Statement by Philippe Peeters at the meeting of November 30, 2000

86584 International Bank for Reconstruction and Development International Development Association International Finance Corporation Multilateral Investment Guarantee Agency FOR OFFICIAL USE ONLY CONFIDENTIAL EDS2000-407 November 29, 2000 05:33:19 PM Statement by Philippe Peeters Date of Meeting: November 30, 2000 Burkina Faso: Country Assistance Strategy and Community-Based Rural Development Project Comments CAS Burkina Faso We support this new CAS for Burkina Faso. It is a balanced document on an important and stable country in West Africa, which has clearly benefited from the recently finalized PRSP. Governance: We are concerned by reports on decreasing governance performance in Burkina Faso. Such deterioration of governance, in terms of political upheaval and corruption, has not seemed to hinder economic growth too much, but this can all the more have been the case for effective social service delivery. In this context, the CAS document ascribes recent lower IDA disbursements to i.e. weak implementation capacity. But it apparently does not see this recent deterioration of governance. On the contrary, box 4 describes laudable improvements in governance obtained during the last 5 years. Also attachment 5 mentions confidence gained in the relationship between the Bank and the Government during the last 3 years. Paras 96 and 97 on the contrary point to the governance risks ensuing from a situation in which the incumbent political party would lose the next elections. We find this uneasy to reconcile with the decreased portfolio amount. On a positive note, we are very much pleased that governance is added as a CAS pillar compared to the 1996 CAS, thanks to the fact that this new CAS has been able to build upon Burkina Faso’s recently finalized PRSP. Effective social service delivery: Effective social service delivery has not yet been attained, in spite of efforts under the last CAS to redirect spending to social sectors (quantity). The Bank’s efforts to target social spending more on the poor during the new CAS deserve our full support (quality). In this context, it is again to be regretted that a table showing the evolution of these and other expenditure categories –i.a. public sector wage and military expenditures- over time, as well as in comparison to neighboring countries, is lacking from the document. We further refer to the high-income inequality in Burkina Faso, and to a lesser extent to the continuing low revenue generation capacity of the Government. However, concerning the latter, domestic resource mobilisation is mentioned as one of the successes of the previous CAS. Has this included a more progressive tax system? Economic growth and rural development: Economic growth in Burkina Faso has been considerable during recent years, but it has to an important extent been driven by large, and foreign aid-financed, public investments. To increase the sustainability of growth, diversification of the economy is therefore all the more imperative. Burkina Faso’s membership of the CFA-zone entails, apart from monetary stability, also a too tight credit policy (para 1 of attachment 4), whereas an increase in the availability of private sector credit is a necessary precondition for sustainable growth. This all the more since the agricultural sector, including livestock, holds the main potential for growth, as opposed to the current situation in which Burkina Faso imports dairy products. Further on growth, the CAS benchmarks of table 6 seem to lack a rural development component, also in view of agriculture being the major driving force behind economic growth, as well as a private sector and a governance component. The latter are well included in the performance- monitoring framework of attachment 5. Strikingly, only the CBRBP document accompanying the CAS document is candid enough to deplore the recently reduced government expenditures for rural development (para 2.6). Finally, between 1994 and 1998 cash crop farmers appear to be the only professional group that benefited from the economic growth and for which poverty decreased. But possibly they were already with the relatively well to do from 1994 on. This suggests that this CAS should all the more concentrate on food crop farmers within its rural development focus. Some more data on this would be welcome. On a positive note in this respect, Burkina Faso is to be commended for having developed a rich data set that can be used as the basis of its development policy. Gender: To be commended in this CAS document is the attention to the gender issue, including HIV/AIDS. Paras 32-33 and attachment 6 are, compared to other CAS documents, very candid. We welcome and support the view that the gender gap urgently needs to be narrowed, not only out of equity considerations, but also from an efficiency and growth perspective. CAS lending level: It could have been better explained why the base case lending level of this new CAS is planned to be the double of the previous CAS’, as well as the rationale for its front-loaded nature (see annex B3). Furthermore, the limited financial difference between Base and High Case Lending proposed by the document is striking (400-420 vs. 450-500 million USD), particularly bearing in mind the gap between the Low and High Case Lending amount in the recently approved new CAS for Uganda. PRSCs: This CAS envisages a shift towards the PRSC instrument, consisting of about 25% of the Base Case Lending amount. We consider its built-in flexibility to be an asset, which nevertheless also entails risks. Cautiousness is appropriate in this regard. Before the instrument comes again before the Board for approval, we can only go along with some pilot PRSCs implemented on learning by doing basis. Comments Community Based Rural Development Project (CBRDP) We think this is a quite innovative project and wish the Government all the best with its implementation. The project will hopefully be key in at last turning Burkina Faso’s good macroeconomic performance of the 90s into substantial poverty reduction results, where previous efforts to this effect have disappointed. The Government has, in preparing this inherently participatory project, provided the right answer to previous criticism that the drafting of its full PRSP has suffered from lack of participation in the context of the atmosphere of political crisis affecting the country since 1998. Positive elements of the project: Commendable features of the project are: its inherently necessary long-term, moderately back-loaded, and phased approach, its large local currency component, its sectoral consistency with the new CAS (including private sector development, which we expect to come forward as a major sector in a participatory, demand-driven setting of the CBRDP), its building upon the experience of its predecessor project –described as very successful on p. 33, but criticized on p. 22-, its building upon other donor-funded participatory rural development programs –for which the project will act as a financier of last resort-, and its strongly owned, homegrown character. Ownership: The strong ownership of the project is not only testified by the legislation already finalized by the Government, which appears to be really willing to delegate responsibilities to the local level. It is also proved by the financial contributions to be made by the Government, as well as progressively by the beneficiaries themselves. The latter would average 20% of total funding, but could vary from 5 to 50%. However, no details are provided on exemptions for the poorest. Capacity building: The back-loaded lending of the project is commendable, because capacity building, especially of the poorest groups, but also, as the document acknowledges, of staff and service providers, will be key to the success of the project. People know themselves best what their needs are, but are not always fully aware of the array of means available to fulfill them, as well as of their comparative (dis)advantages. One third of project funding will therefore be directed at capacity building, including literacy, during the first phase. The huge capacity building needs probably explain the high risk rating of the project in the CAS document, while in the project document itself, its risk rating is only modest. We wonder about the capacity building’s share in funding during the next phases. And because of the crucial role of land tenure security in rural development as well as in gender equality in Burkina Faso, we wonder why the land tenure security pilot project concerned attracts only 3% of the funds. Fiscal autonomy: We would also have liked some further reassurances on the commitment by the Government on the vital fiscal autonomy component of the project, which is even more far-reaching than the central government financially contributing to the CBRDP as provided in the first phase. This will be the ultimate proof of success of the project, also as to feasibility. Some more detail on the local tax bases envisaged would therefore be welcome, as well as on other African experiences in local taxation. Political context: Finally we are concerned that the political problems of Burkina Faso on the national level, in particular as to the continued postponement of the next municipal elections, would have a detrimental effect on the democratic process at the local level. The municipalization, i.e. regrouping of villages, may become very politicized.