Rwanda - Technical Assistance For the Improvement of Public Finance Management Project

Document of The World Bank FOR OFFICIAL USE ONLY CR. Is-aN W Report No. P-3981-RW REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO SDR 4.9 MILLION TO THE RWANDESE REPUBLIC FOR A TECHNICAL ASSISTANCE PROJECT FOR THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT March 4, 1985 This document has a restrided disribution and may be used by recipients only in the perfonnance of ther official duties. Its contents may not otherise be diselad without World Bank authorization.  CURRENCY EQUIVALENTS (as of November 1984) US$1.00 - Rwandese franc (RwF) 102.2 RwF 100 - US$0.97 FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS ADETEF - Association pour le Developpement des Echanges en Technologie Economique et Financiare (Association for the Development of Technical Exchange in Economics and Finance) BNR - Banque Nationale du Rwanda (National Bank of Rwanda) CFP - Centre de Formation Professionnelle (Training Center) CIC - Comite Interministeriel de Coordination (Interministerial Coordinating Committee) DTCD - Department of Technical Cooperation for Development EEC - European Economic Community IAC - Comite Consultatif InterTinist6riel (Interministerial Advisory Committee) MINIFINECO - Ministare des Finances et de l'Economie (Ministry of Finance and Economy, MINIFOPE - Ministare de la Fonction Publique et de la Formation Professionnelle (Public Administration and Vocational Training Ministry) MINIPLAN - Ministare du Plan (Planning Ministry) MINISUPRES - Minist8re de l'Enseignement Superieur et de la Recherche (Higher Education and Research Ministry) ONAPO - Office National de la Population (National Population Office) UNDP - United Nations Development Program WEIGHTS AND MEASURES Metric British/US Equivalents 1 meter (m) = 3.3 feet 1 hectare = 2.47 acres 1 are (100 m2) = 0.02 acre 1 kilometer (km) = 0.62 mile 1 are (100 m2) = 0.01 hectare 1 square kilometer (km2) = 0.39 square miles (sq. mi.) I kilogram (kg) = 2.2 pounds (lb) 1 liter (1) = 0.26 US gallons (gal) 1 metric ton {m ton) = 2,204 pounds (lb)  FOR OMCIAL USE ONLY RWANDA Technical Assistance Project for Improvement of Public Finance Management Credit and Project Summary Borrower: Rwandese Republic Amount: SDR 4.9 million (US$ 4.8 million equivalent) Terms: Standard IDA terms Beneficiary: Ministry of Finance and Economy Project: Objective. The Government's main objective is to improve, through the project, its control over public finance. To that end, the project will aim at: (a) training (i) staff in MINIFINECO and (ii) financial managers in technical ministries, parastatals, and development projects; (b) improving procedures for budget preparation and execution (including financial management of the parastatal sector); and (c) strengthening Government capabilities for economic policy making. Content. Proposed project components would be: (a) training for MINIFINECO staff and for financial managers in other ministries and selected parastatal agencies through (i) establishment of a Training Center in MINIFINECO, and (ii) remedial training for current staff; (b) improvement of tax, customs, budgetary and accounting procedures through (i) technical assistance (one budgetary procedures and budget management specialist for three years, one public accounting specialist for two years, and short backstopping missions); and (ii) phased introduction of automated data processing (hardware, software, training, one computer specialist for three years, and one programmer for two years); (c) improvement of financial management of the parastatal sector portfolio (one business management specialist for three years); This document has a restricted distribution and may be used by recipients only in the peormanem of r their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  (ii) (d) improvement of economic policy-making (provision of short-term consultant cervices); and (e) vehicles and equipment. Benefits: At the end of the project period, Government should have improved control over the budgetary process, from resource constraint identification to unoitoring of budget execution. The introduction of computers should help to produce timely indicators, and improvements in policy-making should help put this 'nformation to better use in the adoption of adjustment measures. Training activities, which would have a measurable output, should help to remedy the current lack of skills, and to provide a steady stream of competent staff for the future. The establishment of the Training Center should help to introduce objective criteria for the recruitment and promotion of financial staff. It might serve as an important building block in the creation of an appropriate institution for civil service training. Finally, support to the CIC mechanism should help strengthen interministerial coordination. Risks: The major risks are linked to the speed with which reforms will be approved and implemented. In particular, the introduction of significant changes in the recruitment and promotion of financial staff is a delicate operation, which might encounter difficulties. Project preparation has aimed at minimizing such potential difficulties. MINIFINECO staff, from working level up to the Minister, is aware and supportive of the project, and key officials plsyed a major role in ensuring a simple and realistic design, matching technical requirements and perceived needs. Terms of reference for the advisers were prepared by those who would work with them. Training activities were identified with Directors and concerned staff. Twinning arrangements should provide backstopping by a mature entity, with extensive experience in specialized training and in meeting the special needs of sub-Saharan African countries.  (iii) Estimated Project Costs: ForeiEn Local Total (US$ thousand equivalent) Training Center 190 720 910 Remedial Trafiing 650 50 700 Long-term Advisers 1,500 370 1,870 Backstopping Missions 90 10 100 Short-term Consultants 310 80 390 Computerization 480 50 530 Vehicles and Equipment 100 120 220 Total Base Costs 1/ 3,320 1,400 4,720 Contingencies 370 200 570 of which: Price 320 180 500 Physical 50 20 70 Total Project Costs 2/ 3,690 1,600 5,290 Financing Plan Foreign Local Total (US$ thousand equivalent) IDA 3,690 1,110 4,800 Government - 490 490 Total 3,690 1,600 5,290 Estimated Disbursements 3/ IDA Fiscal Year (USS thousand equivalent) 1985 1986 1987 1988 1989 1990 Annual 200 1,200 1,500 800 600 500 Cumulative 200 1,400 2,900 3,700 4,300 4,800 Appraisal Report: No appraisal report was prepared for this project. Rate of Return: n.a. Map: IBRD 14634 1. Taxes included in the project costs are negligible as all items would be exempt from import duties and local taxes. 2. Including refinancing of the US$ 450,000 PPF advance. 3. The disbursement profile for Technical Assistance in the Eastern and Southern Affrica Region is 10 years, with a 5 year median. A six-year profile has been retained since (i) uon-consultant related activities are to take place at the onset of the project; and (ii) consultant contracts would have a maximum duration of three years, with recruitment currently under way (PPF financing).  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE RWANDESE REPUBLIC FOR A TECHNICAL ASSISTANCE PROJECT FOR THE IMPROVEMENT OF PUBLIC FINANCE MANAGEMENT 1. I submit the following report and recommendation on a proposed development credit to the Rwandese Republic for the equivalent of SDRs 4.9 million (TJS$ 4.8 million) on standard IDA terms, to help finance a Technical Assistance Project for the Improvement of Public Finance Management. PART I - THE ECONOMY 2. A Country Economic Memorandum (Report No. 4059-RW) was distributed to the Executive Directors on May 20, 1983 which discussed economic developments in Rwanda until that date. These developments, updated when possible, are summarized below. Country data are provided in Annex I. 3. Rwanda's salient characteristics include its small size, an annual population growth rate of 3.7 percent (ranking among the highest in Africa), a population density (in terms of agricultural land) of about 390 per square Km (slightly higher than that of India but about four times that of Zaire and about eight times that of Tanzania), hilly terrain and high average altitude, a landlocked position, lack of natural resources (including shortage of arable land), underdeveloped physical and institutional infrastructure, and a very low level of development as measured by a variety of social as well as economic indicators. These indicators include a per capita income of about US$270 (1983), among the lowest in the world; an average life expectancy of 44 years; and an adult literacy rate of 40 percent. 4. The country is heavily dependent on agricultural exports (coffee, tea, pyrethrum, cinchona) which provide 75 percent of its foreign exchange earnings. Rwanda's manufacturing base is narrow, and the growth of modern manufacturing is limited by the small size of the market and the lack of raw materials, marketing facilities, entrepreneurial skills, and qualified manpower. The country, consequently, imports capital goods, steel, petroleum products, cement and other construction materials, and virtually every modern consumer product. Its merchandise trade is hampered by high transportation costs and dependence on neighboring countries for access to  -2- the sea ports of Mombasa and Dar-es-Salaam. 5. Despite these constraints, Rwanda has made a creditable effort toward economic and social development. During the 1976-80 period, the country managed to satisfy its subsistence needs and to make important advances not only in agriculture but in other fields such as education, health, water supply, and small-scale industry. It succeeded in building basic transport and communication infrastructure and set in place a state administrative apparatus serious about development. These achievements reflect the Government's commitment to economic and social progress, as well as its prudent fiscal, balance-of-payments and debt management policies. At the same time, Rwanda has been able to attract substantial volumes of external aid from a great diversity of sources, confirming donor perceptions Ehat Government is indeed development-oriented and is pursuing generally appropriate objectives. The Government's efforts during this period were significantly helped by favorable weather conditions and the coffee boom of the late 1970's. 6. Achievement and good fortune notwithstanding, development efforts in Rwanda have not alleviated the fundamental problems which continue to compromise development -,rospects: population growth, increasingly at odds with land availability, an undiversified economic structure, Government's limited capacity to provide social services, and the economy's inability to generate jobs either outside or within the rural sector. Though foodcrop output has increased sufficiently to feed the growing population, it has done so at a cost to the land's long-term fertility. Agricultural land use in Rwanda has reached a point where there is little fallow or grazing area left. The rapidly growing population has resulted in serious deforestation, accompanying erosion, and impelled the cultivation of marginal lands with a fragile ecology. Concomitant with these adverse trends has been a deterioration of nutritional standards induced by the shift to traditional high-yield, high-calorie, but low-protein crops. The limited success of Government's efforts has been largely due to the country's structural constraints (among them the critical population problem), institutional weaknesses (stemming largely from lack of skilled personnel), and insufficiency of domestic financial resources. At the same time, the lack of skilled personnel, fragmentation of institutional responsibilities, and poor interagency coordination have limited the country's capacity to absorb external resources. 7. The Rwandese authorities have taken steps to address these problems. Of particular importance have been actions concerned with the extremely rapid population growth, and the lack of education and training. In 1981, the Government established the National Population Office (ONAPO) to plan, coordinate, and monitor all population activities. ONAPO has started to sensitize the population about the implications of excessive demographic pressure on the country's limited resources; a few pilot family  - 3 - planning programs have been set up; and a nationwide fertility survey, now completed, is expected to provide valuable information on the potential demand for family planning. Obviously, the impact of these measures will be felt only in the long run. To address the problem of lack of education snd training, the Government introduced an education reform in 1979 whose objectives are appropriate to the country's needs, but whose implementation has been hampered by financial constraints and the lack of teachers. 8. A quantitative assessment of Rwanda's recent economic performance can only be tentative, as the national account estimates havre serious shortcomings. These estimates suggest that, compared to the period of 1978-1980, during which the GDP grew by about 6 percent, a period of slower growth seems to have begun in 1982, mainly because of a slackening of the agricultural sector performance, and a fall in export prices. Provisional data for 1982 indicate that real GDP grew by 4.0 percent largely as a result of a substantial expansion in construction and public works, commerce and other private services. Manufacturing performed satisfactorily owing mainly to the expansion of productive capacity. However, mining continued the decline that started in 1980 due to persistent financial and management problems. The services sector expanded by over 19 percent, reflecting the impact of the increase in salaries (in 1981), the development of transport and communications, and the expansion of urban Kigali. Economic growth slowed down to 3.5 percent in 1983, following a moderate drought. Agricultural value added increased only marginally, with the rise in the production of export crops offsetting, in part, a shortfall in the foodcrop sector. As in 1982, construction and services continued to expand, while the mining sector deteriorated further. 9. Rwanda's external position came under strong pressure in the last few years, as the volume of imports continued to expand at a time wIen export earnings were declining. The main difficulty arose from successive shortfalls in coffee export earnings during 1981-1983. Since 1981, the total value of exports has been consistently well below previous levels, reflecting the decline in world coffee prices. The terms of trade deteriorated drastically (by about 44 percent) between 1979 and 1983. Moreover, the exports of the principal mining company (SOMIRWA), a large proportion of which is denominated in Belgian francs, have been adversely affected by the relative appreciation of the Rwandese franc vis-a-vis the currency of major trad.ng partners (about 45 percent in real terms between 1980 and 1983). Demand for imports continued to increase during this period mainly because of this appreciation. As a result, the external current account registered a record deficit equivalent to about 13 percent of GDP in both 1981 and 1982. In 1983, the deficit was reduced to about 10 percent of GDP through implementation of a number of measures. These include: tightening of procedures for granting import licenses and intensification of restrictions on current international payments and ,.  -4- transfers; introducticn of an advance import deposit requirement scheme on luxury goods carrying high import duties as well as on goods competing with local products; and shifting the peg of the Rwandese franc (in September 1983) from the US dollar to the SDR, entailing a 5 percent depreciation vis-a-vis the US dollar. 10. On the budgetary side, Government tailed to realize that the high level of tax revenues recorded in 1979 and 1980 was a temporary phenomenon not justifying the accompanying increase in expenditures. This failure reflected a major weakness in the assessment of resource availability and prospects. As a result, during the period 1981-1983, the sharp decline in revenues from coffee export taxes, together with increases in current outlays led to an overall budgetary deficit equivalent to 4 percent of GDP in both 1982 and 1983 (as compared to a surplus of 0.9 percent in 1980). Concern over the worsening budgetary situation in 1982 and 1983 led Government to introduce corrective fiscal measures. In the 1984 budget, the growth of current expenditures (in nominal terms) was limited to 2.3 percent (compared to 35.7 and 9.7 percent in 1980 and 1981, respectively). The growth of public sector employment was to be held under 0.5 percent (the education sector was exempted in order to achieve the revised targets of the 1979 Education Reform). This represents a major break from Government's past policy of practically "guaranteeing" employment to every secondary-school graduate. The budget also provided for a large reduction in net lending to parastatals. Henceforth, state enterprises of a commercial or industrial nature (except SOMIRWA) will not be granted budgetary subsidies and will have to resort to commercial bank financing. On the revenue side, the 1984 budget provided for an increase of 12 percent, mainly reflecting an upward revision of import duties on luxury goods and a more progressive tax structure on wages. Information on the implementation of the budget is not yet available. 1I. Government has been traditionally conservative in its monetary and credit policies. Inflationary pressures have arisen mainly from supply shortages caused by frequent disruptions of supply routes through neighboring countries, higL international transport costs, and increased prices of imports and seasonal fluctuations in the price of domestic foodstuffs. Inflation averaged 8 percent per annum during 1970-83; it peaked at 12.6 percent in 1982, reflecting mainly the substantial increases in electricity and water tariffs and educational fees. 12. Rwanda has been one of the most favored benef.ciaries of foreign aid in recent years. Per capita, disbursements of net official development assistance (ODA) have been above US$30, much larger than for Africa as a whole. The country was also able to attract substantial amounts of grants. During the period 1981-82, grants comprised 82 percent of total external aid flows, and were provided mainly by Belgium, the Federal  Republic of Germany, and France, In view of its level of development, Rwanda will need external assistance for'a long time to come. Even maintaining per capita income at the curlent low level -- a very modest objective indeed -- will require a continuation of assistance at least at the current level, given population growth and exports constraints. The donor community should make efforts to increase its assistance, provided Rwanda pursues sound macro-economic, sectoral (particularly in agriculture), and population policies. 13. Rwanda's medium- and long-term external public debt is relatively small, amounting to US$225 million at end-1983, equivalent to 14 percent of GDP. Most of Rwanda's external debt was contracted on highly concessionary terms; the grant element was over 70 percent on average during the 1972-83 period. Due to the concessionary nature of these loans, the debt service payments on medium- and long-term debt are relatively low: 4.5 percent of exports of goods and nonfactor services in 1983. Hence, there remains scope for further borrowing. However, given the poverty of the country, its overwhelming constraints and vulnerability, and its unfavorable terms-of-trade prospects, external funds should continue to be provided 'a the form of grants or loans at highly concessionary terms, and include a high proportion of local cost financing and non-project assistance. PART II - BANK GROUP ASSISTANCE 14. Bank Group assistance started in 1970 and initially focused on the improvement of the road network and the strengthening of agriculture production. To the present, Rwanda has received twenty-one IDA credits totalling US$217 million: seven fcr agriculture (37 percent); five for roads (32 percent of the total); three for DFC projects (7.5 percent); two for education (8.3 percent); one for telecommunications (3.5 percent); one for technical assistance (2.3 percent); one for water supply (6 percent) and one for power (4.2 percent)l/. There have been no Bank loans. Two IFC loans (one of US$535,000 for a tea factory; a second of US$226,000 with contingent equity commitment of up to US$60,000 to expand the tea factory) were signed in 1976 and 1980, respectively. Annex II contains a stmmary statement of IDA credits and IFC investments as of September 30, 1984. 15. In fiscal years 1982-84, disbursements for Rwanda totalled US$49.1 million compared to new commitments of US$86.2 million. In the 1/ This latter does not include the US$15.0 million credit which represents Rwanda's share of the Ruzizi II regional hydroelectric project benefitting Burundi, Rwanda and Zaire and which was signed on April 4, 1984.  -6- which yields an average annual disbursement rate (ratio of change in disbursement to undisbursed balance) of 19 percent; this is about average for countries of the Eastern and Southern African Regional Office. 16. Our lending has been based on a country strategy which has emphasized: (i) agriculture and rural development, the main objective being to increase food production as well as export crops, while maintaining soil fertility; (ii) human resources, focusing on support to basic education and skills training to improve agricultural productivity, provide skilled manpower, and influence attitudes on the population issue, and, more recently, on family programs per se; (iii) infrastructure development, particularly roads, to reduce the country's isolation and to provide incentives to further intensification of agriculture as well as increased specialization and diversification through better marketing; and (iv) energy, to lessen the demand for fuel imports and mitigate their impact on the balance of payments. 17. One of the major constraints to Rwanda's development is the shortage of technical/managerial capacity. This affects all sectors and inhibits project preparation and implementation. Intensive technical assistance and on-the-job training of Rwandese staff are therefore a salient feature of the Bank's program for Rwanda, both under individual projects in the various sectors, and through a free standing Technical Assistance Project (Credit 1217-RW declared effective November 22, 1982). To date, implementation of this project is quite satisfactory (para. 25). The project has strengthened inter-ministerial coordination, provided training to staff in the studies units of concerned agencies, and contributed to improve the preparation process for the next five-year plan. 18. Our over-all strategy has been pursued in a climate of good relations with Government. In agriculture, improved sector management as well as more rigorous project planning and financial controls have been results of Bank Group encouragement and support. Our evolution away from integrated rural development schemes towards more directly productive projects has engaged Government's ultimate acceptance. In the highway sector, our active dialogue with the Ministry of Public Works and Energy is now focusing on the need to reduce reliance upon expatriate expertise; in the area of industrial development, we have gained Government's commitment to promote small-scale enterprise. Only in the education sector did serious difficulties arise centering on two misprocurements (some six years ago) and also on overly ambitious education reform proposals at the primary level. A much more positive dialogue with the Ministry of Primary and Secondary Education (MINIPRISEC) has emerged in the past three years and now prevails; MINIPRISEC has adopted a less costly and lengthy primary cycle. In summary, our cooperation with Rwanda in all sectors in which we are active can be characterized by a general receptivity to our advice and  an ultimate willingness to take action where suggested. This point is illustrated especially by our experience with the education reforms at the primary level already referred, and with the especially critical question of population growth, where our initially cautious approach to Government on the subject has developed to cooperative promotion of population/family health and planning programs. 19. Bank Group strategy today continues to center on the four sectors mentioned above (para. 16), with special emphasis on agriculture and population. For the former, we give priority to: (i) promote intensification by developing and strengthening Rwanda's agricultural research and extension capabilities; and (ii) reinforce the key sector institutions -- the Rwandese Research Institute and the Ministry of Agriculture. In the population sector, our program invites intensified collaboration with the National Population Office (para. 6 -the agency responsible for designing and promoting educational programs and service delivery systems for family planning), and support to maternal/child health initiatives through the Ministry of Health, recently reorganized, to participate more effectively in executing efforts to deal with Rwanda's bourgeoning population problem. 20. In light of external factors for which Rwanda must develop appropriate policy responses, however, we believe the time appropriate to give a mora systematic macro-economic dimension to our operational and ESW work and to our accompanying dialogue with Government. Rwandese authorities have recently indicated a readiness to proceed with the preparation of an economic recovery program ("Programme de Relance-); Government's request for Bank assistance in formulating this program of comprehensive economic adjustment measures also attests to its responsiveness to Bank Group advice. We intend to support this effort through increased ESW activity, and such heightened interaction as is suggested by the proposed Technical Assistance Project for the Improvement of Public Finance Management.  - 8 - PART III - SECTOR BACKGROUND: ECONOMIC MANAGEMENT IN RWANDA 21. The latest CEM (May 1983) showed that the policy framework and instruments of policy which appear to have served Rwandese development in the late 1970s will not be adequate or appropriate to meet the challenges of changed circumstances in the latter part of the 1980s. The country remains highly vulnerable to its less favorable external environment, which it needs to mDnitor closely so as to react and adjust quickly. Institutional weaknesses, however, have to be addressed before Rwanda i8 in a position to dct es. 22. Given the importance the public sector continues to play in the economy, improving the management of public finance is a high priority. The current situation in this area highlights some of the major weaknesses: (a) linkages bt..ween the Five-year Plan (1982-1986) and public investment programs are weak. Even though the current r1an attempted some sectoral programming for the first time in the country's history, the value of this largely qualitative exercise was limited by the lack of reliable estimates of resource availability, the absence of clear sector strategies, and the scarcity of well selected projects. This translates into low completion rates of planned targets, inadequate prioritization of investments, and inefficient allocation of scarce resources; (b) the budgetary process lacks comprehensiveness. In particular, recurrent expenditures created by Investments, and the financial impact of the parastatal sector are not fully captured. This reqults, inter alia, from outdated procedures, from the dual nature of the budget, divided between recurrent and investment expenditures (each handled by a separate Ministry), from the lack of systematic recording of donor-financed investments, and from the absence of a multi-year framework to link investment programs and their budgetary consequences (para. 27); and (c) the public finance impact of changes in Rwanda's economic environment (domestic and external) is not properly anticipated. Instead, adjustments are slowly made after the fact. Economic policy-making capacity is still nascent. 23. Three main factors contribute to these weaknesses: (a) inter-ministerial coordination; (b) budgetary procedures; and (c) personnel issues.  -9- Inter-ministerial Coordination 24. Though the situation is improving, information does not circulate easily between Ministries, and sometimes within ministries. The poor availability of statistics is one of the consequences. Another is the absence of a clearly defined and executed development strategy. For example, the Ministry of Planning (MINIPLAN) is not always informed of projects negotiated directly by technical ministries, and cannot, as a result, ensure their adequacy with approved priorities, or properly monitor the development budgpt. And the Ministry of Finance and Economy does not control personnel expenditures in the Ministry of Primary and Secondary Education, which has led to chronic overspending by this department. 25. The Government, with IDA and UNDP assistance, has begun to correct the situation. Implementation of the IDA-financed Technical Assistance project to MINIPLAN (Credit 1217-RW) is satisfactcry, and the project is meeting its institutional objectives. An Iwverminis':erial Advisory (IAC) Committee, regrouping the studies units of all ministries, meets regularly to approve the studies needed to prepare new projects. While this may have somewhat restricted the opportunities for technical ministries to approach donors directly with project ideas, and perhaps slowed down approval of some new projects, it has (a) promoted the establishment and enforcement of priorities; (b) facilitated inter-ministerial communications; (c) introduced greater coordination and discipline; and (d) improved the quality of the projects submitted to donors, and thus the probability of their approval. The project is also financing a series of local residential seminars on the project cycle, and on the evaluation of the p'anning process in Rwanda for staff (about 30 people) of the studies units in all concerned agencies. The seminars are having a positive impact on sectoral planning, project identification, and the overall planning process (para. 30). 26. Experience with the IAC, and discussion of the latest economic memorandum contributed to convince Government of the need further to improve internal coordination. On October 12, 1984, a presidential directive set up seven Interministerial Coordinating Committees (CIC)2. 2/ The seven CIC are: (i) Rural Development and Health (Ministry of Agriculture as chair); (ii) Economic Policy (Ministry of Finance and Economy as chair); (iii' Industrial Policy (Ministry of Industries, Mines, and Crafts as chair); (iv) Housing, Urbanism, and Regional Development (Ministry of Public Wbrks and Energy as chair); (v) Political and Security Matters (Ministry of Interior and Communal Development as chair); (vi) Training, Employment, and Youth Promotion (Ministry of Public Administration and Training as chair); and (vii) Planning and International Cooperation (Ministry of Planning as chair).  - 10 - Each CIC is chaired by a Minister, and functions at two levels; a political decision-making level (ministers), and a technical level. The Studies Directorate of the chairing ministry is the CIC's technical secretariat. Our experience with Rwandese institutions, and early indications on the CIC's start up activities, suggest that these coordinating structures may become a useful policy making and economic management tool. Though all CIC's will play an economic policy-making role, two are particularly concerned with economic management issues: (a) the CIC on Economic Policy: chaired by the Ministry of Finance and Economy (MINIFINECO), it includes the Ministry of Industry, Mines, and Crafts, the Ministry of Transport and Communications, the Ministry of Agriculture, the Ministry of Planning, and the National Bank of Rwanda. This CIC will (i) define financial, tariffs, budgetary, commercial, credit, and price policies; (ii) propose measures to improve economic management, and in particular the balance of payments situation; (iii) define budgetary procedures; (iv) define public debt management policies; (v) define policies toward the parastatal sector; and (vi) review economic reports submitted by various sectors; and (b) the CTC on Planning and International Cooperation: chaired by the Planning Ministry (MINIPLAN), it includes the Ministry of Foreign Affairs, the Ministry of Finance and Economy, and the National Bank of Rwanda. It will, inter alia, (i) cocrdinate policies in the areas of planning, international cooperation, and technical assistance; (ii) harmonize statistics and surveys; (iii) program public investments and yearly development budgets; (iv) coordinate the planning activities of ministries and local administrative units (prefectures and communes); and (v) synthesize sectoral strategies. Budgetary Procedures 27. The importance of improving the budgetary process to make it a public sector management tool is clearly recognized by MINIFINECO. The Ministry has begum to study and adopt ways in which the public finance system (which dates back to 1936 for some of its main features) could be revamped. This would imply changes in two key areas: (a) Policy: changes in tax and customs policies are necessary to improve domestic resources mobilization. Recommendations from an IMF mission (April 1983) have been reviewed by Government, and some tentatively approved. After further consultations with the IMF, Government will implement reforms  - 11 - in the tax and customs system, and the Fund will provide technical assistance to help implement them. (b) Structure and Procedures: A. Conceptually, the current budgetary structure is characterized by a double dichotomy: (i) a distinction between the ordinary (or recurrent) budget prepared by MINIFINECO and the development (or investment) budget prepared by the Ministry of Planning (MINIPLAN) and considered a residual budget; and (ii) a distinction between foreign financed investment expenditures which are not budgeted and local investment expenditures (either local contribution to donor financed projects or national projects) which are the only ones budgeted. In addition, existing accounting practices (in particular, the absence of cost accounting) limit MINIFINECO's ability to control the nature and appropriateness of public expenditures. Finally, financial transactions with the parastatal sector are not properly monitored and/or accounted for; B. Mechanically, (in terms of budget preparation and execution), existing procedures are cumbersome, do not facilitate checking of expenditures against their purpose, create delays in the availability of public accounts, and are (by necessity) overly centralized. 28. Operationally, three areas need to receive particular attention: (a) budgeting and expenditure control: the procedures for preparation and execution of both the ordinary budget (recurrent expenditures) and the development budget (investments), need to be improved as well as linkages between the two budgets; (b) resource mobilization: tax and customs administration, and economic policy making (tariffs, exchange rate, taxes) need strengthening; and (c) financial management of the parastatal sector ought to be improved, so as to reduce the sector's burden on the budget. Personnel Issues 29. Many of the deficiencies described above can be traced to the lack of skilled staff in all ministries. The difficulty in identifying sector  - 12 - strategies and appropriate projects, the acceptance of outdated (but tested) procedures, the lack of communications among various entities, and the dependence on foreign advisers (often pursuing contradictory goals) result, in part, from the absence of skilled Rwandese staff who feel assertive enough to propose changes, and to enter into a healthy professional dialogue across institutional boundaries. In turn this situation tends to lead people to repetition of routine tasks, and to a lack of confidence in considering, much less adopting, new procedures and processes. Nowhere is this syndrome more evident than in the area of economic policy-making (in particular on the exchange rate issue). 30. The situation can, however, be improved through the design of appropriate training activities. For example, Government, with the Association's assistance, has organized seminars in Rwanda on project identification and on the planning process which have helped address some of the weaknesses in the planning system (para. 25). These seminars, regrouping personnel from all ministries, and combining theory and practice, have also contributed to a better flow of information, and to better coordination. Cogent criticisms of the existing situation have been voiced, remedies proposed, and adopted. 31. Present procedures for hiring, assigning, and promoting civil servants exacerbate the lack of skills. The links between academic background and assignments are not always systematic (though the situation is Improving with the increase in the number of graduates); nor are career paths clearly defined. Personnel management in the civil service is centralized, and appointments are sometimes motivated by non-technical criteria. The existing system can only be gradually changed over time through the progressive introduction of more systematic and clearer procedures, based on objective and known criteria. Bank Group Strategy 32. The first technical assistance project focussed on improving the project preparation process, and on launching a basis for investment programming. Its training component has sensitized working level staff to the issues discussed in this report. Project related technical assistance in sectoral projects (agriculture, highways, education) pays special attention to management and budgetary issues. Pressed by a deteriorating external environment, Government is now keenly aware of the need to improve public finance management, and in particular the budgetary process. Bank Group strategy in this area is to help Government reach four key objectives: (a) to achieve comprehensiveness and transparency of public accounts;  - 13 - (b) to improve and integrate the budgetary and the planning processes (preparation of multi-year public expenditure programs); (c) to strengthen the internal coherence of the budget; and (d) to help Government gain better control over resource constraints. 33. This is obviously a long-term effort which needs to be operationalized by taking into account absorptive capacity constraints, and Government's own priorities. The first technical assistance project, the project now under preparation to strengthen agricultural services, and in particular, the Ministry of Agriculture's budgetary and financial management functions, the training component of the next highway project, and the project proposed here are building blocks in this strategy. They tend to focus on some key issues, of which Government is by now sufiiciently aware, and are designed as a series of complementary activities (para. 36), emphazising the same general themes of rigorous management, training, and institutional strengthening. Though success in this area is essentially of a qualitative nature, and thus difficult to measure, Bank Group efforts aim at helping Government render economic and financial decision-making more systematic, more purposeful, more informed, and more coordinated. 34. The proposed project would focus essentially on improving budget'ng and expenditure control, since the other priority areas of resource mobilization and financial management of the parastatal sector (para. 28) already receive assistance from other sources. The proposed project would, however, complement this assistance as follows: (a) Resource mobilization receives technical assistance from Belgium and Switzerland (tax administration), and the IMF has made recommendations which it is prepared to help Government implement through appropriate technical assistance to the tax directorate. The proposed project would provide training for tax and customs personnel (using technical assistance personnel from all sources as trainers); and (b) Improvements in the accounting and management systems of Rwanda's parastatals are being addressed by an EEC financed project which will, inter alia, help to produce better information on which to base financial decisions about the parastatal sector (Government equity participation, budget transfers, liquidation, etc.). The proposed pruject would strengthen the financial analysis and management review capabilities of MINIFINECO's unit responsible for making use of this improved information, when it becomes available. 35. The improvement of economic policy-making would be addressed by the proposed project through short-term assistance to the CIC on Economic  - 14 - Policy, which would also play major role in steering budgetary reforms. Improvements in the coordinatio.& between MINIFINECO and MINIPLAN for integrating the planning and the budgetary processes would be sought outside the confines of the proposed project. hhile it would still be necessary to strengthen MINIPLAN's capabilities for preparation and execution of the development budget, it would not be administratively desirable to include this assistance under a project to be implemented essentially by MINIFINECO. Instead, a Bank staff member would be seconded to MINIPLAN under the Program of Technical Assistance to IDA Countries, and would focus on investment and public expenditure programing. Strengthening MINIPLAN's capabilities in the budget area would facilitate the development of a healthy technical dialogue between MINIFINECO and MINIPLAN. 36. In line with the importance ascribed to the development of skills, the proposed project would place special emphasis on training. In general, project activities have been designed, and would be executed, with a view to complementing and strengthening on-going or planned technical assistance in related areas provided by the Bank Group or other sources. In particular, the project would link up with: (a) the IDA /UNDP Technical Assistance Project to the Ministry of Planning (Credit 1217-RW, UNDP Project RWA/80/009: 'Study Fund') in the area of investment budgeting; (b) the UNDP/DTCD assistnnce to MINIFINECO ("Public Finance Project") for project preparation, start-up, and coordination; (c) the EEC effort to improve accounting procedures and organizational design in public enterprises ("Accounting and Organization Pool"); and (d) the IDA Institutional Development Project in the Ministry of Agriculture (under preparation) in the areas of budget preparation and execution. Technical Assistance already provided to MINIFINECO by Belgium and Switzerland, as well as that planned by the IMF, have been integrated into the project design. PART IV - THE PROJECT 37. The project resulted from discussion of the latest Country Economic Memorandum (May 1983) with Government, and from the keen awareness among key officials (Presidency, Ministry of Finance and Economy) of the need to improve the management of public finance. Based on Bank and IMF studies of the fiscal and budgetary systems, an identification mission visited the country in September 1983 and outlined a possible project. In January 1984, Government was reorganized and ministerial responsibilities redistributed (with a significant broadening of the Finance Ministry's responsibilities). New organization charts were published and new personnel appointed in May 1984. Based on the results of the identification missioa, Government prepared a request for a technical assistance project in April 1984. A task force composed of MINIFINECO's  - 15 - Directors-General and Bank Group staff prepared the project in May-June 1984. Appraisal by essentially the same task force took place in October 1984. Negotiations were held in Washington from February 25 to 27 inclusive. Mr, Celestin Ndagijimana, Secretary General of HINIFINECO, led the Rwandese delegation. The project's main features are highlighted in the Credit and Project Summary at the beginning of this Report. Special conditions of the Credit are summarized in Annex III. Project Objectives 38. The Government's main objective is to improve, through the project, its control over public finance. To that end, the project will aim at: (a) training (i) staff in MINIFINECO and (ii) financial managers in technical ministries, parastatals, and development projects; (b) improving procedures for budget preparation and execution; and (c) strengthening Government capabilities for economic policy making. Project Description 39. Proposed project components are: (a) training for MINIFINECO staff and for financial managers in other ministries and selected parastatal agencies through: i) establishment of a Training Center in MINIFINECO (detailed accomodations schedules, renovation of existing premises, furniture and equipment, one training specialist for three years, and short backstopping missions); (ii) remedial training for current staff (training modules, study tours, and high level seminars); (b) improvement of tax, customLs, budgetary procedures, and accounting practices through: (i) technical assistance (one budgetary procedures and budget management specialist for three years, one public accounting specialist for two years, and short backstopping missions); (ii) phased introduction of automated data processing (including appropriate hardware, software, one computer  - 16 - specialist for three years, one programmer for two years, in-service training, two one year fellowships abroad, and short backstopping missions); (c) improvement of financial management of the parastatal sector portfolio through services of one business management specialist for three years; (d) improvement of economic policy-making through provision of short-term consultant services; and (e) vehicles and equipment. Detailed Features A. Training Center (Centre de Formation Professionnelle, CFP) 40. This component is intended both to train national staff, and to introduce objective criteria for the future selection and promotion of personnel in MINIFINECO. It addresses, on a limited and experimental scale, some of the current constraints on civil service personnel management (para. 31). The establishment of the Training Center should help to test the application of basic principles of personnel management on this concrete case. 41. The Training Center would train 30 people per year. The target population would be future, as well as currently employed MINIFINECO staff, and current and future financial managers in technical ministries, parastatals, and development projects. Current training needs have been evaluated at 300 current staff in MINIFINECO, and about 30 for current financial managers. Of this init.al target group of 330, about 70 people would receive remedial training under the project (para. 47). The need to upgrade the skills of current staff not selected for remedial training (260), normal staff attrition in various ministries, and the staffing of development projects justify the proposed cohort size, which is in line with public sector absorptive capacity. 42. Admission to the Center would be on the basis of an entrance examination open to candidates having just completed their secondary education, or to currently employed civil servants. The balance between these two groups would be defined in the entrance examination rules. Successful candidates would have a civil service trainee status, while  - 17 - attending the Center. Upon graduation, which would be based on satisfactory performance, trainees would be bound by an obligation to serve in MINIFINECO, as financial staff in technical ministries, or in entities under the responsibility of technical ministries (parastatals, or development projects) for a specified length of time. Breach of this obligation would require trainees to reimburse the cost of their education (including their salary as trainees). 43. The Center would provide practically oriented training for mid-level positions. The degree granted by the Center would be a "terminal" one (i.e. it would not lead to further higher education). CFP's two-year curriculum would comprise core courses, and four specialized streams (customs specialist, tax specialist, budget and public accounting specialist, and financial controller). The curriculum would stress practical training, emphasizing concrete public administration guidelines, actual procedures used by the Rwandese administration, and case studies. Internships and class-room learning would alternate, and receive equal emphasis. A draft curriculum is provided in Annex IV. 44. The Center's faculty would be made of practitioners (in particular technical assistance personnel), teaching part-time, plus two full-time instructors. Course syllabi would be prepared by each instructor in charge, and approved by a Pedagogical Council composed of the Directors-General of MINIFINECO, one representative from the Public Administration Ministry (MINIFOPE), and one representative from the Ministry of Higher Education (MINISUPRES). Both internships and courses would be evaluated, with constant monitoring of the trainees' status and progress. 45. Administratively, the Center would be attached to MINIFINECO, as a separate department. It would be housed in existing premises, which would be renovated to meet CFP's functions, and to permit the concurrent organization of ad hoc seminars for MINIFINECO staff. The Center's administrative structure wou'ld be light (one director, one deputy director with support staff); no boarding would be offered. 46. The project would finance (a) the preparation of detailed schedules of accomodation, equipment and furniture lists, and architectural designs corresponding to the above principles, and (b) the start-up of the Center's operations (including renovation of premises, furniture, equipment, and operating costs on a declining basis over four years, see para. 71). Terms of reference for preparation of the detailed specifications have been agreed at appraisal, and can be found in Annex IV. To assist Government in establishing the Center, the project would also finance the services of one training specialist for 36 months to help steer the specifications study, and start up operations. Meanwhile, to -meet immediate staff upgrading needs, the project would finance a remedial training program.  - 18 - B. Remedial Training Program 47. The remedial training program would have four main objectives: (a) to improve, in the short-run, the current performance of HINIFINECO staff; (b) to upgrade the environment in which CFP trainees would Mi) receive on-the-job training, and (ii) eventually be integrated; (c) to help fine tune the content of courses to be offered by CFP; and (d) to identify, among staff having completed the program, those best able to teach at CFP on a part-time basis. 48. A detailed analysis of the training needs of each MINIFINECO's Directorate General, carried out in close collaboration with the Directors-General, and, sometimes with the staff to be trained, led to the identification of eight training modules. For each, the target population, content, and delivery mode were specified. Each module would permit to train, at one time, a number of officials sufficient to reach a critical mass, and thus to produce an appreciable change in operating procedures and an improvement in the performance of each Directorate. A description of the modules can be found in Annex V. 49. Besides the eight modules, the remedial training program would also reinforce the commitment of higher officials to the reform and improvement program by (a) organizing for them high-level seminars abroad; and (b) financing study tours (about 10 study tours of 30 days each) to enable concerned officials to become familiar with on-going public finance management reform programs in other francophone countries (for example Niger, some Maghreb countries, Belgium, and France). 50. The modules would be organized partly in Kigali (in the existing facilities of the MINIFOPE), and partly in France. Rwandese officials would be received in units of the French Finance Ministry, comparable to those in which they work. They would attend formal training sessions in the French Ministry Training Ceater, and serve as interns. Each program would be designed to meet the specific skills and needs of the particular target group. C. Improvement of Budgetary and Accounting Procedures 51. Procedures would be improved through: (a) long-term technical assistance for budget preparation and management, and public accounting,  - 19 - and related staff training; and (b) phased introduction of automated data processing, both to increase etticiency and to act as a catalyst for the analysis and rationalization of present procedures. 52. Long-term advisers. The project would finance the services of two long-term advisers as tollows: (a) one budgetary procedures and budget umnagement specialist: this adviser would be assigned tor 36 months to the Directorate General of the Budget to help reform budgetary procedures. This reform function would be temporary. The adviser, who would work in collaboration with MINIPLAN for coordinating recurrent and development budgets, would be expected (Annex VI) to help design, propose, adopt, and enact improved budgetary procedures to address the deficiencies mentioned above (para. 27). The improvements would be submitted for the approval of the Interministerial Coordinating Committee for Economic Policy (para. 26-a) to ensure that they are appropriate to the needs of key ministries and are thus likely to be enacted; for this purpose, key 'spending' ministries (Public Works, Primary and Secondary Education, Defense, Intcrior, Public Administration) would be invited to attend the CIC's meetings on budgetary reform; and (b) one public accounting specialist: this adviser would be assigned for 24 months to the Directorate General of Public Accounting and work in close collaboration with the budget Directorate. The adviser's function (Annex VI) would also be temporary (formulation of reforms). The adviser would design, and help to introduce, new public accounting methods, and train staff. 53. Automated data processing. The project would finance the gradual introduction of computers into MINIFINECO. A phased master plan has been approved to permit the automation of data processing (introduction of micro-computers in the tax directorate first, and then in the customs directorate). While these applications are implemented, the budgetary procedures and pYublic accounting specialists would review existing budgetary and accounting procedures, and propose improvements. When new procedures are agreed, the entire budget management system would be automated on a mini-computer. Earlier applications (tax and customs) would be integrated in the main system. The system would permit, inter alia, to improve monitoring of the country's external debt and budget execution, and production of timely financial indicators. The phasing of the master plan takes into account: (a) the current absorptive capacity of MINIFINECO's various departments (the tax application has been selected as the first one for technical reasons, and because of the quality of the Directorate's staff and management. A successful introduction of microcomputers there would have a positive impact on other Directorates); (b) increasing levels  - 20 - of technical difficulty from one stage to the next; and (c) the need to train Rwandese specialists abroad before the full system can be implemented. 54. The project would finance the services necessary to complete the introduction of various applications, the appropriate hardware and software, one computer specialist for 36 months, one programmer for 24 months, two fellowships to train micro- and mini-computer specialists abroad, and on-the-job training. The long-term computer specialist would first be assigned to MINIFINECO. The specialist would collaborate with the National Computer Service to help design public sector applications, and to ensure compatibility of all systems (special attention would be paid to issues of equipment standardization). The programmer would be assigned to MINIFINECO. D. Management of Public Sector Portfolio 55. Government has recently taken measures to limit budgetary transfers to parastatals. It has also sought EEC assistance to improve management information systems in selected parastatals through the establishment of an "Accounting and Organization Pool". This unit is to help update available financial information, set up proper accounting systems, and offer management advice. This improved information should help HINIFINECO make better financial decisions about the parastatal sector. The unit in charge of preparing such decisions, MINIFINECO's State Investment Control Directorate is, however, currently understaffed, and lacks the proper skills. 56. The project would finance one business management specialist assigned for 36 months to the Inspectorate General of Finance, State Investment Control Directorate. The expert's main responsibilities would be to help design control procedures, and standard methods to analyze various types of enterprises, so as to improve decision-making about the parastatal sector (divesture, equity participation, subsidies, etc.). The specialist would work in close collaboration with the EEC financed "Accounting and Organization Pool", and participate in training activities. E. Strengthening of Economic Decision Making 57. To improve economic policy-making, Government has set up a coordinating mechanism (the Interministerial Coordinating Committee on Economic Policy, para. 26-i), regrouping key actors in this field. MINIFINECO chairs the Committee, for which its Studies and Evaluation Directorate will act as technical secretariat. This Directorate has the required skills to identify needs and to prepare terms of reference for outside expertise as needed. To help prepare papers for submission to the Committee, the proJect would finance short-term consultant services (about  - 21 - 30 staff months), who would work with MINIFINECO's studies and evaluation Directorate. F. Vehicles and Equipment 58. The project would finance vehicles for project related activities, and operating expenditures, and office equipment for selected units in MINIFINECO (typewriters, storage cabinets, hand calculators, etc.). Project Implementation 59. MINIFINECO would coordinate the implementation of various project components (Section 3.01 of the draft Development Credit Agreement). MINIFINECO's Secretary-General in charge of Finance would be responsible for ensuring the coordination of technical assistance from various sources (Section 3.04(b) of the draft Development Credit Agreement). Government would appoint a national project coordinator chosen among high-level officials having closely followed project preparation, and acceptable to the Association (Section 3.04(a) of the draft Development Credit Agreement). An interim choice, acceptable to the Association, was communicated at the time of negotiations. The appointment of a permanent national project coordinator would be a condition of effectiveness (Section 5.01 (b) of the draft Development Credit Agreement). 60. Government would (a) enact, by November 1, 1985, legislation acceptable to the Association establishing MINIFINECO's Training Center (Section 3.05(a) of the draft Development Credit Agreement); and (b) appoint the Training Center Director by November 1, 1985 (Section 3.05(a) of the draft Development Credit Agreement). The enactment of legislation acceptable to the Association, and the appointment of the Training Center Director would be conditions of disbursement for project activities related the Training Center (Schedule 1 of the draft Development Credit Agreement). Government would submit course syllabi to the Association's approval by June 1, 1986 (Section 3.05(b) of the draft Development Credit Agreement). 61. MINIFINECO would: (a) establish and maintain accountIng records for all project activities; (b) open with the National Bank of Rwanda (BNR) a project account to finance local expenditures incurred by the project. Funds would be deposited in this account by Government -- US$ 70,000 equivalent on April 1, and October 1 of each year, starting on April 1, 1986 and ending on October 1, 1988  - 22 - (Section 3.03 of the draft Development Credit Agreement). The first Government deposit of US$ 70,000 equivalent would be a condition of effectiveness of the Credit (Section 5.01(a) of the draft Development Credit Agreement); and (c) open a Special Account in the National Bank of Rwanda to cover expenditures under disbursement categories (c) and (f), and travel expenditures under disbursement category (d) (Section 2.02(b) and Schedule 4 of the draft Development Credit Agreement). The Association would deposit an amount of US$ 70,000 equivalent (revolving fund), corresponding to four months of estimated expenditures. Delivery System for Technical Assistance 62. In view of the specialized nature of project activities, and of the success so far of using a twinning arrangemeu.t in a similar effort undertaken in Niger under IDA financing (Credit 1493, approved n June 7, 1984), the Rwandese Government would enter into a twinning arrangement with the French Ministry of Finance and Economy through ADETEF (a non-profit, voluntary association of civil servants in the French Ministry of Finance). in providing institutional technical assistance, evidence is increasingly available to show that twinning arrangements (a professional relationshlp between an operating entity in a developing ceuntry, and a similar but more mature organization elsewhere) are useful in achieving successful project implementation. The mature entity: (a) has operating experience in similar functions; (b) training and technical assistance can be integrated since the mature entity can offer various combinations of specialist services, role models and training facilities; and (c) the possibility exists of continued long-term cooperation between the two entities. 63. Long-term advisers would be selected by the Rwandese Government. The French Ministry would provide the necessary support for implementation through: (a) periodic secondment of its own staff for short-term backstopping missions in the areas of budgetary and public accounting procedures, computerization, and training; (b) the organization of tailor-made training programs in France for selected Rwandese officials (remedial training program); (c) the review of documents and proposals submitted by Rwandese officials; and (d) the participation of Rwandese officials in high-level training activities organized by France. Special links would be established between the French Ministry Center for Professional Training and Upgrading, and MINIFINECO's Training Center (organization of curriculum, review of syllabi, logistical arrangements for setting up the Center, organizing entrance examinations, etc.). A protocol  - 23 - defining a ',r-gram of cooperation between the French and the Rwandese Ministry has been signed. This protocol defines the framework in which specific activities will take place. It has been submitted to the Association's approval during negotiations. The credit would cover (as in the Niger case) travel and subsistence expenditure for short-term secondment missions, but no professional fees would be charged by French officials. To achieve long-term impact, the twinning arrangement is expected to continue beyond the project period. 64. Long-term advisers would prepare a yearly work program which would be approved by their Rwandese supervisors, and reviewed by the Association (Section 3.07 of the draft Development Credit Agreement). Programs would include time-tables for the completion of planned activities, and specify the respective responsibilities of national and expatriate staff. The Government would assign qualified national staff in adequate numbers to participate in project activities (Section 3.06 of the draft Development Credit Agreement). For long-term advisers, a period of winding down activities would take place at the end of the contract. Instead of residing in Rwanda during their last six months, the advisers would make visits, totaling six months, over a longer period of time. This would allow a progressive transfer of responsibilities, with the guarantee of technical backstopping as necessary. 65. Recruitment. The budgetary procedures and budget management specialist, the public accounting specialist, and the business management specialist would be recruited as a team, preferably through a consulting firm. So would the computer specialist and the programmer. The educational specialist would be recruited as individual consultants. Terms of reference have been agreed at appraisal, and confirmed at negotiations (Annex VI). Project Costs 66. Total project costs at the base date of November 1, 1984 have been estimated at about US$ 5.3 million equivalent, of which US$ 3.7 million equivalent (70 percent) are foreign costs, and US$ 1.6 million equivalent (30 percent), local. The proposed Credit would finance USS 4.8 equivalent (100 percent of foreign costs and 69 percent of local costs) representing 90 percent of total costs. The Government contribution would amount to about US$ 490,000 equivalent. A summary cost table appears in the Project and Credit Summary. A cost table by project component can be found in Annex VII. 67. The average cost per staff-month for long-term advisers has been estimated on the basis of prevailing international rates (which, for long term assignments, include supplementary costs to permit a winding down period for the advisers); the average staff-month for short-term  - 24 - consultants also matches prevailing market rates. Renovation costs for the Training Center have been estimated at about US$ 315,000. The cost of computer equipment has been estimated at about USS 400,000. Price contingencies have been added as tollows: 1984 --international 3.5 percent, local 9.5 percent; 1985 --international 8.0 percent, local 9.5 percent; 1986 through 1989 --international 9.U percent, local 9.0 percent.Physical contingencies have been added: 5.0 percent for equipment, 10 percent for construction and renovation, and none for specialists and consultants services. Procurement 68. The selection of specialists and consultants would be in accordance with the Association's "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published in August 1981. Price would not be a primary selection criteria. 69. Equipment excluding computers (vehicles, office furniture, and office machines) not exceeding US$ 100,000 equivalent after grouping would be procured locally on the basis of quotations from three firms which can provide proper customer services. Computer equipment would be procured through ICB in accordance with IDA guidelines, and subject to Government decisions on equipment standardization. A procurement table can be found in Annex VIII. 70. Renovation work for the Training Center premises, and preparation of the physical accomodations for the mini-computer would be carried out after local competitive bidding, or by force account, whichever is the least cost method. This would be determined when detailed specifications are ready. Disbursements 71. Funds from the credit would be disbursed over four years on the following basis: (a) 100 percent of foreign expenditures and 80 percent of local expenditures for aivestment costs of the Training Center; (b) for operatLig costs of the Training Center: 100 percent of expendicures in FY86; 60 percent in FY87; 40 percent in FY88; and 10 percent in FY89; (c) 100 percent of total expenditures for the remedial training program; (d) 100 percent of total expenditures for technical assistance services (long-term specialists, short-term consultants, and backstopping missions); (e) 100 percent of foreign and 50 percent of local expenditures for computerization;  - 25 - (f) 100 percent of foreign and 80 percent of local expenditures for vehicles and equipment; and (g) refinancing of the advance under the Project Preparation Facility. 72. Disbursements would be fully documented except those for local expenditures against operating expenditures (Training Center and vehicles), and purchase of equipment, which would be reimbursed by the Association according to the above percentages upon submission of statements of expenditures. An advance of US$ 450,000 under the Project Preparation Facility was granted to the Government in December 1984. It would be refinanced by the proposed credit (Section 2.02(b) of the draft Development Credit Agreement). 73. Audit. Project accounts would be audited annually by independent auditors acceptable to the Association (Section 4.01(b) the draft Development Credit Agreement). Special attention would be paid to expenditures reimbursed under statements of expenditures. 74. Project Implementation Schedule. Implementation schedules for various project components were agreed at appraisal. In particular, (a) recruitment of the budget management and public accounting specialists, (b) systems analysis and application design for computerizing the tax administration, and (c) the detailed specifications study for the Training Center would start during the first quarter of 1985, under a $450,000 advance under the Project Preparation Facility (para. 72). The Training Center would start operations in October 1986. The remedial training program would start in March 1985. Full computerization of the budget management system would start in March 1986. The integrated system would operate by June 1987. The closing date would be December 31, 1989. Benefits and Risks 75. At the end of the project period, Government should have improved control ove he budgetary process, from resource constraint identification to monitoring of budget execution. The introduction of computers should help to produce timely indicators, and improvements in policy-making should help put this information to better use in the adoption of adjustment measures. Training activities, which would have a measurable output, should help to remedy the current lack of skills, and to provide a steady stream of competent staff for the future. The establishment of the Training Center  - 26 - should help to introduce objective criteria for the recruitment and promotion of financial staff, and to start a dialogue on larger issues concerning the management of civil service careers. It might serve as an important building block in the creation of an appropriate institution for civil service training. Finally, support to the CIC mechanism should help strengthen interministerial coordination. 76. The major risks are linked to the speed with which reforms will be approved and implemented. In particular, the introduction of new principles in the selection and promotion of financial staff is a delicate operation, which might encounter difficulties. Project preparation and appraisal specifically focused on ways and means to minimize these potential difficulties. MINIFINECO staff, from working level up to the Minister, is aware and supportive of the project, and key officials played a major role in ensuring a simple and realistic design, matching technical requirements and perceived needs. Terms of reference for the advisers were prepared by those who would receive and work with them. Training activities mere identified with Directors and concerned staff, and the Ministry has enough authority to maximize the chances of success of the Training Center. Twinning arrangements should provide backstopping by a mature entity, with extensive experience in specialized training and in meeting the special needs of sub-Saharan African countries. PART V - LEGAL INSTRUMENTS AND AUTHORITY 77. The draft Development Credit Agreement between the Rwandese Republic and the Association, and the Recommendations of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 78. Special Conditions of the Project are listed in Section III of Annex III of this report. 79. 1 am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 80. I recommend that the Executive Directors approve the proposed Credit. A. W. Clausen President Attachments March 4, 1985 Washington, D.C.  - 27 - ANNEX 1 Page 1 of S TaULI h~~~~~~a- cI0 T a I L -1 1a WAUFa -WA ma ma Itat I IIAT 33157 WANDA are - cmit caurs (MIGH aw u CoT L imiitef 3t?lauIn*U) Ik. 1wook 1tkLb- COTiiit 6 sik Thl or mann armuca S. or Sa mu* tiinAA N. u) oAL 20.3 20.3 20.3 aclQILTUIR. 11.0 15.2 1n.e Out Znta (1e4) 70.0 300.0 200.0 249.1 112.9 (WcaM(s or OIL QIIIVALZUT) 30.0 11.0 17.0 62.8 3t.O rmnnm -Murw. sTms ,0f12Afl0.10.N TLYAI (?HOIIAII) 2111.0 3695.0 3530.0 IIUU OpUWaUTIOU (2 01 TOTAL) 2.4 3.2 4.. 2917 PfutLATfOU lEACY 306 pU3ATt?0 to TVI 2000 (MU.L) 10.0 STATZOUAET FOOIlATION (MILL) 47.4 dPlIIAYT 106 inEUt 3.9 1oUUAiclOU 0 T51 pUgE. U. 206.5 160.3 203.0 I.S 51.6 U 5. 3. ASh . LAm. 191.2 242.9 371.0 119.2 113.5 PofuL*TlON StL STXIITIIIE (2) 0-14 TiS 44.3 65.7 65.9 05.0 as A 13-09 TRI 53.0 51.d 51.4 51.5 51.7 05 AIM UIW