for which three lines of credit have been approved. The Bank has also financed the rail infrastructure component for the ICS phosphoric acid/fertilizer complex and an engineering credit to promote development of Senegal's phosphate industry. In response to the effects of the 1979 oil crisis, the Bank has also financed a petroleum exploration promotion project to assist the Government in its search for economical new energy resources. 23. Past projects have strongly supported modernization and expansion of the country's infrastructure in all modes of transport: highways, rail, port and airport. But with the stagnant economy and heavy past investments, emphasis is now being placed on better utilization and maintenance of existing facilities. To this end, three projects were approved during FY84: a Fifth Highway Project addresses the Government's limited capacity to provide funds for road maintenance; the Dakar Container Port Project includes rehabilitation and maintenance of the Port of Dakar; and the Technical Assistance Project for Urban Management and Rehabilitation emphasizes maintenance and rehabilitation of urban infrastructure in support of industrial development. 24. As in infrastructure, the Bank is supporting the rehabilitation, modernizatior. and expansion of the major public utilities. In telecommunications, preparation is underway on a project which would restructure and reequip the sector entity. In electric power, an engineering credit approved in 1980 led to sector reorganization proposals, and a follow-up investment project aimed at rehabilitation and expansion of generating capacity and at energy conservation is now under preparation. Finally, in the urban water supply and sanitation sector, an engineering credit, approved in 1979, laid the groundwork for sector reorganization, supported by the Eleven Centers Water Supply and Sewerage Project which was approved in March 1985. 25. While Bank strategy has supported the emphasis on financing productive projects and rehabilitation needs, it also recognizes the need to support the social sectors, with due consideration to the capacity of both the Government and users to bear the recurrent costs involved. In education, efforts have been directed at primary education and at technical and vocational training to support activities in the productive sectors,  -8- and in health, efforts have been directed at primary care in the rural regions. 26. As it became increasingly clear that many of Senegal's economic and financial problems ran across the board and could not be addressed exclusively through project lending, the Bank program began to shift in the late 1970s towards structural adjustment lending (para.18) and multi-sectoral technical assistance. Two operations in support of this latter effort are currently being implemented: in the parapublic sector, a second technical assistance project was approved in July 1983 to help consolidate results already achieved under the first project and to begin rehabilitation of some key public enterprises through detailed action plans; and a technical assistance project for economic and financial planning was approved in August 1980 to help the Ministry of Planning evaluate priority projects and monitor the investment program and the Finance Ministry to strengthen its debt management capability. A follow-up Project is being prepared to consolidate progress made in improved economic management. 27. Given the need to focus Senegal's public investment program on high-priority rehabilitation and maintenance needs and recurrent costs, improved donor coordination is now assuming increased importance. The Bank is pursuing its economic dialogue with Senegal in close coordination with the INF and bilateral and multilateral donors. In this connection, the Bank convened a first meeting of the Consultative Group in December 1984 at which agreement was reached on the policy measures, assistance levels and aid coordination mechanisms needed to enable Senegal to overcome its economic and financial difficulties. The Bank followed up on this meeting by preparing a structural adjustment operation, and by organizing sector meetings of interested donors on telecommunications and energy. Further sector meetings are planned during 1985-86 for the water supply and agriculture sectors. A second CG meeting is also planned for 1986 to consider the Government's new investment program. 28. The Bank Group's share in total external aid disbursements to Senegal over 1980-83 averaged approximately 20Z, of which roughly two-thirds was IDA-financed. The Bank Group's share in outstanding disbursed debt was 18% at end-1983 and may approach 20Z by 1985. The Bank Group's share in external debt service is estimated to have risen from 3.7% in 1980 to about 7.5% in 1985. PART III - THE IRRIGATION SUB-SECTOR 29. Senegal's irrigation potential compares favorably with that of most other countries in the region. Water and soil resources have the potential to irrigate over 400,000 ha, of which about 60%, or 240,000 ha, are in the Senegal river basin, and the remainder in the Southern region of Casamance. Irrigation has so far known only limited development, covering only 75,000 ha, due to a number of adverse factors: some are economic,  - 9 - such as the need for pumping and the resultant high investment and operation costs; others are institutional or policy-related, such as distorted cost-price relationships, and capital-intensive and bureaucratically managed schemes. Still others are financial, because of the high cost of investment in Infrastructure. In spite of these constraints, irrigation remains one of the alternatives to alleviate the effects of temporary drought and also remains an important element in increased food production. A number of policy, institutional and attitudinal changes are now taking place that draw on the sometimes costly experiments of the past and allow the development of increasingly economic irrigation schemes. 30. Irrigated crops consist essentially of rice, tomato, sugar cane and some local cereals. Rice in Casamance is partially irrigated. In the Senegal river basin, paddy production, which is exclusively irrigated, increased from 40,000 tons in 1981/82 to 75,000 tons in 1984/85, with an average yield of 4.7 tons/ha. Total paddy production in Senegal was about 120,000 tons in 1984/85 or 80,000 tons of equivalent rice, which represents about 15% of the country's total rice consumption of about 540,000 tons. Total production of tomatoes was about 20,000 tons in 1984/85, which is about one third of Senegal's total consumption. Production of local sugar amounted to 57,000 tons in 1984/85, compared to a total consumption of 82,000 tons. In addition, irrigated areas produce about 10,000 tons of maize, millet and sorghum per year, compared to a total production of these cereals varying between 500,000 and 1,000,000 tons; regular imports supply about 400,000 tons, and food aid 400,000 tons in bad production years. The contribution of irrigated agriculture to food supply is therefore significant, particularly wnen one considers the rainfall trend of the last decade and the declining prospects for rainfed agriculture in many areas. 31. Flood recession used to be a widespread irrigation technique in Senegal; this traditional technique was associated with low input levels and resulted in low yields. Insufficient rainfall in recent years and the consequent change in flood levels have, however, led to a substantial decline in flood recession agriculture. After the drought of the late 1960s and early 1970s, the Government therefore decided to shift from flood control to irrigation schemes involving full water control. With the help of many bilateral and multilateral institutions, including the Bank Group, some 20,000 ha have been fully or partially developed along the Senegal river, of which about 12,000 ha are mainly large-scale perimeters in the Delta; another 8,000 ha in the middle Senegal river valley are mainly small village perimeters. The flood recession area could be increased by appropriate water management, in particular in the Senegal river valley, after the construction of the Manantali dam (para. 42). In order to help meet Senegal's projected cereals deficit, Government plans to develop new perimeters and to rehabilitate over 15,000 ha net during the 1984-1987 period, or about 5,000 ha per year. However, IDA estimates that a more realistic assumption would be about 10,000 ha for the three-year period, or about 3,500 ha per year. Those areas will be double cropped, after commissioning of the Diama dam. In Casamance, because of physical constraints, IDA recommends that emphasis be placed on the implementation of pilot projects during this period (paras. 43 and 49).  - 10 - 32. The most successful irrigation schemes have been the small village perimeters such as those in the upper Senegal river valley, where farmers have demonstrated that they can manage irrigation with a minimum of public assistance, provided the schemes are geared to their capabilities. This idea has been used in part in the IDA-financed Debi-Laupsar project, and more extensively in the N'Dombo-Thiago project, financed by Caisse Centrale de Cooperation Economique (CCCE). The results achieved so far are encouraging and the Government's new strategy is to expand farmers' participation to the large irrigation schemes, where SAED traditionally has handled water distribution without really involving the beneficiaries. One of the prerequisites for successful operation and management by farmers/water-users would be a guaranteed, timely and sufficient water supply; to this end, a number of physical improvements would have to be introduced in the existing perimeters (para. 62). Sector Policies and Institutions 33. In most Sahelian countries, irrigation started before independence in the form of large scale schemes conceived as parastatals in which farmers only contributed their labor. This concept endured and irrigation is still largely the responsibility of large parastatals such as SAED in the Senegal Valley. In this framework, development costs grew beyond what was affordable, first for farmers and later for Government finances. As is shown below in the case of SAED, not only new investments, but maintenance and services to farmers suffered, resulting in reduction of irrigated areas. In any event, production at its real cost, and in particular that of rice, ceased to be competitive with imports. Faced with a steeply pent-up demand for basic food staples (essentially rice) and increasingly limited resources, Senegal recently reassessed its agricultural policies. Two important principles of the comprehensive "Nouvelle Politique Agricole" (NPA) have a bearing on the irrigation subsector. The first principle deals with the progressive disengagement of inefficient rural development companies from production and marketing activities and the transfer of their activities to smaller and more competitive enterprises whose costs could be more readily reduced; this is expected to be implemented within five years. This transfer applies to SAED (para. 37) and SOMIVAC (para. 40), the two institutions most involved in Senegal's irrigation development, and has already involved the layoff of about 2,000 employees from rural development companies, for whom the Bank is determined to facilitate resettlement in new activities of the private sector (para. 64). The second principle of the NPA is the establishment of a cereals policy, whereby the Government would encourage the production of local cereals (rice, sorghum, millet, maize) by increasing consumer prices and, hence, production prices. Steps in that direction were taken in January 1985 with a 232 increase in the consumer price of rice. Institutions in the Sector a) SAED 34. The "Societ:6 d'Amenagement et d'Exploitation des Terres du Delta du Fleuve Senegal et des Vallees du Fleuve Seuegal et de la Faleme" (SAED),  - 11 - transformed into a national company in 1981, is the main national irrigation organization, with headquarters in St. Louis. It is a publicly owned company covering the area of the proposed project, and most of the rice in the Senegal valley is produced under its supervision. Its employees number 940, of which 841 are contractual employees, 77 civil servants seconded by the Senegalese Administration to SAED and 22 expatriate technical advisers, financed by French aid. According to its statutes, its operations include: land preparation, implementation and maintenance of irrigated perimeters, input distribution and provision of all agricultural services to the rural population of the area. Before the discussions that led to the formulation of the NPA, Government's policy was to keep cereal production prices approximately in line with international prices. Because the international price of rice had increased less than the cost of living in Senegal and because it had been necessary to maintain farmers' incomes vis-a-vis those of other groups benefitting from low consumer prices based on the cost of imports, the Government had directed SAED to reduce the cost of inputs and services to farmers, thus keeping their incomes at a satisfactory level (para. 37). As long as the Government was able to subsidize SAED to compensate for the reduced revenue from sales to farmers, SAED's operations broke even, though a policy of systematic assistance proved neither stimulating to farmers nor conducive to SAED's efficiency, and SAED's operations became increasingly bureaucratic. In the last two years, the Government has ceased to provide the required subsidies because of budgetary constraints, and SAED's operations have rapidly deteriorated. 35. SAED's only profitable activity is rice milling; it buys paddy from the farmers and sells rice to the Caisse de Pir6quation et de Stabilisation des Prix (CPSP). The selling price of rice is negotiated with CPSP each year on the basis of SAED's marketing, processing, inventory and administrative costs, and provides a small margin for SAED. Until 1984/1985, SAED has been incurring heavy losses on all other activities, either because it had not charged farmers the full operating cost of its physical services, (land preparation, water use, and input distribution were subsidized), or because it had never charged interest for deferred repayments on inputs by farmers. The result was that for 1982/83 and 1983/84, SAED needed Government grants of about CFAF 2 billion (US$4.2 million) each year. Because of severe budgetary constraints, the Government was unable to provide those grants, SAED lost the cash reserve it had accumulated in previous years, and, in 1984/85, SAED's net short-term liabilities seriously hampered its ability to conduct normal business. 36. Since 1981, the company has entered into a contract with the Government, the "'lettre de mission", which defines the objectives and the policy of the company for three-year periods and sets out Government's obligations towards the company to achieve these objectives. The first "lettre de mission" covered the period from July 1, 1981 to June 30, 1984 and the second one extends from July 1, 1984 to June 30, 1987 (para. 56). "nder the first "lettre de mission", SAED implemented measures aimed at progressively decentralizing its management and giving more responsibility to the farmers. In 1980/81, land was allotted to farmers without any time limit, instead of on an annual basis as had previously been the case.  - 12 - Extension workers replaced formal supervisors, new farmers' groups were created, and management training and literacy programs were introduced. In 1983 and 1984, the formally centralized management of perimeters, rice mills and civil works was progressively transferred to decentralized operational divisions in the valley perimeters. The second "lettre de mission" (para. 57) is pursuing these efforts but even more importantly will lay the ground for discontinuing subsidies, transfer a number of its activities to the private sector and adjust its objectives and structure accordingly. 37. SAED's current services can be grouped into two categories: those whose delivery by a central authority is justified and those which should be passed on to firms more adaptive to changing market conditions, and that would charge farmers full price for the services. The first group of services includes: (a) planning and programming of construction of new perimeters, and of rehabilitation of existing ones; (b) supervising the construction of the major collective installations and maintaining them; (c) helping organize village groups and advising them; and (d) literacy, technical and management training. The second group of services includes those that are partly subsidized and should be progressively transferred to specialized units that are more wieldy than SAED: (i) land preparation, i.e. plowing, leveling and ridging; (ii) pumping water for irrigation; (iii) input distribution; (iv) repair of agricultural equipment; (v) purchasing and processing paddy; (vi) marketing rice and other agricultural products; and (vii) providing credit facilities. The first group of services consists of public services that concern a large area and whose costs cannot be allocated to new works and rehabilitation works; thus their high cost cannot be recovered by billing farmers. The Government agreed in the "lettre de mission" that those service charges would be financed by public funds. Subsidies for the second group of services, wnich are directly related to agricultural production, would be eliminated ::er time. Those services would be expected to be provided by private i-rms, as there are no public firms of the required size and flexibility, but such firms could only operate if there is an adequate rice price policy (para. 46). In the event that the private sector is slow in taking over SAED's activities, SAED's disengagement process would take longer than expected and this would have an impact on the implementation of any follow-on project (para. 81). 38. In the past two years, SAED's accounting system has much improved with the help of technical assistance and the introduction of an IDA- ..inanced cost accounting system, but cost and budgetary accounting is not vet reliable and fully operational. A consultant financed by French aid is presently setting up the necessary procedures. 39. SAED's financial statements as of June 30, 1984 were audited by a local firm (Annex 4). In spite of considerable improvements in SAED's accounting, the auditors could not certify the financial statements of 1983/84 in their report dated April 20. 1985. They expect to give a qualified certification for the statements of 1984/85, following partial implementation of improved accounting procedures, as a result of their report on internal controls issued in February 1985, and expect to give  - 13 - full certification for the statements of 1985/86. IDA is satisfied that SAED's accounting organization is sound; the 1983/84 statements were not certified for technical reasons and, had the recommendations of the report on financial controls been available earlier to SAED for implementation in 1984/85, financial statements for that year could have been made certifiable. However IDA wants to ensure that the recommendations of that report would be implemented before effectiveness (para. 73). b) SOMIVAC 40. The Soci4t4 de Mise en Valeur Agricole de la Casamance (SOMIVAC) is a regional irrigation development agency which provides technical assistance to farmers in the Casamance region, and is in charge of functional literacy programs and cooperative development. It implements its programs through an integrated agricultural development project financed by USAID. Its activities will also be reduced in line with the NPA (para. 33). c) OMVS 41. Regulation of the Senegal River to increase irrigation development has been sought jointly by the riparian states of Senegal, Mali and Mauritania, which established in 1972 the "Organisation pour la Mise en Valeur du Fleuve Sneigal" (0MVS). OMVS, assisted by UNDP, has prepared an ambitious long-range development program to achieve year-round irrigation on potential areas along the river. The main secondary benefits would be the production of hydroelectric power and the year-round navigability of the river up to the Malian border. While the major infrastructure will be planned, executed and operated by OMVS, the member countries are responsible for the national components of the OMVS program. 42. The most important projects planned are the construction of two dams at Diama and Manantali. Design work for Diama, funded by FAC, was undertaken in the early 1970s, and for Manantali, funded by the Federal Republic of Germany, through Kreditanstalt fur Wiederaufbau (KfW) in the mid-1970s. OMVS has meanwhile acquired financing for this program. The completion of the Diama and Manantali dams is expected by mid-1986 and during 1989, respectively. The scope for irrigation without dams is estimated at about 80,000 ha for single cropping. The Diama dam, located 24 km inland from the mouth of the Senegal river, will permit irrigation for double cropping in the Delta region on some 46,000 ha in Senegal alone 1/ and will prevent salt water intrusion upstream during periods of low river flow. The multipurpose Manantali dam is located in Mali, about 300 km upstream from the border. Its maximum annual power production is estimated to be 800 GWh and it will provide water to an area of 375,000 ha, 1/ An additional 30,000 ha are available in Mauritania.  - 14 - of which more than half is located in Senegal 2/. The Manantali dam will regulate the flow of the river downstream as far as Diama. Constraints and Prospects 43. Physical constraints to irrigation development are most severe in Lower Casamance where, under the influence of the continued drought, soils in the irrigated perimeters have undergone changes, of which the most serious are a lowering of the organic matter content and acidification. SOMIVAC is presently experimenting with the existing anti-salt dams in order to develop viable methods and techniques for the reclamation and conservation of these soils. 44. In the Senegal river valley, soils are generally heavily textured as well as partly saline in the Delta and lower valley, which limits the range of crop choices: the heavier soils are more suited for the cultivation of rice and, to a limited extent, sugar cane. 45. Irrigated agriculture in the Senegal basin is also quite expensive under current conditions. Because of the topography of the valley and the virtual disappearance of flood recession (para. 31), most irrigation has to be done by pumping which, because of investment, fuel and maintenance expenditures, increases the cost of water. Also, the type of development adopted by the Government and SAED, i.e., large, uniform and centrally managed perimeters, requires extensive land preparation work, and especially levelling to ensure adequate water utilization. Moreover, much extensive land preparation was traditionally carried out by SAED with heavy equipment, the amortization of which proved difficult. Finally, until the Diama dam and, more importantly, the Manantali dam come into operation, the potential for double cropping remains extremely limited and restricts productivity. These constraints are now being addressed through the second SAED "lettre de mission" with the support of the proposed project. It has now been realized that small perimeters are better suited to the utilization of land and water resources simply because they adapt better to local conditions and are easier to manage. Alternative techniques for land preparation will be studied under the proposed project (para. 61) and trials will be conducted; as pre-irrigation reduces traction requirements, it would allow for light mechanization and in certain cases animal traction; both techniques would be less capital intensive than is the case now and could easily be utilized by farmers (as opposed to SAED), thereby further reducing operating costs. Finally, the availability of regulated waters when the dams are operational will permit substantial increases in both irrigated acreage and cropping intensity. 2/ Includes the area for which irrigation water will be available from the Diana dam; the total command area in Mauritania is about 120,000 ha.  - 15 - 46. Because it is the dominant crop in the valley, rice stands to benefit most from the easing of physical and technical constraints described above. However, there remain economic and institutional constraints to restoring and maintaining an acceptable level of competitiveness vis-&-vis imports. The main handicap that irrigated rice production faces is the depressed international rice price level, which makes irrigated rice production in the Senegal valley a marginal financial proposition at the current exchange rate. Since the exchange rate cannot easily be modified in view of Senegal's position in the CFA zone, the financial disadvantage of domestic rice production must be partly overcome through a flexible consumer price policy. The Government has already implemented one of NPA's policy decisions by increasing the consumer price of rice by 23% (100% in three years, since 1982) (paras. 33 and 53). Moreover, SAED's disengagement from the agricultural production process as part of the NPA (para. 33) should progressively restore both the flexibility of market mechanisms and the incentives for private initiative, which are crucial for the very small enterprises prevailing in the agricultural sector, as well as in the supply of inputs and in the marketing and processing of agricultural products. 47. Until ongoing reforms have restored an adequate price equilibrium in the Senegal River Valley, IDA supports Government's decision on the following priorities: (i) rehabilitation and cost-saving in the large perimeters; (ii) full cost charges for services (including inputs) rendered to both small and large perimeters in order to permit private suppliers of such services to enter the market; (iii) expansion through small perimeters and rehabilitation of large perimeters, prior to expansion through large perimeters; and (iv) reintroduction of large-scale flood recession cropping. 48. Apart from rehabilitation of existing perimeters and the construction of new small village perimeters in the Senegal river basin, the introduction of large-scale controlled flood recession cropping for traditional crops (sorghum, millet, maize) appears to be a way to use the abundant water resources that will become available as of 1989 upon completion of the Manantali dam. It is estimated that about 100,000 ha would be suitable for flood recession use. A better estimate would be provided by a study now underway on the use of the Manantali waters and by the master irrigation plan of the valley. The Government also intends to allow private enterprises to invest in the development of the valley and this would be done in consultation with IDA (para. 74). The procosed master plan study (para. 61) would evaluate the consequences of such developments. 49. Because of the physical constraints (para. 43), rehabilitation and construction of new perimeters in the Casamance should be limited until acceptable solutions for soil conservation have been found. Meanwhile, only pilot projects should be implemented and monitored (para. 31). 50. Bank Group Involvement in the Sector. The proposed project would be the Bank Group's sixteenth lending operation in the agricultural sector. Two of the projects have been for irrigation development in the Senegal  - 16 - River Valley, two for rice cultivation in Casamance, two for agricultural credit, and two for resettlement in the thinly populated regions of Eastern Senegal. In addition, the Bank Group has financed a rural development project in the Sine Saloum region, a livestock development project in Eastern Senegal, and an emergency drought relief program. A small rural operations project, a forestry project, an irrigation project, a rural development project, and an agricultural research project are currently under implementation. Project Performance Audit Reports have been issued for six projects: the First Agricultural Credit Project, the First Casamance Rice Project, the Terres Neuves I Resettlement Project, the Drought Relief Project, the Senegal River Polders Project, the Second Agricultural Credit Project, and the Terres Neuves II Resettlement and the Eastern Senegal Technical Assistance Project. The main shortcomings mentioned in the Project Performance Audit Reports for these pro4ects concern (a) the quality of engineering design and supervision of construction of project works; (b) marketing practices, unremunerative prices and input distribution; (c) the need to investigate more thoroughly the social aspects involved in project planning and execution; and (d) difficulties in obtaining counterpart funds. Although these lessons are not all relevant to the proposed Project, particular attention was paid during appraisal to organizational aspects, counterpart contributions and prices for agricultural products, especially rice. PART IV - THE PROJECT Background 51. The original design of an Irrigation project called for the rehabilitation of 3,245 ha of existing perimeters, the construction of 2,130 ha of new perimeters,as well as the electrification of pumping in the Delta. The project was pre-appraised by an IDA mission in early 1982. However, the situation caused by SAED's deficit from its production-related activities raised policy issues which needed to be resolved before the project could be appraised. The deficit, which was meant to be covered by Government subsidies, was generated by a policy of under-charging the cost of services and inputs provided by SAED to farmers. 52. Since 1983, the Bank has participated in a series of meetings with the Senegalese authorities and the other major aid agencies. These meetings helped define a series of urgent policy measures for agriculture to be applied by the Government and supported by aid agencies. The suggested policy reforms aim to restore the competitiveness of local food crops vis-a-vis imports, since Government can no longer meet the cost of subsidies to both producers and regional development companies, and to ensure that development projects are self-sustaining after the investment period. These ideas were most relevant in the case of SAED. 53. At the request of the President of the Republic, a seminar was convened in March 1984 to discuss agricultural policy issues with the major lenders. In April, the President made a number of policy decisions that constitute the "Nouvelle Politique Agricole" (NPA) (para. 33). A major  - 17 - measure calls for a reduction in the responsibilities and number of staff in rural development companies, that is, "deperissement", or a winding down process. In the second half of 1984, the Government began to implement the NPA, indicating its determination to reform the agricultural structure. Among the initiatives relevant to the proposed project was an increase in the consumer price of rice from CFAF 130/kg to CFAF 160/kg, effective on January 15, 1985, 3/ a move indicative of the utilization of cereal pricing as a basic demand-management tool. 54. Meanwhile, the Government had started discussions internally and with various aid agencies. A general policy framework was established in December 1984, a second "lettre de mission" for SAED was signed, and public funds have been allocated to the financing of SAED's public service activities, i.e., those associated with planning, programming, supervising construction and maintenance of major works, as well as training (para. 36). 55. IDA supports the Government's long-term objectives of development of irrigated agriculture in the Senegal river valley, in which SAED has a major role to play. These objectives require, however, that the cost of irrigation development be decreased. This implies the adoption of a strategy favoring small-scale perimeters, and a thorough transformation of SAED's structure and operations. SAED's Second "Lettre de Mission" 56. The preparation of the "lettre de mission", accomplished by SAED with the assistance of the French Fonds d'Aide et de Cooperation (FAC) and Caisse Centrale de Cooperation Economique (CCCE), U.S. Agency for International Development (USAID) and IDA, analyzed the many causes of SAED's problems. The price of paddy was not high enough to reward farmers' efforts, although various forms of subsidies (para. 37) were supposed to compensate for this. SAED sold inputs (fertilizers, seeds, herbicides, pesticides) well below their purchase price. It did not make the farmers pay the full price of land preparation (levelling, plowing, offsetting) and water, which is pumped from the river and distributed through a network of canals. SAED used its own services to maintain tractors and other agricultural equipment and earthmoving machines. Finally, the cost of seasonal credit was borne by SAED. This disregard of basic economic mechanisms led to a situation where operations were run by a cumbersome administration, SAED, and where farmers did not feel committed to agricultural operations that remained to a large extent out of their control. As operations expanded, the Government, on which SAED depended to finance its deficit, became unable to provide the needed subsidies due to severe budgetary constraints (para. 37) and this difficulty can now only be remedied by external assistance (para. 63). 3/ The previous increases occurred in January 1982, from CFAF 80 to 105, and in August 1983 to CFAF 130.  - 18 - 57. The basic geal of the "lettre de mission" is progressively to relieve Government of the burden of financing SAED's production-related activities and to transform SAED, which is now both a rural developer and a service unit for farmers, into a strictly public service company. Over the next few years, SAED would progressively surrender its ancillary service activities to smaller and more flexible private enterprises, to attain a new financial balance by redistributing charges between the Government and the farmers in accordance with the NPA. To this end, the SAED disengagement process outlined by the "lettre de mission" calls for the gradual relinquishing of activities that can be transferred to more adaptive firms (para. 37). The speed, extent and necessary conditions of this disengagement will be determined by the results of the studies (para. 61). The second "lettre de mission" therefore prescribes (i) disengagement studies; (ii) implementation of urgent delayed maintenance; (iii) payment by the Government of funds to cover, for the years 1984/85 through 1986/87, SAED's public service activities, which SAED will retain after its transformation, and (iv) financing by other lenders of SAED's decreasing operational requirements. These operational requirements correspond to the activities that will be transferred to the private sector during the period covered by the "lettre de mission" (para. 37). 58. As a result of the implementation of the "lettre de mission", SAED would become more a planning and supervising agency than it is today. It would contract for and supervise the construction and maintenance of major collective irrigation installations, which should remain centrally controlled, and would continue to help village groups to organize and to manage their irrigation operations. 59. To help achieve the long term objectives of agricultural development in the valley, a sequence of projects has therefore been devised: a) A first (reorientation and maintenance) project, i.e., the proposed one, from mid-1985 to mid-1987. The project would be co-financed by IDA, CCCE/FAC and USAID and would help the Government and SAED to execute the objectives of the second "lettre de mission" (para. 57. items (i) to (iv)). b) A second project (wi:h restructuring, rehabilitation and possibly some new construction), would be appraised after the recommendations of the disengagement studies have become available. The construction period of this second project would run from the beginning of 1987 to the end of 1989. Preparation of the physical works to be included in this project is now underway. A preliminary estimate of the economic rate of return of the planned project is 16Z (it would be above 10% for new perimeters alone), taking the construction costs of the Diama and Manantali dams as sunk costs.  - 19 - c) Subsequent (expansion) projects would include the construction of new perimeters throughout the valley, which would coincide with the operation of the Manantali dam. Project Description 60. The proposed project would: - carry out the disengagement studies for activities that will be progressively taken over by the private sector; - implement urgent maintenance works; - finance SAED's operating deficit during the period of the "lettre de mission";and - provide funds for the resettlement of former staff from rural development companies. a) Studies 61. Five studies are included in the "lettre de mission", with a view to preparing SAED's disengagement process. Ci) The first study would define the steps of the disengagement up to June 30, 1987, with a view to transforming SAED into a company that would only deal with planning and supetrvising the development of the valley. This means abandoning SAED's involvement in agricultural production through subsidized land preparation, repairs of agricultural equipment, distribution of inputs, credit, and operation of rice mills. The study would deal with the problem of phasing out personnel and finding new jobs for the employees who would be compelled to leave SAED in stages as a result of its reduced activity. Consultants for that study are expected to give their conclusions before the end of October 1985. (ii) A companion study would examine the scope and the conditions for the establishment of private enterprises in the valley to take over the activities relinquished by SAED. Such new private ventures would include the operations of: varehouses for input distribution, tractors and other equipment services, mechanical repair shops, and rice mills in association or in competition with existing dehullers. (iii) Another study related to disengagement would deal with agricultural credit. It would involve the national agricultural credit organization, Caisse Nationale de Credit Agricole du Senegal (CNCAS), which woull have to decide on the timing and logistics of opening branches in the valley to provide credit to farmers and small private businesses. There is already a strong suppressed demand for short- or  - 20 - medium-term credit for input distribution, land preparation works, and purchase and repair of agricultural equipment. (iv) The last disengagement study is technical in nature and relates to the new farming conditions that will result from the spread of double cropping after the commissioning of the Diama dam in mid-1986, and from planned flood recessian cropping after the commissioning of the Manantali dam in 1989 (para. 42). The study will explore new types of agricultural equipment and will examine whether animal traction can be introduced into the valley as a means of reducing production costs which are to be fully borne by the farmers upon SAED's disengagement. (v) Because the economics of irrigation will be profoundly modified by the operation of the new dams, a master plan is necessary for the long-term development of irrigated agriculture on the laft bank of the valley. The master plan would have to be coordinated with an operational study (dam operation and optimal use of water) for the Manantali dam financed by an SPPF, and with OMVS, since the Senegal river waters will be used for irrigation, electricity and navigation. The master plan for the left bank, in Senegal, would have to be linked to a master plan for the right bank, in Mauritania, and also with the master plan of the part of the river which is located in Mali between the Manantali dam and the Senegalese border. The master plan for the left bank would be the synthesis of subregional plans, two of which, those of Bakel, in the upper valley, and of the Delta, in the lower valley, would have to be completed beforehand. It was agreed at negotit.tions that SAED would prepare an action program on the steps to be taken for its disengagement, based on the recommendations of the first four of the above studies, and that the action program would be submitted to the Association for approval before January 31, 1986. In addition, to ensure continuity in the policies applied to SAED and in SAED's contractual relationship with the Government, it was agreed at negotiations that a third "lettre de mission " would be prepared prior to the end of the current one; this third "lettre de mission" would be based on the objectives defined for SAED in para 58 above. b) Maintenance Works 62. Tne second "lettre de mission" provides for maintenance works that had been postponed for lack of funds and are now urgently needed by SAED to conduct its operations for the duration of the "lettre de mission". They include: (i) the provision of spare parts to the Delta pumping stations and the installation of two emergency pumping groups;  - 21 - (ii) repairs or overhaul of earthmoving equipment for current operations; (iii) repairs or overhaul of tractors and land preparation equipment for current operations; (iv) maintenance of the rice mills of Ross Bethio and Richard Toll; and (v) maintenance of irrigation and drainage network and protection against flooding. c) Financing SAED's Operational Expenses 63. The "lettre de mission" has made a distinction between two kinds of operations financing for SAED: that of the cost of public service activities which SAED will continue to perform, beyond the disengagement period, and the decreasing subsidies that will finance, only for the duration of the "lettre de mission"1, the activities which SAED will eventually relinquish to the private sector. Presently, and at least for the duration of the "lettre de mission", farmers are unable to contribute to the payment of public services, such as planning of the development of the valley and construction and maintenance of major collective installations (para. 37). The Government therefore agreed in the "lettre de mission" to finance such services. However, because of severe budgetary constraints similar to those of the past years (para. 56), the Government will not be able to finance all sectoral adjustment subsidies, which will thus have to be financed by foreign co-lenders (para. 67). Those of SAED's operational requirements that are to be covered by those subsidies would consist of recurrent costs, spare parts and maintenance works, petroleum products and service supplies, whereas the payment of arrears to suppliers, to the Government and public institutions would be primarily financed by Government's funds. Those arrears would then be paid first, according to the order of precedence. It was agreed at negotiations that, prior to IDA's first disbursement, and not later than March 31, 1986, there should be no arrears going back further than six months. d) Financing the Resettlement of Former Staff from Rural Development Companies 64. At the time of negotiations, IDA accepted at the Government's request to participate in partly financing the resettlement, in productive activities of the private sector, of about 2,000 employees laid off by rural development companies (para. 33). This financing would be implemented through Societe Financiere Senegalaise pour le D&veloppement de 1'Industrie et du Tourisme (SOFISEDIT). The Government would open a Resettlement Fund for that purpose and would deposit therein amounts totalling US$1,000,000 equivalent. It would also deposit in the Ressettlement Fund the amount of US$500,000 equivalent allocated by IDA and the US$500,000 equivalent grant/credit provided by other lenders, and relend the proceeds of the Fund under the terms of a subsidiary loan agreement satisfactory to IDA to be entered into by the Government - SOFISEDIT. SOFISEDIT would therefore be responsible for - the Resettlement Fund and for the allocation of funds rural development companies, who would apply for assistarc:-.  - 22 - their own business, under criteria to be approved by IDA. A condition of disbursement of the IDA credit for this component would be the initial deposit of US$500,000 equivalent by the Government in the Resettlrment Fund. This initial deposit should be made by June 30, 1986. Project Implementation 65. The studies financed by UNDP would be carried out by consultants selected from short lists; co-lenders would use their own procedures for the others (para. 67). The studies are now under way, except for the master plan of the valley, the financing of which is not yet ready. We expect to obtain the consultant's recommendations in October/November 1985, so that an action program could be completed at the beginning of 1986 (para. 61). The implementation of the study recommendations, the maintenance works and the current operations would be carried out by SAED, as they are part of the normal activities which SAED is now adequately equipped to perform. Because of financial shortages due to delays in obtaining committed Government funds, and because funds from foreign lenders have not yet been made available, SAED has not taken any action yet regarding the maintenance works. Project Cost and Financing a) Project Cost 66. The estimated cost of the project, which is exempt of taxes, is US$15.1 million equivalent, of which about US$2.2 million (15%) in foreign exchange costs. Costs are based on estimates of August 1985, the date of negotiations. Contingencies, which provide for any impact on SAED's overall operating deficit caused by unforeseen operating expenses in connection with its current program of construction (para. 77), do not include any physical contingency but include price contingencies of 10% annually on local costs, and on foreign costs as follows: 1985, 5%; 1986, 7.5%; 1987, 8%. b) Financing Plan 67. The Government has committed itself to staged disbursements to SAED totalling CFAF 2,418 million to cover the public service costs from 1934/85 through 1986/87, including arrears to suppliers. A condition of effectiveness of the proposed credit would be the disbursement by the Government of all funds it has committed to SAED prior to December 31, 1985, which amount to about CFAF 1,335 million (US$2.72 million equivalent). IDA would participate in financing consulting services, equipment and operating requirements (para. 69). FAC would participate in financing the studies and CCCE would make its contribution through a structural adjustment loan for which disbursements have started as of July 1985. USAID is expected to finance the Bakel subregional master plan for an estimated CFAF 50 million. UNDP, with IDA as executing agency, would provide about CFAF 200 million for the valley master plan. Participation among CCCE/FAC, UNDP, USAID and IDA for the project would produce the following financing plan:  - 23 - CFAF million USS million Government of Senegal 2,908 a/ 5.93 IDA 2,385 4.86 CCCE/FAC 1,622 3.31 UNDP 200 0.41 USAID 50 0.10 Others 245 0.50 Total 7Z410 15.11 a/ CFAF 1,087 million of counterpart funds that were granted by USAID to the Government of Senegal during the period 1980-1983 are now reallocated to SAED and included in Government's contribution. Foreign lenders' funds would be passed by Government to SAED in grant form. c) Disbursement Timetable 68. Disbursements for SAED are based on SAED's actual expenditures in the 3rd quarter and cash forecasts for the last quarter of 1984/85 and for the next two years, 1985/86 and 1986/87, and on the assumed availability of CCCE's funds in July 1985 and of IDA's in January 1986. Arrears would be a priority for payment (para. 63). IDA's disbursements would be large in the last two quarters of 1985/86, so as to catch up with those of CCCE. Disbursements of the two co-lenders would then proceed on a parallel basis, about pari passu in 1986/87. d) Disbursement Schedule 69. Disbursement of the proposed IDA credit is expected to be completed by mid-1987 under the following categories:  - 24 - X of total CFAF million US$ million expenditures 1. Services of consultants, experts, auditors, specialists and studies 100 0.21 100 2. Agric. machinery, equip. and spare parts 428 0.87 80 3. Operating Costs, including salaries, materials and supplies 1,376 2.80 80 4. Resettlement grants 245 0.50 25 5. Unallocated 236 0.48 2 L385 4.86 Procurement and Disbursement Procedures 70. Maintenance works and repairs of equipment are scattered throughout SAED's supervision area and are not likely to attract foreign bidders, whatever the source of financing. Works and supply of equipment for the part financed by the proposed IDA credit 4/: - up to a value of CFAF 5 million (US$10,000 equivalent) would be directly contracted with local suppliers, where items are proprietary; otherwise, local competitive bidding rules would apply; - with a value between CFAF 5 million and CFAF 50 million (US$100,000 equivalent), would be subject to local competitive bidding rules, which were found at appraisal to be satisfactory to the Bank; - above CFAF 50 million, would also be subject to local competitive bidding and would, to the extent they are financed bv IDA, be submitted to the Association for prior approval. Foreign bidders for all contracts would have the opportunity to participate for the part financed by the IDA credit. 71. Withdrawal applications would be fully documented, except for categories (3) (para. 69), for which statements of expenditures (SOE) would suffice. In the case of SOE procedures, supporting documents would have to 41 The parts financed by CCCE/FAC and USAID (para. 67) would be procured through their own rules.  - 25 - be certified by SAED and kept by SAED for verification by the auditors financed under the project and for review by IDA supervision missions. 72. In view of SAED's shortage of funds to carry on its current operations, IDA would make an initial deposit of US$500,000 into an IDA special account in a local commercial bank. This amount represents IDA's estimated average quarterly contribution for such current operations over six quarters (para. 68). IDA would replenish the special account upon receipt of satisfactory evidence that related expenditures were eligible for financing. Details of the establishment of the special account were agreed at negotiations, and it was also agreed that SAED would be required to open a revolving fund account in the same bank to receive the funds which the Government has committed to SAED for specified dates (para. 67). A condition of effectiveness of the proposed project is that all conditions precedent to effectiveness of other co-lenders' loans or grants have been fulfilled. Auditing 73. In view of the non-certification of SAED's accounts for the year 1983/84, a condition of effectiveness of the proposed project would be a satisfactory assessment by auditors, acceptable by IDA, of SAED's accounting procedures to determine whether they are set up in accordance with the auditors' February 1985 recommendations on procedures and internal controls (paras. 38 and 39). It was agreed at negotiations that SAED's auditors would: - perform a semi-annual control of all funds allocated to the project by the Government and the co-lenders, and submit their report to IDA within one month after the end of every semester; - submit to IDA SAED's audited accounts and their reports within six months after the end of every financial year. SAED's Projected Financial Situation 74. The amount of external grants and Government financing, as calculated in SAED's projected activities (para. 68), is based on a set of agreed assumptions regarding the level of paddy bought and processed by SAED, the price of paddy, and the price of services rendered to farmers 5/. The volume of paddy bought by SAED, which in 1984/85 was below the early forecasts, is expected to increase in 1985/86 and then be sharply reduced in 1986/87 and subsequent years. The price of paddy, which was raised from CFAF 66 to 85/kg for the 1985/86 crop, is calculated to provide farmers with enough resources to pay for land preparation and water provided by 5/ SAED's actual and forecast financial statements are in Annex 4, assumptions to financial projections are in Annex 5.  - 26 - SAED, at 100% and 60X of their cost, respectively, and to pay for inputs at their full price from 1985/86 onwards. 75. Further to the recovery of the cost of inputs, credit, land preparation and water, the objective of disengagement is to obtain full recovery of the cost of SAED's irrigation and drainage activities. It was agreed at negotiations that by the end of the period covered by the "lettre de mission", on June 30, 1987, the farmers would be charged the full cost of operation and maintenance of irrigation and drainage, as well as the replacement cost of the existing pumps. If this objective is attained by that time, the only costs that would not be recovered from the farmers would be the costs to be borne by SAED in its modified status (para. 58) and financed by the Government, mainly those related to the supervision of the construction and maintenance of major collective irrigation installations, SAED's costs in its advisory capacity to village groups, and construction expenditures, financed by the Government and by outside lenders. The question of recovery of those costs from farmers will be addressed in the third "lettre de mission" (para. 61). 76. SAED has already started to disengage from agricultural credit activity, which will be taken over by the National Agricultural Credit Bank of Senegal (CNCAS) in a form to be detailed in the recommendations of the agricultural credit study (para. 61, iii). The means and timetable according to which private business is expected to take over land preparation from SAED will be detailed in the recommendations of the study on conditions of establishment of private enterprises in the valley (para. 61, ii) and in SAED's action program for the implementation of the "lettre de mission" (para. 61). It has been further assumed that personnel reduction would proceed steadily, in line with SAED's reduction of activity, and that the number of employees, which averaged 950 in 1984/85, would go down to an average of 600 in 1986/87, which means a total number of about 500 at financial year's end. In that connection, the main departments concerned by the disengagement process are the equipment department, the regional divisions and the two rice mills, which would be considerably reduced or would have disappeared from SAED's accounts by the end of 1986/87. It is expected that the change in the nature of SAED's operation will call for some degree of change in the expertise of its staff, with more emphasis being given to planning and contracting capability and to extension, rather than to agricultural and irrigation works. 77. SAED's forecasts for construction expenditures in 1985/86 and 1986/87 have been brought down to a more realistic level (Annex 5), and the appropriateness of planned expenditures in rehabilitating its two rice mills of Richard Toll and Ross Bethio would have to be carefully examined by the consultant in charge of the relevant study (para. 61, ii). It was agreed at negotiations to proceed with maintenance works on the two rice mills (para. 62) only if discussions between IDA and the borrower concerning the study recommendations confirm the usefulness of these works, and to proceed with full rehabilitation of those mills only after agreement between the Government and IDA on the results and recommendations of the study. Because the great volume of suppliers' arrears presently hampers  - 27 - SAED in its operating activities (para. 35), the implementation of SAED's construction program, to be financed by external lenders, must be discussed each year with IDA. as it would have an impact on SAED's financial situation through increased operating costs. It was agreed at negotiations that, in the last quarter of each financial year, SAED's program of construction expenditures for the following two years would be discussed with IDA, prior to its execution. Riparian Rights 78. The proposed Project is limited to the replacement of defective equipment and to maintenance of existing facilities; it does not entail any increase in the level of water consumption. Therefore, the Project will have no adverse impact on the rights of other riparians. Justification 79. By the time of project completion, SAED would become a planning and supervising agency with an important role to play in the development of the valley. It would also be in charge of supervising the construction of major collective installations and of maintaining them, and would no longer be a burden to the Government through economically unhealthy subsidies to farmers, who would thereafter be exposed to actual operating conditions. Development of rice production could thus proceed on a sound basis. Furthermore, the Government is unable to sustain SAED at its present level of activity; without external help, SAED would have to curtail its operations drastically, a situation that would be highly detrimental even to current agricultural activities in the valley, thereby compromising further development of the irrigation potential. In addition, following the rehabilitation of its financial situation under the proposed project, SAED would be able to carry out an IDA-financed rehabilitation project, to be followed by "new perimeter" projects, subject to the establishment of an action program resulting from the recommendations of the disengagement studies (para. 61). Finally, the proposed project is the first of a series of projects aimed at strengthening SAED's capacity to provide vital services to farmers, at cost, and to ensure that irrigable land is optimally developed when the dams go into operation. Benefits 80. Given the present tight financial situation of Senegal and SAED, the first benefit of the project would be to avoid disruption of agricultural production in the Senegal river valley and the hardship for farmers which would result from SAED's bankruptcy. A second benefit would be to strengthen SAED to enable it to carry out a more comprehensive rehabilitation project, as well as subsequent irrigation expansion projects, in a sound financial, economic and social environment, with farmers in a position to manage their business themselves. A third benefit would be the reestablishment of market mechanisms in the Senegal valley whereby goods and services would be exchanged on an economic basis: farmers would pay for inputs at their actual cost and would be able to sell their products at remunerative farmgate prices. The Government would also  - 28 - be led to devise a proper balance of rice prices in relation to production, import and consumption, by keeping the production price at a level sufficient to stimulate or maintain production, and by raising the retail price in proportion to the production price to avoid draining its finances. It is not possible to quantify these benefits. Risks 81. Project risks would be in the form of benefits not realized. Their realization depends on the way (speed, priorities, thoroughness) in which recommendations of the disengagement studies would be implemented. For example, private business might be reluctant or slow to take over SAED's activities, or Government's commitment to agricultural reforms could change. Any of these occurrences would affect or possibly jeopardize the project's implementation; IDA would endeavor to contain their adverse effects through close monitoring of project implementation, discussions and follow-up on the recommendations of the studies, and audit controls. The prospect of IDA participation in subsequent irrigation projects, conditional on the satisfactory implementation of the proposed project, would be an added inducement to Government and SAED to implement the project properly. However, if SAED's disengagement is slower than forecast and SAED's continuing role in production-related activities is considered detrimental to the implementation of the follow-on project, such implementation would be delayed. PART V - RECOMMENDATION 82. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. A.W. Clausen President by Robert Picciotto Attachments October 4, 1985 Washington, D. C.  - 29 - Annex 1 T A 4 L 1 34 Fage 1 of 7 nuuaa - locAL IWTCATORl DATA *fl SF53101 0109 1NRIGcUm A Mh) Ia mm? (NORY ncgT RflEHATEI ib NowT MIBLE INCONK NIaoLE TNM 1m4L loyal EUTINa?ELt AFRICA S. OF MUR N. AFRICA A MID AT mAN cumm we. no TOTAL 196.2 196.2 196.2 ACRICULTUAL ".6 104.J 109.3 Cw FM CI (go) .. .. 440.0 1063.8 1131.9 10010 COSMTOM ip (zaLOCBM OF OIL qUIVALET 331.0 Ob0.0 206.0 331.1 b23.9 FOnAC ANDTrL IrsCo POPULATION,ID-TAR (T(UOnmS) 3496.0 4415.0 6211.0 URUN FFULAION (E 0 TOTAL 23.0 30.0 34.4 32.0 49.0 POPULATION PROJUCTIONS POPULATItON IN E 2000 (HILL) 10.1 STATIOART POPULATION MILL) 30.0 POPULATION MONETUM 1.e POULAITION 0,NEITC M SQ. RHI. 17.6 22.5 31.4 65.1 17.6 Rn SQ. im. *a1R. LAND 35.1 62.2 35.2 1:4.6 470.1 POU.ATIGI ACE ST*RUURE (2I 0-14 tIS 42.1 43.9 44.4 45.6 43.5 i5-64 TRS 54.2 53.1 52.6 S1.5 53.0 65 AND AOVE 3.0 2.6 2.8 2.7 3.3 POPULATION GROVIN RATE CZ) TOTAL 2.8 2.3 2.6 2.9 2.8 URBAN 3.4 5.0 3.7 3.1 4.4 CON BIRTH RATE (PER T70OU3) 47.5 417 46.1 47.0 40.0 CRUDE DEATH RATE CPnR 70OUS) 24.4 21.9 18.5 15.0 11.5 06Ss ROOUCTnON RATE 3.1 3.1 3.2 3.2 2.6 PAIILT PLANNING ACC0PT70S. ANNUAL I1US) .. USERS C P MAo RD W ) .. .. 4.0 c 6.4 21.4 INlDE or roo rROD. PUR CAPITA ( 19b9-71-100) 115.0 81.0 64.0 82.9 95.1 PER CAPITA SUPPLT OP CALOS tS (2 OF RZQUIRUNCTS) 99.0 93.0 99.0 98.5 118.Z PROTEINS (CRAMS PER DAT) 67.0 12.0 70.0 55.4 77.8 OP WHICM A42KAL AND PULSE 20.0 19.0 19.0 /d 16.5 17.8 CHILD (AGES 1-4) DEATH RATE 45.9 38.1 28.0 16.6 12.8 LIrE EXPEC. AT BIRTH (TEAS) 39.4 42.6 45.5 52.0 57.8 NPAM'T mutT. RATE (PER THOU) 178.5 166.0 I1O.o 108.8 96.0 ACCSS TO SAFE WATER (ZPOP) TOTAL .. .. 42.0 /a 42.4 67.2 UUN .. .. 77.0 7;% 67.5 93.4 RURAL O. 25.0 35.8 45.8 ACCESS rO EJIUEA DISPOSAL (t OP POPULATION) TOTAL .. .. 33.0 /a 28.9 45.9 URANI .. .. too'.o 7 57.7 t3.0 RURAL 2.0 7; 20.7 28.6 POPULATION PER PHYSICIAN 24990.0 16790.0 13780.0 Ic 11791.7 4331.0 POP. PER NURSIN PERSON 3150.0 1f 1950.0 1390.0 7 2459.8 1845.0 PO. PER NOSPITAL BED TOTAL 840.0 620.0 900.0 Id 981.1 bZ1.8 URBAN 460.0 450.0 s60.0 7i 366.8 545.0 RURAL 1990.0 1250.0 12U0.o 7; 4371.9 2511.3 ADNISSIONS PER HOSPITAL BED .. 22.2 29.2 Id 27.2 25.7 -Si- AVEIRCE SIZE OP HOUSEHLD TOTAL .. .. URBAN 7.6 RURAL 6.07 . AVERSE NO. oF PEBSONS/RObI TOTAL 1.5 /i . mN .. .. . .. RURAL rutDTAcE Of DWEILLINS WIT ELECT. TOTAL UU .. ... RURA .L  - 30 - Annex 1 T AB1*L C 14 Page 2 of 7 SENCC4L _ - SOCIAL INDICATORS DATA SHUT SENEGAL REVERECE GROUPS (WEIGHTED AVUENS) a HOST (HOST RECENT ESTIMATE) /b RECECN HIDDLE INCOS MIDDLE INCO 19601-! 197u/-b gSTjLjjTL/b AFRICA S. o0 SAHARA N. AFRICA A ID EAST ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 27.0 36.0 48.0 93.7 89.8 '441 36.0 47.0 38.0 100.0 103.7 FrLE 17.0 30.0 36.0 63.2 73.2 SECONDARY: TOTAL 3.0 9.0 12.0 17.3 42.9 HALC 4.0 13.0 16.0 23.0 50.9 FINALE 2.0 3.0 8.0 14.8 34.6 VOCATIONaL (I or sEcoNDaRY) 23.1 9.2 10.4 5.9 10.0 UPIL-TEACNER RATIO PRIMARY 43.0 La 65.0 43.0 41.t 29.7 SECONDARY 34.0 34.0 21.0 25.5 16.6 acnUoWfon PASSENGU CARS/THOUSAND POP 5.7 8.7 . 20.6 17.6 RuDnO RECEIVERS/THOUSAND 'OP 33.7 60.7 61.3 107.6 375.9 TV RZCEIVERS/THOUSAND POP .. 0.3 0.8 20.8 3l.Z NEWSsPAPR (DAILY GENuE INTEREST) CIRCUILATION PER THOUSAND POPULATION 3.7 4.5 7.3 16.4 37.2 cNMA ANNuAL ArTCeDAxCE/CAPITA .. .. 0.7 fl 0.4 2.4 LABn ro TOTAL LABOR FORCE Cr10us) 1619.0 L925.0 2509.0 UALE (PERCET) 39.5 39.0 37.9 36.2 11.0 AGRICLTUE (PERCENT) 84.0 60.0 76.9 /a 54.5 42.4 INDUSMT (PERCENT) 5.0 7.0 IO.0 7W 18.3 27.9 PAUTICIPATICO RATE (PERCENT) TOTAL 46.3 43.6 40.4 36.8 26.2 NALE 56.3 53.7 50.7 47.1 46.2 FVKALE 36.4 33.7 30.6 27.2 5.8 WIOIC DEPENDECCY RATIO 1.0 L.1 1.2 1.3 1.J mm DlISIRIDTION PERCENT OF PRIVATE INCOME RECEIVED by HIGEcST 32 OF HOUSEHOLDS 36.8 /k HlIZGST 20S OF HOUSEHLDS 62.5 7N LOESTS 20S OF HoUSEHOLDS 3.2 T.. LOWEST 402 OF HOUSEtHOLDS 9.6 7Tk WM TAMET - ESTIMATED ABSOLEs POVCETY INCOSZ LEMvL (USS PER CAPITA) UR .. .. .. 590.7 226.3 RUALU 62.0 /c 275.3 134.0 ESTIMlATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 194.0 /c 545.6 431.5 BURAL .. .. .. 201.1 326.0 ESTIMATED POP. BELS ABSOLUTE POVERTY INCOHE LEVEL (C) UBAN .. RURAL .. .. .. .. 29.0 NOT AVAILlE NOT APPLICABLE NO T Z S /a The group averegee for each IndLcator are populaclon-_lcbted aritbeetic mane. Coverage of countriem among the Indicators depends on availability ot data and is not uniform. /b Unlear otherwise noted. 'Date for 1960" refer to any ymor between 1959 and 1961; 'Daea for 1970' between 1969 end 1971; and data for "flot Recent Eatleet' between 1981 and 1963. /c 1973; /d 1977; la 1980; If 1963; jg 1962; Ih 1973; /1 1955; fl 1976; /k Population. JUIN, 1985  - 31- Annex 1 Page 3 of 7 DEFITmONS OF SOCIAL INDICATORS Nornse Alhough she deawaue drawn rm soun nerally juded the most authontativeand relihle. it should also be noted that they may not be mntemnuolly comparble beause of the hc of stdanddimbd delfnitins and coxpau Eed by difaent coumtnes in collecung ihe daa The data are, nonethek uweWd so describe orders of magnitude, induiate trends, and characterne crtuin major diffeens between countnr. The refernce groups are (1) the .nme countqry grup of he subjet country and (2) a country group wish somewht higher averr income shna the country group or the subjet country (cwept for "High bIcome Oil Ezpoflrs group where Middle Incowme North Afrca and Middl Easai s chosn because ostronger soclturt affinities). In the reference grup da the awvag ate population weighted arithmeic meuns for each indientor and shown only wen majority ofthe countne in a group h data for thst indicuor. Since the covemae ofdountine among the indicaorf depends on the avulabiity ofdada and not unifonrn caution muss beexercised in miatingavergsof one indiator nother. Thse averages are only uwsful in companng the value of one indicatorat a timeasmong the country snd refierene groups. AREA (thousand sq.kmt Crude Birth Rate (per tho-ssadj-Number of live births in the year 7Tore-Total surfaee area comprising land area and inland waters; per thousand or mid-year population; 1960. 1970, and 1983 data. 1960, 1970 and 1983 data. Crd Demth Rate (per the-lsaed-Number of deaths in the year Airieafstw-Estimate or agricultural area used temporarily or per thousand or mid-year population; 1960. 1970, and 1983 data. permanently ror crops, pastures. market and kitchen gardens or to Gross Reprodution Rate--Average number of daughters a woman lie fallow. 1960. 1970 and 1982 data. will bear in her normal reproductive period if she experier-es present age-specific fertility rates; usually five-year averages ending GNP PER CAPITA (US-S' GNP per capita estimates at current in 1960. 1970. and 1983. market prices. calcu'l . by same conversion method as World Family Pna4ng-Acceptors .4Annal (thotandr)-Annual num- Bask Atlas( (981-83 basis); 1983 data. ber of acceptors of birth-control devices under auspices of national ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program. consumption of commercial primary energy (coal and lignite. Fandly Plaaia-Users (percent of married aimeme-The percen- petroleum. natural gas and hydro-. nuclear and geothermal elec- tage of married women of child-bearing age who are practicing or tricityl in kilograms of oil equivalent per capita; 1960. 1970. and whose husbands are practicing any form of contraception. Women 1982 data. of child-beanng age are generally women aged 15-49. although for some countries contraceptive usage is measured for other age POPULATION AND VITAL STATlSTICS groups. Total Poplation, Mid- Year (thoasands-As of July 1; 1960. 1970. FOOD AND NUTRMON and 1983 data. Indx of Food Production Per Capita (1969-71 l- 10N)-lndex of per Urba Popuatin (percent of toral)-Ratio of urban to total capita annual production of all food commodities. Production population, different definitions of urban areas may affect compar- excludes animal feed and seed for agriculture. Food commodities ability of data among countries; 1960. 1970. and 1983 data. include pnmary commodities (e-g. sugarcane instead of sugar) Poputi proeions which are edible and contain nutrients (e.g. coffee and tea are Population in wear 2000-The projection of population for 2000. excluded): they comprise cereals. root crops. pulses. oil seeds, made for each economy separately. Starting with information on vegetables. fruits. nuts. sugarcane and sugar beets, livestock, and total population by age and sex. fertility rates, mortality rates. and livestock products. Aggregate production of each country is based international migration in the base year 1980. these parameters on national averagc producer price weights; 196145. 1970. and were projected at five-year intervals on the basis of generalized 1982 data. assumptions until the population became stationary. P., Capita Supply of Caloies (percenr ef eaire-setsD-Comput- Stationary population-is one in which age- and sex-specific mor- ed from calorie equivalent of net food supplies available in country tality rates have not changed over a long period. while agc-specific per capita per day. Available supplies comprise domestic produc- fertility rates have simultaneously remained at replacement level tion. imports lcss cxports. and changes in stock. Net supplies Inet reproduction rate= 1). In such a population. the birth rate is exclude animal feed. seeds for use in agriculture. quantities used in constant and equal to the death rate, the age structure is also food processing. and losses in distnbution. Requirenents were constant. and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity sizc was estimated on the basis of the projected characteristics of and health considenng environmental temperature, body weights. the population in the year 2000. and the rate of decline of fertility age and sex distnbution of population. and allowing 10 percent for rate to replacement level, waste at household level; 1961. 1970 and 1982 data. Population Monienrrun-Is the tendency for population growth to Per Capita Supply of Protein (grams per day)-Protein content of continue beyond the time that replacement-level fertility has becn per capita net suppiv of food per day. Net supply of food is defined achieved: that is. even after the net reproduction rate has reached as above. Requirements for all countnes established by USDA unity. The momentum of a population in the year t is measured as provide for minimum allowances of 60 grams of total protein per a ratio of she ultimate stationary population to che population in day and 20 grams of animal and pulse protein. of which 10 grams the year t, given the assumption that fertility remains at replace- shouid be animal protein. These standards-are lower than those of ment level from year : onward. 1985 data. 75 grams of total protein and 23 grams of animal protein as an ftpl.dion Desty average for the world. proposed by FAO in the Third World Food Per sqJkm.-Mid-year population per square kilometer (100 hec- Supply; 1961. 1970 and 1982 data. tares) of total area: 1960. 1970. and 1983 data. Per Capita Protein Supply &aom Aina and Prke-Protein supply Per sq.km. agricultural land-Computed as abovc for agricultural of food denved from animals and pulses in grams per day; 1961-65. land only. 1960. 1970. and 1982 data. 1970 and 1977 data Populaio Age Structue (percenti-children (0-14 years). work- Chid fages 1-4i Deart Rate per thousaadJ-Number of deaths of ing age (15-64 years). and retired (65 years and over) as percentage children aged 1-4 years per thousand children in the same age of mid-year population; 1960. 1970. and 1983 data. group in a gwven year. For most developing countries data derived Population Growth Rate (percent)-tatal---Annual growth rates of from life tables; 1960. 1970 and 1983 data. total mid-year population for 1950-60. 1960-70. and 1970-83. HEALTH PopuAtion Growth Rae (perceur)_-aran-Annual growth rates Life Expectancy at Birth (years)-Number of years a newbom of urban population for 1950-60. 1960-70. and 1970-83 data. infant would livc if prcvailing patterns of mortality for all people  - 32- Annex 1 Page 4 of 7 at the time of of its birth were to stay the sane throughout its life. Ppl-teacher Ratio - primay. ard secondary-Total students en- 1960.1970 and 1983 data. roiled in primary and secondary levels divided by numbers of w Morfta Re (per dsnd)-N umber of infants who die teachers in the corresponding levels. before reaching one year of age per thouand live births in a given year; 1960.1970 and 1983 data. CONSUMPllON Acam t Si* WRr (pw df Nd)- d Pauseaar Cus (par uhaumaad p_opiition)-Passenger cars com- Nuw-Number ofpeope (totial urban, asd runl) with ranoable prise motor cars seating ls than eight persons; excludes amubul- m to .fe water supply (mcludes trated surface wat.as or ances hearses and militay vehides. untted but uncontaminated woter such a that from protected Xb Recwm (r s ppe, nAll typ Or mevm mboilk spmp and .tuy w ) as per8ntas of tbi rsw- for radio broadcasu to general public per thousand of population; tive populations. In an urba area a pubic fountain or standpost excludes un-licensed rccivers in countries and in years when loected not more than 200 meters from a houwe may be cond registration of radio sets was in effect; data for recent years may as being within reasonable am of that houw. In rurd aras not be comparable since most countries abolshed licensing. reaonable accem would imply that the houswife or mcmbers of the household do not have to spend a disproportionate part of the day TV Reciva (per thousand populat)-TV receivers for broadct in fetcWng the family's water neods to general public per thousand population; excludes unlcnsed TV the kmibrse t D_*1 ( 4!(~ needs receivers in countries and in years when registration of TV sets was Acces to Ezwert Diurna (percauta of papalationI -total. uran in det Nd rurl-Number of people (totaL urban, and rural) srved by excreta disposl as pe ntages of their respective populations. New5P!PW Cweaaoa (G e pear thosnd pepuifha)-Shows the ave.- Excreta dispoal may include the coliection and disposal. with or age circulation of daily general interest newspaper,' defined as a without treatment, of human excreta and waste-water by water- peiodical publicatior devoted primarily to recording general news borne systems or the uwe of pit prvies and similar installations. It is consdered to be -daily" if it appars at least four times a week. Ppdatou per ?hysida_P-lpulation divided by number of prac- Cinemas Annul AnendAne per Caia per Ye,-Based on the tising physicians qualified from a medical school at university levl. number of tickets sold during the year. including admissions to PIa__a. per Nursi Peasan-Population divided by number of drive-in cinemas and mobile units. practicing male and female graduate nurses, assistant nurse. prctical nurss and nursing auxiliaries. LABOR WRCE -_uu p.r Oesptal &d-tot_ - urban, and aurao-Npulation rTot Laord Foce (thmJi-Economically active persons. in- (total, urba, and rural) dvided by their respectve number of duding armed rowces and unemployed but excluding housewives. hospital beds available in public and privau. geneal and specAlS-d students. etc.. covering population of all ages. Definitions in hospitals and rehabilitation centers. Hospitals are establishments vanous countries are not compamble 1960. 1970 and 1983 data permanendy staffed by at east one physician Establishments prov- Feak (percar)-Feinale labor forc as percentage of totl labor iding principally custodial care are not included. Rural hospitals, force. howve include health and medical centers not permanently staffed Agrnare (perceut)-Labor force in farming. forestry. hunting by a physician (but by a niedical assistant, rurse. midwife. etc.) and fishing as percentage of total labor force: 1960. 1970 and 1980 wiiich offer in-patient accommodation and provide a limited range data. or medical facilities. Inds&ry (percenr)-Labor force in mining. construction. manu- Ad.dsio r 0wspia Red-Total number of admissions to or facturing and electricity. water and gas as percentage of total labor discharges from hospitals divided by the number of beds. force; 1960. 1970 and 1980 data. Artic6pat&us Roe (percet)-,otala mak. andfnwk-Participation HOUSING or activity rates are computed as total. male. and female labor force A.4ge .e of Hoasekld (persons per hausahold)-toea. m. as percentages of totaL male and female population of all ages ahdusal-A household consists of a group of individuals who share respectively; 1960. 1970. and 1983 data. These are based on ILOs living quarters and their main meals. A boarder or lodger may or participation rates reflecting age-sex structure of the population. and may not be included in the household for statistical purposes. long time trnd. A few estimates are from national sources. A.i Number of Perss par Room-total, urba, and arl- Economic Dependency Rario-Ratio of population under 15. and Average number of persons per room in all urban, and rural 65 and over. to the working age population (those aged 15-64). occupied conventional dwellings, respectively. Dwellings exclude non-permanent structures and unoccupied parts. INCOME DISTRIBtiTION Penemta of Diedrus wth Eleerrciy-toral, urb. n d rural- Pi ernae of Total Dfiposabe Incowe (bth in csh and kind)- Conventional dwellinp with electricity in living quarters as percen- Accruing to percentile groups of households ranked by total house- tage of total. urban. and rural dwellings respectively hold income. EDUCATION POVERTY TARGET GROUPS Adj ed Enroinuent Rajg The following estimates are very approximate measures of poverty AFimwy scho - totaL male and fknde-Gross tamak- a levels. and should be interpreted with considerable caution. female enrollment of all ages at the primary kvel as percentages of Estimsted Absoe Poverty 1n Le (USI perc i- spctive primary school-age populations. While many countries and rural-Absolute poverty income level is that incomc levd consider prmary school age to be 6-11 years. others do noL The below which a minimal nutritionally adequate diet plus essential differences in country practices mn the ages and duration of school non-food requirements is not affordable. are reflected in the ratios given. For some countries with universal Esimted Rele Pobverty Income Level (USS per cop ta)-arban educaion, gross enrollment may exceed 100 percent sinoe sonme and rura-Rural relative poverty income level is one-third of pupils are below or above the country's standard primary-scha.'ol a-erage per capita personal income of the country. Urban level is age- derived from the rural level with adjustment for higher cost of Secoday school - toadl, ma audferale-Computed as abovre living in urban areas. secondary education requires at last four years of approved pTi- Eimted t bpputo BeLw Absolte Pboerty lcme Lepd (pe'- mary instruction; provides genraL vocational, or teacher training ceit)-urIarr and ruavl- Percent of population (urban and rural insuct for pupils usuay of 12 to 17 years of age: correspond- who are absolute poor.- ence couns are generaly exduded. Vocioeal Frogmeni (permnt of scondary)-Vocational institu- Comparative Analysis and Data Division tions include technical industriaL or other programs which operate Economic Analysis and Projections Department independently or as departments of secondary institutions. June 1985  SENE6AL: ECONOMIC INDICATORS Population: 6212 (mid-1993. thous) 61NP per capita: 440 US' (19831 Amount Annual growth reies (1) at constant prices (hill US$ at ------- ---------- ------------------- -------------- current prices) 1990 1978 1979 19380 1981 1982 1983 1984 (595 Isse __ _ _ _ __ _ _ _ __ _ __----__ _ _ _ _ -_--------- - - - - - - - - - - - - - - - - - - - - - - --- ------- ------------ --- --- -- --- --- -- ---_______________ NATIONAL ACCOUNTS Gross Oonestic Product 29370 -6.3 9.6 -3.3 -9.9 14.4 4.2 -4.1 5.2 3.8 Agriculture SE9 -23.7 27.3 -19.3 -5.6 24.? 4.9 -29.5 19.3 3.2 Industry 739 -9.e 11.e -2.9 5.7 14.5 4.7 8.1 3.5 5.0 Other (663 4.0 2.4 3.5 -1.9 (0.6 3.7 9.4 4.5 3.5 Consumption 2984 4.7 0.5 2.9 3.3 6.5 4.8 -1.3 1l0 3.5 Gross Investment 460 -4.9 12.9 -22.3 1.1 6.5 3.1 -7.9 23.4 3.8 Export. of 6NFS 953 -30.4 12.1 -15.7 1.3 28.3 2.1 -3.1 8.6 S.O Imports of 6NFS 1327 -6.5 -5.8 -7.8 11.1 -2.4 3.7 -2.9 3.1 3.3 6ross Ooeostic Saving -13.7 -94.1 357.9 -92.8 -52.9 -23.4 -55.4 165.0 13.9 -_ -------------------_ ------------------- ----------- --------- -- -----------__------ -------------------- -------------------- PRICES W 6OP Oeflator((979-1106 93 lee (12 (29 (32 (42 (59 176 264 Exchange rate (US9- 1 226 213 211 272 329 381 429 472 -- -- - -- -- - --_- - -- -- - -- -- - -- --------- .------ _--------_-------_-----._ _ _ _ _ _----------------------------------------------- Share of GOP at Market Priceastl Average Annual Increase (I) (at current priews) lat constant prices) 1970 (975 IUll 1985 1999 1970-75 1975-80 1980-85 1905-90 Gross Domestic Product 10(.0 l(e.9 (99.9 (99.9 (99.9 1.9 0.6 3.9 4.1 Agoriculture 24.1 30.2 19.1 18.5 19.1 9.8 -3.9 2.8 3.9 Industry 21.5 24.0 24.9 26.9 29.9 3.2 2.2 5.9 5.5 Other 54.4 45.9 56.9 54.7 53.0 9.8 1.9 3.5 3.5 Consumption 89.9 97.7 (99.5 93.6 89.5 1.8 2.9 2.8 3.5 Groa Investment 15.7 17.9 t6.5 16.9 16.3 3.0 -2.4 4.7 3.8 Exports of GNFS 27.4 36.4 28.7 33.2 35.5 1.0 -4.9 5.4 4.9 Imports of GNFS 32.9 41.9 44.7 43.7 41.3 1.4 -9.2 2.6 3.3 PUILIC FINANCE FY 79 FY 79 FY 80 FY 91 FY 92 FY 93 FY 94 FY 85 ____________---- ----- -- - ----- ----- -______--_____ (billions of CFA francel Current Revenue 97.1 122.6 139.2 125.5 (51.9 175.7 (99.4 210.6 Current Expenditure 94.1 105.5 144.9 151.3 165.4 (96.6 295.4 220.4 m m Currant Balance 3.0 17.1 -5.7 -25.8 -13.5 -(9.9 -16.9 -10.4 Capital Expenditure */ 9.5 12.8 13.2 21.1 6.9 7.9 18.9 9.1 _ Surplus or Deficit (-l -6.5 5.1 -(9.9 -46.9 -20.4 -19.8 -26.0 -(9.4 0 a/ Central Government only. excludes paraetetels.  SENEGAL: EXTERNAL TRADE Populatlon: 6282 (nad-1993, thous? GNP per capita: 440 US$ 11983) Arount Annual growth rates (X) at constant prices (mil) US$ at at-------------_________._________ current prices) ISOS 1978l 1979 Igoe 1991 1992 1993 1994 1985 iege EXTERNAL IRADE Merchandine export 401 -48.1 24.1 -24.3 7.2 26.4 9.8 -7.7 9.9 s.8 primary 263 -51.1 25.1 -29.1 -9.4 73.8 9.5 -22.7 B.6 S.3 Petroleum 90 42.0 -37.0 -16.1 92.5 -55.0 15.4 0.g 4.1 3.5 Others 128 -75.D 167.4 -14.6 1.4 5.5 3.4 46.7 14.8 S.% Merchandise Imports 973 -12.4 -5.2 -13.9 17.3 -I.o 2.9 -4.9 2.3 3.8 Food and Beverages 21" 12.6 1C.4 -27.0 46.2 -10.9 -.2 -6.4 -11.3 2.5 Petroleum 276 19.8 -3.0 7.6 19.3 -14.0 5.5 -16.2 28.6 -1.3 Machinery & E4uipment ISO -24.7 -7.5 -18.5 -14.0 9.9 6.9 1.4 0.0 6.4 Others 329 -23.1 -15.2 -16.0 15.7 8.2 1.6 -0.7 2.6 3.8 Prices Export Price Index 94.2 1080. 115.7 1.,8.8 143.4 152.9 178.5 193.4 297.2 41 Import Price Index 88.7 I88.' 124.2 147.6 159.9 171.7 185.9 201.2 297.1 1 Terns of Trade Index 186.2 l18.8 93.2 94.9 09.7 89.1 95.5 96.1 100.0 Compoatiion of MerchendLse IradellJ Average Annual Increase (IS (at current prices) (at constant prices) 1975 1988 1985 1990 1975-80 19808-5 1985-90 larchandise export 180.0 180.0 180.0 l88.8 -5.4 8.4 6.8 pgrmary 70.5 55.2 57.2 54.8 -7.9 7.7 5.3 Petroleum 7.0 10.7 9.2 9.1 7.3 1.8 3.5 Others 22.5 26.1 33.6 36.1 -1.8 13.2 5.0 Marchandise lmports 180.8 180.8 180.0 108.8 -8.3 2.9 3.8 Food and Severages 23.2 21.5 19.7 17.1 4.1 1.7 2.5 Petroleum 12.0 28.4 21.5 26.5 9.4 5.7 -1.3 Mechinary & Equipment 18.4 16.2 14.7 14.9 -3.1 8.5 6.4 Others 46.4 33.9 37.1 41.5 -5.8 5.3 3.8 Share of Trade with Share of Trade with Share of Trade with oil Industrial Countries (S) Developing Countriesll) Exporting Oeveloping Counlriesta) OF 0 Direction of Trade a/ 1975 I980 19o1 1975 1980 1911 1975 198 te9l a' K Exports 65.4 50.4 47.S 20.0 35.6 36.3 2.5 2.6 0 lIports 67.1 68.6 58.4 11.5 18.9 15.8 4.1 18.1 12.9 a/ Exports, f.a.bi imports, c.l.f. (Source: IMFI  SENFnAL - BAI.ANCE OF PAYMENTS ,ENTERNWL CAPITAL MO DBr I1Milliings bf U9 * at current prices Ar tual Projuctud Indicator -- -- ------ - ---------------------- - --------------------- -------------------- 197B 1979 1900 19'1 1902 1903 190 1995 1990 BALANCE or PAYAtrNT1; Lnpnrts (f qnnd% t NrS Al17 H71 953 915 B29 777 79S 935 1S35 of whichaMvrchandiself.n.b) 4n2 '47 4S 5I12 515 510 525 f25 1252 liaports of gQondr. ?. IFS INn.!2 115f) 1327 1365 1194 1143 1105 1221J 21533 of whirhloMerLhIndielf5.n.B) !,45 B52 971 10 9 996 847 005 194 157I Not fartnr inci,mn -17 79 -100 94 -DB -105 -116 -131 -156 NPt tran%fers 29 2 0 "1 36' 29 29 31 46 rf.rrunt AL:cnunt Bal .nce -3914 -f56 -574 613 -423 -442 -394 -393 -409 Private direct tn,. rstint 43 71 96 7"1 5S 47 52 56 76 Ofi cial lIrant Aid 93 oh 120 i,, 107 113 115 lII 157 Not MLT IoAn%(0DRSH' If B 147 IS5 17n 283 304 261 271 2h2 Dlshitor nment 2:'b 222 ''72 -2h 293 322 301 393 '93 Rapayrmrnt 5 hb 75 It? 4B tO IB 40 122 191 Othrr r iaiAl a n l -'!B 96 70 -t36 -103 -100 -109 -25 1lrr.roP..pr ii reg',w vv 72 rK 11 3 IfI, 114 of 74 57 2 Ni't For. ojn aw.rttonr I. Imr) 171 -29r 41'% -49'. -526 -522 -475 a InriudL% erroPr. 46,61 aminsinns rxrrEI?NA1 fVP1AA. AND DEnI OrFFI'r.L (1RI5NT'i 9z.b 72.4 119.7 122.2 106.5 112.! 114.3 117.5 157.3 c1vUrC;V1NAI LnAI. rln,i S f 61.' .5 33.3 153.11 107.7 165.2 158.0 259.9 :'9%.4 PAL 12.0 IIt 5 12.5 35.1 32.9 '6.9 47.9 SS.9 BO.B nPEc .". D 'S. Bj.9 55.6 11.6 49.7 62.2 135.9 9 .4 IDVA 9.7 Ih.. 12.1 47.5 21.0 20.n 21.2 39.0 52.9 OTlER ..J.5 21.1 37.9 15.4 42.3 5S.7 26.7 26.1 56.4 Nn,Cr9t1tW3I0INnL LInAN 169. F1 559. 2znn.B a . 1 5.I 157.1 142.1 133.1 109.9 nil rrAiai rlrnrT CPEDITi -6. 7 411.5 7A.I '' . 136.5 92.1 44.1 31).7 7A.S 111 1! *..,, 11.11 I (I. 1. I 4.8 55.9 - B.9 6.' 1.1 IfTfIl, miIl rILFLrFRAL (a.b 9.0 13.6 I;.' 9.o ;2.2 17.0 16.1 10. I rpPIVASr 1'q.9 156.41 I116. h t. 1 34.8 21.0 72.P 5,1.0 _1.9 rXT'FNAL DEPT 1-0M.:, 1357.? Iel.0o 17100.6 21525S 2179.9 2603.0 2754.4 4191.7 DEr4T OLT-41. ' 119OLHi9r.ISQ) / 791.1 B95.2 9989.7 1236.5 1499.1 1799.0 2ur29.7 2992.2 orr i r.I.. "1.4 4?9-A t M.6 710.2 967.2 12B5.11 1406.7 1741.1 211.:.9 PRIVATEi _ S.B 296.6 27q. 5 269.3 212.3 272.3 299.6 1 D.3 UNDfqIRURP1.n DFBIr S'7.5 5h6. 6 695.9 710.9 91t..0 690.7 944.0 724.7 1199.5 DE141 s;n:lICEL TIIiII rrPviicr PAVYFN1S 1/ 9h.1 117.6 172.2 99.1 46.9 57.3 92.6 2;20.6 299.5 INIEiF-3T 1.. 1 4