E Togo SAP II and III - OECD

AFRICAN DEVELOPMENT FUND ADF/BD/WP/2000/09 28 March, 2000

Prepared by: OPEV Original: French

Translated by: J. SAIDI P. BLACKWELL-CLOMEGAH

Probable Date of Presentation to the Committee on Operations and Development Effectiveness:

TO BE DETERMINED

FOR CONSIDERATION

MEMORANDUM

TO : THE BOARD OF DIRECTORS FROM : Omar KABBAJ President SUBJECT : TOGO: STRUCTURAL ADJUSTMENT PROGRAMMES II AND III PROGRAMME PERFORMANCE EVALUATION REPORT* Please find attached hereto, the above-mentioned document. Attch.

* Questions on this document should be referred to: Mr. G.M.B. KARIISA Director OPEV Ext. 4052 Mr. T.T. KATOMBE Prin. Post-Evaluation Officer OPEV Ext. 4657

SCCD:PW

African Development Fund

OPERATIONS EVALUATION DEPARTMENT

ADF/OPEV/99/19 OCTOBER 1999 PREPARED BY: OPEV ORIGINAL: FRENCH DISTRIBUTION: LIMITED

T O G O

PROJECT PERFORMANCE EVALUATION REPORT STRUCTURAL ADJUSTMENT PROGRAMMES II AND III

(ADF Loans No. F/TOG/PAS II/92/14

and F/TOG/PAS III/97/11)

OOTHIS REPORT HAS BEEN PRODUCED

FOR THE EXCLUSIVE USE OF THE BANK GROUP

TABLE OF CONTENTS

Pages

CURRENCY EQUIVALENTS, ACRONYMS & ABBREVIATIONS i PREFACE iii BASIC PROGRAMMES DATA iv I. EVALUATION SUMMARY 1 1.1 Objectives and Scope 1 1.2 Implementation Performance 1

1.3 Institutional Performance 2 1.4 Impact of Programs 2 1.5 Sustainability 3 1.6 Conclusion 3 1.7 Feedback and Follow-up Actions 3

II. BACKGROUND 4 2.1 Country Economic Context 4 2.2 History of Policy-based Operations 5 2.3 Programmes Formulation 6 2.4 Programmes Rationale 6 2.5 Objectives and Scope at Appraisal 7 2.6 Financing Arrangements 7 2.7 Evaluation Methodology and Approach 7 III PROGRAMMES IMPLEMENTATION AND RESULTS 8

3.1 Loans Effectiveness 8 3.2 Implementation Schedules 8 3.3 Financial Sources, Loan Disbursement and Utilization

of Counterpart Funds 8 3.4 Logical Framework Approach 9 3.5 Consistency with Bank and Country Strategies and Policies 9 3.6 Consistency with Regional Economic Integration 9 3.7 Reform Measures 9 3.8 Institutional Performance and Monitoring 11 3.9 Compliance with Agreement Conditions and Covenants 12

IV PROGRAMMES EVALUATION AND IMPACT 12

4.1 Impact of Reforms 12 4.2 Socio-economic Impact 19 4.3 Institutional Impact 20 4.4 Impact on Women 21 4.5 Environmental Impact 22

V PROGRAMMES SUSTAINABILITY 22

VI PERFORMANCE RATING 23

6.1 Implementation Performance 23 6.2 Bank Performance 23 6.3 Output Performance 23

VII CONCLUSIONS, LESSONS AND RECOMMENDATIONS 24

7.1 Overall Assessment 24 7.2 Feedback and Recommendations 24 7.3 Follow-up Actions 26

ANNEXES Number of Pages Annex 1: Matrix of Recommendations AND Follow-up Actions 2 Annex 2: Matrix of SAP II Measures 9 Annex 3: Matrix of SAP III Measures 4 Annex 4: SAP II Logical Framework Retrospective Matrix 3 Annex 5 SAP III Logical Framework Retrospective Matrix 3 Annex 6 SAP II Performance Ratings 4 Annex 7: SAP III Performance Ratings 4 Annex 8: Key Macro-economic Indicators 3 ----------------------------------------------------------------------------------------------------------------------- This report was prepared by Messrs. T. T. KATOMBE, Principal Post-Evaluation Officer and Abou Amadou BA, Consultant, following their mission to Togo from 25 April to 9 May 1999. For further information on the report please contact Mr. G.M.B. KARIISA, Director OPEV (Ext. 4052).

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CURRENCY EQUIVALENTS, ACRONYMS AND ABBREVIATIONS

Currency Equivalents SAP II At Appraisal On Completion* At Post-Evaluation Mission (January 1992) (July 1997) (April 1999) 1 UA = CFAF 370.462 1 UA = CFAF 753.369 1 UA = CFAF 829.162 1 UA = US$ 1.43043 1 UA = US$ 1.44462 1 UA = US$ 1.35784 * December 1996 SAP III At Appraisal On Completion* At Post-Evaluation Mission (December 1996) (October 1998) (April 1999) 1UA = CFAF 753.369 1 UA = CFAF 792.748 1 UA = CFAF 829.162 1 UA = US$ 1.44462 1 UA = US$ 1.32949 1 UA = US$ 1.35784 * August 1998

Weights and Measures 1 km: kilometer = 1000 meters 1 ha: hectare = 10 000 square meters (m2)

Fiscal Year

1st January - 31 December (Since 1996, the fiscal year goes from 1st January to 30 June of the following year)

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Acronyms and Abbreviations AID : Agency for International Development BCEAO : Banque centrale des états de l'Afrique de l'Ouest

(Central Bank of West African States) CEB : Communauté électrique du Bénin CEET : Compagnie d'énergie électrique du Togo (Togo Electricity Corporation) CIMTOGO : Société des ciments du Togo (Togo Cement Company) CNCA : Caisse nationale du crédit agricole (National Agricultural Credit Fund) CNSS : Caisse nationale de sécurité sociale (National Social Security Fund) COOPEC : Coopérative d'épargne et de crédit (Savings and Credit Cooperative) ECOWAS : Economic Community of West African States ERAP : Economic Recovery and Adjustment Programme ESAF : Enhanced Structural Adjustment Facility GDP : Gross Domestic Product IBRD : International Bank for Reconstruction and Development IMF : International Monetary Fund NGO : Non-governmental Organization OPAT : Office des produits agricoles du Togo (Togo Agricultural Produce Agency) OTP : Office togolais des phosphates (Togo Phosphate Agency) PIP : Public Investment Programme PNAE : Plan national d'action pour l'environnement

(National Environment Action Plan) SDA : Social Dimension of Adjustment SME/SMI : Small and Medium Scale Enterprises/Small and Medium-Scale Industries SOTED : Société nationale d'études de développement

(National Development Studies Corporation) SOTOCO : Société togolaise de coton (Togo Cotton Corporation) UEMOA : Union économique et monétaire ouest africain

(West African Economic and Monetary Union - WAEMU) UMOA : Union monétaire ouest africain (West African Monetary Union - WAMU) UNDP : United Nations Development Programme VAT : Value-added Tax

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PREFACE 1. This Project Performance Evaluation Report (PPER) deals with both SAP II covering the period 1992-94 and SAP III for the period 1996-98 for which the African Development Fund (ADF) granted Togo Loan n° F/TOG/PAS-II/92/14 for UA 11.51 million in October 1992 and Loan n° F/TOG/PAS-III/97/11 for UA 11.20 million in May 1997, respectively. 2. Initially designed for implementation over the period 1992-94, SAP II finally covered the period 1992-96, while SAP III was implemented according to schedule over the period 1996-98. It is worth noting that implementation of SAP II was hindered by the socio-political crisis facing Togo during the period 1992- 93 (a nine-month general strike, political crisis during the transitional period) which paralyzed the entire economic activity in such a way that not all the 94 measures could be implemented. Thus, measures remaining to be implemented were retaken and completed under SAP III. 3. The two-fold primary objectives of SAP II and III which are therefore complementary, were to promote and stimulate sustainable economic growth consistent with financial stabilization, on the one hand, and on the other, to improve the social welfare of the population by restoring the key macroeconomic and financial balances, improving public resource management, setting up an economic environment conducive to private sector development as well as taking into account the social dimension of adjustment through the allocation of budgetary resources as a priority, to social sectors. 4. With the two loans, the Bank intended to provide a balance of payment support by contributing to the alleviation of the financial constraint and enable the Government to pursue, without hindrance, rehabilitation and reform efforts in the areas of public administration, public enterprises sector, external trade and prices as well as taking the social dimension of adjustment into account. 5. Each program was the subject of a Completion Report (PCR) prepared by the Bank following completion missions carried out in July 1997 for SAP II (ADF/BD/IF/97/186) and in October 1998 for the SAP III (ADF/BD/IF/99/122). 6. This report was written following a programmes performance evaluation mission of the Bank in Togo from 25 April to 9 May 1999. It makes reference to the appraisal and completion reports and is based on: (i) information available in the Bank program files; (ii) statistical, economic and financial data collected during the mission; and (iii) discussions as well as talks that the audit mission had with the Authorities and the senior officials of the Ministries concerned by the programs, representatives of the World Bank, the IMF, the European Union, the French Development Agency and UNDP in Lome. 7. The PPER completes the findings, analyses and conclusions of the completion reports and includes an evaluation of performances, achievements and sustainability of the impacts of the programs from the macroeconomic and sectoral standpoint, particularly over the periods 1992-96 and 1996-98. It draws conclusions and lessons from them and makes recommendations to the Borrower and the Bank for the consolidation of the programs' benefits. 8. Copies of the PPER were sent, for comments, to the Togolese Government and to the Bank Country Department - West Region. Their comments were taken into account in the final report.

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SAP II BASIC DATA Preliminary Data Country : Republic of Togo Programme : Second structural Adjustment Programme Loan : F/TOG/SAP II/92/14 Borrower : Government of the Republic of Togo Executing Agency : SAP Interministerial Monitoring Commission B. Loan Data

LOAN ESTIMATE ACTUAL Loan Amount (UA million)

11.5

11.5

Commitment Charge

0.75% per year on amounts disbursed and outstanding

0.75% per year on amounts disbursed and outstanding

Maturity

50 years, including the grace period

50 years, including the grace period

Grace period

10 years

10 years

Repayment Terms

One per cent (1%) of the principal per year starting from the 11th to the 20th year and three per cent (3%) of the principal per year thereafter.

One per cent (1%) of the principal per year from the 11th to the 20th year and three per cent (3%) of the principal per year thereafter.

Conditions for release

Two tranches of UA 5.98 and UA 5.52 million respectively

Two tranches, but the second subdivided into two portions

Appraisal

April 1992

April 1992

Loan Negotiations

July 1992

Board Approval

August 1992

Signature

October 1992

Implementation

December 1993

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C. SAP II Basic Data

Financing Estimate Actual Difference 1. Financing requirements

(UA million)

205.3

205.3

-

2. Duration

1992-94

1992-96

24 months

3. Date of disbursement of

the first tranche

-

4/1/94 and 21/3/94

-

4. Date of disbursement of

the 2nd tranche

-

2/2/95

-

5. Closing Date

31/12/1994

31 December 1996

24 months

6. Financing Plan

Donors

At Appraisal UA million

CFAF billion

On Completion UA million

CFAF billion

Difference million of UA

- IDA

38.1

28.5

27.7

20.7

-10.4

- ADF

11.5

8.6

11.5

8.6

0.0

- EU

15.1

5.9

0.0

0.0

-15.1

- France

13.1

9.7

6.9

5.2

-6.3

- USAID

4.1

3.1

0.0

0.0

-4.1

Total

81.9

55.8

46.1

34.1

-35.8

D. Performance Indicators 1. Number of extension of the date of last disbursement : 1 2. Programme Implementation Status : Completed 3. Implementation Performance : Unsatisfactory 4. Bank Performance : Satisfactory 5. Rating of Programme outcomes : Satisfactory

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E. Missions Missions

Number of missions

Number of persons

Composition

Men/months

1.Identification - - - - 2.Preparartion 3. Appraisal 4. Supervision 4. Monitoring 5. Mid-term Review 5. PCR 6. Post-appraisal

1

1

3

4

1

1

2

3

2

2

3

2

1 Economist 1 Loan Officer 2 Economists 1 Loan Officer 2 Economists 2 Loan Officers 3 Economists 2 Economists

1.26

1.5

1.03

0.6

1.3

4

F. Disbursements (in millions of UA) ESTIMATE ACTUAL Total Disbursed 11.5 11.5 Amount cancelled 0.00 0.00 Undisbursed balance 0.00 0.00 Repayment N.A. N.A. Annual disbursements (in millions of UA) ESTIMATE ACTUAL 1993 0.00 0.00 1994 5.98 5.98 1995 5.52 2.74 1996 - 2.78 Total 11.5 11.5 G. Other programs financed by the Bank Group within the framework of

structural/sectoral adjustment in Togo. Programme Approval

Year Loan amount (UA million)

Implementation Status

Completion Date

Status of PPER

SAP I 1988 13.8 Completed 1990

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SAP III BASIC DATA A. Preliminary Data Country : Republic of Togo Programme : Structural Adjustment Programme III Loan : F/TOG/SAP III/97/11 Borrower : Government of the Republic of Togo Executing Agency : Interministerial Commission assisted by:

(i) Select Interministerial Committee, (ii) (iii) Monitoring-Evaluation Unit; and (iii) BCEAO - National Branch

B. Basic Loan Data

LOAN ESTIMATE ACTUAL Loan Amount

UA 11.2 million

UA 11.2 million

Service Charge

0.75% per annum on the amounts disbursed and outstanding

0.75% on the amounts disbursed and outstanding

Commitment Charge

0.50% on the undisbursed portion of the loan starting to run 90 days after signature of the loan agreement.

0.50% on the undisbursed portion of the loan starting to run 90 days after signature of the loan agreement

Maturity

50 years

50 years

Grace period

10 years

10 years

Repayment Terms

1% of the principal loan amount payable annually from the 11th year through the 20th year, and 3% per annum thereafter.

1% of the principal loan amount payable annually from the 11th year through the 20th year, and 3% per annum thereafter.

Conditions for release

Two tranches of UA 6.4 and UA 4.7 million respectively

Two tranches of UA 6.25 and UA 4.95 million respectively

Appraisal

-

December 1996

Loan Negotiations

-

April 1997

Board Approval

-

May 1997

Signature

-

May 1997

Loan Effectiveness

-

June 1997

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C. SAP III Basic Data Estimate Actual Difference 1. Financing

requirements (in UA million)

2. Maturity 3. Date of

disbursement of the first tranche

4. Date of

disbursement of the 2nd tranche

5. Closing Date

39.16 1996-98 During the first quarter of 1997 During the first of 1997 31/12/1999

39.16 1996-98 8/07/1997 17/12 /97 31/12/1997

- - Over 3 months - -

6. Financing Plan Donors

At Appraisal

On Completion

Difference

UA million CFAF billion UA million CFAF billion UA million

- IMF - IDA - JAPAN - ADF

Total

65.16 32.25 32.25 11.20 140.86

49.9 24.30 24.30 8.44 106.13

53.27 34.56 26.99 11.20 126.02

42.23 27.40 21.40 9.08 100.11

-6.86 +3.10 - 2.9 +0.64 - 6.02

D. Performance Indicators 1. Number of extension of the last disbursement date : None 2. Status of programme implementation : Completed 3. Implementation Performance : Satisfactory 4. Bank Performance : Satisfactory 5. Rating of programme outcomes : Satisfactory

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E. Missions Missions

Number of missions

Number of persons

Composition

Staff/months

1. Identification

-

-

-

-

2. Appraisal 3. Mid-term Review 4. Monitoring 5. PCR 6. Post-appraisal

1 1 - 1 1

2 1 - 2 2

2 Economists 1 Economist - 2 Economists 2 Economist

1.26 0.5 - 1 2

F. Disbursements (UA million) ESTIMATE ACTUAL Total amount disbursed 11.2 11.2 Amount cancelled 0.00 0.00 Undisbursed balance 0.00 0.00 Repayment N/A N/A Annual Disbursements (UA million) ESTIMATE ACTUAL 1997 11.2 11.2 G. Other programmes financed by the Bank Group within the framework of the

structural/sectoral adjustment in Togo Programmes Approval

Year Loan

(UA million) Implementation

Status Completion

Date Status of

PPER SAP I SAPII

1988 1992

13.8 11.5

Completed Completed

1990 1996

- in progress

I. EVALUATION SUMMARY

1.1 Objectives and Scope 1.1.1 This performance report deals with Togo SAP II and III covering the periods 1992-94 and 1996-98 respectively, for which ADF granted loans amounting to UA 11.2 million for the first and UA 11.5 million for the second. 1.1.2 The overall objectives of these programs were to rekindle growth and reduce social disparities. More specifically, SAP II aimed to redress external imbalances, reduce the inflation rate, and rationalize the management of public finances. To this end, SAP II comprised 94 measures in the areas of public finances, restructuring of the partly State-owned sector, trade liberalization, private sector promotion and human resources development. SAP III on the other hand, aimed to restore macroeconomic stability to support the supply of social services. It comprised 57 measures targeting public finances, the acceleration of public sector reforms, private sector development and the minimum budget allocation for social sectors. 1.1.3 The major results expected from these two programs were to raise real GDP growth rate from 4.7 % to 6.5 % respectively over the periods 1992-94 and 1995-98, reduce current balance of payments deficit from 10.5 % of GDP in 1991 to 8.5 % in 1994 and to 7.5 % in 1998, hold the inflation rate down to 3 % during the SAP II period and to 5 % as from 1997, achieve a 5.5 % annual growth rate of exports and 8.5 % for imports between 1996 and 1998.

1.2 Implementation Performance 1.2.1 The implementation of SAP II put back by more than two (2) years owing to socio-political situation resulting from the country's democratization process: it was implemented over the period 1992-96 instead of 1992 to 1994. The loan did not become effective until sixteen months after approval. Conditions for disbursement of the second tranche were reformulated in January 1995 and the loan agreement was amended to that effect. All the programme measures could not be implemented. Thus, some which were not implemented, were carried out promptly under SAP III in contrast to the previous programme and did not encounter any delay: loan effectiveness was declared a little over one month after loan approval and the conditions for disbursement of the second tranche were met within schedule. Nearly all the measures were implemented during the programme period; the remaining measures had, for the most part been embarked upon and were more or less advanced in their implementation, except mainly those relating to the reform of parapublic sector. 1.2.2 Procedures for procurement of goods and services were complied with. SAP II was the subject of three supervision missions and benefited from four general projects follow-up missions to Togo. With regard to SAP III, one mid-term review mission was carried out. SAP II implementation performance is rated unsatisfactory owing to the delay in its implementation compared to the initial completion date, whereas that of SAP III is deemed satisfactory.

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1.3 Institutional Performance

Performance of the Borrower 1.3.1 The Borrower encountered several difficulties in fulfilling some of the conditions for the release of the first tranche of SAP II and in implementing the overall measures relating to this programme. In contrast, it was swift in implementing SAP III, which was completed within schedule. Most of the measures were implemented or are at an advanced stage of their execution; implementation reports of the two programmes were regularly submitted to the Bank, and so were the loan accounts audit reports.

Bank Performance 1.3.2 The Bank participated in the initial preparatory phase and in several meetings of the second programme. It further took part in the joint appraisal mission for this SAP with the World Bank. The preparation of SAP III was carried out on the basis of the Government’s Economic Policy Letter and documents transmitted by the World Bank and the IMF: since the Bank had not become involved in this programme until the end of the second year of its implementation, owing to the non unavailability of ADF VII and the non completion of SAP II. Its appraisal reports were considered to be of a satisfactory quality. While it is true that the general monitoring of the program suffered from the socio-political crisis during the first two years (1992-93), it subsequently became regular through supervision and mid-term review missions. Overall, the Bank’s performance is satisfactory.

1.4 Impact of Programmes 1.4.1 The macroeconomic and financial results stand in contrast. Indeed, after being negative annually during the period 1990-1993, GDP growth rate in real terms accelerated in 1994 to reach 16.8 % under the catch-up and CFAF devaluation effect. Growth afterwards evolved in a seesaw fashion, going from 6.9 % in 1995 to 9.7 % in 1996 and 4.3 % in 1997, before falling back to negative (-1.3 %) in 1998. This growth reversal in 1998 reflects the impact of the oil crisis during the first quarter together with a certain wait-and-see attitude from economic agents during the period preceding and following the presidential elections. The impact of these two phenomena continues to be felt in 1999, leading to expect a negative growth if corrective measures are not taken in time. 1.4.2 Positive but limited results were achieved in the area of public finances between 1994 and 1996, causing a constant reduction in the government deficit (-13% of GDP in 1993 to -10% in 1994). However, a net deterioration in the situation is observed as from 1997, which brought about the difficulties in programming and controlling expenditures on the basis of the available budgetary resources. The liquidity squeeze that derives from this situation led principally to the accumulation of internal arrears. External trade liberalization led further to a faster growth in imports than in exports, resulting in a persistent current account deficit which moved from -6.6% of GDP in 1993, - 9.7 % in 1995, -8.1% in 1997 and to -7.2 % in 1998.

1.5 Sustainability 1.5.1 The key factor for the sustainability of the programmes impacts lies in the political will of the Government to pursue the reforms and consolidate the achievements. This commitment has, however been put to stiff test during the period of the two programmes by the political unrest born out of the political context (generalized strike, difficult transition, electoral process contested). The uncertainties linked to the current political climate together

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with the difficulties in fiscal consolidation (accumulation of internal arrears, precarious state of the banking sector) are not likely to sustain the positive effects of the programmes. The same applies to the privatization process, which registered a very slow development and is still not completed in accordance with the programmes. It is therefore imperative to further concretize this political will by re-establishing a stable socio-political climate and pursuing the necessary structural reforms. 1.5.2 The removal of tariffs, decontrol of prices, the improvement of the legal and regulatory framework and its harmonization with the Community regulations facilitate Togo's faster integration within the framework of the UEMOA; this can provide a guarantee for the sustainability of these measures. However, in order for the country to benefit, in a sustainable manner, from the positive impacts of this integration, it is necessary that supporting measures in terms of capacity building for the administration and the private sector be taken in order diversify the production base and make the economy more competitive. In addition to this, the decisions taken within the framework of the Community should be implemented; these are aimed at promoting conditions for a transparent management in favor of social peace and for the resumption of cooperation with development partners. 1.5.3 The economic results recorded are encouraging, but remain volatile owing to the political climate, the strong dependency of the economy on weather conditions and to fluctuations of staple commodities. The sustainability of the programme's impact requires that the requirements for social cohesion and stability be taken into consideration, together with the elimination of regional and socio-economic disparities through the fight against the marginalization of the most vulnerable social groups (youth, women, etc.).

1.6 Conclusion 1.6.1 The overall performances of the two programmes stand in contrast. The erratic growth of GDP reflects the vulnerability of the economy to exogenous factors (fluctuations in the prices of export commodities, weather conditions, socio-political unrest), but also the low level of public and private investments. Inflation has been controlled owing mainly to weak internal demand while a favorable trend in exports under the effect of the devaluation and efforts at trade liberalization eased the current account balance. Furthermore, a liquidity squeeze was observed at the level of public finances resulting from slackening of expenditure control. The accumulation of internal arrears altogether with the increase in bank credit to the State owing to difficulties in public finances constitutes a worrying situation. 1.6.2 Generally, the weak macroeconomic performances require the re-establishment of a stable macroeconomic framework and the promotion of private initiative. These efforts need to be supported by a commitment to restoring a stable socio-political climate that is conducive to the resumption of cooperation with development partners.

1.7 Feedback and Follow-up Actions 1.7.1 Lessons to be drawn from the two SAP experiences, in addition to those already mentioned in the PCR, relate to the effects of the exogenous factors that were not taken into account, the importance of both the schedules and sequences of the implementation of measures, stabilization of the macroeconomic framework and the creation of conditions leading to mutual confidence between the Government and economic agents (rigorous management of public finances, stable political environment...).

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1.7.2 To consolidate the achievements of SAP II and III, it is recommended to the Government to pursue, with more determination and immediate action, the reform of public enterprises while promoting the private sector and strengthening it (through financing, advice, development of infrastructure), as well as that of the banking sector with the view to mobilizing internal savings needed to facilitate access to local financing of the private sector, SME/SMI in particular. It is further recommended to update and implement the plan for internal arrears settlement, based on a specific schedule, to make budgetary provisions for social sectors that will enable to meet basic requirements of the population and to strengthen dialog mechanisms with all the social partners with the view to encourage everyone to support the reforms process. 1.7.3 To the Bank, it is recommended to pursue the policy dialogue with the Government to consolidate and support reform efforts. This is done primarily through the preparation of detailed macroeconomic and sectoral studies on Togo. It is also recommended to promote the exchange of information with the other donors to better coordinate the operations at all levels of programmes. 1.7.4 Government follow-up actions primarily consist of: pursuing the privatization process and the liquidation of non strategic public enterprises, strengthening of capacities of Ministries involved in budget management for programming and implementing the budgets, updating of the plan for internal arrears settlement and setting up of a mechanism for its implementation, strengthening and monitoring the procedures laid down for the implementation of social sectors budgets. 1.7.5 At the level of the Bank, improvement in the quality of this type of operations requires the establishment, at the appraisal stage, of macroeconomic and sectoral indicators, the formalization of a framework for consultation with other co-financiers with the view to coordinating efforts for the effective implementation of measures. II. BACKGROUND

2.1 Country Economic Context 2.1.1 Since the beginning of the 1980s, Togo was confronted with acute economic and financial difficulties which were reflected by a low GDP growth that moved from being negative during the period 1981-83 (-2.2 %) to a slight improvement rising from 1.4 % to 2.6 % for the periods 1984-87 and 1988-91, respectively. This slackening of growth resulted from the combined effect of exogenous chocks following the fall in export commodity prices leading to significant imbalances of trade balance and public finances, and multiple distortions resulting from the nature of the country's development strategy characterized by the predominance of the public and parastatal sector, together with a low private sector participation. These imbalances had a heavy impact on growth, particularly of the agricultural sector through the negative effects of some factors, namely (i) restrictions on access to external market prospects linked to the export license system for food products, (ii) production and distribution monopoly over agricultural inputs, and (iii) absence of an incentive pricing policy required to stimulate production. 2.1.2 In order to remedy these structural problems, the Government embarked upon a process of adjustment over the period 1988-90, with the support of international financial institutions, including the African Development Bank, with the view to reduce the major macroeconomic imbalances and thus achieve sustainable growth. To this end, the Bank

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financed SAP I in the amount of UA 13.8 million. The specific objectives of this SAP were: (i) to promote the private sector with the view to stimulate motive sectors behind the economy (agriculture, industry and commerce) so as to achieve a GDP growth rate of 3.6 % on average per annum over the period of the programme, (ii) to achieve efficient management of the economy thanks to the restructuring of partly state-owned enterprises and a rationalization of public expenditures to stabilize the macroeconomic framework (reduction in budget deficit and that of current transactions). A completion report on this programme was written in May 1992. 2.1.3 At the end of its implementation, SAP I, even though having enabled an improvement in the country's economic situation yielded inadequate results as compared with objectives set at appraisal. The poor achievements stemmed from the extremely high vulnerability of the economy to fluctuations in the prices of export commodities (phosphates, agricultural products), in addition to the persistence of structural malfunctioning owing to the weak administrative management capacities, the prohibitive weight of the public sector and the absence of a regulatory framework conducive to private sector development. It became necessary to consolidate results already achieved through the pursuit of efforts at reforms needed to ensure a more robust growth. Furthermore, it should be mentioned that the implementation of SAP I gave rise to negative social impacts that were not taken into any consideration the time of the programme design. 2.1.4 It is in this context that the Government launched SAP II covering a two-year period (December 1992 - December 1994) with the assistance from IDA, the Bank, the European Union, France and USAID. The acute socio-political crisis that the country went through from 1991 (a general nine-month strike, political turmoil as a result of the democratization process) prolonged the programme’s implementation beyond the initial schedule and prevented the implementation of the entire set of measures. In addition, it did not allow the resumption of growth whose rate in real terms plummeted from 5 % in 1989-90 to -10.2 % on average in 1992-93. The programme did not, therefore, achieve its objectives. 2.1.5 The CFAF devaluation that occurred in January 1994, together with the improvement in export commodity prices that followed gave a new boost to the Togolese economy which showed signs of recovery: GDP growth rate in volume terms rose from 16.8 % in 1994 to 9.7% in 1997. Given its concern to attenuate the effects of the devaluation and of the socio-political crisis, the Government undertook an Enhanced Structural Adjustment Facility with the IMF covering the period 1994-98 and an Economic Recovery and Adjustment Programme (ERAP) for the 1995-98 period with the World Bank. On the basis of lessons learned and recommendations made from SAP II implementation, the Bank responded positively to the Government’s request, by granting a loan for financing the Third Structural Adjustment Programme in December 1996, which fits in with ERAP. This third programme recaptured measures not implemented during the previous programme and included new measures within the framework of ERAP to take into account the new post-devaluation context.

2.2 History of Policy-based Operations

Prior to the two programmes that are subject of this report, the Bank financed, jointly with the World Bank and the IMF, SAP I covering the period 1988-90, for an amount of UA 13.8 million. The objectives of this programme were : (i) to boost private initiative with the view to generate GDP growth of 3.6 % yearly, (ii) ensure the efficient management of the economy through the restructuring of the parapublic sector by improving the country's absorptive capacity and by reducing internal and external deficits. The achievements of this programme remained below the objectives (cfr. para. 2.1.3). As indicated above (para.2.1.5),

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the IMF and the World Bank financed an ESAF covering the period 1994-98 and an Adjustment and Recovery Programme for the period 1995-98, to reduce the impact of the CFAF devaluation of January 1994.

2.3 Programmes Formulation 2.3.1 The preparation of SAP II which fits in with the major policy objectives of Togo’s economic development process starting from 1990-91, was jointly done by the Government, the World Bank, the Bank and other donors. Similarly, the Bank carried out a joint appraisal mission with the World Bank. Reform measures proposed in this programme were included in the Government’s Economic Policy Letter. 2.3.2 With regard to SAP III, it was prepared by the Government and the World Bank. The Bank was not able to take part in the programme at the same time as other donors, owing, to the unavailability of ADF VII and the non-completion of SAP II. It was able to take part in the programme only at the end of the second year of its implementation, through a loan amounting to UA 12.5 million. Its intervention covers the period 1996-98 and is in line with the objective of pursuing reforms aimed at the stability of the macroeconomic framework, in line with the recommendations of the Country Strategy Paper written in 1996. 2.3.3 The implementation of the two programmes brought to light major shortcomings in their formulation. This concerns, in particular, the excessive number of measures and unrealistic implementation schedules: They were 94 for the first programme and 57 for the second, to be implemented over a two-year period. This did not take into account the socio-political climate in the country and the actual administrative capacities. Besides, each donor had its own conditionalities, different from those of others, thus confusing the Government and not facilitating their implementation. Furthermore, no prior consultation was organized with social and partners to get them to support the programmes. Therefore, the programmes were very optimistic regarding Togo's economic performances without taking into account exogenous factors such as the socio-political crisis, the vagaries of the weather and fluctuations in the world prices of the export goods to which crop farmers is sensitive. Yet, these external factors had a considerable impact on the programmes' performance.

2.4 Programmes Rationale 2.4.1 The various stabilization and adjustment programmes, including SAP I initiated by the Bank since 1984, did not make it possible to meet the objectives set. Indeed, at the conclusion of SAP I, the trade balance remained in deficit, given the slow growth in export compared to the growth of imports which increased; the exports diversification objective was not achieved; the overall deficit of consolidated Government operations as well as that of current operations certainly declined, but without reaching the projected levels; the private sector only benefited from a weak and slow reactivation; social problems worsened, etc. SAP II and III were designed with the view, among others, to remedy these shortcomings. 2.4.2 Given the need to stabilize the macroeconomic framework, notably through fiscal consolidation, the Government launched measures intended to replenish budgetary savings which had become negative in 1991 owing to socio-political unrest, and to reduce the overall deficit (net of grants) to bring them to acceptable levels (5.2% in 1993 and 4% in 1994). The aim was to raise fiscal revenues through the broadening of the tax base and the simplification and improvement of non discriminatory tax treatment. The additional aim was also to rationalize and control operating and investment expenditures in favor of priority sectors : infrastructure, agricultural support services, transport, health and education. Fiscal reform

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efforts were strengthened under SAP III through the elimination of the dispersion in import licences and the removal of specific taxes other than taxes on oil products. These policies led to a generalized value-added tax (VAT) at single rate, a single trade tax for tax payers in the informal sector, the limitation of customs duties to only three taxes, an increase in land tax, the reduction in the total value of exemptions, etc. 2.4.3 SAP II and III thus met the need to restore Togo's macroeconomic imbalances and establish conditions for a sustainable economic growth.

2.5 Objectives and Scope at Appraisal

The specific objectives of the two programmes are contained in the appraisal and completion reports. These objectives and the major actions provided for were pertinent and coherent so as to address the overall objectives to sustain growth and reduce social disparities. The expected results were also well spelled out, but the appraisal reports do not make a clear distinction between results and specific objectives. Furthermore, some objectives and measures lacked precision and did not contain levels of indicators that would subsequently make it possible to display quantitative results and to assess the performances achieved at completion. Such was the case with the objective to reduce social disparities through improvement in rural population income and living conditions of disadvantaged groups; besides, the measure relating to the restructuring/privatization and liquidation of public enterprises was not quantified in terms of the number of enterprises to be privatized, restructured or liquidated and the specific schedule of all the operations was not given.

2.6 Financing Arrangements

2.6.1 Commitments made by donors involved within the framework of SAP II and III are estimated at UA 81.9 million and 140.86 million respectively. All these commitments were not fulfilled. Indeed, in the context of SAP II, (i) France disbursed UA 6.9 million out of a commitment of UA 13.1 million, or shortfall of UA 6.2 million, (ii) the European Union and USAID suspended their contributions given to the socio-political context, (iii) the World Bank disbursed the first two tranches representing 90 % of its commitment, the third tranche having been shifted, by mutual agreement with the Government to ERAP which was under preparation. 2.6.2 With regard to SAP III, all the donors had disbursed the full amount of their respective loans, except for the IMF whose balance of UA 6.86 million could not be disbursed owing to the Government’s poor management of public finances.

2.7 Evaluation Methodology and Approach 2.7.1 The evaluation approach was essentially based on :

(i) An in-depth analysis of the documentation available at the Bank's Headquarters relating to the two programmes;

(ii) A study of documents collected from Ministerial departments;

(iii) Discussions with the officials of the said departments as well with the resident

missions of development partners in present in Lomé and Cotonou (IMF), and involved in the programmes.

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2.7.2 Lack of reliable statistical data and the qualitative nature of some of the objectives (especially social objectives) makes difficult to establish the cause and effect links between the socio-economic variable trends observed during and after the implementation of programmes. Hence the approach used for the evaluation is based on the comparison of results achieved with the initial macroeconomic and financial objectives . 2.7.3 Allocating the impacts of the two programmes is not easy for the following reasons: (i) Togo has been involved in the reforms process since 1984 and the successive programmes adopted are implemented over overlapping periods with the result that certain measures not implemented in the previous programmes were brought forward to the following programme(s); (ii) programmes' achievements are also affected by the specific projects under implementation in one or other one sector of the country's economy; (iii) furthermore, some exogenous factors which are not part of the adjustment programmes but that occurred during implementation, namely the socio-political unrests, suspension of foreign aid, fluctuations in the developed countries' demand for Togo's export commodities (phosphates, coffee, cocoa, cotton, etc...), the trend in these commodities prices on the world markets, drought had a significant impact on the overall results and it is difficult to assess the respective role of each factor. III. PROGRAMMES IMPLEMENTATION AND RESULTS

3.1 Loans Effectiveness

The long socio-political crisis that prevailed in Togo since 1991, characterized by mounting pressure to establish a multiparty system and democracy, a nine month-general strike and political instability prevented the Government from fulfilling some conditions as scheduled, and thus delayed the implementation of SAP III by two years. Concerning SAP III, the conditions for the release of the first tranche were fulfilled swiftly and the effectiveness was declared one month after the date of signature.

3.2 Implementation Schedules

In view of the two-year interval in the implementation of SAP III, the implementation of measures also registered considerable delays to such an extent that the schedule could not be followed and disbursements did not start until 1994 after the devaluation, More than ten measures could not be implemented under the programme and they were brought forward into SAP III. Others were simply scrapped for lack of resources or political commitment on the part of the Government during the period 1991-1993. The same applies to SAP III where some measures were not fully implemented during the programme but are still on-going in spite of the fact that the programme is already completed. This is especially the case of operations relating to the restructuring, privatization and liquidation of public enterprises, as well as some measures that are within the scope of provisions made under UEMOA.

3.3 Financial Sources, Loans Disbursement and Utilization of Counterpart Funds

3.3.1 According to the appraisal report of SAP II, the gross financing requirements for the period 1992-94 were estimated at CFAF 78.5 billion, or nearly UA 205.57 million. This amount was the result of a current cumulative balance of payments deficit to which is added debt retirement, payment of arrears and the replenishment of foreign reserves. Deficit financing was covered by private capital flows (12.2 %), projects drawdowns (13.3 %),

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programmes-loans (32.1 %), and the Paris-Club debt rescheduling (28.7 %). The 13 % residual requirement was mobilized by the Government from bilateral donors. 3.3.2 The loan was disbursed in three tranches instead of two as agreed at the time of negotiations. The conditions applicable to the second tranche were amended in view of their complexity and the delay in the preparation of certain documents. These conditions relate primarily to : (i) agricultural credit, (ii) cross debts, (iii) restructuring of the three Ministries in charge of economic management, and (iv) public enterprise reform. 3.3.3 With regard to SAP III, the appraisal report estimated the residual financing gap for the period 1997-98 at UA 39.16 million, including the ADF loan of UA 11.2 million accounting for 29 %, the rest to be financed through the mobilization of external resources. 3.3.4 Foreign exchange resources were mainly used to finance the following products : (i) insecticides; (ii) bales of fabrics «Dutch wax”; (iii) cement clinker and ; (iv) distribution pumps and mixers. Imported goods came from all member countries. Regarding the counterpart loan funds, these in part were used to finance the recruitment of four senior professionals for the Monitoring/Evaluation Unit.

3.4 Logical Framework Approach

The logical framework approach already existed in the operational guidelines in force at the Bank at the time of the appraisal of the two SAPs, but was not systematically adopted. Despite the lack of clarity in the hierarchy of objectives as well as in the distinction between objectives and outcomes in the reports, a retrospective matrix was prepared for each SAP and performance indicators identified in order to enable the rating of performances in terms of the outcomes and the achievements of the programmes' objectives (cf. Annexes 4 and 5).

3.5 Consistency with Bank and Country Strategies and Policies

Both programmes meet the Togolese Government's objectives which seek to create an institutional framework conducive to an equitable and sustainable growth. They fit within the logic of the first structural adjustment programme and reflect the Bank’s priorities as described in the Economic Prospects and Country Programmes document covering the periods 1992-94 and 1995-97 and in the Country Strategy Paper for the period 1996-98.

3.6 Consistency with Regional Economic Integration

Neither of the two programmes was designed with the regional integration objective in mind. However, measures intended to liberalize external trade, improve the legal and regulatory framework, harmonize investment codes, etc... are likely to facilitate Togo’s integration into the regional economy, particularly in the UEMOA.

3.7 Reform Measures 3.7.1 Measures provided for under the implementation of SAP II and III hinge on the following major components : (i) public finance; (ii) public enterprise sector ; (iii) monetary, credit and interest rate policies; (iv) trade and pricing policies ; (v) agricultural policy, and (vi) private sector.

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3.7.2 The socio-political crisis which faced Togo between 1992 and 1993 delayed the implementation of almost all the SAP II measures. At the end of the programme, those that did not get to be fully implemented were carried forward into SAP III. In contrast, nearly all of SAP III measures were implemented during the programme period, even though some are on-going and at an advanced stage of implementation. Details of the implementation of the matrix of actions are contained in the annex. 3.7.3 SAP II measures which were not implemented concern particularly : (i) increase in the human and material resources for the tax administration ; (ii) improvement in the tax recovery on real estate properties, whose study was completed and the financing being sought to implement the measures retained; (iii) cut in military expenditures which the Government refused to do for internal security reasons stemming from the social unrests; restraint of the annual increase in wage bill in the civil service that the socio-political environment was making difficult ; (v) accumulation of new arrears owing to the non-observance of applicable budget procedures; (vi) integration of the operating and investment budget into one budget under the Minister of Finance's authority; (vii) adoption of a new code of procurement contracts, whose study has been completed ; (viii) unification of the pay files and that of the public sector employment; (ix) the preparation of a medium term programme on the civil service missions and of its qualitative and quantitative trend; (x) the study on the feasibility of implementing a targeted programme for departure which could not be completed for lack of resources; (xi) reduction of public debt owed to the internal banking system ; (xii) development of appropriate financial instruments for the mobilisation of private savings; (xiii) assessment of the competitiveness of Togolese industries and formulation of the measures needed to improve such competitiveness whose study was not completed for lack of funding; (xiv) implementation of operational and financial audits of OPT, OPAT and CNSS and other public enterprises; (xv) implementation of SDA action plan owing to difficulties in mobilizing external resources. 3.7.4 SAP III measures which are under implementation at the end of the programme involve the strengthening of the customs directorate whose modernization of SYDONIA requires financial resources, and the investment code whose reform is underway within the framework of UEMOA. They concern especially the process of privatization and restructuring of state-owned enterprises. Indeed, the privatization process progresses more slowly than anticipated. After nearly four years on hold due to the political situation, the process resumed in 1996. Out of an initial programme of twenty five enterprises under SAP II, only seven have been liquidated (OPAT, SOTED, SSITO, SOTONAM in 1996 and SONAPH, TOGOGRAIN and UPROMA in 1997), four were the subject of partial transfer of assets (BB LOME S.A. and SIT in 1996, CIMTOGO and SGMT in 1997) and one was the subject of a commercial lease (Hôtel SARAKAWA in 1998). With regard to OTP which was a key element of these programmes, the process of opening its capital is dragging. After competitive bidding in September 1997, which was unsuccessful, revised bids were received and evaluated, but the evaluation report was still not available by May 1999. TOGOPHARMA is in the process of being liquidated and a drugs purchase unit together with two depots have been established to take over its activities in the pharmaceutical sector. 3.7.5 The restructuring of enterprises remaining in the State portfolio consisted in producing regularly reports on the Information and Management System (IMS), in preparing account audits and in setting up prices that enable enterprises to be financially autonomous. All of these elements were recently the subject of performance contracts between the Government and the enterprises concerned (CEET, RNET, TOGOTELECOM), and it difficult at this moment to establish their implementation status. However, it should be pointed out that there is a need for a stable economic and financial environment and the observance of reciprocal

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commitments of the various parties if this type of contracts are to be efficient as an instrument of State-owned enterprises management, which limits their flexibility. 3.7.6 It should be underscored that the implementation of these two programmes has strongly been affected by the socio-political situation that prevailed during the last years marked by a general strike which lasted nine (9) months and paralyzed economic activities, political unrest resulting from the democratization process and a lack of political will and commitment on the Government part. It is for these reasons that some measures became extremely sensitive and delicate to implement, in view of the consequences that they might have, and as such they could not be implemented within schedule. It is essential that the privatization process of non-strategic State-owned enterprises and the liquidation of those that are not viable be continued and the private sector be encouraged to take over. It should also be pointed out that the socio-political crisis destabilized the banking system which seriously deteriorated (insufficient equity capital, heavy Government recourse to the banks' financing, accumulation of arrears by state-owned enterprises and businesses on banks) and it prevented the inflow of foreign private capital into the country. This situation brings to light the necessity to rehabilitate the banking and financial system in order to better mobilize internal savings needed to facilitate private sector access to local financing, particularly the SME/SMI. To this should be added the suspension of external cooperation, particularly with the European Union, which deprived and continue to deprive Togo of important resources for the implementation of development activities.

3.8 Institutional Performance and Monitoring A Performance of the Borrower and Executing Agency 3.8.1 The performance of the Borrower and the Executing Agency varied according to programmes. As much as it was unsatisfactory for SAP II, it was satisfactory for SAP III. Indeed, the Government of Togo participated in the design and preparation of SAP II which was in accordance with its objectives of economic and social development. An Interministerial Commission chaired by the Prime Minister was also set up to monitor programme implementation. It comprised several Ministers (Economy and Finance; Planning and Regional Development; Agriculture, Livestock and Fisheries ; Environment and Forest Resources; Industry and Commerce; State-owned enterprises and the development of free zones; Labour and Civil Service; Health ; National Education and Scientific Research ; Mines and Equipment ; Transport and Posts and Telecommunications ; Technical Education, Vocational Training and Cottage Industry; Women’s Advancement and Social Welfare). A Select Interministerial Committee (CIR) composed of representatives of member Ministries was set up to provide the technical secretariat to the Interministerial Commission. However, the disorganization of the Government Services following the socio-political crisis of 1992-93 did not allow the two structures to operate normally. 3.8.2 With regard to SAP III, drawing lessons from SAP II, the Government had identified two structures for programme monitoring: the Central Bank and a Monitoring-Evaluation Unit accommodated in the Prime Minister’s Office and chaired by the Director of Cabinet in the Prime Minister's Office, whose professional staff were recruited using the counterpart funds. The two structures were accountable to the Interministerial Commission. Programme monitoring was carried out properly and activities reports transmitted to the Bank on a regular basis.

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B Bank Performance 3.8.3 The Bank prepared SAP II in close cooperation with the IMF, the World Bank and other donors involved by taking part in different coordination meetings during this preparatory stage. It conducted an appraisal mission, jointly with the World Bank. The monitoring of this programme was hindered by the political situation in the country during its implementation; nevertheless, three supervision and mid-term review missions were carried out as well as four projects general follow-up missions. All these missions did not take place until two years after the programme start-up. SAP III was prepared by the Government and the World Bank. The Bank did not take part in this phase but joined the financing of the programme at the end of the second year of its implementation, due to the non-availability of ADF VII resources and the fact that SAP II was not yet completed. The performance of the Bank in the implementation of the two SAPs is rated satisfactory. C Monitoring 3.8.4 The monitoring of SAP II was to be undertaken by a Interministerial Committee which did not operate efficiently. In fact, the programme follow-up was not made easy by the low level of coordination between the different governmental structures involved in its implementation and by the fact that the economic activity was at a standstill during the nine-month general strike. It resumed its regular pace after the devaluation of January 1994. Under SAP III, the general follow-up was more regular, both on the part of the donors as well as the Government. It was therefore satisfactory.

3.9 Compliance with Agreement Conditions and Covenants

The Togolese Government had a lot of difficulties in fulfilling some conditions, especially those applicable to the second tranche of SAP II. However, quarterly implementation reports were regularly transmitted to the Bank. The Bank procedures for procurement of goods and services were followed in full. SAP III did not face any problem, as all the covenants and provisions of the loan agreement were complied with. IV. PROGRAMMES EVALUATION AND IMPACT

4.1 Impact of Reforms 4.1.1 Efforts at stabilizing public finance through the reconstitution of budgetary savings, channeling of investment expenditures toward priority sector, the continuation of restructuring of the parapublic sector, external trade liberalization (SAP II), as well as the consolidation of reforms in the areas of taxation, parapublic sector and private sector promotion (SAP III) were intended to stimulate Togo's economic performance and provide the grounds for sustained growth. The review of performance indicators obtained from evaluation documents on the two programmes provided support for the analysis of Togo's macroeconomic and sectoral performances.

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Overall Economic Activities 4.1.2 The comparative trend in the growth of real GDP from 1990 to 1998, reveals three major periods :

(i) 1990-93 period: a declining trend in the rate of growth ( from –0.3 % in 1990, -3,8 % in 1992 to –16.6 % in 1993) is observed; trend that is attributable mainly to the strike that lasted 9 months in 1993 as well as the hesitations on economic choices to be made during the transition period that affected the economic sectors. The food crop sector which benefited from an influx of labour emanating from population migration to rural areas following the socio-political crisis, registered a growth rate of nearly 4.4% over the period. Export crops (coffee, cotton, cocoa) registered a 4.5% decline in their production. The production of the tertiary and secondary sectors also declined by 31.8% and 31% respectively in 1993 owing to the disorganization of the marketing channels, the fall of producer prices and the paralysis of economic activities. During this period, all of the SAP II measures were not implemented due to the socio-political crisis ;

(ii) 1994-96 period: this corresponds to a relatively high growth period. GDP grew

at 16. 8 % in 1994, 6.9 % in 1995, and 9.7 % in 1996, thanks to the resumption of economic activities following the return to social peace and mostly to support measures as a result of the CFAF devaluation in 1994. The catching-up effects were sustained through the introduction of tax reforms, the continuation of efforts at restructuring the parapublic sector whose positive impacts on public finance contributed to the stabilization of the macroeconomic framework;

(iii) 1997-98 period: the decline in GDP growth is observed, falling from 4.3 % in

1997 to -1.3 % in 1998, thus showing an economy that has run out of steam, reflecting the combined effects of several factors. Indeed, the low production of some state-owned enterprises, OTP in particular, due to the obsolescence of production equipment, low rainfall in maritime zone, the fall in economic activity owing to the results of the presidential elections which were contested and the energy crisis at the beginning of the year 1998, are among the factors responsible for this situation.

4.1.3 It should be noted that over the periods of implementation of the two programmes, the observed GDP growth rates, which on average stood at 2.16 % and 4.23 % respectively, are well below the targeted objectives, namely: 4.7 % for SAP II and 6.5 % for SAP III. This disappointing performance is attributed to the combined effects of the structural weakness of the Togolese economy which is highly vulnerable to exogenous shocks (unstable socio-political environment, bad weather conditions, oil crisis) and weak domestic demand which did not play its role as a boost and growth sustaining factor. In fact, domestic consumption (public and private) which constitutes a major component of domestic demand remained virtually constant over the period 1994-97, at the level of 88.4 % of GDP, in spite of the resumption of growth. At the same time, a slight contraction is observed in the level of gross investment which declines from 16.1 % of GDP in 1995 to 15.4 % in 1997 and 14.3 % in 1998, signaling a downturn characterized by the weak level of Government investment and a contraction in private investment. Only exports registered a favorable trend with a 19% growth rate in volume terms in 1994 and 10% in 1995, due to the combined effect of

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devaluation (restoration of competitiveness and a favorable trend in the terms of trade) and measures to liberalize the marketing of major commodities. 4.1.4 At the sectoral level, performances were modest. Incentive measures aimed at improving output as well as the internal and external competitiveness of the productive sectors (publication of producer prices, support to agricultural services, improvement in the efficiency of fertilizer distribution and the reduction in marketing costs, institutional framework for support to SME, etc.) did not generate a significant aggregate growth . The primary sector registered an average growth of 1.06% over the SAP II implementation period, which is far below the programme target of 7 % per annum. Over the same period, the secondary sector grew only by 1% compared to the target of 4.1%, manufacturing industries by 3.8 % and the tertiary sector by 2.57%. Under SAP III, liberalization of exportable products with the elimination of the marketing monopoly had more impact by inducing an 8 % growth rate of the primary sector from 1995 to 1998 against the 6.74 % target for the period. The secondary and tertiary sectors registered relatively higher rates of growth, even if they were globally below the targets. The two sectors registered growth rates of 9.6 % and 4.6% respectively in 1998. This expansion is attributed to the resumption of activities in the manufacturing industries that grew by 10.6 % the same year and the resumption of activities in trade, construction and public works sectors. 4.1.5 Government efforts to promote the private sector through the establishment of a free trade zone and an institutional framework for the promotion of small and medium-scale enterprises as well as the setting up of a single window did not yield the expected results as attested by the trend in the rate of private investment, which increased slightly from 9.7% of GDP in 1994 to 12.2% over the period 1995 to 1997, before falling to 10.9 % in 1998. As for free zone enterprises, these were confronted, as was the case for all others, with difficulties of access to local bank credit which is relatively limited, inadequate economic infrastructure, the absence of efficient promotion structures and market outlet. These problems tend to have an impact on private investment trend. But the low level of private investment is also the result of uncertainties generated by the unstable political climate which induces businessmen to adopt a wait and see attitude, of the persistence of inconsistencies of the incentive framework owing to the non- adoption of the investment code while waiting for the Community code within the context of UEMOA and the labour law, but also the lack rigor in the management of the internal debt. Public Finance 4.1.6 The objective of public finance adjustment through the building up of budgetary savings which was a major component of the two programmes was not achieved. However, a constant improvement was observed in the current balance(excluding grants) which improved from -13 % of GDP in 1993 to –10 % in 1994 and to –3 % over the period 1995-98. This positive result, even though limited, reflects difficulties in programming and control of expenditures on the basis of available budgetary resources. In fact, the achievements were below the expected results, in spite of the progress accomplished in the fiscal area. After a substantial decline in budget revenues from 1990 to 1993, falling from CFAF 114.7 billion in 1990 to 78.8 billion in 1992 and to 39.2 billion in 1993, decline attributed to the crisis situation that prevailed during this period, these registered an increase starting from 1994 to reach their level of 1990 in 1995, due to the combined effect of the resumption of GDP growth and tax reforms introduced in 1995 (broadening of the tax base and improvement in tax recovery) which improved both the recovery rates and the broadening of the tax base. Measures taken to reduce exemptions to the minimum, the institution of a single trade tax and a single VAT rate at 18%, the computerisation of big business tax (IGE) are measures that

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increased budget receipts excluding grants from CFAF 96. 3 billion in 1995 to 126.8 billion in 1998, or an increase of 33.4 %. These measures, in large part contributed to the favorable trend in tax receipts observed starting from 1995 whose growth rate stood at 53 % in 1995 and 19.7 % in 1997. They increased only by 1.4 % in 1998, rising in 1997 and 1998, to the equivalent of 14.6 % and 14.2 % of GDP respectively; rates that however remain below the SAP II target of 17 % of GDP. 4.1.7 It should be emphasized that tax reforms implemented had an impact on the structure of tax revenues. Indeed, the share of taxes on external trade fell from 26.16 % of total tax revenues in 1995 as against 50.65 % in 1994, whereas the share of taxes on goods and services increased from 10.6 % in 1994 to 30.27 % in 1995, that of income and profit tax increased from 37.43 % to 40.88 % in 1994 and 1995, respectively. Even if this trend cannot be attributed fully to these reforms, it is observed that they contributed to reducing the dependence of public finances to fluctuations in world prices of Togo's export commodities and also increased tax receipts which represented 14.6% of GDP in 1995 compared to 11.1% in 1994. 4.1.8 As far as current expenditures are concerned, these were reduced from 24.1 % of GDP in 1993 to 18 % in 1997 thanks to a better control of the wage bill which fell from CFAF 53.6 billion in 1995 to 52.4 billion in 1996 and to 56.9 billion in 1997, thanks to the census carried out during the first quarter of 1997 and to the computerized monitoring of the pay and personnel file. Primary expenditures control, combined with efforts at mobilizing tax receipts should lead to a budget surplus representing 4.5 % of GDP in 1994 as against –2.2 % in 1992. 4.1.9 However, a permanent liquidity squeeze that increased early 1998 was observed. This resulted from the persistent disequilibrium between committed and/or authorized expenditures and the Treasury payment capacity, inadequate mobilization of external resources, low capacity for follow up and implementation of expenditures by ministries which do not have an accounting system together with the non availability of counterpart funds in investment projects. This cash flow problem has worsened at the beginning of 1998. The consolidation of public finances which was in the process of being achieved during 1996-97, was threatened by the easing off of controls on expenditures which increased to reach the level of 22% of GDP in 1998 compared to 18% in 1997, exceeding CFAF 14 billion which was the target amount set in May 1998. The increase in expenditures had such an impact on public finances that the decline in growth observed in the first semester of 1887 was responsible for the major shortfall in tax revenues. Thus, the global balance (order to pay basis) deteriorated from -3,3 % to -6,7 % of GDP respectively in 1997 et 1998. 4.1.10 Confronted with inadequate external financial resources and the impossibility to adjust budgetary expenditures to the level of available internal resources, the Government continued to accumulate internal arrears which reached CFAF 175 billion in 1996, and nearly CFAF 200 billion in 1998. This upward trend in arrears may accelerate if efforts are not deployed with the view to adapting budget implementation to the level of resources available by limiting the utilisation of exceptional budget procedures (payment orders and telegrammes – bills, and by avoiding recourse to extra-budgetary expenditures). These practices threaten the plan for the settlement of internal debt prepared in July 1996. At the same time, the Government made use more and more of recourse to resources of the banking system. The impact of this attitude was negative or the one hand, for the banking sector which was already suffering from cash flow problems resulting from the fall in deposits and the increase in private credits following the oil crisis, and for the for the private sector, on the other, whose activities were constrained by a generalized liquidity crisis. Government recourse to bank financing together with inadequate internal savings led to the eviction of the private sector which finds less and less financial

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resources needed for its investment activities; this partly explains, the contraction in private investments as indicated in paragraph 4.1.5. 4.1.11 Public external debt continues to be worrisome owing to cash flow difficulties of the State. However, debt service registered a significant decline, thanks to extension of the last Paris Club rescheduling in June 1998. In fact, the debt service ratio which stood at 50.2% in 1993 fell significantly to reach 25% in 1995 and 14% in 1997. The downward trend in the share of private non concessional debt in total outstanding debt is in line with the programmes' objectives. Currency and Inflation 4.1.12 Measures undertaken in the monetary sector were aimed at controlling inflation, ensuring an adequate expansion of credit for the benefit of the private sector with the view to stimulating economic growth through a flexible policy of positive real interest rates and the promotion of domestic savings. 4.1.13 The socio-political crisis of 1992-93 has undermined the stability of the Togolese banking system which was a reference in the sub-region, through a significant reduction in money supply by 16.3% per annum as a result of massive withdrawals of deposits following population exodus to neighbouring countries. This led to a situation of inadequate liquidity for the economy. The CFAF devaluation in January 1994, coinciding with the normalization of the socio-political environment provided room for relative monetary stability together with the resumption of investors' confidence. Money supply which registered a significant reduction in 1992 and 1993, increased to 28.6 % in 1994 while inflation, after a period of decline, rose by 30.8 % in 1994, 11.9 % in 1995 before settling down to 5 % in 1996. The inflationary pressure increased slightly in 1997 to reach 9. 6 % owing primarily to the standardisation of VAT rates to 18% and the increase in prices of oil products that took place at the beginning of the year. 4.1.14 The deterioration of the balance of payments, primarily as a result of inadequate external capital inflows and the fall in exports led, in 1998, to a decrease in net external assets of the banking system by CFAF 14.9 billion as compared with the level in 1997, representing a fall of 6.9 % of the money supply at the beginning of the period. This brought about a very strong pressure on the banking system credit allocation. Credit to the economy (private sector) increased by CFAF 7.3 billion and the net Government position decreased by CFAF 11.4 billion compared to its level in 1997, leading to a rise in net domestic assets of CFAF 12.9 billion. Confronted with this situation marked by acute liquidity problems, the primary banks had to resort more and more to BCEAO refinancing which increased from CFAF 4.1 billion at the beginning of the year 1998, to 11 billion in June before settling down to 5.2 billion at year-end, as a result of restrictive measures taken by the Central Bank. Thus, the money supply contracted by CFAF 2.8 billion, representing a 1.3 % decrease compared to the beginning of the period. The difficulties of the system led to the erosion of the investors' confidence, reflected by a rise in demand deposits from 28% of total deposits in 1997 to 32 % in 1998, thus adding to banks' liquidity management pressure. To this can be added the combined effects of inconsistencies in the management of public finances (non-compliance with the budgetary discipline and procedures) which bring about internal arrears accumulation and a rise in public debt to the banking system, together with the uncertainties linked to the general situation of the country which made the sector weaker. Efforts at domestic savings mobilization were thus nullified, in spite of progress achieved in the area of small savings promotion through the development of micro-finance institutions.

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4.1.15 It should be underscored that in order to improve banks, Togo continued with the monetary system reform undertaken by UEMOA in 1989, involving the strengthening of banking control with the introduction of prudential management rules together with interest rate liberalization in 1993. Nevertheless, the position of banks remained precarious in view of Government recourse to the banking system resources as well as the arrears by State owned enterprises and economic operators owed to banks. Trade Liberalization and Balance of Payments 4.1.16 Togo's external current account registered a mixed trend during the period 1993-98. Indeed, the deficit increased from –6.6 % of GDP in 1993, to - 9.7 % in 1995, -8.1 % in 1997 and to –7.2 % in 1998. The position of the current account balance is linked to that of the trade balance which is structurally in deficit due to the fact that the absolute value of imports is traditionally higher than that of exports. This situation is primarily due to weak export capacities and low level of competitiveness of Togo's export products. Imports registered a significant increase from CFAF 202.9 billion in 1994 to 252.8 billion in 1995 before reaching the level of 310 billion in 1997. Exports also increased but at a slower pace than imports: CFAF 182.3 billion, 188.4 and 248 billion respectively for the same periods. Thus, the balance of trade deficit decreased from 9.6 % of GDP to 7.6 % and 8.1 % respectively in 1994 to 1995 and 1997. 4.1.17 The rise in overall imports is attributable to the food products imports (with an average growth rate of 42.7 % over the 1994-97 period) due to the household consumption catching up effect after the contraction of 1992-93, and to restrictive measures for tariff protection within the UEMOA framework (a circular note on entry into force No 012/MEF/CAB dated 20 May 1996). With regards to exports, these not only responded positively to the devaluation, but most importantly to the liberalization that occurred in 1996, year in which exports increased by nearly 32%, with coffee and cocoa exports having doubled their 1997 volume compared to 1996. As result of Government divestiture (the abolition of monopolies) in these two sub-sectors, and the competition among exporters who took over, the share of producers in world prices rose on the average to 60 % (76 % for coffee and 80 % for cocoa). 4.1.18 Efforts made in the area of exports liberalization and diversification had a considerable impact on the structure of exports as can be seen from the trend in the latter. Export of manufacturing products reached CFAF 73.5 billion in 1996 against only 31.4 billion in 1994. From 1995 to 1998, their share in total exports represented on average 39.3 %, far ahead of the phosphate sector. These encouraging results would need to be supported by efforts deployed and to be continued to rehabilitate transport infrastructure (maintenance of major trunk roads.), update the legal and regulatory framework, develop the establishment of efficient support structures for the private sector in accordance with measures under the programmes. 4.1.19 It should be noted that measures under the programmes did not have all but positive effects. External trade liberalization through the elimination of protection and quantitative restrictions constitute one of the explanatory factors for the rise in imports and thus, the deterioration of the external current balance of payments deficit. In addition, a significant shortfall in tax receipts was registered, resulting from exogenous factors already mentioned in paragraph 4.1.2, iii), thus leading to the risk of persistence and worsening of the budget deficit with the consequences that this implies on the stability of the macroeconomic framework: a decrease in the level of public investments, arrears accumulation, a decrease in private investments, etc. It should further be noted that the removal of export barriers on agricultural products in 1996 led to an increase in fraudulent cereal exports which created a supply

18

shortage of this product on the domestic market, thus increasing inflationary pressures. It should be pointed out that these measures did, also, encourage informal exports of tradeable products to neighbouring countries. 4.1.20 With regard to public and private net transfers, even though they registered an increase, their level remained relatively too low in relation to balance of trade deficit to lead to a significant reduction. Their level increased from CFAF 17.9 billion in 1993 to 58.7 billion in 1995 and to 52.1 billion in 1998. Reforms of the Legal Framework and Support to the Private Sector 4.1.21 Private sector promotion through the continuation of privatizations of non-strategic State-owned enterprises, the elimination of monopolies in the marketing of export products as well as the setting up of an incentive legal framework constituted the major objective of the two programmes. 4.1.22 Privatization measures did not actually induce a significant the development of the private sector as could be seen from the low increase in investments in the sector. Setting up an development conducive to private sector development should have been a pre-requisite to reform measures for the parapublic sector, so that the private sector can be in a situation to take over following State divestiture. The trend in the number of enterprises set up in the free zone since its creation in 1989, gives an indication of the sector's amorphous state : in ten years only 36 enterprises were operating with 6119 jobs created, 24 enterprises are temporarily or definitely closed. With regard to manufacturing industries which are concentrated on small production units (food, beverage and tobacco, industries wood and paper as well as chemical industries), these remain extremely volatile and sensitive to variations in production costs (electricity, administrative costs, taxes). Their development depends on the growth and diversification of agricultural production, availability of basic infrastructure in quality and quantity, but above all on the firm commitment of the Government to provide support in terms of costs of installation, training financing and counselling. It remains evident that an exports promotion policy can yield results in a sustainable fashion only within a framework of dynamic consultation with the private sector and oriented toward the promotion of competitiveness in terms of setting up an export strategy involving this sector (the revamping of the productive sector, support measures in the areas of financing and guaranties, etc.) 4.1.23 Furthermore, it should be pointed out that the success factor for the liberalisation of the coffee and cocoa sectors is dependent on the involvement of the private sector after the liquidation of OPAT. Liberalisation of the cotton sector has had more modest results because of the absence of private structures able to take responsibility for that sector’s activities. For that reason activities of SOTOCO, the major management structure for the sector’s activities were divided into two components: one part was entrusted to the private sector through liberalisation, and the other part was responsible for restructuring regional institutions, that is to say producers’ organisations which were reinforced and grouped into producers’ federations. The producers were encouraged by the redistribution of 50% of the net profits made by the sector. 4.1.24 The Togolese authorities’ efforts to promote the private sector by creating several entities to encourage private initiatives (National Investment Fund, Enterprise Assistance Division, Chamber of Commerce and Industry, etc.) did not produce significant results because of the persistence of some constraints including, among others:

19

(i) the absence of conditions boosting economic operators’ confidence: a stable socio-political environment reinforced by a coherent macro-economic context;

(ii) accumulation of internal arrears to Government suppliers resulting from the

serious deterioration of public finances;

(iii) delays in structural reforms, especially in privatisations, which are not conducive to potential private investment in the State’s divestment operations;

(iv) a precarious banking system which limits enterprises’ access to local financing;

(v) delays in the adoption of statutory texts; (vi) deterioration and inadequacy of basic infrastructure. 4.1.25 It should also be stipulated that some reform measures, especially those related to foreign trade and private sector promotion, could produce their effects only over a relatively long period given the rigidity of structures, the internal socio-political context and the development of the external environment. 4.2 Socio-Economic Impact 4.2.1 The integration of social concerns in the SAP design, human resource development in social sectors and the increase of budgetary appropriations to priority sectors (health and education) which had been envisaged, were not satisfactorily carried out mainly due to economic and financial difficulties created by the 1992-1993 socio-political crisis, the suspension of external aid and the energy crisis at the beginning of 1998. 4.2.2 The health and education sectors, considered priority and receiving considerable budgetary appropriations in nominal terms, are confronted with financial problems for two major reasons: the appropriations were not respected; only a portion of the budget is committed without payment of all the expenditures ordered and the quasi totality of operating and investment means depend on external resources including mobilisation which is difficult as co-operation with the exterior has not resumed at its normal pace. 4.2.3 The health sector budget in percent of the general budget, developed only slightly between 1990 and 1998. Moreover, over the 1992-98 period, it accounted for an average of 7 to 8% of the general budget compared to 7.76% and 7.48% respectively in 1990 and 1991. The low volume of expenditures committed resulted in the sector’s inadequate facilities, deterioration of infrastructure, insufficient quantitative and qualitative human resources, thereby contributing to the health system’s deterioration. Owing to the Health Project financed by the ADB (November 1991), the creation of a central supply pharmacy with two warehouses in the interior of the country, a medicine control laboratory, a maintenance centre, a central purchasing agency and assistance to the AIDS Control Committee, etc. constitute significant progress that will have a positive impact on the sector in respect of the availability of medicines, reduction of costs and fraudulent import of medicines from neighbouring countries. However, more efforts should be directed toward the renovation of buildings and purchase of equipment and materials for primary health care so as to enhance the population’s access to health facilities and more efficient endemic disease control.

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4.2.4 The education budget clearly increased over the period 1992-99, going from 10% of current expenditure in 1992 to 33.1% in 1996, 28.3% in 1997 and 31% in 1998; It should be noted that 90% of the budget is devoted to the payment of salaries which causes a shortage of operating appropriations. As with health, the budget’s implementation rate is low. The shortage of resources resulted in a decline in the quality of education and therefore its internal efficiency along with an increase in the drop-out and repeater rates which are 15-18% and 25% respectively. Despite the progress made regarding school enrolment, currently about 68%, the budget is unequally distributed according to the level of education, the region and sex; Primary education, which concerns 82% of enrolments, receives only 48% of the education budget while higher education with 1.5% of enrolments received 24% of the budget. Females account for only 14% of the teachers, which has an impact on the enrolment of girls whose school enrolment rate is substantially lower than that of boys. Donors and NGOs are making an effort to compensate for the State’s inadequacies in the area of education; This is the case, in particular, for the ADB Education II Project, the World Bank’s PAGED and Japan’s Textbook Supply Project etc. 4.2.5 In general, the social indicators improved significantly during the SAP due directly to its programmes. The outcome of all the policies carried out by the Government in the 1990s, particularly in the socio-political context subsequent to the general strike and the social and political disturbances caused by the political liberalisation process, were felt directly by the most vulnerable social classes. Social actions were concentrated in the health and education sectors, relegating poverty alleviation activities to rear rank. Social categories, such as youth in difficulty, the handicapped, and women, were not targeted for specific sub-programmes although they were severely affected by the effects of the socio-political crisis and devaluation of the CFA Franc in 1994. A poverty alleviation plan of action was prepared in collaboration with UNDP, but it is still not effectively applied. Furthermore, since 1994, the Government has undertaken poverty alleviation initiatives by carrying out activities such as: the creation of AGETUR-Togo, distribution of textbooks, population survey, creation of 27 infant centres to encourage girls school enrolment, etc. but their impact still remains limited and has not been assessed by the Government. 4.3 Institutional Impact 4.3.1 Implementation of the programmes contributed to substantially reinforcing Togo’s administrative capacities in the realm of macro-economic analysis, formulation and follow-up of economic policies and project financial management and accounting techniques. Construction of a macro-economic model and an economic and social database, within the context of the ADB institutional support project, gives the Administration decision-making assistance permitting correction of undesirable economic developments. Furthermore a privatisation committee has been set up to manage the para-public sector reform implementation process. This committee has acquired considerable experience in the area of privatisation (studies, audits, tendering, etc.) Such is the case in several other areas where new structures have been set up but have had insignificant effects: Road Maintenance Fund (Road Rehabilitation), Rural Advisory and Development Association (producer assistance), Inspection of large enterprises in the Tax Directorate (classification and monitoring of tax payers), computerisation of the Civil Service (staff administration and monitoring), Micro-finance Professional Association (access to credits for small producers). Surely the viability of these new structures will depend on adequate human, material and financial resources, but mainly on the clear definition of their function and objectives targeted within the context of a coherent global policy and a strategic development vision for Togo. Likewise, creation of a new ministry responsible for restructuring and modernising the Administration shows the determination to rationalise the civil service in order to make it less complex, better-structured

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and able to satisfy basic development requirements. However, the studies are continuing and concrete action has yet to be undertaken. 4.3.2 Togo’s Administration acquired experience within the context of structural adjustment programmes as well as the support project to the Ministry of Planning, financed by the Bank, in respect of the design, implementation and follow up of reforms as well as the programming and budgeting of public investments on a three year rolling basis. However, major inadequacies remain:

(i) the inter-ministerial committee to follow-up reforms has not really functioned well nor has it been in a position to accelerate programme measures based on a strategic vision which constitutes an essential condition for programmes’ success;

(ii) the low PIP financial and physical implementation rate throughout the

programmes (55 %, on the average, over the 1994-97 period and 60.8 % in 1998) reflects the weakness of technical ministries’ implementation capacities and the absence of a public expenditure policy compatible with the clearly defined strategies and sectoral objectives (inadequate project implementation in health and education sectors).

4.3.3 Procurement of transmission equipment and rolling stock by the Customs Directorate and reinforcement of the SYDONIA System to facilitate customs clearance and combat fraud, constitute institutional reinforcement elements that not only contribute to enhancing the efficiency of fiscal recovery but also to improving the quality of customs services in favour of economic operators. 4.3.4 Creation of a control laboratory for the quality of medicines, a maintenance station through the ADB Health Support Project as well as CHR staff training (radio technicians, laboratory technicians, radiologists, maintenance technicians) are all advantages that contribute to supporting health sector performances. 4.4 Impact on Women 4.4.1 Although SAP II had formulated specific measures in favour of women, in the opinion of the Department for the Promotion of Women, those measures have not been implemented. Of special concern was the access of girls and women to basic education, institution building and reinforcing the material resources of the department responsible for the condition of women and creating a database permitting the evaluation of enterprises’ activities in this area. However, in collaboration with the UNDP, determining Togo’s poverty profile and a national poverty alleviation plan made it possible to identify and prepare a system of indicators related to women’s living conditions. Furthermore, with the support of IDA, supervisory activities for women’s co-operatives, the integration of women in development at the decentralised level as well as literacy activities were carried out in 1995. This programme stopped immediately after starting up due to a lack of resources, as IDA suspended its assistance. 4.4.2 Undoubtedly the low level of investment and procurement expenditures for health and education sector materials had negative effects on the living conditions of women who are in the most vulnerable category of the population; however it is impossible to obtain precise information and figures in this regard.

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4.5 Environmental Impact Defining a national environmental protection strategy in 1992 as well as organising awareness seminars on environmental issues, within the context of SAP II, make up an important stage for sustainable management of natural resources. However, the impact of that strategy cannot yet be felt. It was in 1998 that the Government adopted a national environment policy statement and a national plan of action for the environment, which was not prepared within the context of SAP II as expected, is being prepared in 1999. Some actions, although limited, to protect the environment and shore erosion control as well as training and environmental information were undertaken; however presently the impact cannot be assessed. V. PROGRAMMES SUSTAINABILITY 5.1 Implementation of SAP II and III was a major contribution for Togo, through the economic liberalization process, which had considerable results, especially: price flexibility, foreign trade liberalisation, gradual suppression of monopolies, introduction of an institutional framework for private sector promotion. It also contributed to consolidating the Administration’s experience in the area of design, implementation and monitoring of reforms. Those measures, which cannot be avoided, are going to help enhance national capacities to promote conditions for viable economic growth. 5.2 It should be pointed out that the Ministry of Planning and Land Development’s institutional support project, financed by the Bank in 1990, to accompany the adjustment process by reinforcing the development management capacity through the training of State employees, particularly in the areas of public investment planning and budgeting, and monitoring of donor procedures. This project, which is undergoing implementation, should accelerate completion; undoubtedly it will help develop capacities by putting into practice public investment programming and budgeting on a three-year rolling basis, which can permit programmes’ positive effects to be sustained. In addition to this project, the Government has made considerable efforts to equip and train several Administrative structures, especially the Tax Department, the Customs Department, etc. which are liable to reinforce the programmes’ sustainability. 5.3 However, the essential factor regarding the sustainability of programmes’ effects lies in the Government’s political determination to pursue reforms, to undertake a permanent dialogue with all social partners in order to bring them to accept the reforms and to consolidate output by stabilising the macro-economic framework. Setting up the Inter-Ministerial Committee to monitor the SAP and the Joint Donors’ Committee satisfy that concern. However, such determination has not been adequately shown, considering the institutional impediments, the socio-political context, the comportment and habits of State structures. For this reason, the privatisation process has developed slowly and has still not been completed in accordance with the programmes, the volume of private investments remains low and the public sector is still the country’s leading investor. Nevertheless, the Government is striving to encourage NGO’s participation in the alleviation of poverty through micro-projects to combat increasing unemployment and the deterioration of infrastructure and neighbourhoods. Furthermore, a committee has been set up on the social dimension of adjustment which carries out actions in favour of target groups. Uncertainties related to the current political climate as well as the difficulties in rehabilitating public finances (accumulation of internal arrears, precariousness of the banking sector) are not of the nature to sustain programmes’ positive effects.

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5.4 Elimination of tariff taxes, the liberalisation of prices and improvement of the legal and statutory framework may facilitate Togo’s integration in the UEMOA and constitute important elements for sustainable growth. However, in order for the country to sustain the positive effects of economic integration, accompanying measures to reinforce the capacities of the Administration and the private sector should be taken to diversify the productive base and make the economy more competitive, without which it will be impossible to meet the challenge of integration. In addition, there is the need to comply with decisions taken within the context of the community, promote conditions for transparent management, strive for social peace and restore co-operation with development partners. 5.5 The economic performances are encouraging but, nevertheless, very fragile because of the Togolese economy’s dependence on weather contingencies, fluctuations of commodity price (agricultural products and phosphate). Furthermore, the sustainability of the programmes’ impact necessitates taking into consideration demands for cohesion and social stability and the elimination of regional and socio-economic disparities by combating the exclusion of the most vulnerable sections of the population, in particular youths and women, by reinforcing the SDA Committee, through adequate human, material and financial resources and strategic definition of its missions. VI PERFORMANCE RATING Tables on SAP II and III performance ratings are shown in Annexes 6 and 7 respectively. 6.1 Implementation Performance SAP II implementation performance was unsatisfactory for two reasons: first, almost all of the measures were implemented more than two years after the programme’s initial period, that is to say in 1994-96 instead of 1992-94 and secondly the Inter-Ministerial Commission responsible for its monitoring did not function satisfactorily. However, the monitoring improved considerably following the devaluation with the implementation of its accompanying measures. SAP III implementation performance was satisfactory, the conditions were fulfilled within the prescribed time and most of the measures were implemented. The programme monitoring unit regularly submitted the implementation reports. 6.2 Bank Performance The Bank’s performance for the two programmes was satisfactory. The Bank participated in the preparation phases and in several meetings for the two programmes. It participated in the joint appraisal of SAP II with the World Bank. Its appraisal reports were considered of satisfactory quality. Despite a period of relative inactivity due to the socio-political context, the Bank regularly monitored the two programmes. 6.3 Output Performance On the whole, the performance is deemed satisfactory considering the efforts made to implement the measures accompanying the CFAF devaluation in January 1994. The individual rating given varies from one indicator to the next. As regards institutional development, many new structures were created within the framework of the two programmes, but their viability depends on the human, material and financial resources which

24

they are appropriated. The information and management system, which is not adequately developed and the institutional framework, which needs to be given more support, thwarted performance. As regards the sustainability, efforts should be made to preserve the output attained by reinforcing the macro-economic context while pursuing reforms and improving the socio-political climate. The relevance and performance of the objectives indicator is also satisfactory for the two programmes. The weakness of private sector development and the problems related to the alleviation of poverty are the main areas of poor performance. VII. CONCLUSION AND RECOMMENDATIONS 7.1 Overall Assessment 7.1.1 The combined results of the two programmes are encouraging but they have not been definitively attained. Overall performances differ, particularly at the macro-economic level. Erratic GDP growth reflects the economy’s sensitivity to exogenous factors (fluctuation of prices of agricultural products, weather contingencies, etc.) but also the weakness of the level of private and public investments. Favourable export development under the effects of the devaluation and the efforts made to liberalise trade permitted the foreign current account balance to be eased. Furthermore, treasury constraints can be observed in respect of public finances due to the relaxing of controls and expenditure procedures. The accumulation of internal arrears and the use of bank financing, subsequent to the difficulties of public finances are of concern. Inflation has been more or less controlled because of the limited internal demand. 7.1.2 In general, macro-economic performances remain fragile and require sustained efforts to restore the economy’s stability and to encourage private initiative. Efforts should be sustained by the determination to restore a peaceful socio-political environment conducive to the resumption of co-operation with all the development partners. The pursuit of reforms constitutes a challenge that the Togolese Government, social partners and donors should meet in the coming years; in order to do this, detailed macro-economic and sectoral studies should be carried out. 7.2 Feedback and Recommendations 7.2.1 Lessons to be learned from the experiences of the SAPs for the country and for the Bank, in addition to those already mentioned in the PCRs are related to the following elements:

i) not taking exogenous factors into consideration can have a negative impact on programmes’ performance (paragraph 2.3.3);

ii) realistic planning taking into account the socio-political context and the

Administration’s real capacity ensure effective implementation of the programme’s measures and therefore the latter’s success (paragraphs 2.3.3 and 3.2);

iii) performance contracts, signed between the Government and public enterprises

still in the State’s portfolio, require a stable economic, financial and political environment as well as mutual respect for commitments taken by the parties concerned in order to guarantee their efficiency as a management tool for public enterprises (paragraph 3.7.5);

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iv) improvement of the macro-economic framework and creation of conditions for mutual confidence among economic operators through strict management of public finances along with stability of the socio-political environment constitute essential factors for private sector development and success of reforms (paragraph 5.3);

v) the export promotion policy in addition to liberalization efforts should be

supported by planned actions with the private sector and support for its competitiveness (paragraph 4.1.21);

7.2.2 In order to consolidate results of SAP II and III, it is recommended that the

Government:

i) rehabilitate public finances (paragraph 4.1.9);

ii) pursue with rigor and rapidity the privatisation of non strategic public enterprises and liquidation of those that are not viable, while encouraging rehabilitation of the private sector (paragraph 3.7.6);

iii) rehabilitate the banking and financial sector in order to better mobilise

domestic savings to facilitate private sector access to local financing, especially SMEs/SMIs (paragraph 3.7.6);

iv) involve technical ministries in preparation of the budget and reinforce

implementation capacities (paragraph 4.3.2);

v) update and implement the internal arrears settlement plan in accordance with a precise schedule, restore private sector operators’ confidence, improve banks’ cash situation and promote the private sector (paragraphs 4.1.10 and 4.1.14);

vi) allocate and implement adequate budget appropriations from the social

ministries while complying with the procedures in force (paragraphs 4.2.3 and 4.2.4);

vii) carry out the study that was envisaged in SAP II on the competitiveness of Togo’s economy with a view to taking measures necessary to define a strategy to reinforce the productive base and to promote exports (paragraph 3.7.3);

viii) restore the dialogue with development partners to mobilise external resources

necessary to pursue and consolidate reforms (paragraph 7.1.2);

ix) complete actions not yet carried out within the context of the Plan’s institutional support project (paragraph 5.2);

x) pursue structural and policy reforms (paragraph 7.1.2).

7.2.3 In addition to the recommendations contained in the PCR, it is recommended that the Bank:

i) pursue the policy dialogue with the country to enhance and support reform efforts based on economic and sectoral studies (paragraph 7.1.2);

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ii) prepare, at appraisal, verifiable economic and social indicators to serve as a benchmark for performance assessment (paragraph 3.4).

7.3 Follow up Actions: A) For the Government

i) accelerate the privatisation/liquidation process of public enterprises (paragraph 3.7.6);

ii) apply budgetary procedures in compliance with sound public finance

management (paragraphs 4.1.9 and 4.3.2);

iii) implement banking sector reforms (paragraph 3.7.6);

iv) update and carry out the internal arrears settlement plan in accordance with a precise schedule (paragraphs 4.1.10 and 4.1.14);

v) carry out the study on the economy’s competitiveness to reinforce the export

promotion policy (paragraph 3.7.3);

vi) set up a facility and structures for negotiations between economic and social partners (paragraph 2.3.3);

vii) complete the project for institutional support to the Ministry of Planning

(paragraph 5.2);

viii) pursue structural and policy reforms. B) For the Bank

i) pursue and reinforce the policy dialogue with the Government on the reforms, based on economic and sectoral studies, that should be carried out (paragraph 7.1.2);

ii) establish economic and social indicators during appraisal, to facilitate

programmes’ performance rating (paragraph 3.4).

Annex 1 Page 1 of 2

MATRIX OF RECOMMENDATIONS AND FOLLOW UP ACTIONS

Major observations and conclusions

Recommendations

Follow Up Actions

Responsibility

Formulation and basis of the programmes 1) Failure to take into account

exogenous factors essential for economic performance

2) Absence of a control

mechanism for the effective implementation of measures

Programmes Implementation 3) Approximate time-table for

application of reform measures 4) No follow up mission was

carried out within the context of SAP III

Evaluation of programmes’ performances 5) Non compliance with

budgetary rules and procedures 6) Ministries inadequate

implementation capacities

- Explicit consideration of exogenous factors in defining the programmes’ objectives - Effective application of measures - Determine a precise time table for measures -Regular monitoring of programme implementation - Adapt implementation to available resources - Reinforce ministries’ implementation capacities

-Carry out macro-economic and detailed sectoral studies including the evaluation of foreseeable effects of exogenous factors - Set up a follow up-evaluation structure -Set up a follow up-evaluation structure - Apply relevant operational guidelines -Review public expenditures -Undertake capacity building activities (training, practical training, seminars…)

Government Government/ Bank (Country Programme Department) Idem Bank (Country Programme Department) Government/ Bank (Country Programme Department) Government

Annex 1 Page 2of 2

Major observations and conclusions

Recommendations

Follow Up Actions

Responsibility

7) Harmonisation of the budget

was not effectively carried out

8) Accumulation of internal

arrears 9) Inadequate budgetary

appropriations to social sectors

10) Fragile macro-economic

framework 11) Very low level of private

investment 12) Inadequate implication and

approval of social partners to ensure successful reforms and the appropriations for programmes

13) Introduction of a poverty

alleviation programme

-Effectively carry out budgetary harmonisation Update the settlement plan - Foresee and implement budgetary appropriations required by the social ministries - Pursue and reinforce reforms - Introduce a conducive incentive framework - Involve the different actors in the design and implementation of programmes - Prepare a national poverty alleviation strategy

- Review public expenditures - Implement the plan according to a precise schedule and cease generating new arrears - Review public expenditure in social sectors - Implement appropriate supplementary economic policy measures -Harmonise the investment code with the UEMOA community code - Set up appropriate structures for negotiations -Prepare and implement a poverty alleviation plan of action

Government/ Bank (Country Programme Department) Government Government / Bank (Country Programme Department) Government Government Government Government

Annex 2 Page 1 of 9

TOGO : SECOND STRUCTURAL ADJUSTMENT PROGRAMME (1992-1994)

MATRIX OF MEASURES ECONOMIC

MEASURES AND OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

1- Public resources and expenditures a- Income Enhance the elasticity of fiscal income Promote industrial and commercial sectors while preserving budgetary income

i- Improving fiscal administration by : a – taxing the informal sector b – eliminating exemptions and; c – appointing adequate staff and appropriating sufficient resources ii – Measures relating to indirect taxes - Implementation of tariff and fiscal reforms - Elimination of exemptions for projects financed with external aid iii – Improving the recording and collection of taxes in the informal sector by reinforcing and decentralising structures: introduction of a specific customs duties tax iv – Improving real estate tax collection v –Implementation of contracts with all public enterprises concerning external debt servicing payments

1993 1993 1993 1992-1993 1 January 1993 1992-1993 1992 1992

1994 1993 1995 1993 1995 1995 1995

1994 Appropriation Law, Article 186 and Payment Authorization n° 93/005 of 28 July 1993, art. 4 P3 Appropriation Law of 1993, Article 1403 Measure not implemented See Approp. Law. N° 95/011 of 10/03/95 and decree n° 95/118 of 29/08/95 Appropriation Law . Management 1996 Investment Code : Revision underway Creation of a single business tax Creation of large enterprises’ inspection in 1995. Studies completed, search for resources to implement the actions selected

Annex 2 Page 2 of 9

ECONOMIC MEASURES AND

OBJECTIVES

ENVISAGED MEASURES

PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

1 – - Public resources and expenditures (continued) b –Expenditure guarantee and allocation of expenditures in compliance with the medium-term development strategy c – Internal arrears

i –Establish standards for expenditures and appropriation of the operating budget for the maintenance of infrastructure, agricultural support services, transport, health and education ii – Cut military expenditures iii – Limit the annual increase of the civil service wage bill iv – Reinforce financial audit on the State’s demembrements i – Avoid the accumulation of new arrears ii – Reinforce co-ordination between spend thrift ministries and the Treasury and between the commitment procedure for expenditures financed from external aid and aid disbursement.

1992 1992-1994 1992 1992 1992 1992

1995 1995

Failure to respect budgetary discipline and treasury problems did not permit satisfactory implementation of this measure Implementation delays due to socio-political disturbances Financial audit has not been established ,which is reflected in the co-ordination in budgetary implementation An arrears settlement plan was prepared in July 1996, but has not been implemented. In May 1999, the accumulation of arrears continued. Done within the context of the computerisation of the Budget, Treasury, Finance Department, Planning Department and planning units of technical ministries

Annex 2 Page 3 of 9

ECONOMIC MEASURES AND

OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

2 –Public Investments Consolidate the programming and three-year budgeting system into a mobile time-frame for public investments Prepare and implement priority projects Accelerate project implementation 3 – Public sector management Assess for improved efficiency in policy management.

i – Annual review, with IDA and the ADF, of the three-year rolling PIP for all capital expenditures ii – Including in the PIP donations in kind iii – With IDA , quarterly review of content and progress of the PIP iv – Calculate operating expenditure for the PIP and their insertion in the budget v – Combine the operating and investment budget in a single budget under the authority of the Minister of Finance Significant increase of capital expenditure on the basis of an increased implementation rate for priority projects with assured rate of return and external financing Adoption of a new public contracts code i – Carry out a survey of civilian staff ii –Unify civil service and residual balance files iii – Prepare a plan of action to improve the performances of key ministries : Ministries of Planning, the Economy, Finance and Trade iv – Prepare a medium-term programme on Civil Service missions and on its quantitative and qualitative development.

1992-1993 1992-1993 1992-1994 1992-1993 1993 1993 1992 April-92 End 1992 June-92 Sept. 1992

Nov. 1992 1992 1993 June 1995 10-06-94 05-May-92 1995 1994 Oct-92

Done within the framework of ADB supervision missions Done within the context of budgetary conferences organised between the Ministère du plan et de l’amenagement du territoire and the Ministry of the Economy and Finance Within the framework of ADB consultation missions to Togo Study carried out Study carried out, but rehabilitation measures were not implemented Creation of an inter-ministerial follow-up committee Request for financial and logistic support

Annex 2 Page 4 of 9

ECONOMIC MEASURES AND

OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

3 – Public sector management (continued) Immediate measures to reinforce public sector resource utilisation efficiency 4 – Monetary, credit and interest rate policies Ensure adequate expansion of credit to the private sector in order to stimulate growth of profitable enterprises Encourage domestic savings and better utilisation of bank credit System’s institutional framework Credit to the public sector

v – Study on the possibility of implementing a targeted separation programme Reinforce the capacities of the Ministry of Planning and other technical ministries in order to improve project preparation with sectoral and macro-economic strategies. i – Encourage Banks to participate in the financing of SMEs within the context of the private enterprise development project backed by IDA i – Pursue a flexible policy of positive real interest rates and ensure the keeping of private foreign capital in Togo i – Complete the liquidation of the CNCA, ii – Establish the basic principles of an autonomous and viable agricultural credit system from the financial standpoint i –Reduce public sector debt to the domestic banking system ii – Develop appropriate financial instruments to mobilise private savings

1995 1992-1993 1992-1993 1992-1994 1992 1992-1993 1992-1993 1992

1995 1995

No voluntary separation has been made. Several seminars were organized in this regard by the ADB-financed Ministry of Planning Institutional Support Project Carried out Socio-political disturbances destabilised the banking system and thwarted the inflow of foreign private capital Carried out Underway in Dec., 1996 and resumed in 97-98 SAP III Not carried out Difficulties in mobilising private savings due to current insecurity of the banking system

Annex 2 Page 5 of 9

ECONOMIC MEASURES AND

OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

5 – Commercial and pricing policies Avoid distortions in domestic pricing structures Maintain the competitiveness Maintain the financial balance of public service enterprises 6 – Reform public enterprises Rationalise and reduce the State’s intervention in commercial and industrial activities Assessment specifically to improve the efficiency of public sector enterprises

Removal of price controls on imported products Evaluate the competitiveness of Togo’s industries and formulate measures required to improve this competitiveness Review and regularly adjust tariffs to reflect the complete recovery of costs and realise a financial surplus to help in the financing of investments for public service enterprises, i – Complete the liquidation and transfer of assets for the six public enterprises of the first phase, ii – Implement the privatisation or liquidation strategy of the 9 additional enterprises iii – Define and adopt the terms of transfer for enterprises where the State holds between 5 and 90% of the shares iv – Identification of cross debts between public enterprises and the Government and between other public enterprises themselves. v – Settle cross debts i – Implement operational and financial audits of OPT, OPAT and the CNSS ii-Implement operational and financial audits for the other public enterprises

Jan,1992 Sept, 1992 1992-1993 1992 June-92 End October 1992 June-92 March-93 1992-1994

1995 July 1995 - - Nov, 1995

See inter-ministerial order n° 28,29 MCETP/DCIPC of 17/08/96 Study not carried out due to a lack of funds Underway in Dec, 96 and continued in SAP III 97/98 Underway in Dec, 96 and continued in SAP III 97/98 Done Ord, n°94/002/PR and order n° 94/03/38 of 10 June 1994 Updated in Nov.1995 Settlement tested on behalf of the CEET,RNET and the OPT: 33 enterprises were selected for the initial operation

Annex 2

Page 6 of 9 ECONOMIC

MEASURES AND OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

7 – Infrastructure 8 – Industrial policy Encourage investments, production and employment, especially in the export sector, 9 – Agricultural policy Increase and diversify production and exports a - Cash crops - Ensure adequate revenues to cash crop producers,

i – Transport, water, electricity and telecommunications : implement measures to recover the entire costs in compliance with IDA backed projects, ii – Prepare the transport sector draft strategy statement iii – Develop the strategy for urban infrastructure taking into account labour intense environmental protection, i – Set up customs free industrial areas, be assured of the basis and cost effectiveness of investment incentives ii –Set up a framework for appropriate institutional support to SMEs through the effective entrance in activity of the CTI, DIVAS, and the FPPS. iii – Create a single window approach to facilitate investments Update the agricultural strategy i – Maintain a flexible price fixing system compatible with world market conditions; once a year, with the Bank and the Fund, review price fixing facilities. ii – Publish check prices paid to producers of the three products for each season

1992-94 August-92 June-92 1992-1993 1992 1992 August-92 1992-1993

1995 1994 1995 1992

Underway in Dec.96 and continued in SAP III Undertaken in 1995 and continued in 1996 Seminar in Dec 1995 Review of the Investment Code was not carried out; it will be done in the framework of UMOA See Inter-ministerial order n°95/13 MISEQZT/MC/PT of 14-Dec.-95 Done at the beginning of each season, see letter n°1754/MPAT/DGPD of 13 Nov. 1993

Annex 2

Page 7 of 9 ECONOMIC

MEASURES AND OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

9 –Agricultural Policy (continued) b – Agricultural services : Improve farmers’ access to agricultural services c – OPAT Enhance operational efficiency d – Export promotion Promote export of cereals and non-traditional agricultural products.

i – Consolidate and integrate, agricultural support services into the services of the Ministry for Rural Development. Review staffing to agricultural support services. ii – Improve fertilizer distribution efficiency in non-cotton sector. i – Reduce marketing and administrative costs by 50% ii – Transfer responsibility for cotton export to SOTOCO Eliminate agricultural product export barriers to non CEDEAO member countries and promote the export of non-traditional products ;

1992 Before End Oct-92 Sept. 1993 15-April-92

- 1994 1994 In 1995 In March 1996

A study on this topic has been made Done : delay due to socio-political disturbances Done. Act n°94/002/PR of 7 Oct. 94 Order n0 95-016/PR on the transfer of cotton marketing to SOTOCO Within the statutory and incentive framework, order n° 96/25/PR in March 1996, Ministerial order n° 17/MCPT/MDRHV and n° 18MCPT/MDRHV in June 1996 on abolition of public sector monopolies in the marketing and export of coffee and cocoa and the fixed margin rate and licensing systems for marketing.

Annex 2

Page 8 of 9 ECONOMIC

MEASURES AND OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

10 –Human resource development Define and implement human resource development measures in the health and education sectors 11 – Environment Prepare the environmental plan of action 12 – Social dimension of adjustment Give more importance to social considerations in SAP preparation

i – Prepare a global education and training programme defining the strategies to meet the sector’s financial and quality requirements, considering the priority given to primary education and to mathematics and the sciences in secondary school ii – Reinforce family planning and health services capacities by implementing institutional reforms iii – Create a special unit in the Ministry of Planning to take into account demographic variables in the planning process iv – Reinforce technical training institutions and provide METFP with labour market analytical and follow up capacity in order to better adapt training to the market's needs in compliance with the dual approach to training v –Create a national fund for apprenticeship, training and upgrading of vocational skills intended to finance technical training activities satisfying labour market requirements i – Organise inter-ministerial seminars on environmental problems ii – Complete works of environmental plans of action i – Prepare a social dimension of adjustment plan of action that includes concrete measures to improve the conditions of the poor ii – Implement the SDA plan of action

June-92 1993-1993 1992 1992 1992 1992 June-92 April-92 1992-1993

1992 1992 Oct, Nov 1992

Done within the context of the Education Management Support Project (PAGED). Measure not implemented and included in SAP III Measure not-implemented and included in SAP III 97-98 Creation of a labour observatory in the DGETEP is underway Seminars have been organised Partly implemented due to disturbances Considered in the poverty alleviation programme This measure was not implemented for reasons related to the mobilisation of external resources

Annex 2

Page 9 of 9 ECONOMIC

MEASURES AND OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

13 –SAP follow up

Create a structural adjustment programme follow-up commission composed of representatives from the Ministry of Planning and Land Development, Economy and Finance, Trade and Transport, MISE, Rural Development, Education. v – Create a national fund for apprenticeship, training and vocational re-training to finance technical training activities meeting the needs of the labour market i – With IDA and ADF, review annual budgetary provisions regarding equipment and routine expenditures in the health and education sectors, ii – In general education, enhance material and operating expenditure especially as regards the maintenance of infrastructure while limiting salary and non-teaching expenditure iii – Raise the share of expenditures other than that of salaries in the health sector to 35 % of the total by 1995 iv – Prepare and implement a recovery programme for costs and supply of essential medicines i – The Government will neither contract not guarantee new non-concessional loans due between 1 and 12 years , nor will it contract short-term loans (less than 1 year) except for normal import operations ii – Avoid accumulating new external payment arrears

1993 1992 1992-1993 1992-1993 1992-94 1992-1994 1992-1993 1992-1993

1993 Oct, Nov 1992 1990 1993

Order n° 93/006/PMRT of 15 Feb.93 Order n 088/17 of 07 December 1988 and order n° 90/68/PR of 17 May 1990 Done Done Not carried out , continued in SAP III Not carried out and continued in SAP III 97-98 Not carried out and continued in SAP III 97-98 Done

TOGO : THIRD STRUCTURAL ADJUSTMENT PROGRAMME (1996-1998)\ MATRIX OF MEASURES

Annex 3 Page 1 of 4

ECONOMIC MEASURES

AND OBJECTIVES ENVISAGED MEASURES PROJECTED

DATES EFFECTIVE

DATES OBSERVATIONS

Public Finances 1 – Fiscal and tariff reforms Simplify the fiscal system by improving neutrality and broadening the fiscal base

Business taxes and open taxes 1 – Eliminate compulsory contribution to FNI 2 – Reduce the current dispersion of export duties from 5/35% to 5/20% 3 – Eliminate specific taxes other than those on oil products (rice, sugar and Wax fabric) 4 – Combine the TFR with other taxes on oil products and eliminate the TC 5 – Abolish the market price list system 6 – Reduce exemptions by the non-renewal of special agreements and benefits given for investment 7 – Remove the last non-tariff carriers and replace them by a tariff system (cement, wheat flour, reinforced concrete and corrugated iron ) 8 – Set up a Customs Directorate Reinforcement Programme

Feb. 1996 July. 1995 June 1995 May 1995 May.1995 1995-1996 August,1996 1996

March, 1996 28 June 1995 26 June 1995 28 June 1995 28 June 1995 Dec. 1997 17 August 1995 1996

Done (Order n°96-005/PR) of 08/03/96. Appropriation Act 19960 Done : order °62/MEF of 28/06/95 ; Appropriation Act n° 95-082 of 10/02/95 Done : Decision n°613/MEF/AD/OG of 26 June 95 Order 083/MEF. Order n° 081/MEF of 28 June 1995 Done : Order 081/MEF Of 28 June 1995 Done: with IMF provisions taken at the last meeting of the Investment Committee, 12/95 Done (circular n° 1923 of 17/08/1995 Order 97/104/PR of 29/07/97 : the new Customs Code has been available since July 1997, procurement of 8 micro-computers and 6 vehicles. Modernisation of SYDONIA remains to be carried out. CFAF 1.2 billion being sought for financing.

Annex 3

Page 2 of 4

ECONOMIC MEASURES AND OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

2 – PUBLIC ENTERPRISES a- Improve the efficiency of public enterprises remaining in the State’s portfolio

Budgetary Appropriations To priority sectors (continued) 2 – Raise the share of expenditures for education in overall State current expenditure, excluding debt servicing and investments financed by the exterior, to 28.3% in 1996 and 29.3% by 1997. 3 – Increase road maintenance expenditure to CFA F 2 billion by 1996 and to CFAF 2.5 billion by 1997. 4 – Ensure adequate appropriations for water, electricity and the Administration's telephone. 5 – Give the Bank at the end of each quarter a quarterly budget implementation paper 1 – Finalise SIG reports for 1992, 1993 and 1994 2 - Finalise SIG reports for 1995 3 – Review the performance contract with public utilities: CEET. RNET. OPTT

1996-1997 1996-1997 1996-1997 1996-1997 June.1996 Sept.1996 Sept.1996

30/9/1997 1996 1995-1997 1996 1996 Sept.1996 Nov.1997

The share of expenditures devoted to education was 33.12% in 1996 instead of the envisaged 28.3% ; the 24.3% education budget rate for 1997 will be attained; it was 22% as at 30/9/97 Realised: CFAF 2 billion as envisaged, CFAF 2.5 billion envisaged; CFAF 3 billion envisaged in 1998 Realised: Appropriations are ensured for these expenditures within the framework of the Appropriations Act. The measure was realised in 1996 for the World Bank and was continued for IDA and the ADF in 1997-1998 The 1992. 1993 and 1994 SIG reports were prepared in April 1996 The SIG report was finalised in June 1996 Performance contract RNET was signed in 11/1997; CEET management was privatised; OPTT : divided into 2 entities by decree in Fev.1996

Annex 3

Page 3 of 4 ECONOMIC

MEASURES AND OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

b. Promote the private sector and enhance its scope of activities by reducing the State’s role in productive sectors : reduce pressure on the budget, exerted by non-viable public enterprises (continued)

3 – Transform OPAT into a lightly structured, joint-venture company with majority shares held by the private sector. 4 –Adopt a programme of action for the State’s withdrawal from the hotel industry ( Hotel 2 Février, Hotel de la Paix, Sarakawa Hotel and the Tropicana Hotel) and implement the said programme of action 5 – Sell provincial hotels (le Lac. Kara. Central, Fazao, Roc. 30 August) 6 – Open tenders and finalise transactions 7 – Re-issue invitations to tender for the transfer of STOMA and UPROMA assets 8 – Decide the method of State divestment from SONAPH 9 – Transfer State shares in SOTED to the company’s employees. 10 – Decide on the method of State divestment from SATAL 11 – Implement the decision

June. 1996 Dec. 1996 June, 1996 Sept. 1996 May. 1996 May.1996 June.1996 June.1996 Sept.1996

27-11-96 1997, 98 Dec., 1996 Sept. 1996 June. 1997 Dec. 1996 Dec. 1996 1997

OPAT was disbanded by order n° 96-159/PR of 27/11/1996 - Sarakawa: rented out on 18/2/98. Keys were handed over on 7/8/98. - Hôtel Tropicana on the market. - 2 Février : engineering study carried out in 1997 and will be completed by a financial study operation not finalised in May 1999. Tendering for some unprofitable provincial hotels : 30 August . Central. Kara. Roc. Lac: Fazao shares transferred: management entrusted to a Swiss NGO, Franz Weber see details hereafter New SOTOMA: new limited consultation launched ; deadline 31 October 1997; Uproma: disbanded in July 97 SONAPH disbanded , order n° 97-077/PR of 19 March 1997 SOTED was disbanded by order n° 96-165/PR of 30 December 1996 Documentation on amendment of SATAL statutes signed in Sept. 1997. The State’s share was transferred to the Libyan partner for 1 symbolic franc. In 1997 the State’s share was transferred.

Annex 3

Page 4 of 4

ECONOMIC MEASURES AND

OBJECTIVES

ENVISAGED MEASURES PROJECTED DATES

EFFECTIVE DATES

OBSERVATIONS

3 – REGULATORY AND INCENTIVE FRAMEWORK Eliminate the impediments to private sector activities and promote strong private sector supply in response to the recent devaluation

Agricultural sector Cotton 1- Transfer 50% of net profits after taxes from SOTOCO to producers 2 – prepare a plan of action for deregulation of the cotton sector Coffee and Cocoa 3 – Deregulate prices to coffee and cocoa producers 4 – Abolish public sector monopolies in the marketing and export of coffee and cocoa 5 – Abolish fixed margin rates and the licensing system for the sale of coffee and cocoa Non Agricultural Sector 1 – Eliminate price controls (cement, iron) PVC pipes, wheat flour, beer and alcohol-free beverages), and fixed margin rates (sugar, rice, vegetal oil, milk, tomato sauce, gas and sewing machines) 2 – Review the Investment code 3 – Review the labour code and implementing orders 4 – Review the framework law for the pharmaceutical sector

1995-1996 July-96 March-96 July-96 July-96 July-95 Dec-96 Dec-96

20-08-97 1997-1996 1997 19-03-96 17-08-95 07-08-95 1996-1997 1997 1997

Implemented (order n°79 112/PR) on 20-August-97 Legal texts adopted in 1997, and submitted to the National Assembly in 98. Plan of actions prepared by CI since 95 Implemented (order n° 96-25/PR of 18 March 1996) Implemented (order n° 96-25/PR of 19/03/1996) Interministerial order n°28/MCTPT/ MDRHV Implemented : 28-29/MCPT/DCIPC of 07-08-95 Project terminated on 6/10/95 but the review was carried out within the context of UEMOA. Implemented draft labour code adopted by the Govt. on 23/07/1997 and submitted to the National Assembly ; not approved in May 1999. Bill adopted by the Govt. on 05/02/1997 and submitted to the National Assembly

Annex 4 Page 1 of 3

TOGO :Matrix of Structural Adjustment Programme (SAP II) Objectively Verifiable Indicators Narrative Summary Indicators

At appraisal (1992)

At completion (1996)

Estimate at evaluation (1999)

Means of Verification

Important Assumptions

1. Overall Objective Sustain growth

-GDP growth rate -Private investment/GDP - Domestic consumption

-3.8 12.6 94.7

9.7 12.3 104.9

7.9 10.5 93.2

National accounts (Economic Affairs Department)

2. Programme objective 2.1 Rationalise public finance management

- Fiscal revenue (% GDP) - Public consumption (% GDP) - Current account deficit excluding grants (%GDP)

12.0 13.6 -2.2

13.1 12.9 -3.5

13.4 10.8 -1.3

National Economic Affairs Department

. Availability of external resources

. Government’s determination to respect budgetary process -Stable socio-political environment . -Conducive international demand for Togo’s export products

2.2 Deregulate external trade

- Export growth rate - Import growth rate - Current external deficit (in % of GDP)

-22.0 -15.1 -10.4

-8.8 -14.0 -3.3

8 3.4 -5.4

National Economic Directorate

. Conducive international demand for Togo’s export products .Conducive exchange terms . Favourable weather conditions . Effective approval of measures by social partners

Reduce social disparities - General State budget (in billion CFAF) - Health expenditures - Education expenditures - Rate of access to health services

- 4.39 0.95 52.1

- 3.3 5.99 51.8

- - - -

National Economic Affairs Department ADB Social Statistics

. Availability of external resource flows

. Reduction of appropriations to the social sector . Government determination to continue reforms

Annex 4

Page 2 of 3

TOGO : Matrix of Structural Adjustment Programme (SAP II)

Objectively Verifiable Indicators Narrative Summary Indicators

At appraisal (1992)

At completion (1996)

Estimate At Evaluation (1999)

Means of verification

Important Assumptions

3. Output 3.1 Rehabilitation of

public finance

- Fiscal Revenue in %

of GDP - Public Consumption in % of GDP - Current account deficit (excluding

grants) in % of GDB

12 13.6 -2.2

13.1 12.9 1.8

13.4 10.8 -1.2

National accounts - -

Government determination to respect fiscal discipline Deterioration of terms of exchange

3.2 Rehabilitation of balance of payments

- Current account deficit (excluding public transfers) in % of GDB

- Outstanding debt in % of GDP - Net external assets (in billion

CFAF).

- 10.4 73.7 47.7

-3.3 99 4.6

-5.4 - 5.1

National accounts - -

Conducive international demand for Togo’s export products Conducive terms of exchange

3.3 Control of inflation - Inflation Rate

3.8

9.7

-

Political instability

3.4 Budget re-appropriation for social services

- Global budget social sector budget - Health expenditure in % of current

account expenditure - Education expenditure

in % of current account expenditures - Literacy Rate

- - - -

- 8.8 26.4 53.7

- 10.3 (1998) 26.1 (1998) -

General State budget Public expenditure review reports

Available international aid Deterioration of public finances

Annex 4 Page 3 of 3

TOGO : Matrix of Structural Adjustment Programme (SAP II)

OBJECTIVELY VERIFIABLE INDICATORS Means of Verification

Important Assumptions

Output

Narrative Summary

INDICATORS

At Appraisal

(1992)

At Completion

(1996)

At Evaluation (1999)

4. Activities 4.1 Replenishment of budgetary savings and orienting investments to productive sectors 4.2 Completion of para-public restructuring 4.3 Deregulating trade and reinforcing private initiatives 4.4 Integrating the social dimension in economic policies.

Finance Plan Million UA % ADF 11.5 14.04 IDA 38.1 46.52 EU 15.1 18.43 France 13.1 15.99 USAID 4.1 5.50 TOTAL 81.9 100. 00

General disbursements ledger Programme evaluation and completion reports

- Compliance with conditionality - Delay in setting up financing - Withdrawal of a donor.

Annex 5 Page 1 of 3

TOGO: ADJUSTMENT PROGRAMME MATRIX (SAP III)

Objectively Verifiable Indicators (OVI)

Narrative Summary Indicators

At Appraisal At completion At post-evaluation

Means of Verification Important Assumptions

1. Global Objective Sustain growth

-GDP growth rate -Private Investment/GDP in % -(External current account deficit (excluding public transfers) in % of GDP

9.7 12.3 -3.3

-1.3 10.9 -7.6

6.0 10.5 -5.5

National Accounts (Department of the Economy) Prog. Appraisal and Completion Reports Misc. World Bank Reports

2. Programme Objective 2.1 Restore macro-economic stability

-Budget deficit (excluding grants) (% GDP) -Current account balance (excluding public transfers) (in % GDP) -Rate of inflation

-3.5 -3.3 9.6

-0.7 -7.1 2.8

13.4 -5.5 3.0

National Accounts (Department of the Economy)

-Stable socio-political environment -Govt. determination to respect budget procedures -Favorable international demand for Togo’s exports -Availability of foreign resources -Favorable weather conditions

2.2 Social Services Supply Assistance

-Social services access rate -Girls’ secondary school enrolment ratio -Gross mortality rate (per thousand)

51.8 27 14.64

52.1 (1997) - 14.38

National Accounts (Department of the Economy) ADB social statistics

-Availability of foreign resources -Reduction of social sector appropriations -Deterioration of public finances

Annex 5 Page 2 of 3

TOGO: Adjustment Programme Matrix (SAP III)

Objectively Verifiable Indicators (OVI)

Narrative Summary Indicators

At Appraisal At completion At post-evaluation

Means of Verification Important Assumptions

3. Output 3.1 Public finance rehabilitation

Fiscal revenues in % of GDP -Routine expenditure in % of GDP -Current deficit (excluding grants) in % of GDP

13.1 18.6 -3.5

14.7 16.0 -2.7

- - -3.01

National Accounts Programme appraisal and completion reports Misc. World Bank reports

Govt. determination to exercise budgetary restraint. -Favourable international demand for Togo’s exports. -Favourable weather conditions -Stable socio-political environment -Favourable terms of exchange

3.2 Balance of payments stabilization

- Current external deficit (excluding public transfers) in % of GDP Outstanding debt in % of GDP -Net external assets (in billion CFAF).

-3.3 99.0 4.6

-7.6 91.9 5.1

-5.5 - -

National Accounts Programme appraisal and completion reports. Misc. World Bank reports

-Favourable international demand for Togo’s exports -Favourable terms of exchange -External resource availability

3.3 Private sector promotion

-GDP growth rate -Private Investment (in % of GDP) -Net private transfers (in % of GDP)

9.7 12.3 0.82

-1.3 10.9 0.92

6.0 10.5 -

National Accounts Programme appraisal and completion reports

-Stable socio-political environment -External resource availability

3.4 Budget re-appropriation to social sectors

Heath expenditures in % of routine expenditures Education expenditure in % of routine expenditure Literacy rate

8.8 26.4 53.7

10.3 (1998) 26.1 (1998) -

- - -

National Accounts Programme appraisal and completion reports Misc. World Bank reports

-External resource availability -Reduction of social sector appropriations Deterioration of public finances

Annex 5

Page 3 of 3

TOGO: Adjustment Programme Matrix (SAP III)

Objectively Verifiable Indicators

Output

Narrative Summary

Indicators

At Completion (1996)

At completion (1998)

At post- evaluation

(1999)

Means of Verification Important Assumptions

4. Activities 4.1 Tax reforms and public expenditure control 4.2 Semi public sector reform consolidation 4.3 Private sector development support 4.4 Minimal budgetary appropriation to social sectors

Finance Plan

UA million % ADF 11.2 7.95 IDA 32.25 22.89 IMF 65.16 46.25 Japan 32.25 22.89 TOTAL 140.86 100.00

Appraisal and completion reports

-Fulfillment of conditions -Delay in setting up financing -Donor’s withdrawal

Annex 6 Page 1 of 4

SAP II PERFORMANCE RATINGS 1. Implementation performance

INDICATORS RATING (1-4)

OBSERVATIONS

1. Compliance with schedule

1

The programme was carried out with a delay of more than two years, owing mainly to the socio-political crisis. Almost all the measures were implemented during the 1994-96 period rather than as initially scheduled.

2. Compliance with costs

N.A.

3. Compliance with terms and conditions of loan agreements

2

The Borrower has had considerable difficulty in complying with some conditions, especially those of the second tranche. He regularly transmitted implementation reports and loan account audit reports and prepared the programme completion report.

4. Equilibrium of follow-up/evaluation and quarterly progress reports

2

The Inter-ministerial Board responsible for the programme’s follow-up did not function appropriately. Inadequate coordination of the different structures involved in the programme’s implementation. General follow-up, insufficient during the socio-political crisis, was reinforced after regular transmission of programme implementation reports.

5. Satisfactory operation (if necessary )

N.A.

Overall Evaluation

1.66

Unsatisfactory

Annex 6 Page 2 of 4

2. Bank’s Performance

INDICATORS RATING (1 - 4)

OBSERVATIONS

1. At identification

N/A

The Bank did not participate in the programme’s identification

2. At preparation

2

The Bank participated, with the World Bank, in the programme’s preparation. It took part in several co-ordination meetings with the Government and other donors during the preparation phase

3. At evaluation

3

The Bank participated in the programme’s appraisal in 1992 along with the World Bank. The appraisal report was deemed of satisfactory quality

4. At supervision

2

The Bank also ensured the programme’s regular follow-up, especially after the general strike, by carrying out several supervision missions.

Overall evaluation of the Bank’s performance

2.33

Satisfactory

Annex 6

Page 3 of 4 3. Output Performance

INDICATORS RATING(1- 4)

OBSERVATIONS

1. Pertinence and implementation of objectives

2.0

Satisfactory

i) Macro-economic policy

3 Undertaken, since the end of the 80s by the Government, in an adjustment procedure with the support of international financial institutions. SAP II comes within the framework of the new orientations of the economic development process adopted for the country from 1990-91.

ii) Sectoral policy

2 The programme had envisaged agricultural policy measures (reduction of marketing costs, agricultural services support), as well as for non-agricultural sectors (rehabilitation of infrastructure and promotion of SMEs/SMIs). In the social sector, an overall education policy and a social dimension of adjustment plan of action were defined and partially implemented.

iii) Physical implementation (including production)

N.A.

iv) Financial output

N.A.

v) Alleviation of poverty, social aspects and women in development

1 The social indicators did not improve substantially: the socio-political crisis and the devaluation worsened the conditions of the most vulnerable sections of the population and poverty became widespread, especially in rural areas. A poverty alleviation plan was prepared but not effectively applied; women did not receive specific sub-programmes.

vi) Environment

2 A national environmental protection strategy was defined. The national plan of action for the environment which was supposed to be prepared was never effectively done during the programme. Sensitization seminars and environmental training were organised; afterwards some actions to protect the environment, combat shore erosion, and infrastructure and neighbourhood deterioration were carried out

vii) Private sector development

2 Considerable efforts were made to promote the private sector through the deregulation of the economy, setting up a customs free zone, State divestment from productive activities. However, the political context and the lack of the firm commitment to implement privatisations constituted an impediment to Togo’s private sector development and to its greater involvement in productive sectors. .

viii) Others (to specify )

N.A.

Annex 6 Page 4 of 4

2. Institutional development 2.00

Satisfactory

i) Institutional framework (including restructuring)

2 The Administration benefited from the experience in preparing reforms, new institutions were created and training activities carried out, which contributed to enhancing institutional capacities. The institutional support project financed by the Bank also made a considerable contribution.

ii) Financial information and management system including the audit system

2 The management information system and the audits of accounts were instituted within the context of performance contracts with the enterprises remaining in the State’s portfolio. However, statistical data need to be harmonized and made more viable, public accounting deserves to be improved and reinforced.

iii) Transfer of technology 2 The direct involvement of national managers in the design and preparation of programmes, the implementation of reforms, especially as regards the privatisation/liquidation of public enterprises as well as the follow-up of those that contributed to enriching their awareness and experience. Within the context of the ADB institution support project, training in the area of macro-economic analysis, programming and implementation of PIPs were organised.

iv) Allocation of qualified staff (including rotation). Training and allocation of counterpart staff)

2 Efforts remain to be made to expand the Ministry of Planning and permanent and qualified supplementary human resource development to improve PIP implementation capacities.

3. Sustainability 2.00

Unsatisfactory

i) Borrower’s continued commitment

2 The Government’s determination to pursue the selected reforms was not sufficiently shown mainly because of the socio-political crisis.

ii) Political environment

2 The political environment was disturbed by the general strike of 1993 as well as the initial steps of the democratic process which thwarted the programme’s smooth implementation.

iii) Institutional framework

2 A legal regulatory framework was set up; it still has to be enhanced and reinforced by pursuing reforms.

iv) Technical viability and staff re-training

N.A.

v) Financial viability including cost recovery system

N.A.

vi) Economic viability

2 Economic bases able to promote sustained growth exist but structural reform and socio-political environment stabilisation efforts should be pursued to reinforce the rehabilitation of the macro-economic framework and to sustain the programme’s accomplishments.

vii) Environmental viability

N.A.

viii) Operating and maintenance facility (availability of recurrent funds, foreign exchange, spare parts, maintenance workshop.

N.A.

4. Internal Rate of Return N.A. 5. Overall evaluation of output 2.00 Satisfactory, thanks to measures taken subsequent to the

devaluation.

Annex 7 Page 1 of 4

I. SAP III

II. PERFORMANCE RATINGS 1. Implementation Performance

RATING (1 TO 4) OBSERVATIONS 1. Compliance with implementation schedule

2 The programme was implemented within the prescribed time. Conditions were fulfilled rapidly. Almost all the measures were implemented during the programme period; however, measures such as restructuring the semi-public sector and the settlement of arrears, the review of investment and labour codes have not yet been completely terminated, although the programme has been completed. Disbursements were made promptly without jeopardising the programme.

2. Observance of costs

NA

3. Fulfil conditions and provisions of loan agreements

3 The Borrower fulfilled all the conditions. Procedures were complied with for the procurement of goods and services. Most of the other loan agreement provisions were complied with, especially the Borrower’s transmission of audit and completion reports.

4. Appropriateness of follow-up/evaluation and quarterly progress reports.

2 A programme follow-up/evaluation unit, attached to the Prime Minister’s office, and placed under the supervision of the inter-ministerial commission, was set up, but the follow-up/evaluation and progress reports were not transmitted each quarter. Nevertheless, programme follow-up was adequately ensured, as noted in the reports received on the implementation of the SAP measures.

5. Satisfactory implementation (where appropriate)

NA

Overall Evaluation 2.33 Satisfactory

Annex 7

Page 2 of 4 2. Bank Performance

RATING (1 TO 4) OBSERVATIONS 1.At identification NA The Bank did not participate in the programme’s

identification 2. At preparation 3 Having intervened in the programme after the World Bank,

the Bank prepared the programme on the basis of documents transmitted by Bretton Woods Institutions and the Government’s development policy statement.

3. At appraisal 3 The appraisal report treated all the programme’s aspects and was deemed of good quality, but did not include socio-economic indicators.

4. At supervision 2 The programme was of short duration, a mid-term review mission was carried out by the Bank, follow-up having been ensured through the reports received and the meetings held with delegations from Togo to Bank Headquarters

Global evaluation of Bank Performance

2.5 Satisfactory

Annex 7

Page 3 of 4 3. Programme Output Performance RATING (1 TO 4) OBSERVATIONS 1. Pertinence and achievement of objectives

2.0 Satisfactory

i) Macro-economic policies 2 The macro-economic policies were appropriate in relation to the programme’s objectives which are in conformity with those contained in the Government’s letter of intent. These policies produced moderate results (GDP growth rate rather substantial during the programme period, but encountered a downturn during the last year; improvement of the balance of payments without producing a surplus; deterioration of the public finance situation in 1998, entailing an accumulation of domestic arrears; external debt service ratio in relation to exports developed positively; inflation rather well controlled).

ii) Sectoral policy 3 The Government’s letter of intent defined a policy for the export sub-sectors. Considerable progress was made in the coffee and cocoa sectors with greater involvement of the private sector in marketing owing to reform measures undertaken in this area. Liberalisation of the cotton sub-sector is underway. The infrastructure sector received considerable support. However, it is important to continue to develop and reinforce sectoral strategies and to diversify the productive basis of the entire economy.

iii) Physical output (including production)

NA

iv)Financial performances NA v) Poverty alleviation, social aspects and women in development

1 The social strategy did not cover all aspects of poverty alleviation. The inadequacies of effective expenditures in the social sectors (health and education) did not permit the populations sanitary conditions to be improved nor school enrolment problems to be solved. The vulnerable categories of the population-women and youths-did not receive any specific assistance.

vi) Environment NA vii) Private sector development 2 Marketing liberalisation measures as well as the State’s

withdrawal from productive sectors should foster private sector development. However, problems related to the accumulation of domestic arrears, the situation of the banking sector, and the socio-political context constitute a serious handicap which thwarted its development and hindered it from fully playing a key role in growth.

viii) Others (to be specified) NA

Annex 7 Page 4 of 4

2.25 Satisfactory

i) Institutional framework (including restructuring)

2 The Administration benefited from the experience in preparing reforms and its institutional capacities were enhanced. Customs and tax services were strengthened. Several new structures as well as a regulatory framework, texts regarding the liberalisation of domestic and international trade, private sector incentives and promotion were created. The weakness of the PIP’s implementation capacities demonstrate the need to pursue capacity building efforts.

ii) Financial information and management system, including the audit system

2 The information and management system and audits of accounts were instituted within the framework of performance contracts with the enterprises remaining in the State’s portfolio. However, the statistical data have been standardised and must be made more viable; the public accounting framework should be improved and strengthened.

iii) Transfer of technology 3 The direct involvement of local managers in the design and preparation of programmes, in the implementation of reforms particularly as regards the privatisation/liquidation of public enterprises and in their follow-up contributed to enriching their skills and experience. Within the context of the institution building context for the Department of Planning financed by the ADB, training was organised in the areas of micro-economic analysis and project audit.

iv) Designation of qualified staff (including rotation), training and provision of counterpart staff)

2 Owing to training sessions organised by this institution building project, the expertise of Managers from Ministries responsible for economic management increased. Efforts must be made to provide these ministries with additional, permanent and skilled human resources. Skills should be reinforced in the areas of programming and budgetary management.

3. Sustainability 2.0 Satisfactory i) Commitment continued by the Borrower

2 The Government should show greater commitment to pursuing reforms in order to rapidly complete the privatisation process. It should strive to observe budgetary discipline and favour restoration of socio-political stability to calmly undertake new programmes to reinforce the macro-economic framework.

ii) Political environment 2 Political stability was lacking toward the end of the programme. The problems of poverty and unemployment which were not solved, are of such a nature as to disrupt the political situation.

iii) Institutional framework 2 Substantial efforts have been made to strengthen the institutional framework by creating new structures and adapting those that already exist in the country’s new socio-political context. Instituting a new regulatory and incentive framework may improve the institutional framework.

iv) Technical viability and upgrading staff

NA

v) Financial viability, including the cost recovery system

NA

vi) Economic viability 2 The macro-economic framework remains fragile and there is a need to create conditions for the resumption of co-operation with donors to mobilise the necessary external resources.

vii) Environmental viability NA Operating and maintenance facilities (availability of recurrent funds, spare parts, maintenance workshop

NA

4. Internal Rate of Return NA 5. Overall performance evaluation 2.08 Satisfactory

Annex 8 Page 1 of 3

TOGO : STRUCTURAL ADJUSTMENT PROGRAMME II AND III (1992 – 1998)

KEY MACRO-ECONOMIC INDICATORS

Average Average National Accounts (yearly variations) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1992-96 1995-98

GDP at constant prices -0.3 -0.7 -3.8 -16.6 16.8 6.9 9.7 4.3 -1.3 2.29 4.90 Primary sector 1.9 -0.7 1.9 6.7 -1.3 5.5 16.4 4.5 -2.6 4.43 5.94 Manufacturing industry -4.4 7.1 -7.7 -29.4 26.3 20.8 5.2 2.3 2.9 2.92 7.79 Service industries 0.1 -4.5 -6.2 -30.0 35.8 1.3 5.7 5.2 -2.3 1.36 2.49 Public Administration 0.0 1 0 -5.2 6.7 4.1 1.4 -1.2 0.6 0.92 1.23

GDP Structure in % 100 100 100 100 100 100 100 100 100 100.00 100.00 Primary sector 34.2 34.2 36.3 46.4 39.2 38.6 41.0 41.1 40.5 40.43 40.31 Manufacturing industry 21.5 23.1 22.2 18.8 20.3 23.0 22.0 21.6 22.5 21.49 22.27 Service industries 44.3 42.6 41.5 34.9 40.5 38.4 37.0 37.3 37.0 38.09 37.42 Public Administration

Resources – Employment in % of GDP Import of goods and services 45.4 41.5 36.5 31.8 34.3 38.8 37.7 35.6 38.0 36.10 37.52 Total Resources 145.5 141.5 136.5 131.8 134.3 138.8 137.7 135.6 138.0 136.10 137.52 Domestic Expenditures 111.9 108.1 109.3 107.6 103.7 104.2 104.9 103.8 104.0 105.37 104.24 Domestic Consumption 94.8 94.6 94.7 100.1 88.6 88.1 88.6 88.4 89.8 91.18 88.71 Public 15.0 14.6 13.6 16.1 13.2 12.2 12.9 10.8 12.0 12.95 11.97 Private 79.8 80.0 81.1 84.0 75.5 75.8 75.7 77.6 77.8 78.23 76.74 Gross Investment 17.1 13.5 14.6 7.5 15.0 16.1 16.3 15.4 14.3 14.19 15.53 Public 7.3 4.5 3.5 2.3 2.3 3.5 2.8 2.5 3.9 2.96 3.15 Private 8.7 10.1 12.6 8.7 9.7 10.1 12.3 12.1 10.9 10.92 11.34 Stock variations Exports of non-factor goods and services

1.1 33.5

-1.2 33.4

-1.6 27.2

-3.5 24.2

3.0 30.6

2.6 34.6

1.2 32.8

0.9 31.8

-0.5 34.0

0.31 30.73

1.04 33.28

Source : Missions – IMF and Directorate of Economy

Annex 8 Page 2 of 3

Balance of Payments in % of GDP

1990

1991

1992

1993

1994

1995

1996

1997

1998

Average 1992-96

Average 1995-98

Trade Balance -7.1 -3.7 -4.9 -2.9 1.4 -0.4 -0.3 -2.1 -2.1 -1.5 -1.0 Current Balance -6.2 -3.4 5.6 -6.5 -5.7 -4.1 -4.0 -4.6 -5.6 -5.1 -4.5 Current Balance (net official transfers) -13.2 -9.1 -10.4 -9.0 -8.1 -6.8 -6.2 -6.8 -7.6 -7.8 -6.8 Balance of Payments Position -3.0 -3.0 -10.1 -17.5 -10.8 -4.9 -3.3 1.3 -4.5 -7.1 -2.9 Private transfers 0.6 0.9 0.5 0.8 0.9 0.8 0.9 0.8 0.8 0.8 0.9 Net capital flows 3.1 0.4 -4.6 -11.1 -5.1 -0.8 0.7 5.8 0.7 -2.0 1.6 Direct foreign investment

Average Average

Public Finances in % of GDP 1990 1991 1992 1993 1994 1995 1996 1997 1998 1992-96 1995-98

Total Revenue (excluding grants) 22.7 17.4 16.0 10.8 12.2 14.7 14.7 14.7 14.2 13.9 14.6 Fiscal Revenue 18.7 15.2 12.0 8.8 11.1 13.6 13.1 13.2 12.9 12.1 13.2 Total Expenditure 28.9 24.9 21.8 26.4 25.1 22.5 21.0 18.0 20.9 22.2 20.6 Current 21.4 20.4 18.2 24.1 22.8 19.0 18.3 16.0 17.0 19.3 17.6 Investment 7.3 4.5 3.5 2.3 2.3 3.5 2.8 2.0 3.9 2.9 3.0 Current Balance (excluding grants) 1.2 -3.0 -2.2 -13.2 -10.6 -4.3 -3.5 -1.3 -2.7 -5.4 -3.0 Current Primary Balance (excluding grants) 4.5 0.2 0.6 -9.0 -5.1 -0.8 -0.8 1.0 -0.6 -2.1 -0.3 Basic primary balance (excluding grants) 1.3 -1.7 -0.9 -10.7 -5.8 -1.8 -1.4 0.7 -1.4 -3.1 -1.0 Overall Deficit (commitment base) -6.2 -7.5 -5.8 -15.6 -12.9 -7.8 -6.3 -3.3 -6.7 -8.3 -6.0 Payment arrears -0.5 2.1 1.3 10.9 5.9 -7.4 -0.3 -3.4 0.8 1.1 -2.6 Domestic -0.5 1.2 0.6 8.2 1.9 1.4 0.3 -1.8 0.0 1.1 -0.7 External 0 0.9 0.6 2.7 4.0 -6.0 -0.6 -1.6 0.8 0.0 1.9 Overall deficit (cash basis) -6.7 -5.4 -4.5 -4.6 -7.0 -15.2 -6.7 -6.7 -5.9 -7.2 -8.6 Source : Missions – IMF and Directorate of the Economy

Annex 8 Page 3 of 3

Average Average

Money and Credit (yearly variation) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1992-96 1995-98

Net external assets 5.6 3.9 -27.6 -63.9 81.9 -43.7 -74.1 25.7 -275.8 -53.8 -91.8 Domestic Credit 15.2 8.5 -7.3 0.5 20.6 46.0 8.3 8.6 10.6 12.5 18.4 Credit to the State -53.6 51.4 52.3 -60.1 -284.4 189.9 20.5 -3.6 30.8 -7.8 59.4 Credit to the Economy 3.5 11.7 -1.1 -9.1 -0.7 27.4 4.7 12.8 4.8 5.5 12.4 Money and quasi money 9.5 3.1 -18.0 -15.3 43.5 22.0 -9.1 8.1 1.2 4.6 5.5 M2/ GDP 2.8 2.7 3.3 3.1 3.3 3.3 4.1 4.4 4.5 3.7 4.1

Development of External Debt

Outstanding (disbursed) 306.3 318 326.8 349.4 707.5 710.1 741.9 788.6 818.1 634.6 764.7 Medium and Long-term Debt 306.3 318 326.8 349.4 707.5 710.1 741.9 788.6 818.1 634.6 764.7 Official Creditors 293.3 305 313.3 335.2 680.8 684.8 701.3 788.5 818 617.4 748.2 Bilateral 114 115.9 111.3 115.1 235.7 236.7 230 246.5 299.8 210.7 253.3 International organisations 179.3 189.1 202 220.1 445.1 448.1 471.3 542 518.2 406.7 494.9 Private Banks 13 13 13.5 14.2 26.7 25.3 40.6 0.1 0.1 17.2 16.5 Others IV. Total IMF and Trust Fund 22.3 20.6 21.7 22.8 43.2 62.9 21.5 15.7 V. Grand Total

Disbursed Outstanding/ GDP in % 69.2 70.2 73.7 99.2 129.7 108.6 90.0 90.1 91.9 98.9 97.4 Total Outstanding/ GDP in % Debt Service/Export of non-factor goods and services (in %) Debt Service in % of exports

20.8 28.7

19.3 26.4

22.5 31.3

35.8 50.2

36.5 48.5

19.7 25.2

16.8 21.6

12.6 14.2

13.6 16.7

22.5 29.7

19.4 15.7

Source : BCEAO/Lomé SNI - FNADP