Rwanda - Emergency Reintegration and Recovery Credit Project

Document of The World Bank Report No. T-7149-RW THE RWANDESE REPUBLIC EMERGENCY REINTEGRATION AND RECOVERY CREDIT TECHNICAL ANNEX June 11, 1997  CURRENCY EQUIVALENTS Currency Unit Iwaida 1ranc (1?w F) US$ 1.00 Hwl,M'd(0(,(avt(<rage fol 199(G) SDR I !.,; 1w1 SYSTEM OF WEIGHT AND MEASURES MetriJc 11, (I oi Va, nt I meter (in) 28 if(t (ft) 1 hectare (ha) ' 17 acres (a) FISCAL YEAR Januarrx I - Decelmlr he I ABBREVIATIONS AfDB African Bankel , in tnt [Aa n k BNR Banque Natit)lowl c (ILt Rwandal (tentr iad bank) ERC Ejmnrt>,encv le(ovi vx (l Cre(it ERRC Eiriergencv Rei nto- ration and ILRecovery ('redit ERRP Emerre nic Re in teogrationand Rec(ionstruction P'rogrrnam ESAF-I Enha:nced Struc lural Adjustment Facility ESW Econlomill' &-ind Sec tor VN(o)rk EUl European LTnion FEP1 Framewoark f(o Fc onomic Poliieis (G)P Gross [)omestic Product. (,.)R Government )t x a n(da I )A Internittional I Xx elopment \s5oeiatii IDF Institutional )ev(t lo(mintn [Llnldi (World Bank) IEC Infiormnation. dXi utation and (Coinmmulnications IFAD Lnterniatjional tu itl li Agriculto al I)evelopment IMF International NI mntavr F'Und] JAM Joint;\ssessment Mission NGO Non Govermiwntntl Organization ODA (UK) Overseas 1)eveltp(m)lent Admini-t,iaition ( lJK) PFP Polex Frame work Paper SAC Strutl l rl . \dho-,i1 mell t Cr-edit, SSA Sub-Sal lh .a llA.f: tTN United Nations UNI)P United Naitlo1io lieve lop ment Pio-iamin USAI D Uniltcd St At s nc'V aoi Internatjiona il D)evelopment Vice President C Madavo Director N Tchevan Division Chief. Manager : 1 arIvonc Staff Member C ()hidegwu, Sr Economist  RWANDA EMERGENCY REINTEGRATION AND RECOVERY CREDIT TECHNICAL ANNEX Table of Contents 1-BACKGROUND 1 Origin of the Program and Project I Government's Strategy for Reintegration, Reconstruction and Development 2 International Response to the Crisis 4 World Bank Response 5 II - ECONOMIC AND SOCIAL CONTEXT 6 Recent Macroeconomic Developments 6 Poverty and Social Indicators 7 The 1997 Government Budget 8 Progress in Economic Reform 12 III - THE EMERGENCY REINTEGRATION AND RECONSTRUCTION PROGRAM (ERRP) 12 Rationale and Objectives 12 Sectoral Objectives and Strategies for the ERRP 13 Estimated Program Costs 17 IV - IDA PROJECT AND IMPLEMENTATION PLAN 17 Objectives of the IDA support 17 Project Description 18 Implementation Arrangements 18 V - ANNEXES 20 Status of Bank's Operations 20 List of Imports to be financed under the Credit 23 List of Imports to be financed under the Credit (contd) 24 This Report is based on the findings of a joint WB/UN/GOR emergency assessment mission in December 2-15, 1996 and a WB/IMF/AfDB joint economic mission in January 20-February 7, 1997. The assessment mission was co-led by R. Venkateswaran, World Bank Resident Representative in Rwanda, Omar Bakhet, UN Resident Coordinator, Rwanda, and Ephraim Kabaija, Adviser, Office of the President of Rwanda. Other World Bank participants in the assessment mission were Nat Colletta, Markus Kostner, Chukwuma Obidegwu, Steve Holtzman, Jean Doyen, Marie-Chantal Uwanyigilira, Prosper Nindorera, Francois Kanimba, Aubert Zohore, and Denis Gravel. For the economic mission, the World Bank team consisted of Chukwuma Obidegwu, Francois Kanimba and Angele Whittaker. The Ad Hoc Advisory Committee for the emergency operation consisted of Peter Miovic (EDI), Michael Sarris (AFC08), Barbara Santos (LEGEC), Wei Ding (EC2CO), P. Hari Prasad (AFTS2), Pedro De Blas (LEGAF), and Francois Nankobogo (AFCO9). The appraisal mission consisted of Chukwuma Obidegwu (mission leader), Pedro De Blas, and Francois Kanimba. The work on the missions and the preparation of this operation was carried out under the general direction of Nils Tcheyan, Country Director.  I  RWANDESE REPUBLIC EMERGENCY REINTEGRATION AND RECOVERY CREDIT I - BACKGROUND Origin of the Program and Project 1. Between 1990 and 1994, Rwanda suffered from civil war, genocide, and massive displacement of the population. The genocide of 1994 led to a loss of over half a million lives, and the civil war that followed resulted in the flight of about 2 million Rwandans to Democratic Republic of Congo', Burundi and Tanzania. The refugees included the government officials, military officers and members of the militia who masterminded and carried out the genocide. A government of national unity, formed in July 1994 after the civil war, affirmed its determination to work for peace and national reconciliation, bring to justice the perpetrators of the genocide, facilitate the resettlement of internally displaced persons and the return and re-integration of all refugees, and reform and liberalize the economy. With the change in Government, 800,000 exiles of past conflicts (old case load refugees), returned to Rwanda in 1994 and 1995. The Government encouraged the refugees of 1994 (new case load refugees) to return, with assurances of their security and right to the properties they left behind. Despite these assurances, for over two years, the vast majority of these refugees remained in the camps outside Rwanda until civil wars in both Burundi and Democratic Republic of Congo forced them to return to Rwanda. About sixty thousand refugees returned from Burundi in August 1996, and a massive influx of an estimated 700,000 refugees from Democratic Republic of Congo took place within two weeks in November 1996. This was followed in December 1996 by the return of 500,000 refugees from Tanzania. International efforts are currently underway to bring back an estimated 100,000 Rwandan refugees stranded in Democratic Republic of Congo. 2. The events of 1994 traumatized and impoverished the population, destroyed the country's social fabric and institutional capacity, and damaged social and economic infrastructure and the physical environment. The population of vulnerable persons, such as widows, unaccompanied children, female headed households and refugees, increased substantially. The international community--UN agencies, international NGOs, bilateral donors and multilateral institutions-- responded to the human calamity in Rwanda with substantial flows of humanitarian assistance. However, the GOR often blamed the official international community for not responding rapidly to the events in 1994. 3. The new Government, with the support of the international community, quickly began to address the social and economic problems, rehabilitate infrastructure and administrative, judicial and social institutions. Progress was made in resettling internally displaced persons, reintegrating some old case refugees and returned new case refugees, providing assistance and comfort to vulnerable groups, and enhancing peace and security. Progress was also made in coping with the The new name of the country, which until May 1997, was known as Zaire.  2 adverse impact of the war on the economy. The key economic institutions, notably the National Bank of Rwanda (BNR), and the Ministry of Finance and Economic Planning have been partially rehabilitated, enabling the Government to reinstate the budget and the public investment program, embark on economic policy reform, and improve revenue administration. As a result of these efforts, the economy has recovered somewhat from the steep decline of 1994. Government's Strategy for Reintegration, Reconstruction and Development 4. The immediate challenges that faced the new Government in 1994 were to: (i) foster national reconciliation and facilitate the return, resettlement and reintegration of refugees (ii) rebuild the country's institutions and capacities; and (iii) stimulate economic recovery and lay the basis for sustained growth and development. In January 1995 the GOR presented its Program of National Reconciliation, Rehabilitation and Socio-economic Recovery to a Round Table Conference for the Reconstruction of Rwanda, held in Geneva in January 1995. The program, subsequently redefined in the June 1996-Round Table document, contained the following elements: the preservation of an atmosphere of peace and security; the restoration and strengthening of national unity; the repatriation, resettlement and social reintegration of refugees; the improvement in the living conditions of the population, especially the orphans, widows, handicapped, and the other victims of the genocide and war of 1994; the development of the national economy; and the development of human resources. 5. The Government is committed to ending the impunity associated with violence which characterized Rwandan society. It is therefore determined to bring to justice those responsible for the genocide of 1994. About 100,000 suspects have been detained for genocide-related crimes. The start of the trials of the detainees was delayed because the appropriate laws had to be put in place and the judicial system, which was practically wiped out by the events of 1994, had to be rebuilt. With the assistance of donors, progress has been made in these two areas. This has allowed the trials to start in October 1996. In addition to the domestic proceedings, the International Criminal Tribunal for Rwanda, set up by the UN to prosecute leaders of the genocide living in exile, has indicted 20 suspects and the trials started in September 1996. 6. With the return of the majority of the refugees, Rwanda needs to intensify efforts on national reconciliation and nation-building while consolidating the progress made in economic recovery and stability and in building institutional capacity. These are enormous challenges in the fragile social and economic situation in Rwanda. The Government intends to rapidly resettle and reintegrate the returned new case load refugees, and the old case load refugees and victims of genocide who still need to be resettled. Priority needs are for permanent shelter; support for building sustainable livelihoods including the provision of seeds, farm implements and inputs for agriculture; education and health services; improved justice and security; capacity building and food aid. Lack of prompt action to resettle and reintegrate the refugees will increase poverty and environmental degradation, weaken the economic recovery and stabilization already underway, and increase tension and conflict which the society has little capacity to absorb. 7. The sudden and massive return of refugees in late 1996 put enormous pressure on the programs designed for the resettlement of the refugees which were based on a much slower rate  3 of inflow of refugees. The GOR and the international relief agencies responded quickly to provide for the immediate needs to the returnees pending the design of a coherent emergency reintegration program. Following the first wave of the massive inflow of refugees, a GOR-donor meeting was held in Geneva on November 23, 1996 where the Government requested assistance for an "Emergency Program for the Resettlement and Reintegration in the Context of the Present Massive Return of Refugees". The Government's strategy for the emergency program was to link short-term humanitarian relief with the medium-term reintegration and reconstruction and longer-term reconciliation and sustainable development. The strategy required that emergency interventions be undertaken within the existing development framework; and that reintegration efforts should strengthen longer-term reconciliation and development interventions, and contribute to capacity building of national and local institutions. 8. A joint Bank/UN/GOR Assessment (JAM) mission in December 1996 assisted the GOR in designing the Emergency Reintegration and Reconstruction Program (ERRP), to enable the country move from humanitarian relief onto the path of reintegration and reconstruction, and facilitate the transition to sustainable development. To this end, the program would focus on enhancing social services, development of housing and rural and urban infrastructure, national and local capacity building, income generating activities, and justice and security based on coordinated community and national interventions. The program emphasizes community-based interventions, including at commune levels, which would enable the beneficiaries to determine their priorities and participate in implementation. These programs would complement sectoral projects by the central government and help to strengthen communities, rebuild social capital by galvanizing communities around mutually beneficial activities, directly address rural poverty, and lay the foundations for national reconciliation and sustainable development. 9. A joint Bank/Fund/African Development Bank (AfDB) mission visited Rwanda in January/February 1997 and assisted the GOR to integrate the emergency interventions identified by the JAM mission into the budget framework and assess the financing requirements. The joint mission also negotiated with the Government a policy document: Post-Conflict Reconstruction: Framework for Economic Policies (FEP) which set out the macroeconomic framework, and the policy and institutional reform measures to be undertaken in the 1997-98 in the context of the transition program. 10. Rwanda faces formidable development challenges; the most formidable is putting an end to the cycle of violence which has plagued the country and the region in the last forty years. Without peace and stability, the sustained economic growth that Rwanda needs to reduce poverty and raise the living conditions of its people will not take place. Furthermore, sustained economic growth will only come from high productivity growth, which requires good policies, investments in knowledge to improve agricultural practices and technology, savings and investment to create productive capital, the protection of the environment, building the capacity of the labor force, enhancing the role of women, protecting property rights, increasing the efficiency of the public sector and developing the private sector. 11. In the short-run, the priorities of the Government are the resettlement and reintegration of refugees and victims of genocide, national reconciliation, and rapid economic recovery. In the  4 post-war economic recovery program, the GOR sought rapid economic growth which would enable economic activity to reach its 1993 level by the end of 1998, implying a real economic growth rate of 15 percent p.a. in 1996-1998. Growth of the economy in 1996-98 is likely to be in the range of 10- 13 percent, assuming the rapid reintegration of the returned refugees into productive activities. Thus the goal of attaining the pre-war level of economic activity may take a little longer than planned. 12. For the longer-term, poverty reduction is to be addressed through increases in agricultural incomes, creation of rural non-farm employment, improved social and economic services and protection of the environment. The development strategy is based on private sector-led growth in a liberal, market oriented economy, limited but effective role for the state, emphasis on rural development, and a macroeconomic environment favorable to growth and equity. The Government has endorsed the pre-war growth with poverty reduction economic reform agenda and is committed to broadening and implementing the necessary reforms. In addition the Government intends to undertake legal reforms and strengthen the legal institutions that are essential to establish and protect property rights, enforce contracts, and provide security of persons and property. In pursuit of its development objectives, GOR intends to restructure its expenditures to focus on capacity building and provision of economic and social services, while encouraging private and NGO delivery of these services. International Response to the Crisis 13. The international community responded to the events of 1994 with financial and material assistance, initially with primarily humanitarian assistance. At the January 1995 Round Table Conference, the international community pledged about US$700 million for humanitarian and development assistance to Rwanda. By December 31, 1995 the pledges reached US$1.2 billion. IDA, IMF, AfDB and some bilateral donors provided quick disbursing import/budget support which supported the restoration of the operational capacity of government and stimulated economic recovery. Another Round Table Conference was held in 1996, at which the Government and the donors discussed further actions for rebuilding Rwanda and the related needs for assistance. Donors pledged US$536 million at the conference. It is estimated that around $1.0 billion were disbursed in 1995-1996 by the international community for the reconstruction of Rwanda. In addition, until October 1996, the international relief agencies were spending about one million US dollars per day for the upkeep of the refugee camps for Rwandans in exile. 14. Many bilateral donors--Belgium, USAID, ODA (UK), Netherlands, Germany, France, the European Union and Japan, and practically all the multilateral development and humanitarian agencies have resumed activity in Rwanda. In the risky post conflict environment, external assistance needs to be well coordinated to be an effective instrument for rapid change. The Bretton Woods Institutions are working closely with the UNDP particularly on donor coordination for economic reform, post-conflict reconstruction, and external debt management. Since the end of the war, the UJNDP organized the two Round Table Conferences which provided the GOR the opportunity to discuss its programs and needs with the international community as well as raise close to US$1.8 billion for the country.  5 15. Donor Support for the Present Emergency. The GOR has approached bilateral donors, the European Union and the multilateral financial institutions for assistance in financing the emergency program. A thematic consultation on reintegration between the GOR and its external partners is planned for June/July 1997 to discuss the ERRP and seek financing for it. A number of donors--the USAID, the EU, Canada, and Denmark-- have sent missions to Kigali to discuss with the Government areas of assistance. The AfDB has indicated that it will provide budget support in early 1998. The IMF Board approved on April 22, 1997, an emergency post-conflict assistance of US$20 million to Rwanda. The IMF intends to provide further resources through and ESAF planned for the end of 1997 and, to this end, the Bank, the IMF and the GOR will prepare a PFP to set out the medium-term reform framework. Once the ESAF is in place, the GOR will request from the Paris Club a rescheduling of its external debt arrears and current maturities on the Naples terms. 16. The Role of NGOs. Since the genocide, NGOs have been active in providing social services to the rural population and humanitarian aid to vulnerable groups, building local capacity, and providing support for economic activities. The work of NGOs has made up for the lack of capacity in Government to provide these services. Over 150 international NGOs are currently operating in Rwanda. In 1995, the GOR was very dissatisfied with the services and activities of some of the foreign NGOs and, in late 1995, it expelled 18 of them from Rwanda. However, in 1996, the NGOs and the Government worked out a framework for cooperation, and the international NGOs are continuing to provide critical resettlement and reintegration services as well as humanitarian relief. World Bank Response 17. Since the end of the war, the Bank has supported economic and social recovery. The Emergency Grant of August 1994 and the IDA Emergency Recovery Credit (ERC), approved by the Board in January 1995, provided humanitarian and economic rehabilitation assistance and facilitated the rapid recovery and stabilization of the economy. The ERC helped to revive private sector production and restore the GOR's operational capacity to provide social and economic services. In addition to the emergency assistance, the Bank has supported rehabilitation and socio-economic recovery by restructuring and implementing the existing portfolio of investment projects to meet high priority needs such as health immunization, rehabilitation of rural schools and health centers, provision of water and sanitation services, capacity and institution building, and economic reform. As a result, the undisbursed portion of the investment portfolio has declined from US$188.6 million at the end of 1994 to US$116 million in March 1997. 18. The Bank, in collaboration with the UTNDP, IMF and AfDB, assisted the GOR to work out a strategy and a coherent package of measures to support reintegration, reconstruction and economic recovery. The Bank's contribution to the recurrent budget, through the proposed emergency reintegration and recovery credit, will assist the Government to deliver key social and economic services to returning refugees and the existing population to facilitate the transition from refugee status to normal productive lives. The Bank expects to support, in the context of coordinated international assistance, the Government's efforts on reintegration, economic  6 reconstruction and recovery, capacity building and human resource development, and policy and institutional reform. II - ECONOMIC AND SOCIAL CONTEXT 19. Significant progress has been made in economic recovery and stabilization, and the rehabilitation of social, institutional and economic infrastructure. The massive return of refugees puts these achievements at risk unless Rwanda receives assistance to rapidly reintegrate these refugees into productive economic and social life. Because of the need to deal with the problems arising from the genocide and war, limited effort has been made to tackle the structural problems that make Rwanda poor. Recent Macroeconomic Developments 20. Rwanda's per capita income declined from a high of US$380 in 1988/89 to US$250 in 1993. As a result of the genocide and civil war of 1994, the per capita income fell sharply to US$150, making Rwanda one the poorest countries in the world. In 1994, real GDP declined by 49 percent and the inflation rate was 64 percent per annum compared to 12 percent in 1993. Economic activity rebounded in 1995 with real GDP growth of 25 percent, followed by 13 percent in 1996. However, the real GDP in 1996 was only 72 percent of its 1990 level. Inflows of budget support, principally from the IDA, the IMF and the AfDB, and prudent fiscal and monetary management helped to reduce inflation to 22 percent per annum in 1995, 5 percent on an annual basis in October 1996, and an average of 9 percent for 1996. 21. Government revenues, only about 4 percent in 1994, rose to 7.1 percent and 9.6 percent in 1995 and 1996 respectively. This is still much below the 12-13 percent of GDP achieved before the war. As GDP in 1996 was only 72 percent of the 1990 GDP, government revenue in 1996 was 58 percent of the 1990 level. Thus the fiscal situation is precarious, with heavy dependence on foreign aid. The overall fiscal deficit, excluding grants is equivalent to 14 percent of GDP. As a result the domestic and regional insecurity, military spending is onerous and represented an equivalent of 5.5 percent of GDP in 1996. The burden of external and internal public debt is very high, with total external debt at US$ 1.1 billion or 84 percent of GDP in 1996 and scheduled external debt service ratio of 41 percent in 1996. Eight three percent of the debt is owed to multilateral creditors. Total domestic debt is estimated at US$3 10 million. The Government is not current in debt service and continues to accumulate external and domestic debt service arrears, estimated at US$79 million and US$62 million respectively in end 1996. The Government has been accumulating external and domestic debt service arrears, estimated at US$79 million and US$62 million respectively in end 1996. 22. The impact of the return of refugees on economic performance in 1997 is expected to be significantly positive. The return of 1.3 million persons, equivalent to over 200,000 households, to principally to the rural areas, is expected to boost production of food crops in the second harvest season of 1997. This assumes that returning farmers would have been assisted, with seeds and farm implements and inputs and will have access to land to resume production. The secondary sector (industry, energy, mines, and construction), with 17 percent of GDP, is  7 projected to grow by rapidly, driven by construction and rehabilitation of housing for the resettlement of returning refugees. These are the key factors in the projected real GDP growth rate of 12 percent in 1997. 23. Inflationary pressures have been successfully reduced over the last two years. The annual rate of inflation in October 1996 was 5.0 percent. However, with the massive return of refugees in November, the prices of the major consumer good, particularly foods, experienced significant increases. It was estimated that between the first and second halves of November, prices of consumer goods rose an average of 7 percent. These price pressures were due primarily to increased demand for goods and services from returning refugees, as many of them came back to Rwanda with money, and significant increases in the inflows of foreign exchange from donors, relief agencies, foreign NGOs, foreign visitors and tourists, which were used to buy domestic goods and services. It appears that these inflationary pressures have been contained and the inflation rate for 1997 is expected to be about 7 percent per annum. 24. The massive return of refugees is unlikely to cause any significant shifts in the structure of the balance of payments. In the short-run, imports will increase, driven by the expansion of economic activity, the increase in food aid and externally financed humanitarian and development assistance. To the extent that the aid-related activities are fully financed by donors, the impact on the overall external balance will be from the rise in commercial imports. The estimate of the current account balance, before grants, is 18.7 percent of GDP for 1997 compared to 16.1 percent in 1996. The overall deficit is estimated to be US$100 million, not taking into account the estimated US$79 million needed to cover the external debt arrears. The imbalance in the external payments will rema n formidable and balance of payments support will be needed in 1997 and beyond. 25. The manufacturing sector. The sector contributed 13.3 percent of GDP in 1991 and 14.5 percent in 1996. However, production in 1996 was estimated to be around 60 percent of the 1990 level. This reduced level of production reflects the problems facing the sector--the low demand for goods manufactured in Rwanda due to the fall in personal income; the increased competition from imports from neighboring countries, such as Uganda following the liberalization of the trade and exchange regime; the lack of working capital due to the inability of the firms to borrow; and the loss of markets in eastern Democratic Republic of Congo following the deterioration of relations between the two countries and the civil war in Democratic Republic of Congo. The insecurity in the Great Lakes Region has discouraged private investment needed to rehabilitate and modernize Rwandan industries. The government does not have the resources to rehabilitate and reactivate potentially viable public enterprises and has put together a strategy for privatizing them. Those PEs which have ceased operations and are non-viable are to be liquidated. Poverty and Social Indicators 26. Rwanda's population of 7.95 million (including the refugees) is growing at the rate of about 3 percent per annum. The World Bank 1994 poverty assessment, completed just before the crisis, showed that the percentage of the population living below the poverty line (US$170 at  8 1985 prices and exchange rates) rose sharply from 40 percent in 1985 to over 53 percent in 1993. Most of the poor (98.6 percent) lived in rural areas, were engaged in small-holder agriculture, and had large families. The poor derived 86 percent of their income from agriculture and artisanal services compared to 75 percent for the non-poor. Forty one percent of female headed households were below the poverty line compared to 39 percent for male headed households. 27. Rwanda's social indicators used to be above the sub-Saharan Africa averages but stagnated in the late 1980s. For instance, life expectancy rose from 46 years in 1982 to only 47 years in 1993 compared to the average of 48 and 52 years for SSA respectively. Secondary school gross enrollment, at 8 percent, is one of the lowest in the continent. The AIDS epidemic is one of the worst in the world (over 20% of the population is seropositive), and the incidence of malaria remains high. Government expenditures on social sectors declined from the late 1980s due to rising military spending. The share in total recurrent expenditures declined from about 38 percent in 1985 to about 20 percent in 1992 and 1995. The events of 1884 led to massive disruption of social services. Large numbers of social sector workers were killed or fled the country and facilities and equipment were damaged or lost. 28. The events of 1994 which led to a sharp decline in economic activities and per capita income, and to large increases in the numbers of vulnerable populations and has undoubtedly aggravated p',verty. As in other post-conflict economies, the ongoing economic recovery, supported by donor funds, is having a positive impact on the urban economy but the rural economy has remained largely depressed. The impact of the massive return of refugees on per capita income and poverty will be negative in the short-run. The duration of this negative impact will depend on how rapidly the refugees are integrated into economic and social life and begin to participate fully in economic production. The 1997 Government Budget 29. Draft ordinary and development budgets for 1997, prepared before the massive return of refugees in November 1996, had to be substantially revised to provide for the needs for returning refugees. The two major reintegration-related spending priorities for the recurrent budget were (i) the reabsorbtion of students returning from the refugee camps into primary and secondary schools and the university; and (ii) the provision of health services to the returning refugees. For the development budget the priorities were permanent shelter, support for agricultural production, water and access roads to new settlements, education and health facilities and equipment, strengthening justice and security, income generating activities and capacity building. Table I shows the government budgetary operations, with the large recurrent budget financing gap of FRW34.9 billion (US$109 million).  9 Table 1: Rwanda: Budgetary Operations of the Central Government (in billion of Rwf) 30. The recurrent (ordinary) budget. The 1996 1997 distribution of the recurrent expenditures for 1996 and the budget for 1997 is shown in Table Revenue and Grants(1) 70.9 122.1 2. In 1996, 49 percent of expenditures was on .Revenue 39.5 46.4 the military as the deterioration of security in Grants 31.4 75.8 the country in 1996, with incursions from Total Expenditure (2) 93.5 168.2 Democratic Republic of Congo by exiled Current Expenditure 52.6 60.4 soldiers and militia of the former regime, led to Capital Expenditure 40.9 108.3 higher than budgeted military expenditures. The Change in Arrears (3) 8.2 -8.5 increase was at the expense of spending for administration, with 17 percent of expenditure Overall Deficit(cash basis) -14.4 -55.0 compared to its share of 25 percent of the Financing (4) 16.5 20.1 budget. Social services accounted for 22.8 Foreign Financing 12.9 20.1 percent of recurrent expenditure in 1996, close Domestic Financing 3.6 0.0 to the budgeted share of 21.7 percent. For the Financing Gap -2.1 -34.9 1997 budget, military expenditure is to decline in relative and absolute amounts, with its share of recurrent expenditure falling from 49 percent to 37 percent. Expenditure for the social sectors, particularly for education, is substantially increased, accounting for 39 percent of recurrent expenditure. Table 2: Rwanda: Current Expenditure by Sector 1996-1997 (interest payments not included) (in billions of RWF) 1996 (actual) 1997 (budget) Expenditure % of Total Expenditure % of Total 4-Military 22.67 49.0 19.70 36.8 2-Administration 7.88 17.0 10.71 19.9 3-Economic Services 5.65 11.2 2.46 4.6 4-Social Services 10.52 22.8 20.73 38.7 Education 8.56 18.5 14.22 26.5 Health 1.19 2.6 1.37 2.6 .Reintegration/Resettlement 0.13 0.3 3.55 6.6 .Demobilization 0 1.00 1.9 Other Social 0.64 1.4 0.59 1.1 Total 46.23 100 53.60 100.0 31. The development budget. The development budget for 1997, at FRW1 08 billion (US$339 million), is a significant increase from the draft development budget of FRW61.5 billion prepared before the massive return of refugees. Table 3 shows the distribution of the  10 development budget by sector. The bulk of proposed expenditure is for the social sector, including specific programs for resettlement and reintegration. Capacity is a major bottleneck in the implementation of projects; thus priority is to be given to building the capacity to implement projects at national and community levels. Table 3 Rwanda: Development Expenditure by Sector: 1997 (In billions of Rwf) Budget % of Total Economic Services 35.0 32.3 .Productive Sector 10.5 9.7 .Infrastructure 24.4 22.5 .Environment and Tourism 0.1 0.1 Social Services 55.0 50.8 .Education 16.7 15.4 .Health 11.9 11.0 . Repatriation/Resettlement 18.4 17.0 .Demobilization 3.2 3.0 .Other Social 4.8 4.4 Administration Services 13.4 12.4 .Justice and Security 4.2 3.9 .Other 9.2 8.5 Not Specified Sector 4.9 4.5 Total 108.3 100 32. The Prospects for closing the budget financing gap. The recurrent budget financing gap is the critical one that needs to be filled urgently. The financing identified so far to cover the $109 million gap is $30.3 million comprising of $16.5 million from ongoing budget support operations by the European Union, $3.6 million from the Dutch support to debt service due to World Bank and $10.3 million from the ongoing African Development Bank balance of payment support operation (see Table 4a). With the US$50 million from the proposed ERRC and US$10 million to be raised through the commodity monetization program, US$18.5 million remain to be identified. The Government is working with the Bretton Woods institutions and the UNDP to secure funding for this gap as well as the development budget gap.  11 Table 4a Table 4b Financing of the Recurrent Financing of the Development Budget Gap 1997 (US$ millions) Budget 1997 (US$ millions) Overall Financing Gap 108.90 Total 338.15 Budgetary Grants and Loans 30.40 AfDF 17.29 of which: Belgium 16.39 European Union 16.50 Canada 4.30 Netherlands 3.64 IFAD 3.96 AfDB 10.25 France 3.40 IDA 58.30 Balance to be funded 78.50 WFP 4.59 etherlands 13.46 Financing Prospects: UNDP 9.15 IDA--ERRC 50.00 Germany 33.64 Com. Monetization Prog. 10.00 Rwanda 15.61 Switzerland 5.83 Residual Balance 18.50 European Union 66.84 UNICEF 4.56 USAID 4.09 Others 20.34 L Financing Not Secured 56.41 33. Military and Security Expenditures. As a result of the endemic political instability and conflict in Rwanda, the military has absorbed a relatively high share of public expenditures. Spending on the military rose rapidly in the late 1980s, from 1.6 percent of GDP in 1985 to 6.3 percent in 1992 as opposition to the government then in power intensified. Following the genocide and the war, the military continued to absorb a big share of the meager budget due to continuing insecurity in the country and region. In FY95, the military budget, including the spending on the gendarmerie (the national police force), was the largest single item in the recurrent budget, accounting for 35 percent of recurrent expenditure and equivalent to 4.5 percent of GDP. However, in real terms, post-war budget expenditure on the military is less than half of pre-war level. 34. The Government recognizes that the burden of military expenditures is excessive. For the short-term, it is reducing military costs through cost-saving measures and improved financial management. Military outlays are budgeted to decline from 5.5 percent of GDP in 1996 to 4.2 percent in 1997 owing to cost savings arising from the introduction of a system of cash supplements for soldiers' rations, a reduction in vehicle maintenance outlays following the replacement of the old vehicles of the army, and effective controls on the use of fuel. The Government also expects improvements in financial ianagement, following the computerization of key operations. For the medium-term, the Government plans to reduce the size of the army. Early in 1996, it requested assistance from the World Bank and bilateral donors for a demobilization program. However, since the initial request, internal and regional security has  12 deteriorated, implementation of the program has been delayed but preparations began in earnest in early 1997. Progress in Economic Reform 35. The Rwandan economy faced severe financial imbalances in the 1980s. The initial policy response of the Government proved inadequate to deal with the crisis. In 1990 the Government embarked on an economic reform program supported by the IMF and the Bank. The IMF's Extended Structural Adjustment Facility (ESAF) of SDR 8.76 million was approved in April 1991, and an IDA-financed Structural Adjustment Credit (SAC) of US$90 million was approved in June 1991. The reforms were to stabilize the economy and make it competitive, improve resource allocation, and establish the basis for sustainable growth and poverty reduction. The authorities implemented, in 1991-92, most of the agreed reform measures, except the coffee sector reforms. Eventually the momentum of reform was lost due to the intensification of the civil strife in the country. This led to a disruption of economic activities and a large build-up of military expenditures, effectively derailing the program. The ESAF and the SAC were suspended in April 1994, and the second tranche of the SAC was canceled in December 1994. 36. The pre-war economic reformn agenda remain largely valid for post-war Rwanda. The new Government has endorsed this agenda and affirmed its determination to broaden it and accelerate its implementation. In March 1995, the Government took the first steps by liberalizing coffee marketing, the exchange regime and interest rates. In March 1997, the Government endorsed a program of policy and institutional reform as part of its emergency reconstruction and reintegration program (ERRP). This program, articulated in the Post-Conflict Rehabilitation: Framework for Economic Policies, was developed jointly with the staff of the Bretton Woods institutions, includes the privatization of the public enterprises, the reform of the public sector management, regulatory reforms for the promotion of the private sector, and the reform of the financial sector. III - THE EMERGENCY REINTEGRATION AND RECONSTRUCTION PROGRAM (ERRP) Rationale and Objectives 37. The ERRP is a multi-year program designed as the centerpiece of the joint response of Government and the international community to the challenge resulting from genocide and the massive return of refugees to Rwanda. The main objective of the ERRP is to promote the social and economic reintegration and revitalization in Rwanda, thereby contributing to peace and stability. ERRP will address the short- to medium-term settlement and reintegration needs of the affected populations, facilitate their economic and social reintegration into their communities, and assist them to build sustainable livelihoods. Furthermore, ERRP will lay the foundation for national reconciliation and longer-term sustainable development by rehabilitating and reconstructing economic and social infrastructure, reinforcing local capacity, promoting income  13 generating activities, rebuilding social capital and strengthening justice and security; within a macroeconomic framework oriented towards monetary and fiscal stability. 38. The ERRP targets vulnerable groups in both rural and urban areas at the community level where the real transition from war to peace takes place. ERRP consists of new and ongoing sectoral activities, and community-based activities, identified by the beneficiaries and financed by a fund created for that purpose. These activities are intended to revitalize local economies and galvanize communities around tangible mutually beneficial actions. The ERRP covers the following sectors: (i) Rural and urban settlements (housing, water and sanitation, roads); (ii) Social infrastructure (education, health); (iii) Sustainable livelihoods (agriculture, income and employment generation, micro-credit enterprises); (iv) capacity building at the community and national levels, including security and justice. 39. The expected outcomes are as follows: the successful social and economic settlement and reintegration of refugees in Rwanda; an improvement of standard of living of vulnerable groups; the rehabilitation of key social and economic infrastructure; the enhanced capacity to implement community-based development programs effectively; improved and institutionalized coordination between Government and donors; and participation of beneficiaries in project identification, preparation and implementation. Sectoral Objectives and Strategies for the ERRP 40. Rural housing. The objective of the rural housing program of ERRP is to permanently resettle returned refugees and victims/survivors of genocide. The Government has earmarked 34 areas for the settlement of returnees, many of them in Kibungo and Mutara prefectures. The Government planned the construction of more than 250 small settlements to accommodate old case load families who choose to settle in the rural areas and to support the construction of rural housing, to supplement those to be built under self-help schemes facilitated by agencies and international and national NGOs in existing communities. The Government will also support the rehabilitation of housing for survivors of genocide and returned new case load refugees. 41. Urban housing. The goals of the urban housing program are to support the construction of houses for those families who currently do not have permanent accommodation and strengthen the capacity of urban communities to meet the demand for shelter and urban services in an efficient and sustainable manner. The support for urban housing requires a three-pronged approach. Firstly, to accelerate the initial tranche of site preparation already identified by Government and to ensure a rapid construction of houses. Secondly, to pilot and replicate various approaches for meeting the demand for housing, relying on community initiative and market response. Thirdly, to develop urban policies and related capacity. 42. Water and Sanitation: The provision of water supply to the new settlement areas is a short-run priority of the ERRP. For the medium-to-long term, the water sector needs a sound legal, regulatory and institutional framework, and enhanced human capacity and funding to meet the demand for its services. The sector requires strong community participation, especially in peri-urban and rural areas, thus capacity building is a priority, particularly for to enhance the technical capacity of local operators, and for planning and management for regional (prefectures)  14 and central administration. Government also intends to improve the awareness of population of the value of water and sanitation, with programs of communication, information and sanitary education. 43. Transport. The objectives of Government for the transport sector are to improve rural transport infrastructure, reduce internal and external transport and communication costs, protect existing investments, and improve road safety. The poor local transport system has been a major constraint on provision of basic services and on rural development. The ERRP includes an emergency road rehabilitation program based on the current sector policy of road maintenance/rehabilitation by private entrepreneurs and the use of labor-intensive methods. The program, which includes primary and feeder roads to improve access to agricultural and commercial areas, will provide badly needed rural employment and revitalize rural economic activities. 44. Education. The education sector deteriorated owing to the financial constraints in the late 80s and the 90s, and from the destruction of the 1994 war. Gross enrollment is about 70 percent in primary schools and 8 percent at the secondary level. Most educational institutions (primary, secondary and tertiary levels) lack qualified teachers, instructional materials and equipment, and operate in damaged facilities. The Government is preparing a comprehensive strategy for the education sector. For the long-term, the objectives are to increase gross enrollment rate in primary schools to 100 percent, and in secondary schools to 20 percent; improve the quality and relevance of education, and build an educational system that contributes to the enhancement of peace and democracy in Rwanda, promote environmental awareness, and improve language training, which is considered a priority in a country that has now three official languages. 45. With the return of over one million refugees in late 1996, additional 200,000 students will have to be accommodated in the education system, representing an increase of in enrollment of 20 percent. This requires immediate support for: (a) school rehabilitation and construction, (b) hiring of additional teachers, (c) in-service teacher training, (d) curriculum development for secondary schools, (e) the printing and distribution of textbooks and (0 the provision of supplies. Higher education needs classrooms and boarding facilities; more professors; and supplies and equipment. For non-formal education, the rehabilitation of commune literacy and skills development centers and the development of appropriate training programs are underway. 46. Health: Health standards were deteriorating in the decade preceding the 1994 crisis because of a combination of a deteriorating health conditions and underfunding of public health programs. The major problems included the dramatic increase in the cases of drug resistant malaria; the high incidence of AIDS, with an estimated seropositivity of 25-30 percent among adults in urban areas; and increasing food insecurity and malnutrition. The public health system was not equipped to respond to these challenges. Following the 1994 events, the combined efforts of the Ministry of Health (MINISANTE), the donor community and NGOs helped to rehabilitate and upgrade the system. Most health facilities are now functional. However, the main challenges remain and the system is plagued by a shortage of human resources and equipment,  15 and an ineffective pharmaceutical distribution system. MINISANTE has developed a health sector strategy to deal with these problems. 47. The massive return of refugees does not change the challenge to the health sector but it has increased its scope. Immediate actions fall into: (a) rehabilitation of facilities and construction and equipment of a limited number of health centers (b) recruitment and training of health personnel, (c) provision of medicines, vaccines and other supplies, and (d) coverage of operations and maintenance costs. The return of the refugees from the camps exacerbates the risk of spreading AIDS/HIV throughout the country. Consequently, sensitization campaigns and related activities would be undertaken nation-wide. 48. Agriculture and Food Security. About 92 percent of the economically active population of Rwanda is in the agricultural sector. With the rapid growth of the labor force in agriculture, this has led to declining land per farmer, with the majority of farmers cultivating less than one hectare. Almost all land suitable for agriculture is being cultivated, with 94 percent of the land for the production of food crops. Soil fertility has been falling, leading to declining productivity. The massive displacement of the population during the 1990s adversely affected agricultural production. The effects of the combination of these factors have been rising rural poverty and food insecurity. 49. The priorities of the Government since the end of the war have been the resumption of agricultural production, the rehabilitation of production infrastructure, and reinforcement of the capacity of the Ministry of Agriculture. After the 1994 war, the Government, with support of donors, provided farm implements, seeds and other inputs that enabled farmers to resume agricultural activities. ERRP proposes this kind of support to assist about 200,000 returned households that will resume farming. 50. Skills Development. This component of ERRP will rehabilitate existing training centers at the national, prefecture and commune levels, and provide funding to beneficiaries to access several alternative training schemes. The principal avenue would be a contract training scheme which would subcontract a range of training providers, including vocational training centers, industrial, commercial and agricultural schools, NGOs and private training facilities and teacher training institutes. Where necessary, the capacities of these institutions would be strengthened to enable them develop and deliver the special courses that the beneficiaries need. Educational scholarships to those wishing to continue their formal education, be it primary, secondary, technical institute, or teacher training would be available to eligible beneficiaries. 51. Microenterprise Development. Diversification of rural economic activity and creation of employment opportunities both in rural and urban areas are key to reintegration. There is substantial scope for developing rural agro-processing, introduction of simple technologies and development of revenue-generating activities. Provision of financial, technical and managerial support to individuals and groups will enable the creation of new off-farm employment in the rural areas, and with the vocational training component, will improve the marketable skills of the beneficiaries. Micro-credit, channeled through local financial intermediaries, rural cooperatives and women's associations, will enable the development of such entrepreneurial activities. Self-  16 managed micro-credit schemes could be set up at the local level to facilitate disbursement of funds and to act as a capacity-building measure. 52. Justice and Security The transition from war to peace requires a stable social environment. The existence of the rule of law and the protection of human rights facilitate peaceful coexistence in the communes and the smooth reintegration of new and old case load refugees. The Government will strengthen the policing and judicial capacity at the communal level to promote reconciliation between the resident population and the returnees, and reinforce the capacity of the judicial system to carry out the genocide trials expeditiously. An awareness- raising campaign, emphasizing the respect for the rule of law, will be launched. 53. Demobilization. The objectives of the Rwanda Demobilization and Reintegration Program (RDRP) are: (a) to downsize the army; (b) to reinsert and reintegrate the demobilized soldiers and the returned ex-FAR soldiers into civilian life. The RDRP will target assistance to the families of the demobilized soldiers as well as the communities where they settle. The reintegration component of the RDRP will be closely linked to the sustainable livelihood components of the ERRP. The Government established the RDRP Commission in December 1996. The Commission has started the preparatory work with a socio-economic survey of the RPA soldiers to be demobilized. 54. Strengthening capacity at national and community levels. Building capacity, i.e. enabling national, prefecture and commune level institutions and organizations to (a) increase their effective use of limited resources, (b) ensure greater sustainability, and (c) ensure the empowerment of beneficiaries, is of paramount importance for successfully implementing the ERRP. Capacity-building efforts would be driven by the need to develop sustainable development strategies at commune and prefecture levels; the shift from emergency assistance (saving lives) to development assistance (sustaining livelihoods); the strengthening and empowering of civil society and civic associations at the local level; and the Government's desire to create an environment in which all elements of society, particularly individuals, private sector and non-governmental entities play a vital role in the rehabilitation and reconstruction of the country. 55. Program planning and management. Capacity strengthening would be initiated as a matter of priority in order to facilitate the expeditious and smooth implementation of the ERRP. Monitoring and evaluation of projects would be among the priority actions, and the national coordinating organ, the sectoral ministries, as well as the prefectoral offices would be duly strengthened in this regard. As coordination of the ERRP is entrusted to the National Development Program Coordination Commission, the first task is to strengthen the Commission to carry out this mandate. Secondly, prefectoral level project management units will need to be strengthened to ensure effective decentralization of ERRP implementation. Thirdly, existing project management capacity within the sectoral ministries will also to be supported and strengthened.  17 Estimated Program Costs 56. The total cost of the program is estimated at US$429.1 million consisting of US$408.1 million for the multi-year investment program and US$2 1.1 million for recurrent expenditure in 1997. The program will be funded through donor contributions to a trust fund managed by UNDP, and directly through existing bilateral and multilateral arrangements. The ERRP provides the framework for identifying specific projects which can then be integrated into the public investment program and ultimately into the development budget as funding becomes available. The Government will carry out consultations with donors to raise funding for the ERRP. Table 1: Emergency Reintegration and Reconstruction Program (in Millions of USS) Component Sub-component cost Settlements Rural settlement 113.3 Urban settlement 45.8 Social Infrastructure Education 38.6 Health 11.7 Sustainable livelihoods Agriculture 16.4 Skills Development 23.3 Microenterprise Development 54.5 Capacity building Community level capacity building 28.3 National level capacity building 10.3 Other Justice and security 12.0 Demobilization 34.0 Food Aid 17.6 Sub-total in the Public Investment Program 1997-99 408.0 Sub-total ordinary budget 1997 21.1 Total 429.1 IV - IDA PROJECT AND IMPLEMENTATION PLAN Objectives of the IDA support 57. Objectives and Benefits. The proposed ERRC is part of the effort by the Bank to play a constructive role in international efforts at reconstruction and rapid economic recovery, peace and stability in Rwanda and the Great Lakes region generally. The World Bank's participation in this emergency program is crucial to encourage bilateral donors and other multilateral agencies to provide the assistance that Rwanda needs. The proposed operation will ensure that the Government is able to provide basic services to returning refugees and the existing population, and consolidate the economic recovery and stability already underway. By providing foreign exchange for imports, ERRC will enhance private sector production and employment which  18 would reinforce the reintegration effort. Based on the experience of the Emergency Recovery Credit, we expect the funds to be fully disbursed within 12 months. Project Description 58. The proceeds of the credit will finance a positive list of imports important for reintegration, reconstruction and continued economic recovery. The list of eligible imports is shown in Attachment 2. The counterparts funds from the use of foreign exchange for private sector imports will go to support the general government budget. Since the return of the refugees in November 1996, the budget constraint of the Government has been severe and critical expenditures had to be postponed. ERRC will be effective only in the second half of 1997, corresponding to the second half of the GOR's fiscal 1997. To assist the Government in meeting its financial commitments for FY97, a retroactive withdrawal of up to 25% of the credit amount is recommended. This will cover a 4-month-period prior to the estimated date of the signing of the credit agreement. Implementation Arrangements 59. The Ministry of Finance and Economic Planning will have the overall responsibility for the implementation of the credit. The Ministry will appoint an officer, at the level of Director or above to coordinate the implementation. The relevant services in the central bank, the BNR, will be assigned the responsibility for collecting the eligible import documents, and preparing statements of expenditures and requests for reimbursement. 60. Procurement and Disbursements. The proposed credit would finance 100 percent of imported goods for the private sector, and will include direct cost, insurance and freight of goods imported from eligible sources based on a positive list (see Annex 2). Imports contracts above $2.0 million would be procured under Simplified International Competitive Bidding procedures in accordance with Bank guidelines. This will involve: (a) advertising in a local newspaper and either in the Development Forum or a newspaper/technical journal of wide international circulation or a notice to embassies/representations located in Rwanda; (b) the use of standard bidding documents; and (c) preparation of an evaluation report based on a format acceptable to IDA. All contracts above $2.0 million would be subject to prior review by the Bank. 61. Pre-shipment inspection for quality, quantity and price will be required. Imports contracts up to $2.0 million (each) will follow established commercial practices in Rwanda, which are compatible with competitive purchasing methods acceptable to IDA. Contracts below $10,000 are not eligible for financing under the proposed credit. Expenditures in excess of an aggregate amount equivalent to $12.5 million of petroleum products shall not be financed under the credit. Imports financed under other development assistance programs will not be eligible for financing under this project. Retroactive financing up to an aggregate amount of $12.5 million would be acceptable for eligible imports paid for during the four-month period preceding credit signing. 62. Disbursement of the proceeds of the credit will be on a reimbursement basis and there will be no special account into which IDA would advance funds. For goods contracts above the US$2 million threshold, the documentation to be submitted to IDA to justify expenditures out of  19 the credit includes the customs bill of entry; the final invoice; proof of payment where applicable; and pre-shipment inspection certificate. The audits of the Emergency Recovery Credit were satisfactory and on time, and based on that record, the use of statements of expenditure is being expanded for the ERRC. Disbursement will therefore be by statements of expenditure for eligible imports contracts under the US$2 million threshold. Supporting documentation will be kept locally to enable supervision by Bank staff in the field and by auditors acceptable to the Bank. 63. Supervision and Audits. Apart from daily monitoring by the Bank's resident mission in Rwanda, the supervision of the Emergency Reconstruction and Recovery Credit will be conducted by a task team leader of the project. The Ministry of Finance and Economic Planning will prepare a quarterly report on the execution of the project, which would be submitted to the Bank. The report would cover procurement and disbursement, and the progress on the budget execution. The report would also identify any issues in need of resolution by the Minister of Finance and the Bank. An audit for the project would be carried out every six months and at the time of project completion. Auditor's opinion and reports satisfactory to the Bank on such statements would be required to be provided after each audit. The Borrower will finance the audit. An Implementation Completion Report will be prepared by the Government and the Bank within three months of credit closing.  V - ANNEXES Attachment I Page 1 of 3 Status of Bank's Operations 64. As of January 31, 1997, IDA has extended 47 credits for a total of US$734.5 million including two Special African Facility Credits amounting to US$25 million. Todate canceled amounts total US$126.2 million while total cumulative disbursements equal US$529 million. The distribution of credits by sectors is as follows: (a) infrastructure 33.5 percent; (b) agriculture and rural development 23.8 percent; human resources 11.9 percent; (d) structural adjustment 11.3 percent; (e) an emergency recovery credit 9.3 percent (f) credit to small and medium enterprises, finance and industry 5.2 percent, (g) development and distribution of local energy sources and energy conservation 2.5 percent and (h) Technical Assistance and Public Sector Management 2.5 percent. IFC has extended three loans and two equity participations. 65. The current portfolio, with an undisbursed balance of US$104.62 million at the end of April 1997, consists of 9 investment projects and one emergency recovery project which provided imports and budget support and is fully disbursed except for a small technical assistance component. These projects are: 66. Water SupplvyII. (Credit-1783; Effective 10.31.88; Closing Date 12.31.93; Undisbursed US$2.33 million). The project's original objectives were to improve the quality and quantity of drinking water in rural areas, sensitize and make rural communities responsible for the maintenance of water installations and help the government put in place an institutional and financial framework to coordinate the activities of various donors in the sector. The project was restructured after the 1994 civil war to: (i) complete repairs of the water supply systems and the water source from the Yaanze river supplying Kigali which were damaged during the war; (ii) finance an evaluation of the water needs in secondary cities; and (iii) finance a rehabilitation study for simple and complex rural water supply systems. 67. Sectoral and Pre-investment. (Credit -1796; Effective 08.18.88; Closing Date 06.30.97; Undisbursed US$4.32 million). The project objectives were to assist the government in strengthening its planning and investment capabilities by financing strategic sectoral, subsectoral and feasibility studies for priority investment projects, building capacity for the management of the public investment program and the budget, and conducting studies and workshops to advance the economic reform program. The project is progressively moving towards an orderly closure.  Attachment I Page 2 of 3 68. Transport Sector, (Credit-2136; Effective 03.29.91; Closing Date 09.30.98; Undisbursed US$22.51 million). The project objectives are to: (a) reform sector policies to promote competition and liberalize prices; (b) develop the planning capacity of the government; (c) improve road maintenance ability and (d) promote private sector activity in road maintenance. The project supports main road construction, improved road maintenance and promotion of communal activities. 69. Second Communication. (Credit-2189; Effective 08.19.91; Closing Date 12.31.98; Undisbursed US$7.43 million). The project promotes efficient communications through institutional reform and some modest investments. It seeks to create autonomous, commercially-oriented operating entities for the telecommunications and postal services, and to provide a regulatory framework which permits the entry of the private sector in the telecommunications industry. 70. Education Sector Credit. (Credit-2227; Effective 06.24.92; Closing Date 09.30.97; Undisbursed US$15.03 million). The project aims at: (a) consolidating and expanding primary education; (b) improving the overall quality of education; and (c) strengthening the sector's management capacity. Both the Bank and the government have recognized the necessity to emphasize project components dealing with teaching quality. The Government may seek the extension of the closing date. 71. Health and Population. (Credit-2272; Effective 06.04.92; Closing Date 12.31.98; Undisbursed US$17.25 million). The project was restructured in June 1996. Its original objectives were to: (a) support the implementation of the National Health Strategy by reforming and strengthening pharmaceutical policies, health sector financing, and the operations of health districts; (b) strengthen the government's capacity to formulate and put into effect a comprehensive and sustainable strategy of AIDS control on a national scale; and (c) strengthen the government's capacity to formulate and carry out a population policy. The project as restructured will: (i) support the operation of six health districts; (ii) assist with the supply of essential drugs; (iii) support a national IEC capacity; (iv) restructure and decentralize the National AIDS Control Program; (v) restore the capacity to carry out epidemiological surveillance; (vi) develop a national capacity for voluntary AIDs testing and counseling; (vii) develop an awareness and an understanding of population issues; (viii) improve population education; and (ix) educate officials on population issues in the new context.  Attachment 1 Page 3 of 3 72. Food Sector and Social Action. (Credit-2388; Effective 08.05.93; Closing Date 12.31.97; Undisbursed US$11.37 million). This project was restructured to: support the recovery of community activities by rehabilitating social and economic infrastructure, (b) promote public participation in small-scale productive activities, (c) create temporary and permanent employment, and, (d) improve the nutrition of relatively poor and vulnerable groups. The project has three components: a community infrastructure component that finances numerous schools, clinics and water supply works; a small-scale credit component that finances income-generating activities in agriculture and related areas; and, a food security and nutrition component that aims to reduce food insecurity, malnutrition and a health component targeting sick children, pregnant and lactating mothers, AlDs-affected households and the growing number of orphans. An important aspect of the restructuring is the setting aside of US$2 million for a pilot on project implementation through communal participation. 73. Energy Sector. (Credit-2456; Effective 01.21.94; Closing Date 12.31.98; Undisbursed US$11.5 million). The project was to promote rational energy policies and establish the basis for efficient utilization of Rwanda's energy resources. The project has been restructured and the Woodfuel and the methane gas components were dropped whiel a pilot waste management project for the city of Kigali was added. 74. Private Sector (Credit-2541; Effective 06.09.95; Closing Date 06.30.99; Undisbursed US$11.63 million). The project has three components: (a) an APEX line of credit for productive investments, (b) a private sector support fund and (c) support for institutional strengthening to various companies and participating financial intermediaries. The project aims at promoting the expansion of the private sector. 75. Emergency Recovery Credit. (Credit-2678; Effective 07.05.95; Closing Date 06.30.97; Undisbursed US$1.02 million). The project objectives were to help Rwanda begin to overcome the problems created by the 1994 civil war and facilitate the return to normal life and productive activities. To this end, the project was designed to: (i) help the government begin the restoration of key economic and social services, rebuild the institutional capacity necessary for suitable economic recovery and design a coherent economic policy framework and (ii) provide the private sector with foreign exchange to resume operations and create jobs.  23 Attachment 2 Page 1 of 2 List of Imports to be financed utd(ler the Credit 2 H. S. Codce 01.02 - 01.06 Live animals for breeding 12.09 - 12.14 Seed grains and fruits and spores for planting 15.05 - 15.20 Oil and chemical oil products 17.01 - 17.02 Sugar and industrial glucose 27.12 - 27.14 Petrolcum coke, natural and other asphalt, industrial petroleum jelly and paraffin 28.01 - 28.43 Inorganic chemaical products 29.01 - 19.06 Hydrocarbons and derivatives 30.03 - 30.06 Pharmaceuticals, medicines 31.01 - 31.05 Fertilizers 32.15 Inks and toners 33.01 Basic oils 34.04 - 34.06 Artilicial wax, powders and candles 38.01 - 38.08 Chemiiical products, insecticides, herbicides, fungicides 39.01 - 39.26 Plastic and cellulose products 40.01 - 40.17 Rublber products (including pipes and cables, tires and surgical products) 44.01 - 44.21 Wood and wood products 47.01 - 47.07 Wood pulp, cellulose fibers and paper and carton refuse 40.01 - 48.3 1 Papcr and paper products 49.01 - 49.06 Books, textbooks, engineering and architectural; drawing materials 52.01 - 53.08 Cotton and jute fibers and textiles 54.01 - 58. 11 Syntlhetic fibers and textiles 69.01 - 69.10 Ceramic products (including construction bricks, tiles, pipes, etc.) 70.01 - 70.07 Glass ancd glass products 72.01 - 73.26 Iron and steel products 74.01 - 74.19 Copper and copper products 75.01 - 75.08 Nickel and nickel products 2 Description according to the Rwanda Harmonized System Customs Code. Products here described and those contained unlder the four-digit category are considered eligible to be financed by the credit.  24 AachbmnL2 Page 2 of 2 List of Imports to be financed un(ler the Credit (contd) 3 H. S. CO1lC 76.01 - 76.16 Aluminium and aluminum products 78.01 - 78.06 Lead and lead products 79.01 - 79.07 Zinc and zinc products 84.05 - 84.85 Motors and electrical machinery (gas generators, turbines, pumps, etc.) 85.01 - 85.05 Motors and electrical machinery (power generators, translormers, bobbins, etc.) 85.17 - 85.27 Teleplhones and radiophone equipment 87.01 - 87.16 Motor cars, tractors, cycles, and other vehicles (includinlg parts) 90.01 - 90.09 Plhotocopiers, printers 90.15 - 90.17 Topographical, geodesic and mathematical instruments 90.18 - 90.26 Medical instruments 90.28 - 90.29 Gas, liquid or electrical meters 94.01 - 94.02 Medical and surgical furniture 94.06 Prefabricated constructions 96.01 - 96.13 Office equipment Descriplion according to the Rwandat I larmon11oized System Customs Code. Products here described and thosc contained unlder the fou1-digit category are considered eligible to be financed by the credit.   IMAGING Report No.: T 7149 RWV Type: TAN