Burkina Faso - Agricultural Sector Adjustment Credit Project

Document of The World Bank FOR OFICIAL USE ONLY MICROFICHE COPY Report No. P- 5721-BUR Type: (PR) RePortNz P-5721-BUR MILLS, C. / X35000 / J9 137/ AF5AG REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT OF SDR 20.6 MILLION TO BURKINA FASO FOR A AGRICULTURAL SECTOR ADJUSTMENT CREDIT MAY 12, 1992 Tbis document has a restricted distribution and may be used by recipients only In the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EoEJealEN!S Currency Unit - CrA franc (CPA?) USS 1.00 = CFAF 272 CFAF 1 million - US$ 3,676 SYSTEM OF WEIOHTS AXD MEASURE: METRIC FI8CAL YA January 1 - December 31 This report is based on the findings of a World Bank mission composed of Messrs. Cadman Atta Mills (Senior Economist and Mission Leader), Francis Mody (operations Officer, Resident Mission, Niger), Celestin Bado (Operations Officer, Resident Mission, Burkina Faso), and Me. Tonia Marek (Nutritionist) who visited Burkina Faso in October/November 1991 and in January 1992. The October/November appraisal mission was held jointly with the French Aid Agencies (Caisse Centrale and the Ministry of Cooperation) and the European Community. Further Assistance was provided by Mr. Albert Djigma (Local Consultant) and Mr. Kafando (Local Consultant, provided by UNICEF). Mrs. Jann Masterson provided operational assistance. Ms. Monika Huppi provided support to the project during the preparatory phase. Messrs. Joseph Baah-Dwomoh and J. W. van Holut Pellekaan were peer reviewers. Mr. Rashid Faruqee reviewed the program for the Chief Economist's Office. Mrs. Katherine Marshall is the Department Director, Mr. Frangois Laporte, the Department Lead Economist and lead advisor for this project, Mr. Emmerich Schebeck, the Department Projects Advisor, and Mr. Salah Darghouth, the managing Division Chief.  rOR OmCIAL USE ONLY AfED s African Development Bank AW I Amenagement des Vallees des Volta (Volta Valley Authority) BCEAO B Danque Centrale des Stats de LAfrique de 1'Ouest (Central Bank of (Francophone) West African States) CBC a Conseil Burkinabe des Chargeurs (Burkina Council of Shippers) CCC$ s Caisse Centrale de Coop6ration Economique (French Development Bank for Economic Cooperation) CSAO Communaut6 Iconamique des Etats de L'Afrique de l'Ouest (Economic Community of (6 Francophone) West African States) CFDT I Compagnie Fransaise pour l Developpment des Fibres Textiles (French Textile Development Corporation) CGP a Caisse G6n6rale de Pdrdquation (price stabilization board for imported basic commodities) CNELS s Commission Nationale de Lutte contre les 8ffets de la S6cheresse (National Commision to Combat the Sffects of Drought) CNCA s Caisse Nationale de Cr6dit Agricole (National Bank for AgrLultural Credit CRPA I Centre R6gional do Promotion Agro-pastorale (Regional Centers for the Promotion of Agro-pastoral activities) CSPPA Caisse do Stabilisation des Prix des Produ-ts Agricole (Price Stabilization Board for (export) Agricultural Products) DEP a Direction des Etudes et do la Planification (Directorate of Studies and Planning) EC s European Community EPiC a tabliosement Public Industriel at Commercial (Publicly-owned Industrial and Commercial Establishment) PIER Ponds de l'Eau et de l'EquLpemeat Rural (Rural Water Resources and Infrastructure Fund) FLEX-FASO a SociLte des Fruits at Lgqumes du Burkina Paso (a mixed state enterprise producing and exporting fruits and vegetables) 011 a Groupement d'Int&r&t Economique (Economic Association) 02s3 Les Grands Moulins du Burkina (Burkina Flour Kill) IXHP international Monetary Fund INERA a Institut National dZtudes et de Recherche Agricole (Agricultural Research Institute) INSD a Institut National de la Statistique et de la Demographie (National institute for Statistics and Demography) MACP a Ministtre de l'Action Coop6rative Paysanne (Ministry of Cooperatives) MAE s MinistAre de 1'Agriculture et de l'ElQvage (MLnistry of Agriculture and Livestock) OVNACER s Office National des C6r6ales (National Cereals Marketing Board) ONAC a Office National de Commerce 8xt6rieur (National Foreign Trade Agency) ONAN s offfice National des Barrages et des Amenagements Hydro-Agricoles (A state institution for supervising dams and irrigation schemes) PAS a Programme d'Ajustement Structurel (Structural Adjustment Program) PA"8 a Programme d'Ajustement Sectoriel de l'Agriculture (Agricultural Sector Adjustment Program) PFP a Policy Framework Paper PNT(V) s Programme National de Gestion des Terroirs Villageois (National Village Land Management Program) SIL s Structural Adjustment Loan This document has a restrictod distribution and may be used by recipients only in the petformance of their offlcial duties Its contents may not otherwine be disecsed without World Irt a ithorizaion.  SE s Soci6te dEtat (state-owned enterprise.) SECAL s Sector Adjustment Loan 8EN s Socift6.AdEconomie Mixte (Joint Venture Company) SOFITEX s Soci6t6 Burkina des Fibres Textiles (mixed state cotton company) SOFIVAR : Soci6t6 de Financement et de Vulgarisation de l'Arachide (Groundauts Promotion Company) SONACOR s Soci6t6 Nationale de Collect* du Rix (rice processing companys subsidiary of CGP) SOSUCO s Soci6t6 sucribre de la Como& (Comoe Sugar Company) UCOBAM s Union des Coop6ratives Agricoles at MaralchAres du Burkina (Union of Agricultural and Vegetables Cooperatives of Burkina) U1O0A Union Mon6taire Ouset Africaine (West African Monetary Union)  AGRICULTUA sRT VU-NI CRlmIT TADL3 OF eoNTEN5. Credit and Program Summary . . . . . . . . . . . . . . . ... . i I. THE MACROECONOMIC FRAMEWORK AND ADJUsTMENT STRTEGY . . . . . 1 A. Background . . . . . . . . . . . . . . . . . 1 B. The Structural Adjustment Strategy . . . . . . . . . . 6 C. Growth Prospects and Economic Outlook . . . . . . . . . 8 II. THE AGRICULTURAL SECTOR DEVELOPMEhT STRATEGY . . . . . . . . 9 A. Sector Background . . . . . . . 9 B. Recent Performance . . . . . . . . . . . . . . . . . . 10 C. Constraints to Sustainable Growth . . . . . . . . . . . 10 D. Current Sector Development Strategy . . . . . . . . . . 12 E. The Medium Term Agricultural Sector Strategy . . . . . 14 --,. MEDIUM-TERM AGRICULTURAL ADJUSTMENT PROGRAM . . . . . . . . . 14 A. Objectives of the Sector Adjustment Program . . . . . . 14 S. The Policy Agenda .a... . . .................. . 15 Cereals Policy . . . . . . . . . . . . . . . . . 15 Cotton . . . . . . . . . . . . . . . . . . . . . 19 Other Cash Crop. (Sesame, Groundnuts, Sheanuts) . . . . . . . . . 23 Sugar . . . . . . . ............... 24 Fruits and Vegetable; .............. 26 Livestock * * * *.. . .... .. . . . . . . . . . . . 26 other Institutional Reform . . . . . . . . . . . 27 Coordination of Investment with the Recurrent Budget .28 IV. THE PROPOSED CREDIT ..................... 30 A. Credit History . . . . . . . . . . . . . 30 B. Financing and Management of the Program . . . . . . . . 30 C. Procurement and Disburements . . . . . . . * . 31 D. Organization for Credit Execution . . . . . . . . . . . 32 S. Accounting, Auditing, and Reporting . . . . . . . . . . 32 F. Monitorable Actione ................... 32 G. Benefits and Risks . . . . . . . . . . . . . . . . . . 35 V. RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . 36 VI. ANNExEs Annex I: Key Nacroeconomic Indicators Annex II: Agricultural SECAL Policy Matrix Annex III: Letter of Agricultural Development Policy Annex IV: Supplementary Credit Data Sheet Annex V: Status of Bank Group Operations  ABCULtmRAL SECTOR B aE= rSTMNT C -JflpD Credit and PSoar Summar AogrEsa 8 Burkina Faso Amounts SDR 20.6 million (US$ 28 million equivalent) Cof inancinas European Community (Lome IV) ECU 17 million (US$ 20 million); African Development Bank VA 10 million (US$ 13 million); France FF 120 million (US$ 21 million) Termss Standard IDA terms, with a maturity of 40 years Program Dencriotions The proposed Agricultural Sector Adjustment Credit (Agricultural SECML) would support a sectoral adjustment program to deepen and extend to the agricultural sector reforms supoorted at the macroeconomic level by SAL I, which was approved by the Bank's Board in June 1991. The main components of the agricultural sector adjustment program ares liberalizing domestic marketing and prices of traditional cereals at producer and consumer levelst liberalizing (external) trade in traditional cereals; liberalizing the consumer price of rice, the price of paddy, and the processing of rice; restructuring OFNACER (the national cereals marketing board), and limiting its role to the maintenance and management of food aid and food security stocks; reforming the agricultural trade regime-import policies and the determination of appropriate tariffs (pending the results of an ongoIng tariff study) for the main imported agricultural commodities (rice, sugar, wheat flour)--including reforming the export price stabilization schemes for cotton and abandoning the schemes for groundnuts, sesame, and shea butter; reinforcing the nain achievements of the on-going IDA- financed Fertilizer project by ensuring that the marketing of all agricultural inputs is liberalized and further ensuring that no new subsidies on inputs (whether direct or indirect) are reintroduced; rationalizing the role of various ministries and agencies intervening in the agricultural sector, and undertaking a manpower review of the main agricultural extension units (the ORPAs) with a view to restructuring them; and assisting the Government to prepar three-year investment program (1992-94) which reflects clear sectoral priorities and the established project selection criteria agreed under SAL I. Benefits and Riskos The proposed operation is expected to improve incentives for agricultural production and marketing, improve efficiency, and increase productivity in the agricultural sector. The project is expected to have a pesitive impact on economic growth and employment creation in the private sector and, through its impact on agricultural incomes and agricultural product marketing across the country, to contribute to food security in the medium term.  - li - The risks derive from the fact that Burkina Paso has embarked on dramatic political reforms. Political reforms include the adoption of a now constitution was submitted to public referendum in June 1991, and the holding of presidential elections In January 1992. Legislative elections are planned for May 24, 1992. Along with these reforms, there have been a number of ministerial reorg&nizations, and another is expected following the legislative elections. The number of ministerial changes affecting the agricultural sector have been considerable. However, the fact that the Government has formulated its economic reform program in a relatively open and transparent manner reduces the risks of delays in implementation linked to the ministerial reorganizations. The preraration of the sectoral adjustment program has involved a large number of Burkinabe officials and economic agents and various aspects of the proposed policy agenda have been widely debated in a series of nation-wlde seminars. This process is expected to strengthen the Government s commitment and ability to implement the proposed policy agenda. The Government has already undertaken far reaching reforms in the context of SAL I and thus demonstrated its commitment and ability to carry out such reforms. The most important donors in Burkina Paso have been closely associated with the preparation and appraisal of the agricultural sector adjustment program and are committed to participate in the financing of the program. -atimated Disbursements: US$ 28 million equivalent of credit would be released in three tranches, with US$ 10 million constituting the first tranche, US$ 10 million would constitute the second tranche, and the remainder US$ 8 million the third tranche. The first would be released upon effectiveness; the second would be released after completion of a specific list of core actions and a satisfactory performance review to be held within 12 months of effectiveness; the third tranche would be released after completion of core actions and a second performance review to be held within 12 months of release of the second tranche. Disbursement of the entire credit is expected to be completed within 24 months of credit effectiveness. IBRD 20660 There is no separate staff appraisal report.  rINYUR 9rImNAL Du ffOPNIN A880CIATIN REPORT AND RElowMENDarI0N OF THU PRUSIDENT TO TME EXECUTXVU DIRECTORS ON A PROPOSED ZD3EWONSNT CREDIT TO SUHiWI PASO FOR AR AGRICULTURAL SECTOR AI_USTMENT PROGRAM 1. *I submit for your approval the following report and recommendation on a proposed credit of SDR 20.6 million (US$ 28 million equivalent) on standard IDA terms with a maturity of 40 years to Burkina Paso to help support the Government's agricultural sector adjustment program. The African Development Bank (AfDB), the European Community (EC), and France have expressed interest in providing cofinancing or parallel financing. I. M U MACROCOoNOMIC FRAMEWORK AND ADJU8TMENT STRA2EGY A. 8ackaround 2. Economic Structure. Burkina Faso is a landlocked country with a population of about 9 million, which is 90 percent rural. It lies in a transition zone between the Sudano-Guinean region and _he Sahel, and its climate is characterized by wide rainfall variations. Soil, water, and biomass resources are limited and fragile. Resource degradation is accelerating because of overexploitation and population pressure. With a gross domestic product per capita of US$320 in 1990, Burkina ranks among the worldts poorest countries. Basic social services are undeveloped, and 13.fe expectancy at birth (47 years) and primary school enrollment (31 percent) remain among the lowest in sub-Saharan Africa. There has been substantial emigration to neighborir.g coastal countries, particularly Ghana and Cote dlIvoire, mainly by the youngest strata of the active population. This has helped to contain rapid population growth, while bringing in substantial income in the form of emigrant workers' remittances. 3. The economy is dominated by agriculture and the public sector. Agriculture and stock raising contribute about 30 percent to GDP and are the main source of income and provide employment for almost 90 percent of the economically active population. Cultivation of traditional food crops (millet and sorghum) is by far the most important farming activity while cotton is the major export crop. Services are the largest sector, accounting for an estimated 42 percent of GDP while manufacturing remains undeveloped and contributes only about 14 percent of GDP. Informal activities dominate in the services sector (about two-thirds of value added) and are also significant in the secondary sector (about 40 percent of value added). The modern sector is essentially limited to government services and to the parastatal sector which accounts for practically the whole of moderr industry. 4. Despite some success with exports of off-season vegetables to Europe and fruit to neighboring countries, Burkina's exports are dominated by three primary commodities--livestock (to the coastal countries), cotton and, since 1985, gold. The economy has been highly dependent on inflows of foreign assistance and of remittances from an estimated 3 million BurkinabA abroad to finance most investment and in some years a part of consumption expenditure. With the limited potential for near-term economic diversification, the economy remains highly vulnerable to climatic vagaries and adverse movements in international commodity prices. 5. Recent Economic Growth 11S82-901. Despite rapid population growth and a fragile resource base, Burkina's economy fared relatively well during the 1980s. During 1983 - 1990, GDP growth (3.7% p.a.)  slightly outstripped population growth (3.3% p.a.). The average growth rate masks two distinct periods: until 1988, the economy enjoyed relatively rapid growth (average annual growth rate of 5.5%) mainly fuelled by strong performance in agriculture (6.4% annual growth), expansion in public consumption, and a construction boom driven by the public investment program. During the last two years, however, economic growth fell significantly: -0.4% in 1989 and 1.3% in 1990. This slow down was to a large extent due to negative growth in the agricultural sector, caused Inter alia by inadequate rainfalls. Tabl2J14 Selected Economic Indicators, 1986-90 .~~ . ... | = NIAWA Nnboomends |dw 1986 1987 1989 1990 GDP at consta_ 198S pio (% p.a.) 93 1.2 61 -0.4 13 ApcuhWe, Uveok and foiesy (S6 pa.) 10.8 -4.2 13.8 _2.9 -3.4 Gross domntc i_estment (% of GDP) 22.9 20.0 22.2 22.8 19.9 Gros domeavisass (X of GDP) 3.3 4.1 82 6.0 S.2 GDP def_tor (%pa.) 0.0 5.S 3.0 1.2 3.0 Consamorprbie(% pa.) 1.9 1.8 1.9 2.0 3.0 _ _-= ..= - == 6. Manufacturing stagnated during the 1980s even though highly protected by import controls. The reasons were several. Structural factors such as poor technical skills, high energy and transport costs, high wages, worker benefits, and rigid price and trade regulationq hurt competitiveness. The regulatory framework for industry, both public and private, based on an official strategy of *state capitalism," included a complex and sometimes contradictory set of regulations while special tax exemptions and protective measures for a number of large enterprises under the investment code deterred efficiency gains. 7. The significant fall in economic growth in 1989 and 1990, growing internal and external arrears, and an increasingly strained budgetary situation suggest that the basis for the expansion of the 1980. was, to a large extent, unsustainable. First, the high growth of agriculture was due to good weather and to the bringing of new land, recently freed from onchocerciasis, under cultivation. Further, the agricultural growth "was largely based on the mining of the natural resource endowment"IJ especially in the Sahel and the Central Plateau as the growth was achieved through more extensive land use, shortened fallow periods, etc. Second, the expansion of public consumption could not continue in the face of stagnant revenue performance and growing budgetary arrears. Finally, because the overall efficiency of investment was very low, as reflected in an ICOR of 7.3 in 1985-90, only modest benefits from past high investment spending were secured. 8. Savines Ma Investment. Burkina is dependent on foreign assistance to finance most public investment and some consumption. In 1986-90, net disbursements of official capital grants and loans averaged US$126 million annually or 5 percent of GDP. An additional average of US$100 miliion annually was contributed by donors for technical assistance and by NGOs. Thanks to four years of strong economic growth after the JJSee Buna Pawo: Economc loms in Renewable Naund ReueMa AguiuC Opeation, Sa DepaDmnt, Afiia Regin, March 30, 1990.  1983-84 drought, domestic savings performance up until 1988 was good, but could not be sustained with the economic slowdown in 1989 and 1990. Workers' remittances from abroad (averaging 6 percent of GDP in 1986-90) have made a significant contribution to national savings. 9. Throughout the late 1980s, investment has been relatively high, averaging 22 percent of GDP, largely because of large public investment. Much of the investment, however, has gone to major new infrastructure projects with low, or even negative, economic returns such as a railway extension, a large dam, new public office buildings, and a clinker crushing plant. Public housing projects were financed by forced lending from domestic banks, contributing to an increasingly precarious situation of the banking system. As for the private sector, it has invested primarily in housing, office buildings and informal sector activities. The legal and regulatory framework was not conducive to investment in formal sector industrial and service activities; moreover, private investors were crowded out by the privileged and, in some cases, formally monopolistic, positions of public sector firms in virtually all subsectors. 10. Fiscal and Monetary Performance (1986-90. Although government revenues (excluding budgetary grants) averaged 13 percent of GDP Z/ in 1986-90, the budgetary situation has been strained, with the overall government deficit (excluding grants) averaging 12 percent of GDP in 1986-90 (Table 2). The difficult financial situation was mainly due to three factors: (i) a large part of budgetary resources claimed by the wage bill; (ii) substantial parafiscal resources, especially those levied on imports of petroleum products, remaining in special accounts of autonomous public agencies; and (iii) tax revenues hindered by a narrow tax base, a large volume of exemptions, and weakness in the tax structure and collection process. 11. The overall fiscal deficit was particularly large in 1986-88 in response to an increase in public investment and, after 1987, an expansion of the public wage bill. The rapid growth in the government wage bill, especially for the military, has squeezed expenditures for supplies, operations and maintenance, local contributions to foreign- financed investment projects, and debt service. Since government borrowing from the central bank is statutorily limited by the rules of the West African Monetary Union (UMOA) of which Burkina is a member, a part of the deficit was financed through an accumulation of arrears. Arrears on domestic and external payments began to accumulate especially rapidly in 1987 aned reached an estimated CFAF 83.4 billion by the end of 1990, equivalent to one year's fiscal revenue. Arrears on external debt service, CFAP 49.4 billion of the total, have compromised relations with donors while arrears on internal payments now constrain business activity. 12. At the same time significant parafiscal resources have not been available to finance public expenditure because they have gone into the special accounts of autonomous price stabilization funds and service agencies. Although some of these funds were used to provide capital for several public enterprise investments, most have remained on deposit with domestic banks. As a result, the Government has been a substantial net creditor to the banking sector. In 1986-88, there was also a marked increase in net foreign assets due to good growth of exports and a relative stagnation of imports. This contributed to a rapid growth of the money supply, mostly in time and savings deposits. In 1989, the trends in credit were reversed as lending to the private sector expanded, the net 2.1 The GDP series used for the ratios of fised performnoce eohude the value added of the infrmal sector because it is hard to measure. hi the 1ate 1980s, thee formal secor accounted for an estimated 72 percent of GDP.  - 4 - creditor positior. of the Goverment shrunk, and the overall balance of payments registered a large deficit for the first time since 1982. The financial health of banks deteriorated throughout the period, with a marked worsening in the last two years. In 1990, nonperforminin loans (net of bank provisions) increased by CFAF 8 billiout, to CFAF 22 billion, equivalent to 15 percent of the banks' loan portfolio. Audits conducted by the central bank showed that three commercial banks urgently needed resteucturing while the postal checking system and the national savings bank continued to experience liquidity problems. Table.2. Selected public finance and external sector indicato's, 1986-90 ---------------------------------------------------------__----------- 19,8 19? im 1999 199 publb fiae indicators (% of fomal GDP) Goverwmea Revenue 13.4 14.5 13.2 11.8 14.6 Cunt Expend 13.5 13.2 13.4 12.5 14.5 caal E_enure 12.4 IS.1 11.8 9.0 7.9 Consolidated budget deficit (a) 12.8 14.5 12.5 8.9 7.6 GovemeatWae Bil (% of Curent Expendre) 54.0 58.6 63.5 65.2 60.7 Expornvolums (1985 100) 103.9 133.1 127.0 123.0 151.3 - cotton 175.0 237.5 187.2 188.5 246.0 -od 171.1 247.7 261.1 154.8 214.4 - ihvesock 78.5 79.7 91.1 104.0 107.2 TOtl expont of goods and NFS (USS m) 188.8 264.7 284.2 254.5 3S1.4 Towa wrkes' rt_a (USS ni) 191.6 173.4 174.6 1473 163.9 Totd iKpots of good and NPS (US$ m) 594.7 660.2 695.1 710.2 835.4 Metruandise Tems of trade (198&-10)((USS) 97.6 98.2 108.5 96.8 98.8 Reld effetve exchange rate (1955 1003 98.2 94.1 94.5 90.4 90.3 Balace of spvms idicators (X of formal GD Current Account EBaance (a) -15.3 -13.4 -12.8 -173 -14.5 Overll Baance 1.9 0.5 1.0 -7.1 -1.6 I ternal Debt WLT+ST+IEMF Toa debt diursed and custanding (US$m)(DRS) 669.5 866.0 877.8 757.2 794.0 Tota debt srvice paid (USS Milion) (b) 67.3 61.3 54.4 321.9 51.9 Debt srvice pald/epo"ils of goods and uvc (%) (b) 33.5 22.0 18.2 120.2 14.2 (a) Excluding grants, comMi t basis. (b) Includes, in 1989, for official debt to France, debt rief of US$16.6 nillnu and capialiton of canled dbt of US$188.7 m 13. Starting in 1989, the fiscal situation has begun to improve, initially due to a reduction in public investment expenditure as several large projects neared completion. More sustained improvement took place in 1990 in response to measures taken to reverse the adverse development in both current expenditures and revenues in the three preceding years. The government achieved a 15 percent growth in revenues thanks to reduced import duty exemptions, strengthened tax collection, and revision of standard values on which import duties are assessed. The last measure  channelled to the budget a larger portion of the substantial parafiscal resources arising from the difference between import and domestic prices of petroleum products. Initial steps were also taken to contain the wage bill by limiting recruitment and freezing both salaries and the financial impact of promotions. As a result of the launching of the ad4ustment program in 1990, the overall fiscal deficit fell to 7.6 percent of GDP. 14. Given Burkina' s membership in the West African Monetary Union and the fixed exchange rate parity between the CFA franc and the French franc, appropriate demand management policies are necessary to hold price increases in Burkina below those of its competitors. Throughout the 1980s the authorities have been successful in containing inflation and improving Burkina's international competitiveness. With domestic price inflation, as measured by the consumer price index, lower than that of its recorded trading partners, Burkina Paso's real effective (trade-weighted) exchange rate depreciated 25 percent between 1980 and 1990 3/. Further progress is needed, however, to improve the competitiveness of the economy. 15. Balance of Payments. In the 1980s, balance of payments developments have been driven largely by four main factoras (i) revenues from exports of labor to neighboring countries, which were almost as important as the revenues from exports of all goodsi (ii) world market prices for cotton and golds (iii) domestic production performance of cotton and gold; and (iv) imports linked to the public investment program. 16. The summer of 1986 is considered l'6t6 noir" for Burkina's cotton. The average f.o.b. export price at Abidjan collapsed from CFAF 593 per 'kilogram in 1984/5 to CFAF 367 per kilogram in 1985/86. Though world market prices recovered somawhat in 1986/87 (to CTA" 406 per kilogram) and 1987/88 (to CFAP 447 per kilogram), in 1988/89 they dropped again, by 16 percent, and recovered only weakly, by 8 percent, in 1989/90.4/ Thus, despite rapidly growing export volume (including exports from previously accumulated stocks), cotton export revenues in the last two years remained lower than revenues in 1987/88. 17. Gold exports grew rapidly until 1989. Gold prices were, however, weak in 1988 and 1989. The drop in the price of gold was compounded in 1989 and 1990 by sharp declines in the volume of production due to technical difficulties (a mine collapse). Estimates of livestock exports vary widely (see Table 8). Most sources show that export of heads of cattle and small ruminants fell considerably between 1985 and 1988 and begun to reco--r only in 1989. 18. With grants and net official capital inflows averaging US$263 million annually, the overall balance of payments continued to record surpluses of about 1 percent of GDP each year until 1988. lJ This situation was dramatically reversed in 1989 when a decline in workers, remittances, due to economic difficulties in the coastal countries, combined with weak export revenues and rapid growth of imports, especially of capital goods for the public investment program, resulted in a widening V/ Meud asandine,,rdeffetivexcahaeratewuas 1OO in1980,SSin 1985,80in 1988,and7S in 19. 9/) See Table 6. The data on pris wor obtied from two differet sourn: SocicW des Fms Textiles (SOFITMQ publicatons and World DBank, SEDES (1987) staff oetmates. Whiloe ru ar differencs in the estimates fom these two sources for the two yeas for which the ris overap (1995186 ad 1986/8, the diffencs ar minor. 1/ A pan of the overll balo of paymens defici has in offec ban 'finaned" by a onatiwou accumulation of anran on officid extena debt svie due to te fi reoumrc mostait  of the current account deficit to an unprecedented 17.3 percent of GDP. The deterioration, however, proved to be temporary, largely thanks to a sharp recovery in 1990 of gold and cotton export volumes and a deceleration of imports linked to the public investment program. The terms of trade improved and were not affected by the Gulf crisis in the latter half of the year since Durkina Faso had placed most of its orders for petroleum producte at prices prevailing before August 1990. Although the current account deficit thus narrowed to 14.5 percent of GDP, the improvement was not enough to prevent a further small loss of official reserves which declined to 4.5 months of imports by the end of 1990. a* The Structural Adiustment Strateav 19. Since a change in Government in August 1983, the authorities pursued policies inspired by central planning and marxism. The private sector was discouraged by confiscatory measures and political interference in the management of enterprises. Domestic and external trade were increasingly controlled. In 1984, the Government launched a program of development which aimed to mobilize rural and urban people to construct public infrastructure. This initiative was followed by an ambitious first five-year plan (1986-90) which included a number of large economically inviable projects. The interventionist policies contributed to lagging fiscal revenues which led the Government to implement, in 1985 and 1986, austerity budgets which included a 12 percent cut in nominal civil servants' wages. In the social sectors, the Government sought to improve the education and health status of the population by aggressive vaccination and literacy campaigns; these, however, could not be sustained because of a lack of resources and institutional weaknesses. The authorities also actively promoted environmental conservation and the role of women in development. 20. Following a change in Government in late 1987, the authorities became it.creasingly conscious of the limits of their dirigiste approach to development. The dialogue on economic management issues with the Bank begun during an economic mission in 1988. As the fiscal, balance of payments, and economic situation worsened dramatically in 1989, the Government accelerated the preparation of reforms aimed at liberalizing the economy, increasing the private sector role in development, and improving the management of public resources. A Policy Framework Paper (PFP) was drafted by the Government in late 1989, and included, in particular, an initial definition of the reform packages which would form the basis for programs supported by Bank adjustment operations. The authorities have assumed much of the initiative and responsibility for the formulation of the reform program. Significantly, the structural adjustment program was the subject of public debate at meetings in mid- 1990, to which all political and economic groups were invited. Because of the extensive consensus-building which the authorities chose to undertake, negotiations on the PFP were concluded only in December 1990. 21. The overriding objectives of the first-year PFP, considered by the Bank Board meeting as the Committee of the Whole in early 1991, are to raise the standard of living of the population through broad-based amployment and income growth and to lay the foundation for sustainable economic and social development. The Government is aiming for economic growth of about 4 percent per annum while strengthening public finances and the balance of payments. The Government has adopted an appropriate fiscal policy stance the aim of which is to contain public consumption so as to promote public and private savings and foster private initiative and investment. At the same time, it will increase revenues through improved collection performance and expanded tax coverage. The program aimed at a settlement of all external arrears In 1991, largely with debt-forgiveness and rescheduling on Toronto terms, and a resolution of internal arrears by 1993. Given Burkina Paso's exchange rate arrangement, containing domestic inflation will be essential for improved international competitiveness and  - 7 - better growth prospects in the long term. Because of the tight fiscal position, the Government is pursuing a prudent external debt management policy: it will contract or guarantee only concessional loans, with the exception of short-term trade credits and loans arising from Paris Club rescheduling. 22. Starting in 1990 the Government made good progress on key budjetary issues and in implementing structural reforms set out in the PFP: elimination of most price controls, liberalization of commerce, elimination of export taxes, and easing of trade regulations. The consolidated fiscal deficit (excluding grants), wihich averaged 13 percent of GDP in 1986-88, shrunk to 7.6 percent of GDP in 1990 and the Government has adopted strong measures to effect a further decline in 1991. In the 1991 budget military expenditures have been substantially reduced, personnel costs are smaller in nominal terms than in 1990, despite a substantial increase in the number of primary school teachers, and student stipends have been reduced. The Government has also moved to improve the productivity of public investments by giving priority to rehabilitation and maintenance, strengthening project selection, and dropping several large uneconomic projects. Several public enterprises have been liquidated or sold, and steps in a program to accomplish substantial divestiture had been taken. Key reforms (including the restructuring of the banking system) have also begun to encourage private sector and export growth . These and other reforms constitute the basis for a program supported by SAL I, which was approved by the Bank's Board in June 1991. 23. SAL I supports reforms in two broad areas: (i) increased efficiency of public resource use through a restructuring of budgetary expenditures, improved management of the civil service, and better programming and monitoring of public investments, and (ii) establishment of an enabling environment for private sector activities through a comprehensive package of banking sector reforms, public enterprise privatization, liberalization of pricing, marketing, and external trade regulations, and reforms of the legal and regulatory framework affecting investment, commercial relations, and employment. 24. Bank assistance strategy to Burkina Faso was discussed by the Board on February 4, 1992. In line with this strategy, the proposed Agriculture SECAL seeks to reinforce policy measures initiated under SAL I and to provide for their concrete application to the agricultural sector. Among the issues of direct relevance to the SECAL, the program supported by SAL I provides for: - improved management and monitoring of public resources and enhanced efficiency of public resource use through: (a) consolidation of all state resources and expenditures in a single document to be annexed to the government's budget, (b) preparation of consolidated annual public investment budgets within a framework of a three-year rolling public investment program, (c) a reduction in extra-budgetary operations, and (d) a reduction in the number of special treasury accounts; - enlarging the scope for private sector activities in production and distribution through: (a) abolition of commercial and distribution monopolies with the exception of imports of petroleum products and rice, (b) simplification of licensing requirements for engaging in trade, (c) liberalization of local trade, (d) elimination of price controls on locally produced goods, and (e) implementation of a phased program of import liberalization.  C. Growth Prosoects and NconolMc MUtlook. 25. In the medium-term, assuming reasonably favorable climatic conditions and a continuing small improvement in the terms of trade, Burkina's economic growth can reach about 4 percent per annum, i.e. slightly faster than the population growth rate which is estimated at 3.3 percent per annum. The formidable constraints to development, however, are not amenable to rapid change in a medium-term perspective: improved soil, water, and biomass resource management can affect agricultural output only gradually; reduction of population growth can only occur in the longer term if the Government's population policy is effectively implemented; only gradual progress can be made in increasing human capital, and hence labor productivity of the working population; and exploitation of new mineral deposits (gold, zinc, copper) can only make small contributions to overall growth. Moreover, the economy is highly vulnerable to drought and to economic conditions in C8te d'Ivoire and Ghana because of the importance of workers' remittances. 26. Nevertheless, several factors favor per capita income growth in the medium terms a hard-working and disciplined population; a domestic market approaching 10 million people; and manufacturing opportunities in the local and regional markets. Given appropriate incentives, there is room for expansion of private sector activity in both traditional and market-oriented agriculture (cotton, oil seeds, fruits, and vegetables) and related processing and service industries; and in small-scale productive and commercial enterprises in construction materials, services such as repair facilities, and tourism. For the lonoer-term there is reason for cautious optimism because the Government is a leader in the Sahel in addressing environmental degradation, the role of women in development, and population growth. 27. Economic projections of the most likely development scenario in 1992-2000--involving normal weather; more efficient investment, in part due to a rapid improvement in the private business climate; a continuous expansion of exports (including, after 1995, exploitation of significant zinc deposits); a slow recovery in workers' remittances; a relative decrease in public consumption; a containment of imports through gradual import-substitution and improved external competitiveness; debt relief; and an increase in external capital flows in response to the implementation of the adjustment program--show modest GDP growth of about 4 percent per annum for the rest of the decade. The achievement of this target is predicated on the capacity of the economy to generate resources for rehabilitation and new investment. The expansion of Industry and services and, to a lesser extent, of agriculture, is predicated -on a revival of private sector activity in response to improved incentives. 28. Based on these assumptions, which also formed the basis for the macroeconomic framework agreed upon in the context of the first-year PFP, the current account deficit would decline to about 12 percent of GDP by the end of the decade. After taking account of disbursements on existing and expected project-related commitments and debt relief available to Burkina on Toronto terms, the external financing needs average US$114 million per annum in 1992-93. About US$10 million annually would be financed through Burkina Paso's a-cess to the IMF SAF and a further US$51 million annually through IDA support for the adjustment program (SAL I, the Transport 8ECAL approved by the Board in February 1992, and the proposed Agriculture SCAL). The remaining resources are expected to become available through cofinancing from both multilateral and bilateral donors. If external resources are mobilized to cover these needs during the 1992-93 period, the net per capita disbursements to Burkina of Official Development Assistance (ODA) projected for 1993 (US$44) would still be less, in nominal terms, than the net per capita disbursements of ODA to other sahelian countries in 1987 (US$59). A  growth rate in external aid flows (grant and concessional loan disbursements) of about 6.8 percent per annum in US dollar nominal terms, which would be adequate to cover Burkina's financing needs up till the year 2000, is therefore realistic if the Government continues to maintain an appropriate macroeconomic framework and implement structural policy reforms. II. T8E AGRICULTURAL SECTOR DuEVY MON3 STRiC3EY A. Sector 8ackaround 29. The structure and performance of Burkina' a agricultural sector are largely a function of the agro-ecological conditions prevalent in the country. Water and soil resources are limited and fragile. Over 50% of the country is covered with poor ferralitic soils. Rainfall is low and irregular and highly susceptible to runoff. It varies from an annual average of 350Omm in the northern Sahel to over 1000mm in the more resource rich South-West. 30. It is estimated that rain-fed cropping covers about 35% of the country's surface, while pasture land makes up another 45%. About 30,000 km2 (11% of total surface) are cultivated yearly. Agricultural production is mainly rain-fed. Irrigation accounts for only 1% of total cultivated area, although the irrigated surface has almost doubled since 1982. Traditional coarse grains (millet, sorghum and to some extent maize) cover about 80% of the cultivated area. Food crops (mainly cereals) account for over 45% of agricultural CDP, followed by livestock (about 28%). Cotton is the most important cashcrop and provides almost 40% of export revenues. Livestock is the second most important agricultural export (mainly to the coastal countries), accounting for about 10% of total export earnings. Other cashcrops of growing importance are groundnuts, sesame, and off- season vegetables. Off-season vegetables are mainly cultivated on small irrigated perimeters where they have increasingly been replacing paddy as higher value added crops. 31. Rapid degradation of the natural resource base on the Central Plateau and in the Sahel region on the one hand, and the elimination of onchocerciasis in the West and the South on the other hand, are provoking a rapid shift in Burkina' s agricultural production structure. Pressure on pasture lands and degradation of the bio-mass in the Sahel are leading to a move from pastoral to agropastoral activities. Thus, crop production is becoming more important in an area traditionally dominated by pastoralism. Low rainfall and fragile soils, however, prevent both rapid agricultural and livestock development in this part of the country. The onchocerciasis freed areas in the South and South-West are the main receiving zones of migrants from the densely populated Central Plateau which is suffering from rapid degradation of its natural resource base due to overutilization. Hence, the West and the South are the areas with the highest rate of agricultural and livestock development. Currently about 95% of cotton and over 50% of cereals are grown there. 32. Emigration into the onchocerciasis zones is organized by government agencies such as the Volta Valley Authority (AVV--Amenagement des Vallees des Volta). Studies show, however, that the ALw-sponsored immigration represented only a fraction to the onchocerciasis zones. Instead, a significant portion of emigration is spontaneous movement to areas of higher potential. Most of the new settlement areas inadequately protect their environment, and consequently, environmental degradation is increasing rapidly.  - 10 - S. Recent Performance 33. The growth rate of the agricultural sector was a high 6.1 percent per annum in 1982-88 followed by declines in 1989 and 1990 (-2.9 and -3.4, respectively). Growth in the agricultural sector during the 1982-88 was driven by increases in crop (as opposed to livestock) production. Although the strong performance of the agricultural sector during the 1980s reflects relatively favorable rainfall patterns (except for the drought of years of 1983 and 1984), significant expansion of cultivated area, productivity gains, slowly increasing diversification, and regional (intra-country) specialization have contributed to agricultural growth. The remarkable expansion of cultivated area (overall average annual rate of almost 5S and as high as 18% for crops like cotton) was partly rendered possible by the eradication of onchocerciasis in the more fertile and higher rainfall areas of the South and South-west, although further extension onto marginal lands in the North and East took also place. In all areas of the country, reduction of the fallow period was also observed. 34. The most significant growth in output during the 1980s was achieved in the cotton sector (see Table 10, Annex I). Output of seed cotton almost tripled from an average of 66,000 tons in the early 1980s to about 170,000 tons at the end of the decade, turning Burkina into the third largest producer of West Africa. Burkina has a clear comparative advantage in cotton production, with its production costs ranking second lowest in the region (behind Mali). Further increases in productivity and cuts in production costs are, however, necessary if Burkina is to keep its competitive edge in the international market. 35. The rapid development of cotton production has had positive effects on overall agricultural and rural development in the South-West and to some extent the West and the South. Cereals production in these regions has particularly benefitted from this development. Over a quarter of national cereals production is currently produced in rotation with cotton. Productivity gains and higher production have been achieved through the residual effect of fertilizer applied to cotton and the adoption of improved farming practices. Other external economies from the development of cotton production include the promotion of literacy programs through the organization of farmers into village groups to market cotton and the development of social infrastructure through the reinvestment of village group incomes from cotton marketing. 36. The significant overall increase in cereals production during the 19809 (average annual growth rate of 6.5% between 1980-1990) was to a large extent driven by production increases in the South-West. During years of adequate rainfall Burkina is self-sufficient in millet, sorghum and maize, but increasing quantities of rice (100,000 tons in 1990) are imported, as a result of growing demand and stagnating production. Considerable growth has also been achieved in the production of groundnuts which are produced for the local market and increasingly also for exports to the sub-region. Groundnuts have been successfully introduced in areas where cereals production was previously declining. This helped prevent further productivity decreases in cereals production thanks to the residual effect of fertilizer applied to groundnuts. Groundnut production grew at an average annual rate of 10% during the 1980s. C. Constraints to Sustainable Growth 37. Although the performance of BurkinaIs agricultural sector over the past decade has been impressive for a Sahelian country, economic projections indicate that the high agricultural growth rates of the 1980. will not be sustained. Even with the policy reforms supported by this operation, slower agricultural sector growth (4%) is expected in the 1990s as the potential for expanding cultivated areas sharply declines. The  - 11 - level of agricultural technology remains low and extensive. Farming practices continue to put undue stress on the natural resource base thus seriously imperiling sustainable growth in the long run. As pointed out above, much of the sector's expansion during the past decade has in fact occurred at the expense of the environment. 38. The causes of the risk to sustainable sector growth go beyond extensive land use, low technology and environmentally hostile farming practices. The pricing, marketing, and trade policies pursued in Burkina may have had on balance a negative impact on natural resources, in particular in the Central Plateau where cereal production is still expanding to marginal lands instead of being intensified in the South and Southwest. In cereal markets, trade regulations (traders licenses, provincial trade barriers, pan-territorial wholesale prices, road taxes etc) have considerably increased transaction costs between surplus and deficit areas. When prices are beyond their purchasing power, poor rural households extend their cultivated areas under food crops into marginal areas. This impact is exactly the opposite of what would be desirable to restore soils in the already very degraded areas of the Central Plateau, that is long bush or cultivated fallow, with a comparative advantage for livestock production instead of cereals. This perverse effect of Government market interventions is also felt in the surplus areas where cereal prices, and consequently returns to labor, are too low to encourage the development of more intensive production. 39. Furthermore, subsidies for domestic rice production may be encouraging inefficient use of water resources. The increased demand for rice has led to the development of several irrigation perimeters, most of them with Government or donor support. Even at the high productivity levels reached in some of them (nine to ten tons of paddy per hectare), rice production is uneconomic if water resources were priced at their scarcity value. The subsidies are encouraging an inefficient use of scarce water resources. Interestingly, on private small-scale irrigation schemes which do not benefit from the subsidies, farmers have switched from rice to higher value crops for exports (vegetables). 40. It is also important to question the impact of cotton pricing and marketing policy (para 78) which has been a very strong incentive for the expansion of production. On the one hand, favorable relative cot.ton/cereals prices have supported the continued application of chemical fertilizer, thereby maintaining soil productivity. On the other hand, farm survey results suggest that very little organic matter is restituted to the soils, and that crop rotations are not adhered to. The long-term impact on soil fertility of such practices could be quite negative. Even while this result is only an indirect effect of pricing and marketing policies, it draws the attention of linking pricing policies to other measures, such as the delivery of good extension services to prevent natural resource degradation. 41. Burkinabe producers have shown an ability to adapt to major changes in the environment (particularly degradation of natural resources) and develop now indigenous technologies. But neither the level of these technologies nor the rate at which they are currently adopted are sufficient to maintain the capital of productive assets and support sustainable growth. Although fertilizer consumption has significantly increased over the 1980., its application remains highly concentrated in the cotton areas. High yielding seeds continue to be limited to cotton and to some extent groundnuts, as varieties appropriate for the ecological conditions in Burkina are not yet available for crops such as millet and sorghum. Mechanization (mainly animal traction) has progressed, albeit at a much slower pace than in some other African countries including Sahelian countries such as Senegal and Mali. Only about 3% of farmers possess a complete traction unit, while about 25% have partial units. About 50% of cotton producers use animal traction.  - 12 - D. Current Sector DeveloDment 8trateoy 42. Government efforts to reduce the impact of the constraints to sustainable growth include major undertakings aimed at improving the management of the countryIs renewable natural resources, policy reforms in agricultural input (especially fertiL.zer) policies and efforts to develop and promote the use of cheaper fertilizers, agricultural research, and the establishment of a national agricultural extension service. 43. Environmental Management. The ..mpact on resource degradation of its demographic growth and the spontaneous settlement in the onchocerciasis zones is being openly addressed by Burkinabe leaders, and the country stands out amongst the Sahelian countries of West Africa as the pioneer for initiating operational approaches to alter the trend in renewable natural resource degradation, in particular since the early 1980's. Four major initiatives have been taken. In 1983, the Government launched a program called the "three fights" to contend against uncontrolled bushfires, livestock movements, and tree cutting. A National Plan against Desertification (1986) and a law on Agrarian and Land Tenure Reorganization (revised in 1991) have been prepared. The preparation of a National Environmental Management Program has been completed and is in its implementation stage with major donor assistance, including IDA, and more recently, a National Environmental Action Plan has also been prepared. 44. The National Environmental Action Plan is a global strategic framework for the management of natural resources. It contains four main components for which detailed investment plans have been prepared: - the management of national natural resource endowments which includes a national forestry action plan, a soil cartography program, regional planning, and studies/analysis on subterranean water table; - land manaaement proaram includes the campaign against tree cutting, and the national land management projects such as the national environment management program; - program to improve the conditions of life in rural areas includes projects to develop secondary townships, village well construction, projects to construct schools, markets, dispensaries and village access roads, as well as an urban component which aims at addressing the impact of a high rate of urbanization on the destruction of natural resources; - environment awareness and training program includes mass environmental information campaigns, training programs in primary, secondary, and higher levels on environmental issues, and technical assistance to the private and public sectors on environmental management 45. Thy National Mwvironsmntal Manaon#sent Proara is designed as a long-term effort to stop and reverse the proceas of land degradation in order to secure agricultural growth, to restore biodiversity, and to manage forests and wildlife in a sustainable manner. The program has an innovative bottom-up approach. It supports community land management plans conceived with formally organized rural communities that have been granted secure rights (through the Agrarian and Land Tenure Law) over land and land resources. With support by decentralized government and non- government services, these communities decide ultimately on actions to be carried out on their lands. 46. Concomitant to the Government's efforts, tremendous momentum has built-up amongst the rural population in certain areas to reclaim  - 13- degraded lands and protect their resource endowment. The joint efforts of the population and the Government have led to substantial support from the donor community, including non-governmental institutions (NGOs), with the result that many pilot operations are underway, and valuable experience is available. 47. Fertilizer Policies. With IDA assistance, the Government has improved fertilizer policies and the structure of fertilizer use by removing subsidies, identifying and providing cheaper fertilizers, and eliminating supply inadequacies. Through policy reforms, the project focuses increasingly on the domestic sources of supply (animal manure, other organic matter, rock phosphate) and, where economically justified, on cheaper kinds of imported fertilizers. The Government'e fertilizer program includes field trials, a phosphate acidulation unit, credit to farmers for fertilizer purchases, rock phosphate production, as well as studies to (a) analyze the impact of subsidy removal on fertilizer consumption and cereals production and (b) the technical and economic feasibility of existing processes for local production of chemical fertilizers. Results on fertilizer research have been encouraging: researchers have come up with fertilizer formulas for cereals production for different agroclimatic zones, and the results of composting work have generally been positive. Detailed technical and economic analysis are in process to determine the profitability of these innovations before they are passed onto extension for diffusion to farmers. 48. Aoricultural Research Proa. Under this program, the Government established a national agricultural research organization (the Institut National d'Ntudes et de Recherche Agricole--INERA) and research network that plans and executes agreed priority research programs that are in line with government policies regarding national food security and natural resource management. Research is farmer oriented (responsive to farmers' needs), and allows for better coordination in the formulation and execution of national and international agricultural research program. Furthermore, linkages between research and extension services have been strengthened. 49. Aaricultural Extension ProaRam. The Government, with IDA assistance, introduced a T and V system (training and visit) adapted to Burkina s environment, thereby ensuring all farmers (male and female) equal access to advisory services, and extension staff access to appropriate training. The program promotes and organizes communication between national agricultural research staff and extension staff, and has: improved services to the livestock sector, introduced a grassroots functional literacy program, strengthened the Ministry of Agriculture and Livestock s organization and management by developing an in-house training facility, and developed an effective information aystem to ease the data collection and management by extension workers and trainers. 50. The Government recognizes that its efforts to remove the constraints to sustainable sectoral growth (improved soil, water and biomass resource management, agricultural research, and improvements in the quality and responsiveness of extension services) are neither likely to lead to rapid improvement in agricultural productivity, nor are they complete. To complement these efforts, therefore, the Government has designed a medium term agricultural sector strategy. The strategy emphasizes the elimination of the restrictive regulatory environment (through pricing and marketing liberalization) and unproductive public investments. The strategy aims at achieving sustainable sectoral growth through modernization, diversification and increased private sector participation.  - 14 - 3. The Nedium Term Agricultural Seltor Strateav 51. As outlined in the SAL I Letter of Development Policy and the PFP the Government's sectoral objectives are threefold: (i) to modernize and diversify agricultural production; (ii) to increase food security and, (iiI) to improve natural resource management. 52. To pursue the above objectives, the government'a current policies in agriculture (defined as a result of discussions on the PFP, SAL I, Environmental Management (PNGT) as well as the proposed Agricultural SECAL) focus on: - liberalizing prices, domestic marketing, and international trade of agricultural products; - reducing the role of the public (parastatal) sector in the marketing of agricultural products and abandoning all attempts at stabilizing the prices of agricultural products; - enhancing the security of land tenure to ensure improved management and conservation of natural resources by the rural population; - fostering private investment and employment creation in rural areas; and - improving efficiency in public investment and recurrent expenditures by establishing clear sectoral investment priorities which will focus on activities that are complementary to and supportive of private sector investment such as agricultural research, extension services, and environmental management; 53. As an integral part of the Agricultural sector adjustment program, the Government has prepared action programs for the key subsectors, including cereals, cotton, fruit and vegetables, livestock and oilseeds. In addition, the Government has prepared a long term environmental action plan, which is supported by the IDA Environmental Management Credit--cr. 2229-BUR (PNGT). UXI. * lWIgM-=R AGRICULTURAL ADJUSTIM A. Objectives of the Sector Adiustment Proaram 54. The proposed credit would support the Government' a medium-term sectoral adjustment program and hence promote sustainable growth in the agricultural sector. The major objectives of the program ares (a) to improve the competitiveness of key sub-sectors while ensuring sustainability of the production systems; (b) to reduce the mandate of the cereals marketing board (OFNAMCR) and eliminate public attempts at stabilizing price., to streamline the interventions of government ministries in the agricultural sector, and to improve the management of public institutions in rural areas; (c) to secure the incentive environment for increaseod food security; (d) to promote a facilitating environment for private sector participation in production and marketing. 55. To pursue the above objectives the program would focus on specific actions in three crucial areas: pricing and marketing reforms in key sub-sectors such as cereals, cotton, livestock and oilseeds; institutional reforms to streamline public sector involvement in agricultural research and extension and public policies affecting the production and marketing of agricultural products; improved management of sectoral public expenditure. In addition, the proposed Food Security and  - 15 - Nutrition Project (FY 92) would support the implementation of a food security action plan, thus directly contributing to achieving one of the oovernment's primary goals for the medium term. 56. The important issue of natural resource management and related land tenure questions are addressed under the separate ongoing Bank Environmental Management Project which aims at making rural communities responsible for the management of natural resources within their territory, while benefitting from public assistance in the form of technical and financial support. Given this project (PNGT), the sectoral adjustment credit would not include these issues. B. The Poliec A@enda Cereals Policv 57. Current Marketing and Pricina Policies: From 1983 through the 1990/91 agricultural campaign, consumer and producer prices of the main cereals were determined administratively by the Direction des Prix of the Ministry of Commerce. The system neither allowed for differences in quality, seasonal availability of cereals, nor for differentials in transportation costs. Observations on 25 markets across the country, however, showed that official producer and consumer prices were generally only adhered to by public institutions such as the cereals marketing board (OFNACER) and the Caisse Generale de Per6quation (cGP) in the case of purchases of locally produced paddy. 58. Traditional Cereals. OFNACER has a dual mandate: to guarantee official prices of coarse grains (millet, sorghum, maize) through market interventions at the producer and the consumer levels in normal years; and to maintain and manage a national food security stock. To these ends, OFNACER maintains stabilization and food security stocks and it intervenes at both the wholesale and retail levels. During the 1980s, OFNACER sales averaged about 44,000 tons yearly, while purchases on the local market amounted to about 23,000 tons yearly, the rest being secured through imports or food aid. Food Aid (typically wheat flour, rice, cooking oil, and sugar) is mainly imported (usually duty free) by NGOs. Until now, the monitoring of the amount of food aid has been weak while policies on its distribution (target group, conditions of sale, or free distribution) have been the prerogative of bilateral donors and NGOs. 59. OFNACER's attempts at stabilizing prices of local cereals, however, had little effect on market prices for two reasons: OFNACER's actions were too small to have a significant impact on prices (OINACER handles less than 1S% of marketed output) and its purchases frequently occurred too late because official prices were often announced late and because of OFNACER's cashflow problems. Nevertheless OPNACER's interventions have often had a destabilizing effect on private sector cereals marketing, as its interventions have increased uncertainty and invited speculation. in addition, ONACFR's operations have been costly as the margins allowed for by the officially set prices did not permit OFNACER to cover its full costs. OFNACER has been running significant financial losses which have mainly been financed by foreign assistance. During the 1989/90 campaign, for example OFNACER's total operating costs (excluding the cost of cereals purchased) amounted to 845.8 million CFAF, while net revenues from sales only amounted to 33.1 million CFAF. 60. There are no regulations prohibiting traders to market cereals from one region to another. However, between 1983 and 1989, regional authorities frequently prohibited movement of cereals from their region during local cereals shortages, as determined by them at any point in time. In addition, traders who sell to OFNACER are not allowed to deliver  - 16 - their goods to OFNACER warehouses in regions other than where they have purchased them. Further, (until 1991) traders were required to be members of publicly established traders' associations (groupements d'int6rot 6conomique--GXB) in order to obtain a trader's license. This situation negatively affected intra-country trade, as uncertainty and a certain degree of arbitrariness persisted. In addition, although information on actual market prices has been collected by OFNACER over the past three years, this information has not been made available to the public. Availability of this information would likely have increased trade between surplus and deficit regions, as opportunities for arbitrage could have been recognised more widely. 61. Ric. While OFNACER purchases traditional cereals, the recently established (1991) Socift6 National. pour la Collecte et le Traltement du Rix (SONACOR) has the mandate to purchase and process locally produced rice. Prior to the 1990/91 agricultural campaign, SONACOR's parent company, the CGP, was responsible for collecting and processing locally produced paddy, as well as importing rice. Currently, CGP maintains the monopoly over rice imports which it sells to wholesalers for local distribution at the same price as locally produced rice. Further wholesaling and all retailing of imported and locally produced rice is handled by the private sector. 62. Although SONACOR has the obligation to collect all locally produced paddy offered for sale at the official price, it doas not have an official monopoly over paddy collection and processing. However, the official price structure currently applied to paddy (85 CFAF/kg) and rice (170 CFAF/kg) is such that it prevents the private sector from collecting and processing locally produced paddy. Private processing of paddy is thus limited to the quantities produced for home consumption, for sale in local rural markets, or on sub-contract from CGP. At the current price structure, SONACOR and its parent company CGP, run a loss on the collection and processing of local paddy and subsequent distribution of rice. In 1989/90 CGP's loss amounted to about 19 CFAF/kg of rice, but losses very likely increased in 1990/91, as SONACOR's milling costs are higher than those of the private processors sub-contracted by CGP in 1989/90. As the quantity of local rice handled by SONACOR and CGP is currently low (average annual rice production of about 5000 tons) the total loss from locally produced paddy is not very large (below 100 million CFAF), and is financed by the margin which CGP retains from rice imports. 63. Trade ReQulations. Imports and exports of local cereals (the coarse grains) require prior authorization. The CGP (and through the CGP, SOSUCO and the Grand Moulins du Burkina (GHB)) has the monopoly on the import of rice, sugar, and wheat. Wheat production in Burkina is insignificant and the domestic price which incorporates an implicit import tax is set without regard to the cost of local production. The domestic price of rice is set irrespective of world market prices and taxes on rice imports are extremely low as they are based on a "valeur mecurialew (minimum import value). As a result, the COGP, which has the monopoly to import rice, generally retains a significant profit margin on these imports. As losses incurred by the collection and processing of local paddy are much smaller, these revenues have generally been used to finance extra-budgetary expenditures, including uneconomic investments: the current border price equivalent of imported rice in Ouagadougou is about CFAF 117/kg, while CGP sells imported rice to wholesalers at about CFAF 153/kg. Imports in 1990 amounted to 100,000 tons, which at the exchange rate of US$ 1 to CPAF 250, would leave CGP's gross margin at over US$ 14 million..  - 17 - Prososed Polil= Chances: 64. Policy changes for the cereals eubsector was, prepared by the cereals working group of the preparatory group for the Agricultural SECAL. The centerpiece of the work of this group is the "CQrQeals Plan" which provides for measures to JntX aliat intensify, diversify, and transform local cereals; introduce and/or promote agricultural products (especially maize) for which Burkina may have a comparative advantage; improve the mAnagement of food aid and rationalize the use of food aid counterpart funds; put in place an incitative environment (including the provision of inputs and rural credit) to promote the intensification of production; promote a greater private sector role in the collection, storage, and commercialization in both the domestic market and in subregional markets; and create an institutional focal point for the management of cereals policy and food security. 65. Price reaulations. To allow for a more efficient allocation of resources and to encourage domestic trade of cereals between surplus and deficit regions, the Government has decrided to liberalize producer and consumer prices of cereals and abolish public attempts at stabilizing the prices of all grains. An important first step in this direction was taken on March 28, 1991 when the text establishing price control procedures for locally produced goods was abolished by decree. 66. gFNACR. The Government has further decided that OFNACERs role would be limited to the maintenance and management of a national security stock of a maximum size of 50,000 tons, the management of food aid stocks and the commercial sale of program food aid. This position is strongly endorsed by IDA and the other donors. The objective of the security stock is to stock sufficient coarse grains to ensure adequate domestic supplies in case of drought until the arrival of food aid and emergency imports. 50,000 tons is the amount of cereals required to maintain a population of about 2 million (the number of Burkinabe estimated to be at risk during periods of severe drought), at a reduced cereals consumption of 150kg per capita per annum. The assumed reaction time (the time required for food imports or aid to reach cereals markets) is 60 days. 67. During non-drought years OFNACER's market interventions would be limited to the purchase and sale of the quantities necessary to ensure adequate technical rotation of the security stock. As cereals can only be stocked for an average of three years, a third of the security stock would have to be renewed each year, requiring OFNAhER to sell and purchase about 16,700 tons annually. Under the adjustment program, OFNACER would be required to effect all purchases and sales at market prices and limit its activities to wholesaling. OFNACER would purchase its cereals in surplus regions through competitive bidding. It would sell mainly in the northern deficit regions. 68. Burkina's private cereals markets are generally competitive and relatively efficient. Exceptions may be found in certain deficit areas of Yatenga and the Sahel where lack of infrastructure, difficult access during the rainy season, lack of purchasing power and low population densities often make it unremunerative for private traders to intervene. OFNACER would be required to satisfy the markets in these areas through its sales in connection with the technical rotation of the security stock. OFNACER would, however, only be called upon to satisfy solvent demand and intervene at the wholesale level. Targeted sales at subsidized prices, if necessary, would be handled by the CNLES (Comit6 National de Lutte des Effets contre la Secheresse, the national organization responsible for coordination and distribution of emergency food aid), MOs, and local authorities. OFNACER would furnish them the necessary cereals and be remunerated for it through the common food aid counterpart fund or directly by the Government. Rules which specify  - 18 - modalities of OFNACER intervention in the market when buying and selling to maintain the national security stock would be d fined in a contract plan between OFNACER, the Government, and donors supporting OFNACER. 69. To identify regions where solvent demand is not adequately served by the private market, and to promote efficient private sector trade in cereals, a strong laformation system must be established. As part of this eystem, OFNACER would continue to be responsible for the collection of market price information, which would be made available to the public on a regular basis through communication by mass media. The CNLES would be made responsible for establishing emergency food aid plans, based on the information available from an integrated Early Warning Systems (MWS). Measures to improve the performance of these EWSs are provided for under a proposed Food Security and Nutrition Project. 70. The new (reduced) mandate of OFNACER would require an internal reorganization and a reduction of its infrastructure. The reorganization would entail both, a small reduction in staff (currently 330, which is only marginally excessive for the management of a security stock of 50,000 tons) and a geographic redistribution of OFNACER centers and security stocks. In addition, a substantial reduction in OFZACER's storage capacity (currently bver 130,000 tons) and automobile fleet would be required. OFNACER would also dispose of its automobile repair shop and all retail stores. Details on OFNACER's internal reorganization (and the costs) are being worked out by the Government. 71. OFNACER would be transformed from an EPIC (itablissoement public & charactore industriel et commercial) into a SI (Socift& d'Etat) and details of its obligations towards the Government and the Government's obligations towards OFNACER would be spelled out in a contract plan. OFUACER's financial resources would be clearly established as would its remuneration. The contract plan would be drawn up for one campaign only, to allow for further improvements after a one year experience. The Government has prepared a draft contract plan which it has submitted to IDA and other donors and was discussed during negotiations. This contract plan will enter into effect at the end of 1992. 72. OFNACER would no longer have access to individual donor accounts, as its budget would be agreed upon and financed jointly by concerned donors and the Government. Within the agreed budget, OFNACER would present invoices for rendered services to an Oversight Committee (consisting of donors which financially support O ACER and representatives from the Ministry of Finance and the Ministry of Agriculture) which would reimburse OFNACER. All government financing for OFNACER would be budgetized and the entire OFNACER budget (including donor financing and Government financing) would be annexed to the annual Government budget. This procedure would greatly facilitate OFEACEP.'s financial management and render it significantly more transparent. OFNACER would present yearly budgets and audited accounts to be approved by the Oversight Committee and IDA. 73. Narketina. The Government has realized that free circulation of cereals within the country is not only important to increase food security, but that it is also crucial to encourage regional (intre- country) specialization in agricultural production. Therefore, all barriers hindering free circulation of cereals within the country would be removed and intra-country trade would be encouraged through regular provision of price information on markets across the country. Traders would be granted licenses without being obliged to adhere to publicly designated traders' associations. 74. Trde. The Government also recognizes the important role which the private sector could play through imports and exports of cereals during deficit and surplus years. Imports and exports of coarse grains  - 19 - would, therefore, be liberalized as a condition of effectiveness of this operation. The Government wishes, however, to maintain CGP's monopoly on rice imports to reduce the possibility of import tax evasion, and because CGP can benefit from significant scale economies and other savings through government to government purchases. However, CGP's "profits" (marge) from rice imports would be budgetized, through the introduction of a transitional import tariff (para 76) in 1992. In line with the agreement reached between the Government and IDA (SAL I) to abolish all "valuers mecuriales" (minimum import values) by 1992, the transitional tariff would be based on CIT prices. In addition, the Government has undertaken, in the context of SAL I, to launch a study during 1992 to determine the best strategy for liberalizing the imports of rice. 75. A tariff on rice imports is warranted to protect local rice production. Although Burkina's rice production is currently not competitive at international prices there is significant scope for further cost reductions, through productivity increases in rice production, the liberalization of paddy prices (which are currently set 15 CFAP/kg higher than in neighboring countries) and efficiency gains in processing. 76. Under the agricultural sector adjustment program, therefore, the Government would guarantee that (i) neither SONACOR nor any other public institution would obtain the monopoly over paddy collection or processittg, and (ii) paddy and consumer rice prices will be fully liberalized. Rice imports, however, would be subject to a transitional import tariff designed to protect local rice at a nominal rate of about 50% at current international prices and CFAr exchange rate. Given the volatility of international rice prices, however, the level (as opposed to the rate) of protection for local rice producers would be maintained reasonably stable during the production and marketing phases of the agricultural campaign. To this end, the Government and IDA have reached agreement on the terms of reference of a study to determine the feasibility of introducing a variable import levy on rice. The levy would decline over time but, in any one year, would be reviewed quarterly and adjusted whenever the CI? reference price of rice (in CFAP) fluctuates by more than 5 percent. The recommendations of the study would be implemented in December 1992 and would be reviewed after six months. 77. The proposed 50% nominal rate of protection--in the transitional phase--would leave consumer prices in the major urban areas around the market prices currently observed, while lowering paddy prices (which would be liberalized) to about 70 CFAP to 75 CFAF/kg (depending on milling efficiency) in the west, where most paddy is produced. Under this price structure private entrepreneurs could engage in commercial collection and processing of paddy and help render domestic production more efficient, as their processing costs are expected to be lower than those of SONACOR. As agreed in the context of SAL I, the Government will: (a) prepare the terms of reference for a study to determine the best strategy for privatizing SONACOR, (b) reduce its shares in SONACOR to a maximum of 25% before July 1, 1993 and (c) provide evidence, judged satisfactory by IDA, that all direct and indirect subsidies to SONACOR have been eliminated. Reducing Government shares in SONACOR and eliminating all subsidies would be conditions for second and third tranche releases respectively. sgns. 78. The successful development of cotton production during the 1980 was to a large extent the result of an efficient development strategy. The relatively good management and financial autonomy of the cotton company, SOP!TSX, have played an important role in ensuring the prompt delivery of inputs to producers and assuring a secure market for seedcotton. Marketing arrangements, based on guaranteed prices and cash payments further enhanced production.  - 20 - 79. Despite the success of cotton production, analysis of the current situation reveals the following features: production increases were obtained largely through more acreage being brought into production and the guaranteed producer prices; there are considerable differences in productivity per hectare in different producing regions and, as a general rule, fewer than 60% of the area under cotton receive the "right" doses of insecticides; information on production (acreage, productivity, etc) critical for the smooth management of the cotton campaign (collection, ginning etc) is often unreliable; and, given the role played by village groups in the marketing seed cotton, the lack of rigor by these groups in classifying cotton, imposes additional costs to SOFITEX thus putting Burkina cotton at a competitive disadvantage in international markets. Further, many of the village groups are plagued by internal management problems thus are unable to ensure a better management of the cotton campaign. 80. SOFITEX's cotton ginning efficiency is very satisfactory (currently at 41.25%) and it is expected to improve over time. As a result, the factory-gate price of Burkina cotton of CFAF 348/kg compares favorably with other West African producers. There is, however, considerable scope for productivity increases in the marketing of Burkina cotton. The fob price (port of Abidjan) projected to be around CFAF 389/kg for the 1992/93 cotton campaign reveals a much higher cost of transport than in similarly landlocked countries (such as Mali). Similarly, the projected average cif price of CFAF 436 reveals that considerable cost reductions in marketing are feasible. 81. Measures to Improve Productivity: the Government proposes to promote the intensification of cotton production while ensuring that the fertility of the soil is maintained. To achieve this, the Government proposes tos ensure the security of land tenure and thereby encourage producers to apply techniques of land conservation; map out the various cotton production zones and develop appropriate cotton development strategies for the zones; and promote the integration of livestock raising and crop production to ensure more use of organic fertilizers. 82. In addition, the Government proposes to redouble the efforts for: gathering more reliable agricultural statistics (including examining an efficient and a cost-effective means of involving village groups in the gathering of statistics), closely follow developments in the cotton sector and continuing adapting the extension services to the particular demands of the sector, promoting better coordination and collaboration between the various actors (producers, village groups, extension services, and SOFITEX) involved in the sector, pursuing cotton research with a view to improving the profitability of the sector, improving the supply of inputs (including the promotion of appropriate mechanization) and optimizing their use, inciting the producers and the village groups to better claesify cotton by introducing a third quality standard, ensuring the rigorous classification of seed cotton by confiding the ultimate responsibility for grading to SOFITEX. These measures would be accompanied with investments which would enhance the productivity of the sector. Among the productivity enhancing measures are the modernization and expansion of SOFITEX s ginning capacity and improved maintenance of feeder roads (addressed in the Bank-supported Transport SECAL). 83. The cotton crisis of the mid-1980s and subsequent world price fluctuations, together with the depreciation of the dollar, significantly affected the financial viability of Burkina's cotton sector. Furthermore, the cotton price stabilization scheme managed by the Caisse de Stabilisation et de Per6quation des produits Agricole (CSPPA) proved non- viable. Burkina undertook a series of adjustment measures in response to the sharp fall of world market cotton prices in 1985/86 and 1988/89. The measures included a reduction of the producer price, elimination of input subsidies and a series of financial meaoures including the reduction of  - 21 - SOFTTEX's remuneration on turnover. However, further cost reductions are needed if Burkina is to maintain its competitiveness at the current exchange rate and projected world market prices for cotton. Cotton producer prices, the remuneration and taxation of the cotton company (SOFITEX) need to be adjusted periodically to reflect change. in world market prices. 84. Along with other export crops (groundnuts, sesame, sheanuts) cotton is part of a stabilization scheme which is managed by the CSPPA. The system is based on a fixed producer price which is set irrespective of world market prices (currently 95 CFAF/kg for lst grade seedcotton). The stabilization mechanism is defined in an agreement between SOFITEX and CSPPA whereby SOFITEX's operational budget (5S of gross sales on cotton and cotton oil seeds) is guaranteed by CSPPA. CSPPA is subsequently obligated to cover the difference between SOFITEX's revenues from cotton exports and actual expenditures. SOFITEX, in turn, pays 75% of its after tax profits to CSPPA. However, following the collapse of world market prices in 1985/86, CSPPA was unable to honor its obligations to SOFITEX and the latterls revenue shortfall (about 10,4 billion CFAF after the 1985/86 and 1986/87 campaign) had to be covered by its own reserves and by borrowing from the banking system. 85. The cotton stabilization scheme failed essentially for two reasonss (i) it was too rigid as producer prices and SOFITEX's operating budget and commissions were set irrespective of world market prices; (ii) CSPPA played a dual role as a commercial enterprise (engaged in marketing and exporting cash crops other than cotton) and manager of the stabilization fund, but failed to keep separate accounts for these activities. As a result payments from SOFITEX which should have gone into the stabilization fund were considered as CSPPA revenues and were taxed by the Government as such. In addition the funds were partly used to cover CSPPA's own operational costs, to finance the purchase of large quantities of sheanuts from traders and to acquire shares in public enterprises in the name of CSPPA. 86. Proposed Price stabilixation Schemes The main objective of the reforms is to link oroducer iricesand a OFITEXes commissions to world market prices. The linking of producer prices to world market prices would be achieved through the transformation of the currently fixed producer price into a flexible, but guaranteed for any particular year, cotton seed collectioni/ price, which would be adjusted upward or downward in line with movements of international cotton prices. Further, for the purpose of the stabilization scheme, the basis for the calculation of SOFITEX's guaranteed operating costs (including commissions) would be revised so that they depend on (1) signiflcant efficiency gains in the marketing of cotton (para 80), and (2) the profitability of the campaign rather than gross sales as is currently the case. The guaranteed collection price would be announced before the planting season. Farmers would receive a premium (ristourne) for the following year's cotton if the current cotton campaign proved profitable due to higher international prices. Thus, except for the very first year of the scheme, the actual purchase price of cotton will be the guaranteed collection price plus the premium calculated on the basis of the results of the previous year's campaign. 87. The collection price would be supported by a self-financing independent cotton fund, which would be placed with a financial institution and be managed by a committee including representatives of i/This price is tm minimum t a producer would be guanted at t collection of sec4 cotton. The actual price paid will be this prioe plus a premiun calculated on th basis of tho resu of the previous years cotton campaign as is aplained below.  - 22 - SOIITBX' I management, the Government, SOFITEX' u private shareholders, and the producers. The fund would benefit from an initial deposit by the Government in compensation of CSPPA's outstanding debt with SOFITEX (through donor financing). It would subsequently be financed from lint export revenues. The fund would have a ceiling of CFAP 4.5 billion in its first year (1992/93). At this ceiling, the fund would be capable of supporting a difference in the world price (sales price) and the average cost price of Burkina cotton (estimated at CFAF 420/kg) of up to CFAF 60. The collection price would, however, be lowered if the cotton sector ran deficits for two consecutive years and/or the stabilization fund reached its minimum level of CPAF 1.8 billion. 88. Distribution of profits: Profits from the cotton campaign are currently distributed between CSPPA (75S%), SOPITEX (15%) and the CRPAs (regional service of Ministry of Agriculture) (10%). The latter receive a share of SOFITEX's profits because they are responsible for extension in the cotton producing areas. Under the reform program the government proposes that net revenues from lint exports would only be distributed among beneficiaries after the stabilization fund has been constituted to the agreed ceiling. After tax profits in excess of this would be distributed as follows: 45% to producers in form of a premium to be paid out during the following marketing season and 55% to SOFITEX. SOFITEX's board would decide on the use of funds generated through after tax prof its. The CRPAs would no longer share the cotton sector' s profits, but would be remunerated by SOFITEX for the services they provide on the basis of 1 CFAF/kg cotton produced in the area they serve. 89. Taxations The cotton sector is currently taxed in three ways: SOFITEX's revenues from the sale of cotton seed to farmers and domestic industries and its 5 remuneration on lint exports are subject to a 45% turnover tax. The 75% SOFITEX profits paid to CSPPA are considered as CSPPA revenues and thus subject to a 45% turnover tax. Lint exports are subject to a 3% statistical tax. Under the reform program the turnover tax would be replaced by a tax on SOFITEX's profits at a rate of 45%. 90. Other Trade Reforms: The regulation according to which SOFITEX can not move cotton out of the country before a sales contract is signed would be abolished to allow SOFITEX to stock cotton in export ports and take advantage of higher paying fast-delivery requests from clients. 91. Institutional Reforms: A contract-plan between the Government and SOFITEX--acceptable to IDA and other donors--which specifies SOFITEX Is accountability to the Government as a mixed-capital company2/ and the Government's obligations vis-&-vis SOFITEX has been drafted to cover an initial 3-year period (1992-94), updated every year. In particular it guarantees SOFITEX's managerial autonomy (in line with the agreement in SAL I that all SEMs will be subject to private commercial law) and renders SOFITEX solely responsible for all decisions related to its commercial activities including ginning and marketing. The contract-plan also defines multi-year sectoral objectives, including an investment plan and its financing. 92. To strengthen the capacity for sectoral planning and monitoring, a planning and monitoring unit for the cotton sector would be established and would be directly accountable to SOFITEX's board of directors, which would hold the ultimate responsibility for sectoral VIThe Govenmen retains 65% of the capital and wil continue to retain hs share duing the adjustmet period. Tho Compne Faiase pour e Ddvoppment des Fibres Textils (CFDT) holds 34% and the remaining 1% is hed (0.5% each) by two loal banku the Banque nenatonal du Burdna (BIB) and the Banque Intntonal pour Ib Comme, lIndustrie et rioultu du Burkina (BICIA-B). The Govement is committed to reducing its shams in SOFPfEX provided national owners can be found.  - 23 - planning and monitoring. SOFITEX would be restructured following the recommendations of the recently accomplished personnel audit. The restructuring would aim at cost reductions and further increasing SOPITEX's managerial capability, with particular attention to strengthening the middle-level management. 93. The 1992/93 Cotton Camnaian. The Government proposes that, as a transitional year and exceptionally, the 1992/93 collection price be announced in the middle of the cotton campaign. The reasons are the following: earlier proposals to maintain cotton prices at 95 CFAF/kg for first grade seedcotton, 80 CFAF/kg for second grade, and 50 CFAF/kg for third grade would have meant, given current grading practices, an average seed cotton price of 91.7 CFAF/kgt at the current average sales price of CPAF 340 CFAF/kg realized by SOFITEX on the world market, the average producer price could not exceed 57 CFAF/kg assuming that SOPITEX's cotton marketing costs were to remain at the same levels. The delay in announcing the seedcotton collection price and the entering into effect of the contract plan (currently planned for October 1992) will permit the Government to (1) identify and implement measures to drastically reduce SOFITEX's abnormally high marketing costs, (2) institute more rigorous seedcotton grading practices, (3) better appreciate the trends in the world market price of cotton, and (4) mobilize donor assistance to prevent too drastic a drop in the producer price. Given announced floor prices in neighboring countries, the Government would aim for a minimum average seedcotton price of 85 CFAF/kg Other Cash Croos (8esame, Grounduuts. Sheanuts. 94. Current Situation: Up till the 1991/92 agricultural campaign, prices of the above cash and export crops were fixed annually by the Ministry of Commerce. Prices were uniform across the country and no allowance was made for quality differences. Prices were fixed at three levels: producer prices, CSPPA purchases from traders, and CSPPA sales of the products to local processing factories. CSPPA guaranteed the announced prices through direct purchases from village groups or from accredited traders. CSPPA subsequently ensured the export of these crops, although accredited traders could also export after obtaining an export permit and CSPPA's approval. CSPPA acted as a stabilization agency to the extent that it bought at the officially announced price throughout the year and then absorbed fluctuations in the world market prices. 95. Similar to cotton, the stabilization of oil seed prices did not work effectively. Marked inter-annual fluctuations of official producer prices during the 1980. indicate that CSPPA performed little stabilization from year to year. In fact, the relative variation of official producer prices over the 1980s was higher than that of international prices for sesame and sheanuts and only marginally less for groundnuts. In addition, the system worked to the advantage of traders rather than producers, as CSPPA bought a large share of its products from traders who did not necessarily observe the official producer prices. This was particularly true for sheanuts, the only product which benefitted from price support (but not necessarily effective price stabilization), during the 1980s. CSPPA's cost price of sesame and groundnuts was always significantly below its achieved export price during the 1980., so that producers of these products only contributed to but never benefitted from the stabilization fund. Ironically, of all the products which CSPPA sought to stabilize, sheanuts is the one for which stabilization has the least justification as it requires neither investments nor labor prior to gathering (harvesting). 96. Proposad Policy Reforms: In 1990, the Government abolished prior export authorizations for all products except cereals and in early 1991, as part of SAL I preparation, the system of authorized pricing for locally produced goods was abolished with the exception of a negative list  - 24 - of goods deemed essential (rice, sugar, and wheat flour). Abolishing prior export authorizations effectively ended CSPPAIs monopoly over the exports of sesame, sheanuts, and groundnuts. However, exporters still require the approval of C8PPA in order to benefit from the price stabilization scheme. Under the agricultural sector adjustment program, the price stabilization schemes and the CSPPA role in them (and thereby price setting at the three levels: the producer, CSPPA purchases from traders, and CSPPA sales to local processing industries) for sheanuts, sesame and groundnuts will be abandoned. The Government will confirm and widely publicize that the exports of these products are liberalized and exporters neither need prior authorization to export nor the approval of CSPPA. 97. Currently, CSPPA plays three different roles: a price stabilization board for sheanuts, groundnuts and sesame; a supplier of these products for exports and local processing industriest and a significant shareholder in a number of local industries. As of 1988, the CSPPA held shares amounting to CFAF 4.31 billion (US$ 17.24 million in 17 local industries, of which shares in SOSUCO (CPA? 1.35 bllion) were the most important. Other significant shares (CFPA million and above) were held in CITEC RUILERIE (CFA? 914 million), SOFITEX (CFAP 900 million), SAVANA (CFAF 180 million), UREBA (CFAF 160 million), PASO YAAR (150.1 million), CNCA (CFAP 150 million), and BND (100 million). 98. In November 1991, within the context of a SAL I supervision mission, the Government prepared the terms of reference for a study to determine the future role of CSPPA (and OFNACER and COP) in a context of liberalized marketing and pricing systems. The Government is fully committed to promptly implement the recommendations of the study. The study could recommend (a) the liquidation of CSPPA, or (b) its transformation from an EPIC (etablissement public A charactbre industriel et commercial) into a SEM (societ4 d'economie mixte), engaged in commercialization (domestic and export) of agricultural products and the management of its shares in local industries. In the latter case, CSPPA would operate in competition with other traders and exporters. Further, in addition to CSPPA operating as an autonomous enterprise, the Government would sell a minimum of 75% of CSPPA's capital to the private sector by July 1, 1993. 99. SOFIVAR currently an EPIC would be transformed into a Soci6t6 d'Economie Mixte (SEM) with a reduced Government participation in its capital to a maximum of 25%. SOFIVAR has in recent years (since 1985) played an important role in the successful promotion of groundnuts through the provision of inputs, production credit, extension and purchase of groundnuts. It would, therefore, continue its activities in this field. Aside from the fact that 80FIVAR will no longer be obliged to make contributions to CSPPA's stabilization fund, no further policy changes are called for with respect to SOFIVAR as it carries out its activities efficiently and effectively. Iusar 100. The production of sugar is an exclusive monopoly of the Soci6t6 SucriAre de la Como6 (SOSUCO), a mlxed-capital company with 66.1% state ownership. The rest of the shares are held (in order of importance) by: various parastatals (16.5%), the Republic of C8te d'Ivoire (10.7%), SOMDIAA (a French-owned company, 6%), and the private sector, of which foreign private (0.6%) and domestic (0.1%). The ownership of shares in SOSUCO by the C8te d Ivoire makes SOSUCO unique among parastatals in Burkina. The present capital structure of 80SUCO dates from 1984 when it was purchased from SONDIAA and restructured. At that time the share capital of SOSUCO was raised from CFA? 3.115 to CFAF 6.031 billion. soSUCO, however, inherLted accumulated losses of CPA? 3.387 billion, leaving a net value of only CFAF 2.644 bllion.  - 25 - 101. SOSUCO manages a large irrigation perimeter (4,000 hectares) in Banfora where between 240 to 329 thousand tons of sugar cane are produced. 30 thousand tons of refined sugar is produced annually, on average. In all SOSUCO employs about 4,800 people of which 1,850 are classified as permanent, 500 are contractual, and 2,500 are classified as seasonal. 102. The problems of sugar production and marketing in Burkina are multiple. They include the high cost of domestic production, a rigid and unmanageable marketing arrangement which invites fraud, public import monopoly, and import taxes based on a very low valeur mercuriale (minimum import value) which leads to substantial unofficial importss Marketina arranoement. Until 1990, SOSUCO sold sugar only to traders approved by the Ministry of Commerce. 'Wholesale and pan- territorial consumer prices were set by the same ministry. The traders were reimbursed for transport costs by SOSUCO depending on the ultimate destination of the sugar. As a result, many traders make false declarations on their ultimate destination in order to maximize transport costs. In 1990, SOSUCO requested and obtained permission from the Ministry of Commerce to select its own traders with the result that the number of traders was reduced from 167 to 43. The problem of transport fraud, however does not seem to have been completely eliminated. Trade regulatiqns. SOSUCO, through CGP, has a monopoly on sugar imports. Despite this monopoly on imports, however, unofficial imports (estimated in excess of 20% of domestic consumption) have been considerable. 103. In addition, SOSUCO is financially distressed due to an inadequate capital structure (thus a high long-term debt to capital ratio) as well as questionable management practices. Among the latter is a policy of carrying very high inventories financed by substantial short term borrowing from the banking system. 104. With assistance from the CCCE (the Development Bank for Economic Cooperation) of Prance, the Government initiated a rehabilitation of SOSUCo in 1990. The rehabilitation addresses SOSUCO's capital structure, reductions in manpower, and generally seeks to improve the management of the company. Much needed investments to improve the productivity of SOSUCO are either already under way or are contemplated. These include a new dam on t-he Comoe (nearing completion) to increase the irrigation potential of SOSUCO and some modest investments to improve the industrial machinery. It is expected these investments, and better selection of cane varieties on SOSUCO's part, will lead to substantial reductions in costs of production in the medium term. Sugar production in Burkina, however, will still not be internationally competitive after these improvements. 105. Under the Government Is Medium-Term Agricultural Sector Program the reforms will concentrate on two main issuess reform of the sugar import trade regime, and liberalization of domestic marketing of sugar including the abandonment of pan-territorial consumer prices for sugar. First, a transitional tariff based on c.i.f. prices would be imposed on imports of sugar. This is in line with agreement reached under SAL I for the "valeurs meicuriales" (minimum import values) to be abandoned by 1992. The exact level of protection would be calculated as to leave the domestic price (on average) at the current level and is expected to be initially about 30 percent of CIF value. Second, SOSUC0 would be free to determine the factory-gate wholesale price at which sugar will be sold to traders, given the new tariff structure. Third, the system of reimbursement of transport costs will be abandoned. The import tariff will be revised downwards over time on the basis of an agreed time table of cost  - 26 - reductions with SOSUCO. The cost reductions would reflect foreseeable productivity increases due to measures undertaken under the rehabilitation plan. To this end, the Government and IDA have agreed on the terms of reference of a study to determine the appropriate tariff structure for sugar over the medium term. This new tariff will be implemented starting in December 1992 and would be reviewed after six months of implementation. Fruits and Veaetables: 106. Although Burkina has successfully broken into the European market for horticulture products and, to a more limited extent, fruit, it currently has problems defending its market share because of irregular and frequently delayed deliveries and problems with the quality of the produce delivered. The main constraints faced by the sector are two-folds first, a large share of the export market (between 65 and 80% of the vegetable market) is controlled by L'Union des Cooperatives Agricoles et Maraichares du Burkina (UCOBAM). This union of cooperatives8/ has the role of providing inputs to member cooperatives (including guaranteeing credit accorded by the agricultural bank, CNCA), providing technical assistance at the level of production, and handling the collection, internal transport, storage and export of products. Since 1987, UCOBAM has been facing severe difficulties in all its roles and has serious internal management problems. Further, many of the member cooperatives are not well managed and are able to continue producing only because they rely on the state or foreign aid for the maintenance and renewal of irrigation infrastructure. Second, bottlenecks in transportation for the export markets are severe. Air Afrique only makes limited freight space available for the export of these products and exports of UCOBAN receive priority thus often leaving other exporters9/ without outlet. This problem needs to be addressed, especially since Burkina is facing stiff competition and is likely to lose its export market if problems with deliveries and quality persist. 107. Under the adjustment program, the Government would withdraw from UCOBAM after addressing the issue of UCOBAM's indebtedness to the banking system. UCOBAM would be managed exclusively by the member cooperatives which would decide on whether to dismantle it if it should prove impossible to rehabilitate it. In addition to the renegotiation of landing rights with Air Afrique to increase available freight, the policy of according priority to UCOBAM exports will be abandoned. 108. Further, special import authorization for cartons will be eliminated as such prior authorizations effectively oblige producers to purchase all packaging materials from SONACEB the sole local manufacturer of cartons. Packaging materials from this source aro significantly more expensive than materials imported from Mali and unduly raise the price of Burkinaba agricultural exports, thus hurting their competitiveness. Live7ltck: 109. Livestock remains important in the 8urkinabe economy. However, its performance has significantly lagged behind that of agricultural production and productivity in the livestock sector remains low compared to other countries in the region. The Government is fully aware of the problems posed by the sector and has already taken a series of policy measures aimed a improving the sector' s performance. Prices of all 8/UCOBAM was created in 196. t gmup about 30 cooperais. n ai UCOBAM has 20,0 nmember who are vegetable and fit producers. 2/In 1990 there wer 7 prite epores-who purchasether supplies of vegetabks fom non-UCOBAM producers and, increasin*, from UCOBAM coopeative.  - 27 - livestock and meat products are fully liberalized and the livestock marketing board has been abolished. Veterinary services have been opened to the private sector. The only pressing issues--within the sole competence of Burkina authorities--in terms of policy measures remains the elimination (and at a minimum, reduction and harmonization) of (para- fiscal) taxes on exports of meav and livestock. In 1991, the Government eliminated the droits de sortie (4,400 CFAF per head of cattle), which cut the combined burden of taxes on exports to 3,300 CFAF. Burkina continues to levy, however, a statistical tax of 2,200 CFAF per head and various other taxes (patente, taxe de recherche et conditiotnement, timbre douani6re, taxe CBC, taxe ONAC) that total 1,100 CFAF per head. Meat is currently subjected to higher taxes than live animals, thus punishing the export of these higher value added goodss several of these levies are calculated on the basis of the valour mecuriale (minimum export value). The mercuriale for meat, however, is higher in relation to exports of live animals thus, the bias against meat exports. This also means the incidence of parafiscal taxes (especially the statistical tax, taxe do recherche et de conditionnement, taxes CBC, and the taxe ONAC) could actually increase if the mercuriales are replaced by actual market prices as foreseen in SAL I. 110. While no further reform measures are currently required in this subsector, strong efforts are in place to define priority programp and projects and secure their financing. Particular attention will be paid to the demarcation of livestock grazing ranges and their development and protection (under the Environmental Management Project--para 45), increased integration of animal husbandry and farming, supplementary animal feeding with agro-industrial by-products, access to water points and the promotion of private animal health services. The Government is currently preparing an action plan for the livestock sector focussing on priority projects to be undertaken during the period of the adjustment program. i11. Other policies to boost Burkina's livestock exports can only be meaningfully addressed in an interregional context. These includes the lack of competitiveness of Burkina's meat products in non-CPA zone coastal West African markets (especially Nigeria and Ghana), export subsidies on SC exports of red meat and poultry products, which reached very high levels by 1987-89, particularly in C8te d'Ivoire, and the high livestock marketing costs (transport, informal "taxes", and other marketing costs) in the West African market. Other Xnstitutidnal Reforms: 112. Under SAL I, the Government has undertaken to (i) implement statutory and financial reforms to induce greater efficiency in the public enterprise sector; (ii) create an appropriate policy and legal context for divestiture; (iii) begin the divestiture process which would be completed under a proposed IDA private sector development project (PY93). In addition to eliminating of all subsidies, amending the laws governing public enterprises (done in July 1991), eliminating of all cross debts, reviewing the statutes of all public enterprises, enacting a law to permit financially distressed enterprises to be put into receivership, SAL I will also support, among other measurest (i) the conversion into administrative institutions (EPAs) financed directly by the Government budget, those EPICs providing public services only; (ii) putting those that have been identified as having financial difficulties under receivership; and (iii) initiating the divestiture process for 12 enterprises, identified as most attractive to private investors, which would be privatized by the end of 1992. 113. With respect to institutions operating in the agricultural sector, reforms other than those pertaining to OFNACER, CSPPA and SOFITEX will occur at two levels: In accordance with SAL I, all EPICs intervening  - 28 - in the agricultural sector will be transformed either into SPAs (OFN&CER, CRPAs and others) or SEMs. During SAL I negotiations, agreement was reached with the Government on the transformation of all current EPICe operating in the agricultural sector into either SPAs or SEMs. 114. The jecond level of institutional reforms pertains to streamlining the services of the key Ministries intervening in the agricultural sector. A number of ministries are currently involved, either directly or indirectly, in agricultural and rural development. They include the ex-Ministry of Commerce (responsible for the main agricultural price stabilization boards and now part of the Ministry of Industries and Commerce), the Ministry of Transport (feeder roads), the Ministry of Agriculture and Livestock, the ex-Ministry of Cooperative Action (currently a State Secretariat), the Ministry of Water Resoutces, the Ministry of the Environment and Tourism, and the Ministry of Territorial Administration. Of these, three (Agriculture and Livestock, Water Resources, and Cooperative Action) carry out the majority of tasks pertaining to the sector. The division of labor between these three Ministries (but especially Agriculture and Livestock and Cooperative Action) is currently ill defined, leading to significant overlap of activities and responsibilities. 115. Under the agricultural sector adjustment program, the Government has set up a working group to analyze the existing situation and to draw up an action plan and implementation schedule to rationalize the intervention of these ministries. on the basis of the preliminary findings of this working group the main objectives to be pursued under the action plan will be to ensure greater coordination between (and rationalization of--including reduction in the number of) ministries involved in the rural sector to avoid duplication of effort and ambiguities in the division of labor between ministries. However, since June 1991, there have been a number of ministerial realignments, the full implications of which are not immediately evident. For example, the livestock portfolio within the Ministry of Agriculture and Livestock, is now handled by a minister of state in charge of livestock as opposed to a state secretary. Given the continuing realignments, therefore, the Government proposes to submit the terms of reference for a detailed study aimed reorganizing central Government departments and agencies intervening in the agricultural sector for IDA's approval in September 1992. The recommendations of this study will be jointly examined by Government and IDA in the second quarter of 1993, while implementation of the recommendations will begin during the first half of 1994. Coorination of InvestIent with the Reeurreut audact 116. About 40% of public investment, but less than 8% of budgeted current expenditure go to the rural sector. About 90% of public investment in the rural sector is financed by external sources which also finance a large share of the operating expenditure of rural public services. Because these projects are implemented by four different ministries (Agriculture and Livestock, Cooperative Action, the irrigation component of the Ministry of Water Resources, and the environment and fishing portions of Ministry of Environment and Tourism), and their regional offices without coordination between these agencies, the Government lacks an overview of total recurrent public expenditures going to the rural sector. In addition, not enough effort is made to assess the future recurrent expenditures of individual investment projects, with the result that most projects lack financing for maintenance upon completion. The public investment program has lacked clear sectoral priorities and many of investment decisions were donor driven. Thus, a significant share of resources went to investments with low financial and economic returns, such as large scale irrigation projects.  - 29 - 117. In March 1991, an Agricultural S8CAL preparatory mission examined the 1991 current expenditures and investment budgets of the four ministries with exclusive or substantial impact on the rural sector and observed that the recurrent budgets for these ministries (and especially the ministry of agriculture and livestock) provide a very partial picture of the true extent of these expenditures. This is because in agricultural extension, for example, the budget of the ministry covers only the salary component of the CRPA's expenditures whereas, being EPICs, these centers cover their operations and maintenance needs through services rendered to projects, other EPICs, or SEMs (eg placing credits for CNCA, placing inputs for SOFITEX, providing veterinary services etc). As a result, the salary-recurrent expenditure ratio of the ministry (and by extension the ratio for the public sector) is significantly overestimated. Further, it is difficult for the authorities to ascertain if the recurrent expenditures of the rural ministries are adequately provided for or effectively and efficiently used. 118. Much of the shortcomings observed in the public investment programming in the agricultural sector are being addressed in SAL I. First, the UNDP and the Bank--within the context of the SAL I-supported reform program--assisted the Government to establish procedures for formulating a three-year rolling public investment program (PIP) and for monitoring investments. The PIP is to be revised twice a year in consultation with the Bank to reflect implementation experience and to add new projects which meet an agreed set of criteria. The monitoring of investments is to be substantially strengthened by the merging of the Banque Int6gr6e de Projets (BIP) at the Ministry of Finance and Planning and the Service Informatique de Suivi des Projets (SISP) at the Presidency. 119. Investment decisions will consider future operating and maintenance costs as well as the availability and sources of funding. To this end, the Government will assess the recurrent needs of the principal spending programs in the priority sectors (by 1993, these will bet basic education, health, road maintenance, agriculture, and the environment) as well as of all major projects to be completed in 1991 and 1992. Starting in 1992, inclusion of new projects in the PIP will require an estimate of future recurrent costs. Satisfactory implementation of the 1991 and 1992 budgets and agreement on the 1992-94 investment program are conditions of Second Tranche and Third Tranche release of SAL I. 120. Proposed Actions Under the Agricultural SECA. In view of the comprehensiveness of the SAL I program, no new reforms specific to investment programming in agriculture are warranted. However, supervision of the implementation of the Agricultural SECCL will ensure that the investment budgets of the rural ministries (a) correspond to sectoral priorities as set out in the Government's Letter of Agricultural Development Policy and (b) are rationalized to, in particular, ensure the adequacy of the provisions for operations and maintenance.  - 30 - IV. THE PROP08ED CREDIT A. Credit Historv 121. The proposed credit would be the first IDA agricultural sector adjustment credit to Burkina Faso. The possibility of an agricultural sector adjustment credit was first considered with the Government during discussions of the Country Economic Memorandum in January 1989. The proposed Agricultural SECAL was identified during a mission in June 1989, prepared during two joint IDA/French Aid Agencies/EC missions in November and March/April 1991, and appraised by the joint mission in October/November 1991. Negotiations are planned for April 1992. B. Financiny and Management of the Prouram 122. Credit Amount and Financing: It is proposed the Government's agricultural sector adjustment program be supported by an IDA credit on standard terms for the equivalent of US$ 28 million. These quick- disbursing funds are sufficient to support the Government's agricultural sector policy reforms and to finance a significant part (approximately 26 percent) of the projected residual external financing gap for the period 1992-94. The current account deficit is expected to remain around 14% of GDP during 1991-1993 and to decrease to about 12 percent by the end of the decade. After accounting for debt rescheduling and project-related disbursements, an annual residual financial gap of US$ 114 million is foreseen during 1991-93. About USS 10 million annually will be financed through Burkina Faso's access to the IMF SAF approved by the IMF Board in March 1991. A further US$ 51 million annually will be financed through IDA support for the adjustment program, of which the proposed Agricultural SECAL (USS 28 million between 1992-1994) would be a part (see Table 2 on Page 31). The counterpart funds will assist the Government in carrying out reforms which could ultimately have a budgetary impact in excess of US$ 75 million. These costs includes termination allowances of staff of OFNACER, SOSUCo, and SOFITEX which will become redundant; eliminating the debts of CSPPA, CITEC, and FASO-YAAR to SOFITEX, and the accumulated debts of UCOBAM, as well as restructuring the capital of SOSUCO; and providing the initial funds to the revised cotton stabilization scheme. 123. The French aid agencies are expected to provide quick- disbursing financing in the amount of around USS 20 million, to assist the restructuring of the cotton and the sugar sub-sectors. Additional funding would be provided for investments in these two subsectors and possibly the livestock subsector, cereals, and fruits and vegetables. The European Community is expected to finance projects up to US$ 20 million on the basis of Lom6 IV agreements. The actions of EC will concentrate on the Cereals Plan (para 64), including the costs of restructuring OFNACER, and measures to promote livestock production, export and the integration of livestock raising in agricultural production systems. Parallel financing of as yet undetermined amount would be provided by Germany to support reforms In the cereals subsector and in support of actions to promote food security. The African Development Bank would finance projects to the tune of 10 million units of accounts (UA) under the Agricultural SECAL. To assure that these programs fit within the overall framework of tne sectoral adjustment program, mutual agreement on the key sub-sectoral action programs were made an integral condition of the proposed sectoral adjustment credit. The Government of Burkina Paso would be the Agricultural SECAL borrower.  - 31 - C. Procurement and Disbursexents: 124. The IDA adjustment credit of US$ 28 million would be disbursed in three tranches. The first tranche of USS 10 million would be d4isbursed gDon offectiveness, the second tranche (US$ 10 million) approximately 12 months later, and the third and final tranche (US$ 8 million) a year after the disbursement of the second tranche. 125. The adjustment credit would finance 100% of the CI? costs of general imports, excluding luxury goods, military equipment, and environmentally hazardous products as defined under the Standard International Trade Codes (SITC). Disbursements against a positive list would be impractical given the low estimated value of agricultural intermediate imports. Contracts for goods to be imported by the Government or the private sector, each estimated to cost US$ 2 million or more, would be awarded following a simplified International Competitive Bidding (ICS) procedure using a standard bidding document to be cleared with IDA--this threshold is consistent with the anticipated size of contracts and the experience of Burkina with Bank procedures. Procurement by public agencies for items below this threshold would follow standard Government procedures acceptable to IDA: a minimum of three quotations from eligible suppliers with the exception of proprietary equipment, spare parts, and standardized equipment required for reasons of compatibility with existing equipment. 126. The Country Procurement Assessment Report (CPAR) prepared by the Bank in 1990 indicated that the laws and decrees governing procurement procedures of Burkina were in broad conformity with Association Guidelines. The Association surveyed a sample of potential public importers and found that when a limited number of suppliers were contacted directly, this was on the basis of lists which in general were reviewed and updated regularly. Eligible imports below the US$ 2 million threshold by private agencies would be procured in accordance with normal commercial practices: wherever possible, quotations from eligible suppliers from at least two countries would be sought. Single source purchasing would only be used for proprietary equipment, or where compatibility with existing equipment require standardization. The Association reviewed the current procedures used by some major potential private importers: these procedures were competitive by soliciting quotations from a variety of sources before finalizing purchases, except for cases of direct contracting acceptable to the Association. Accordingly, the standard commercial practices being followed are acceptable without reservation. 127. A General Procurement Notice will be published in "Development Business" to alert expcrters from Bank-member countries to export opportunities offered in respect of this operation. Imports shipped prior to August 1989 would not be eligible for Bank financing. Contracts below US$5,000 would not be eligible for IDA financings this threshold would be consistent with a satisfactory access of small and medium size importers and still a manageable operation from an administrative point of view. Retroactive financing would be acceptable up to US$ 5 million (18 percent of credit amount) for eligible imports paid during the four-month period preceding credit agreement signature. No more than 20 percent of the credit would be used to purchase petroleum and food products. Preshipment inspection rules applicable to imports financed under SAL I would also apply to the Agricultural Sector Adjustment Credit. They were put into effect as of January 1992 to reduce fraud associated wLth underinvoicing and misclassification. Except for items procured under ICB procedures, all other procurement under this credit would be subject to price verification by a designated inspection agency. 128. IDA would carry out an ex-post review of all contracts awarded under simplified ICB procedures. Before submitting the first application for withdrawal of funds from the proposed credit, the Government of  - 32 - Burkina would submit to IDA two conformed copies of the contract in question, together with an analysis of the respective bids and recommendations for award, and a description of the advertising and tendering procedure followed. Procedures and contracts below the US$ 2 million threshold would be reviewed by IDA supervision missions on a sample basis. Before submitting the first application for the withdrawal of funds from the proposed credit, the Government will submit to IDA such supporting documentation and information as IDA may reasonably request. 129. Disbursements. The proposed credit would be disbursed against a general list of imports (excluding products on a negative list). Disbursements made on the basis of fully documented reimburement applications for individual contracts exceeding US$200,000, and SOEs for contracts under US$200,000 with the disbursement/procurement documentation retained in the field and made available to auditorss TORs for an audit would cover verification for procurement in conformity with procedures outlined in the credit agreement. The Government would establish a special account at t)e Central Bank to facilitate disbursements. On fulfillment of the conditions of effectiveness, IDA would disburse an initial amount of CFAF 800 million, equivalent to the level of eligible expenditures over a four month period. The closing date for the proposed credit would be December 31, 1994. D. Oraanisation for Credit Execution 130. The Ministry of Agriculture and Livestock would have overall responsibility for project execution, but would work closely with the Permanent Technical Secretariat for Adjustment operations, and the Ministry of Finance and Planning. The Permanent Technical Secretariat for Adjustment Operations has been created to coordinate all adjustment programs. The Secretariat consists of specialized subcommittees which assure day to day follow up of the implementation of adjustment programs. The Secretariat is also empowered to receive and quickly act on complaints from Burkinabe citizens (an ombudsman role) concerning the failure of Government officials or agencies to apply new regulations or procedures in adjustment programs. A working group with representatives of the Ministry of Agriculture and Livestock, the Permanent Technical Secretariat for Adjustment Operations, and the Ministry of Finance and Planning would be established to act as counterpart for supervision missions. X. Accountina. Auditina, and Renorting 131. The Central Bank would maintain separate accounts related to the sectoral adjustment credit. These accounts would be audited annually by independent external auditors acceptable to IDA. The audits would (a) verify that the conditions of the credit agreement have been respected; (b) determine whether the accounto have been prepared and maintained in accordance with sound and generally accepted accounting principles and practices --eptable to IDA; (c) determine whether records maintained by the Minist., of Finance and Planning permit the identification of all receipts and payments under the sectoral adjustment credit. A certified copy of the accounts together with the audit reports would be submitted through the Ministry of Finance and Planning within six months after the end of each fiscal year. The appointment of an external auditor acceptable to IDA would be a condition for credit effectiveness. F. Monitorable Actions 132. Policy actions to be undertaken under the proposed Agricultural SCAL are detailed in the Government's Letter of Agricultural Development Policy (see Annex III). Tranche releases will depend on satisfactory progress in the implementation of the sector adjustment programs overall, and upon fulfillment of the specified list of core  - 33 - actions presented in the policy matrix in Annex 1I of this report. The macroeconomic framework should also remain consistent with the objectives set out in the PFP. The Letter of Agricultural Development Policy forms the basis for sectoral performance review. 133. The following core actions were undertaken by the Government before negotiations of the proposed credits (a) Government eliminated export taxes (para 22); (b) Government abandoned the principle of pan-territorial pricing for all products in March 1991 except for rice, cotton seeds, and sugar (para 65); (c) Government assurances were obtained by IDA that the price stabilization roles of CSPPA and OFNACER will be withdrawn (parao 65 and 96); (d) Zovernment agreed that it would present an action plan and implementation schedule for an integrated information system for the regular collection and timely dissemination of market information to the public (para 69); (e) Government proposed transitional rice and sugar import tariffs acceptable to IDA, and reached agreement with IDA on the terms of reference for a study to determine appropriate tariffs on rice and sugar, to be implemented in December 1992 (para 76 and para 105); (f) Government assurances were obtained by IDA that: the price of paddy, rice and sugar would be liberalized at the same time as the implementation of the transitional tariffs; public milling capacity would not be further expanded, and that requirement for SOSUCO to reimburse traders for their transport costs would be abandoned (paras 77 and 105); (g) Government submitted a draft SOFITEX contract plan, acceptable to IDA, guaranteeing SOFITEX's autonomy and providing a new cotton stabilization scheme linking producer prices and SOFITEX renumeration to world market prices (paras 86 and 91). (h) Government withdrew CSPPA monopoly on the exports of shea butter groundnuts and sesame (para 96); (i) Government and IDA reached agreement on the terms of reference for studies on the roles of OFNACER, CGP, and CSPPA in the context of a liberalized pricing system (para 98). (j) Government and IDA reached agreement on EPICs to be converted into government agencies (ERAs), into state enterprises (SEs) and mixed capital enterprises (SENs) (para 113); 134. During negotiations, agreement was reached or confirmed on the following actions which are reflected in the Government's Statement of Agricultural Development Policys (a) IDA and Government reacbed agreement on the general provisions of the OFNACER contract plan, and furtner agreed that the contract plan will be put into effect in December 1992 after the recommendatione of ongoing studies on the details of O)NACER' s restructuring and divestiture plan have been agreed upon between Government and IDA (para 71);  - 34 - (b) Implementation of the recommendations of the study of import tariff for rice, and liberalizing the price of local paddy in December 1992 (para 76); (c) Government and IDA agreement on terms of reference on a study to determine the best strategy for privatizing SONACOR (para 77); (d) Government assurances that the SOFITEX contract plan will be put into effect in October 1992, at which time all restrictions on SOFITEX's ability to move lint outside of the country will also be removed (paras 90 and 91); (e) Government assurances on prompt implementation of recommendations of study to determine the fut4re role of CSPPA (para 98); (f) Government assurances that it will disengage from UCOBAM in December 1992 after settling UCOBAIMs outstanding debts (para 107); (g) Government assurances that it will present, for IDA's approval the terms of reference for a study to redesign and reorganize central and regional Government departments and agencies active in the rural world, and which will emphasize (among others) rationalizing and coordinating the activities of the Ministry of Agricultuire and Livestock, and the State Secretariat for Cooperative Action in September 1992 (para 115) . 135. The condition for credit effect'veness would be: (a) The establishment of an accounting and financial management system in accordance with sound and generally accepted accounting principles (para 131) and the appointment of an external auditor acceptable to IDA (para 131). (b) The establishment of an interministerial working group with representatives from the Ministry of Agriculture and Livestock, the Technical Secretariat for Adjustment Operations, and the Ministry of Finance and Planning to coordinate activities and to monitor the progress of the program (para 130). (c) Government submitting an audit report covering fiscal year 1991 in respect of the IDA-supported Fertilizer Project (Cr. 1550-SUR) (d) Government issuing a notice, acceptable to IDA, repealing the Notice to Importers and Exporters No. 92-066/MICM/DGC/DCE of February 19, 1992 concerning special export authorizations for agricultural products. 136. Conditions for Second Tranche release would be: (a) Government and OFNACER have put into effect a contract plan acceptable to IDA, and which includes an adequate mechanism for monitoring and disseminating market information (para 71); (b) Government review of the rice and sugar tariffs implemented in December 1992 as a result of the recommendations of the tariff study, and introducing modifications, acceptable to IDA, to the tariffs (paras 76, 105);  - 35 - (c) Government reduction of its shares in SONACOR and CSPPA (should the latter continue to exist as an autonomous export company) to a maximum of 25% in each institution (paras 77 and 98); (d) Government and SOFITEX have put into effect a contract plan acceptable to IDA, and which includes provisions for an improved cotton price stabilization scheme (paras 91 and 93); (e) Government submitting to IDA the recommendations of the study to redesign and reorganize central and regional Government departments and agencies that intervene in the agricultural sector (para 115); and (f) A satisfactory macroeconomic framework (para 132). 137. Conditions for Third Tranche release would bet (a) Progress, judged satisfactory by IDA, in the implementation of the OFNACER and SOFITEX contract plans (paras 71 and 91); (b) Government has provided evidence, satisfactory to IDA, demonstrating that SONACOR has not been granted and subsidies, whether direct or indirect, during the preceding calendar year (para 77); (c) Government proposing an action plan and implementation schedule, judged satisfactory by IDA, for streamlining activities of the Government departments and agencies intervening in the agricultural sector (para 115); and (d) Continued satisfactory macroeconomic framework (para 132). IDA's bi-annual review and approval of a revised agricultural sector public investment program will be pursued within the context of SAL I. G. Benefits and Risks 138. The proposed project is expected to improve incentives for agricultural production and marketing, improve efficiency, and increase productivity in the agricultural sector. The project is expected to have a positive impact on economic growth and employment creation in the private sector and, through its impact on agricultural incomes, to contribute to food security in the medium term. The project, by linking cotton producer prices to world market prices, would significantly improve the competitiveness of Burkina's cotton. By drastically reducing para- fiscal taxes on livestock and meat products, exports should increase. The domestic cost of producing sugar should also significantly fall. Over time, the service delivery of ministries involved with the agricultural sector should markedly improve as a result of measures to coordinate and harmonize thooir activities. 139. Burkina Faso has recently embarked on dramatic political reforms. Political reforms include the adoption of a new constitution was submitted to public referendum in June 1991 and the holding of presidential elections in January 1992. Legislative elections are planned for May 24, 1992. Along with these reforms, there have been a number of ministerial reorganizations, and another is expected following the legislative elections. The number of ministerial changes affecting the agricultural sector have been considerable. However, the fact that the Government has formulated its economic reform program in a relatively open  - 36 - and transparent manner reduces the risks of delays in implementation linked to the minibterial reorganizations. The government has already undertaken a significant number of reforms in the context of SAL I and thus demonatrated its commitment and ability to carry out such reforms. The preparation of the sectoral adjustment program has involved a large number of Burkinaba officials and various aspects of the proposed policy agenda have been widely debated in a series of nation-wide seminars. This process has strengthened the Government's commitment and ability to implement the proposed policy agenda. The most important donors in Burkina Faso have been closely associated with the preparation and appraisal of the agricultural sector adjustment program and are committed to participate in the financing of the program. V. C o a 140. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association and I recommend that the Executive Directors approve the proposed credit. Lewis T. Preston President Attacbments Washington, D.C. May 12, 1992  -37 - ANNEX I Pagejifi 12 pages (is Up6 WI Ilon.at cu errent prioes) Aatusi Pr*toj gobR. Projeetian M81I U811 qw to"e two i.e0 2wI son I.e 1994 1o" am A. enperta of agod" a WeS 127 S;S 264. 264.2 2w64. 8560 8567.4 858 1653.5 418.7 52. 94. 1. Nurchandlee (FM2 IN.8 149.0 269. 249.2 215.0 804.7 10.6 .06. 1*7.5 157.2 454.1 626. 2. Nun-Factor Services 27. 89.6 84.9 84.9 59.5 49.4 51.0 51.8 56.1 6183 69.4 1177 S. Isgorts of Seeds A W$ 4615.0 594.7 160.2 6956.1 730.5 92.8 849.2 9020 979.0 1046. 1124.8 1644.4 1. lurohmndlss (FM8 165. 487.5 475.2 4661.9 SU1. 5601.5 610.1 647.5 199.5 76.7 ISA2 111.4 S. man-Faste seiviee 11611.2 157.2 36.0 36.2 36.5 6901.2 260. 54.2 170.5 55.6 102.6 4516.6 C. Reacmurce, blanc. 4-6.8 406.9 495. -410.9 -4115.6 -466.4 -491.5 -541.7 495.2 -42.$ 401.4 -70.2 0. Not Facto Ins. -0.9 -12.0 -14.5 -11.1 -15.4 -7.9 -12.5 -17.6 -25.5 W.4. 44.8 -26.7 1. Feetor Ruceipta 9.5 12.2 14.0 14.1 18.2 15.4 16.7 15.7 15.7 16.7 17.6 11.8 2. Fabcw Paqaanft 10.7 24.8 26.1 27.2 26.5 2. 29.5 14.5 42.5 47.5 51.9 60.2 Ol:Totl intreab. U.X (1990-99M sIdta) 10.7 24.3 26.8 27.2 26.8 9.5 26.4 2.6. 24.4 24.0 24.2 24.4 Interest arrears other factor peaanute (residual) a/ 0.0 0.0 0.0 0.0 0.0 15.5 5.9 10.5 1S.3, 26.1 27.7 35.4 K. Not CuirrwAn Transfoer (private) 159. 191.1 155.6 155.2 144.2 160.5 155.5 155.8 156.6 I5. 168.5 19.5 1. Current Receipts 177.5 241.6 240.5 241.0 215.8 248.8 23.5 226.6 240.8 240.8 242.9 261.8 a. workers. remittance. 126.9 191.0 178.4 174.6 147.8 W 155119.5 189.5 11.1 164.5 166.6 193.1 b. other current tranm. 51.7 80.2 67.5 67.2 69.0 60.0 77.8 77.8 77.2 75.53 76.3 $8.5 2. Current PaiaMatS 36.4 50.5 75.2 76.6 72.1 84.5 61.8 61.5 51.5 61.5 79.4 92.0 F. Current Account balanes 1. SBetr" ae" sfisial transfers, -187.1 -M66. -244.2 -266.5 -27. 485.8 -849.1 -406.0 -46.2 401.8 -47.2 -542.4 2. NMt ofaicil trnswfers 6/ 17.0 206. 196. 201. 415.0 254.6 266.9 268.1 802.8 127.6 841.5 430.5 0/9s Capitol grants 0.0 115. J25. 127.4 1215.4 76.6 97. 94. 1226.5 187.1 145. 194.5 S. Aftr net offaicia trwansers -60.1 -20.6 -51.2 -87.0 66.1 -3110.7 -112.2 -14.9 -159.9 -174.2 -180.6 -111.6 0. Long-Vera Capital mnf lns 0.0.1 * 46.1 UA. 61. 65.1 -197.6 66.5 67.8 129.1 00.6 129.4 121.8 105.7 1. Direct, Fareig. Invetomant 12.5 2.9 6.0 1.7 1.6 1.5 0.0 0.0 0.6 16.1 19.2 -10.6 2. Not LT Leans (1900-99: I data) U6.6 40.7 '75.9 61.5 -1911.4 60.5 67.5 129. 900. 11.8 142.1 16.8 a. Dlshur.aante (1900.409: GM) 8.9 92.7 106.6 86.7 94.0 76.7 111.4 15.2 124.1 149.8 189.7 181.6 h. Amorltiatee, OME (1990-99: OMS 6/ 22.8 46.0 12.9 27.2 295.4 16.2 61.1 81.9 84.2 16.0 87.7 85.8 S. Other LT af les (nwot 2/ 0.0 0.0 0.0 0.0 0.0 4.2 0.0 0.0 0.0 0.0 0.0 0.0 H. Total Other Item. (nt .2 26.1 1.8 29.5 51.1 47.5 26.6 -IS.6 18.9 0.0 0.0 0.0 1. Not Sobrt TOre CseitAl 2.7 8.2 5.5 8.4 4.7 8.7 0.0 0.0 0.0 0.0 0.0 0.0 2. Change In arrears (+ increase) 8/ b/ 2.1 27.2 22.4 14.6 691.8 19.7 -145.1 -10.0 0.0 0.0 0.0 0.0 S. Capital Fious N.E?. 8.1 -11.8 -2.3. 4.4 46.3 4.4 0.0 0.0 0.0 0.0 0.0 0.0 4. Deb" vJ lot 6/ 0.0 0.0 0.0 0.0 15.6 0.9 36.7 14.4 18.9 0.0 0.0 0.0 5. Errore.ind Omissions 0.5 4.5 -2.9 14.7 -26.2 19.7 0.0 0.0 0.0 0.0 0.0 0.0 I. changes io Net6 Ageerwe 5.6 -84.9 -11.2 -315.6 46.6 16.7 1.3 1.0 5.6 -14.2 46.6 -25.6 1. Nut Credit free the, Dv 0.0 0.0 0.0 0.0 0.0 0.0 7.7 11.6 7.6 0.0 0.0 49.4 Purehauss (SA) 0.0 0.0 0.0 0.0 0.0 0.0 7.7 11.6 7.6 0.0 0.0 0.0 ftsurd.a.es 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.4 2. chose In net for. att,s,l. m lea 5.5 -4M.9 -12.2 45.6.4 406'S 15.7 46.4 -10.0 -2.0 -14.2 -=5,6 .2.4 Financing Sep (not transfer gap) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 27.6 49.5 59.0 45.1 81.7 Naues$ Nat officil grant so dne LT leans 150.6 25.8 m.9 368.83 213.7 265.8 824.2 892.4 892.8 440.9 441.6 547.1 Dlifiial Capitol gatst and net LT leans 85.0 155.2 1901.0 109.1 -74.0 189.1 184.9 262. 212.0 260.4 247.4 810.0  -38 - ANNEX I Page 2 of 12 pages afta&t-Po - ACIIN WP PAWtOS (C"'d) I/ Attachment a (Page 2 of 2) (in USS *tllltom at airet prices) Actal PFrl la . ProJetion li 21141o t wae a1110 1w10 i to io lo" 1995 2000 t. $hrs 40 P (to 5) t 1. Resou.rc Iblame .0.7 420.0 -18.0 -14.9 -17.0 -1S.4 -14.7 -18.1 -18.4 -18.2 -18.8 -t1.0 2. Total Zeterst Paymts (Lx+.34gn 0.7 1.2 1.1 1.0 1.1 0.8 0.7 0.7 0.0 0. 0o. 0.4 S. Cwm Met 8.1. suck. gOantelper" MP -10.1 -18.8 -18.4 -12.0 -1.8 -14.8 -14.8 -18.8 -10.4 -18.0 -14.5 -11.7 4. LT Caoltal PFlom (aet.*f tiamafr) 12.1 2.7 11.0 9.0 0.4 0A 9.7 10.O 14.2 1a.0 10.4 8.4 S. Na Credit frVW DP 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.$ 0.2 0.0 0.0 -0.1 0. Nat official grnt ad nt LT loan* 11.2 12.0 10.0 9.0 0.8 0.4 9.7 10.9 10.2 10.6 9.9 0.0 7. Off elt aptltl toran Md Ua LT lotn, 2.5 0.1 a.0 0.9 -2.9 4.4 5.8 0.2 8.8 0.0 5.8 4.9 M. Pereign achang R"e t 1. nt's. _ees,a (W$ 11.4) 189.5 1.S 6.0 8.9 25.5 800.5 - - - - - 2. Good (nd yr Lmnd pri) 8.0 4.8 8.4 4.0 4.8 4.2 - - - - - - 8. arms fle.,. tool. 00.1 14a.2 2s7.0 82r.9 8.4 209.0 804.7 080.4 80s.0 290.2 810.4 844.2 481.8 4. Grose Res. lo 1anth. of Report gde&arv 8.4 4.0 S.7 8.4 4.4 4.2 4.1 8.9 8.8 8.4 8.8 8.2 L. Eacag Rtee 1. #_itrl Off. such. rats CPAF/S)3 Annal averag ( rf) 449.8 8".8 800. 2.0 819.0 272.8 262.1 202.1 2.1 202.1 282.1 262.1 8.8-of-Year (InS a) 870.S 8.8 267.0 8.0 290.4 20.5 - - - - -- - 0f eanvrwson factor 449.8 84.8 800.5 207.8 19.0 272.8 22.1 22.1 2.1 262.1 202.1< 261.1 2. IndIoes be" 190610s Ibel .tf..cb.rtt ( o/o/aP) ( 2I) 00.0 90. 94.1 04.4 00.7 - - 04 laoe" N (U$ 19v60800) 100.0 17.9 19.8 80.9 1 8.0 14.0 140.? 182.09 19.6 106.0 1n.2 206.8 N. Nt _enu item Formal P at * . Come sIllotn) 1088.4 1470.4 18.8 209.0 18t0.0 2607.1 2466.4 2010.2 2614.8 82.0 8250.9 46.1 Iorol O ao M.P. (Mat IIl tom) 1SA1.5 20810.0 2649.7 2785.0 2564.7 8n17.0 M.0 80A4.0 8 .4 4142.9 4405.8 087.0 S/ Date are from SW. PFPI, Veretla of 1/24/91. exapt ittieed o*thei. 2/ Iclude di4ereno, betw.. net LT l_e as estimated if PFPI sod thee ro rt th. R. nJ eal. differem. beta. lstere"t payeant. M "etietd n to end thf m reported In the oN. a/ In 1991, the deal In In arregro of 15.1 S mpries. arrer. Paid to aeh (21.6), arrare to be re_chod.jled (148.8). md penltWy nterest to be reechedled (240)l ad oti..end-91 arrears lncrea (80). b/n 1909, grants Increased by 018.7 ml Il which a t-h capitoliged Ifutor (1990 and after) debt seryce on the cancel led Frech dbt. Amortization OM In 190 tel. 0t18.7 sill of apitalafid futufr debt service to Fre. and 070.0 mill dw to the aeeuption by 0Owt of reepenoibiit., for RAM arrer. (which technically beewe payable, 1enc amortzation due, right aw). n 1900t. principal arrrs of 070. mIll wre ANt *rr er (Govt didn't p" these arrears). Zn 1909. det Write-off of *1. Sil as the amount of debt service due to France for that year.  - 39 - ANNEX I Page 3 of 12 pages 1mwva-mm - te OQCWATin 06-Ret-I -*- - - - --(ig of 1) 12,88:8 FM A_tal Pro t E. Proectn Ku Indicators 1906 1,16 16 1r 1969 19O0 1991 10992 198 1094 1t9 O0c0 Real Growth rates (1) (fte data In ctnt 196 pIe.")t WP 6.8 9.8 1.9 6.1 -0.4 1.8 4.0 8.6 4.1 4.2 4.0 4.0 DV o9.1 9.0 1.2 7.S -1.7 .6 S.9 .2 8 .6 4.2 4.2 4.1 tn '000 CMI .s 19S pticee Real MP pop capita 1.6 66.9 W.? 661.5 65.6 86.6 68.4 86.0 87.0 807.9 a.8 98.8 Real total cen.nrotleo v.c. 79.0 08.6 68.6 64.6 M-.3 81.9 80.0 81.8 81.8 8.0 62.7 68.4 Real private cmnslo p.O. 6.2 78.0 7.4 M8.o n.s n7. 70.s n.s 1.s 8.8s 7.2 T4.9 Neal per capIta Growth rates M) (trm dat la soe. 16n Pralme)$ Real CW p.c. 5.7 6.5 -1.5 8.8 .8.1 -1.5 1.0 0.0 1.1 1.1 1.0 L.0 Real total camoeticn p.c. 2.4 8.8 -0.1 1.8 -2.8 -0.e -t1. 0.7 0.1 1.9 40.4 0.4 Real private cmwptlen p.c. 2.8 8.8 -0.6 2.2 -8.8 -0. -0.9 1.1 0.4 2.8 -0.1 0.7 e bt and datas eerI.ea (LT.DU.17)T(S) Total 060 (M ae II.) (CMN data) 884.7 69 466,0 677.6 787.2 665.9 80t.1 tS0.0 110.8 1216.6 18. 1665.4 060,/1 a8.4 88.0 84.7 #1.9 99.2 29.8 29.9 91.0 21.0 29.4 99.5 99.1 Totas debt servtce (USS atII) I/ a2.9 67.8 61.2 9 5.4 821.9 29.1 84.8 85.7 86.5 0.2 61.9 65.6 5/RExport.e ged and servIce 19.1 88.8 22.0 18.2 1*0.3 7.6 14.6 14.6 14.6 18.6 1.4 6.7 os/W 2.. 8.8 2.8 2.0 19.4 0.9 1.6 1.8 1.5 1.8 1.4 1.0 Interset bard". CiXaU4T)(S) t TOWl Inte,.t (1111at Il) I/ 10.7 24.8 96.8 27.2 29.5 9.6 26.4 96.8 24.4 24.2 24.2 24.0 mT/Report acode and servce. 6.9 19.1 10.1 9.1 10.7 2.7 6.2 6.8 6.1 8.6 4.5 2.6 W1WI 0.7 1.2 1.1 1.0 1.1 0.8 0.7 0.7 o.6 0.6 0.8 0.4 01/We (re"l tae) (M 29.9 7.4 21.4 29.7 2.9 92.8 211.6 24.1 . 94.9 29.7 22.9 22.9 I;IR (S yesr ending jer eon) 4.6 7.0 8.9 7.4 6.2 8.9 5.7 66/We (r"l tre) (t) 8.2 8.8 2.S .4 8.s 8.1 8.1 4.6 8.2 4.6 6.1 10.0 rree balane/ntesal W (OP C) -.7 -0.0 -1t.8 -14.0 -18.4 -18.4 -14.7 -25.1 .31.4 -Y1.2 -.18. - t.0 estop (real tre) (S) 12.6 12.6 8.4 1.1 8.6 7.9 .4 8.4 0.7 7.7 9.0 u2.8 o Cor, aext.l hot .greaterval WP (S) -18.1 -18.8 -18.4 -19.0 -17.8 -14.8 -14.2 -18.8 -6.4 -16.6 -34.8 -11.7 iero doeste meavIn ratim.r.t. MP 0.8 0.1 -1.1 0.6 8.0 -o.S 0.6 -.1 0.2 -0.1 0.4 0.2 meg national aevlfg rate w...t. , 0.9 0.1 4-.4 0.8 8.8 -0.4 0.8 -0.2 0.2 -0.9 0.4 0.9 Public anI/P (real tare) (5) 10.8 16.7 1S.6 14.8 0. 18.8 18.9, 1.7 14.1 18.6 19.8 19.0 Privet. OPI/We (ea"l tAres) (3) 10.1 6.2 8. 6.9 9.4 0.4 9.4 9.9 11.0 10.4 10.2 11.0 More of feer_I WP (In S): Gov totl revenue (*xel. rta)/teral WeP 18.8 1.4 14.8 18.2 18.2 14.6 14.6 14.9 18.0 18.1 18.8 18.7 0ev tout expend A ot landIngftwor_l IW 20.7 96.1 29.0 92.6 98.2 92.2 29.8 22.8 2 1. 9 2 1. 9 I0 22.0 Dodo"t al.(Gos beetajecol grt)/ferl GWe -7.2 -12.7 -14.5 -19.4 -10.0 -7.6 -8.7 -7.4 41.9 -4.7 -6.4 -6.8 WeP delatr (1961100) 100.0 10.0 105.8 tC89.6 10.0 1.8 119.0 118.2 1.0 181.0 in.7 189.0 MOP deflatOr gngt rate (5) 4.7 0.0 8.8 8.0 1.29 8.0 8.1 8.8 S. 8.1 8.6 8.0 R"el effective each rate (196-) (DI) 1.0 98.2 94.1 94.4 69.7 - Nerch. tar of trde (sM 19611o) 100.0 97.6 96.2 100.8 96.6 9.6 9.8 94.4 99.7 968.0 904.9 96.6 aepert (@N8) volm gawt rate (r) 2/ -1.6 9.6 10.8 4.6 0.6 20.4 2.6 2.2 4.6 4.8 17.6 8.4 X8F/Tetal We (fre- data In 1968 price) M 1.4 1.4 18.1 U1.7 11.6 14.0 18.6 18.6 18.7 1T.7 1.4 18.0 zeport ( ) voelue rowh rate M V/ 80.1 1.S -7.2 2.8 2.2 8.7 1.4 8.7 4.0 2.6 2.0 8.1 19065/outl W (frow date In 19S priem) (i) 84.1 88.0 82.1 81.0 81.8 88.2 8 528 .S 83.8 8.6 81.8 80.4 SWP curt ao"nel.eal 1.a*tot Co Si II.) -187.1 -996.6 -944.2 -9. 47.0 8.81 -89.1 -406.0 -462.2 401 -12. .842.4 oros o a" trervee Year-and (S alI Ion) 148.2 287.0 S27.9 80.4 969.6 804.7 806.4 S01.6 29.2 810.4 8t4.2 481.8 oree re. an onthS of lort ada & *erv. 8.4 4.6 8.7 8.4 4.4 4.2 4.1 8.9 8.8 8.4 8.8 8.2 I/ tpS to 1969, data rer ft.. PtPI, Version 1/94/91. Date for 190-99 are frt ad fure ln m tt. re 1969. dat include capital Ized de"t serIc (1099 and afte) to th Reach OCI of 6166.? .10.. eritte-eff Ir 199 (Dakiar lOltiatIv). 2/ Cooputed from Retlonl Aeownit data at _etOt 190 priesn.  Page 4 o 12 pages _nA Pmg6un (inoa 6S 8.i 4C1.0 % Uda