The World Bank · DATA SHEET A. Basic Information Country: El Salvador Program Name: PUBLIC FINANCE...

Document of The World Bank

Report No: ICR2743

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-80480)

ON A LOAN

IN THE AMOUNT OF US$ 100 MILLION TO

TO THE

THE REPUBLIC OF EL SALVADOR

FOR A

PUBLIC FINANCE AND SOCIAL PROGRESS DEVELOPMENT POLICY LOAN

June 13, 2013

Poverty Reduction and Economic Management Central America Country Management Unit Latin America and Caribbean Region

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REPUBLIC OF EL SALVADOR - GOVERNMENT FISCAL YEAR January 1 – December 31

CURRENCY EQUIVALENTS The US Dollar is the currency in El Salvador

WEIGHTS AND MEASURES Metric System

SELECTED ABBREVIATIONS AND ACRONYMS

ARENA National Republic Alliance Party CPS COMPRASAL

Country Partnership Strategy Government e-procurement System

DGA Customs Agency DGII Tax administration office DGT DPL

Treasury office Development Policy Loan

FDI Foreign Direct Investment FMLN FISDL

Farabundo Marti National Liberation Front Party Social Investment Fund

GDP Gross Domestic Product IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results Report IDA International Development Association IADB Inter-American Development Bank IMF International Monetary Fund LAC Latin America and the Caribbean NFPS P@GOES PDO

Non-Financial Public Sector Platform for electronic payments Program Development Objective

PER Public Expenditure Review PFM Public Financial Management PFSS Public Finance and Social Sector SSGER Sustaining Social Gains for Economic Recovery Program

Vice President:

Country Director: Sector Manager:

Lead Economist & Sector Leader: Task Team Leader: ICR Team Leader:

ICR Primary Author:

Hasan A. Tuluy Carlos Felipe Jaramillo Auguste Tano Kouame Oscar Calvo-Gonzalez Bárbara Cunha Luc Razafimandimby Ana Lucia Armijos

REPUBLIC OF EL SALVADOR

Implementation Completion and Results Report for the Public Finance and Social

Progress Development Policy Loan

CONTENTS

Data Sheet A. Basic Information ............................................................................................................ i B. Key Dates ........................................................................................................................ i C. Ratings Summary ............................................................................................................ i D. Sector and Theme Codes................................................................................................ ii E. Bank Staff ....................................................................................................................... ii F. Results Framework Analysis .......................................................................................... ii G. Ratings of Program Performance in ISRs ..................................................................... vi H. Restructuring (if any) .................................................................................................... vi Contents

1. Program Context, Development Objectives and Design ............................................ 1 1.1 Country Context at Appraisal ............................................................................... 1 1.2 Country context during implementation ............................................................... 3 1.3 Original Program Development Objectives (PDO) and Key Indicators (as approved) .................................................................................................................... 5 1.4 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification ............................................................................................ 7 1.5 Original Policy Areas Supported by the Program ................................................. 7 1.6 Revised Policy Areas (if applicable) ................................................................ 8 1.7 Other significant changes ...................................................................................... 8

2. Key Factors Affecting Implementation and Outcomes .............................................. 8 2.1 Program Performance ........................................................................................... 8 2.2 Major Factors Affecting Implementation: .......................................................... 10 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: . 11 2.4 Expected Next Phase/Follow-up Operation (if any): ..................................... 12

3. Assessment of Outcomes .......................................................................................... 12 3.1 Relevance of Objectives, Design and Implementation ....................................... 12 3.2 Achievement of Program Development Objectives ........................................... 12 3.3 Justification of Overall Outcome Rating ............................................................ 15 3.4 Overarching Themes, Other Outcomes and Impacts .......................................... 15 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops ... 16

4. Assessment of Risk to Development Outcome ......................................................... 16

5. Assessment of Bank and Borrower Performance ..................................................... 17 5.1 Bank Performance ............................................................................................... 17 5.2 Borrower Performance ........................................................................................ 18

6. Lessons Learned........................................................................................................ 19 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ........... 20 Annex 1: Public Finance and Social Progress DPL - Policy Matrix ........................... 21 Annex 2 Bank Lending and Implementation Support/Supervision Processes .............. 24 Annex 3. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 25 Annex 4. List of Supporting Documents ...................................................................... 27 Annex 5. Map of El Salvador ...................................................................................... 28

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DATA SHEET

A. Basic Information

Country: El Salvador Program Name: PUBLIC FINANCE AND SOCIAL PROGRESS DPL

Program ID: P122699 L/C/TF Number(s): IBRD-80480 ICR Date: 05/20/2013 ICR Type: Core ICR

Lending Instrument: DPL Borrower: REPUBLIC OF EL SALVADOR

Original Total Commitment:

USD 100.00M Disbursed Amount: USD 100.00M

Revised Amount: USD 100.00M Implementing Agencies: Ministry of Finance Co-financiers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 12/16/2010 Effectiveness: 09/22/2011 09/07/2011 Appraisal: 04/13/2011 Restructuring(s): Approval: 06/02/2011 Mid-term Review: 03/05/2012 04/09/2012 Closing: 12/31/2012 12/31/2012 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies: Moderately Satisfactory

Overall Bank Performance: Satisfactory Overall Borrower

Performance: Moderately Satisfactory

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C.3 Quality at Entry and Implementation Performance IndicatorsImplementation

Performance Indicators

QAG Assessments (if any)

Rating:

Potential Problem Program at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Program at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing) Central government administration 70 70 Other social services 30 30

Theme Code (as % of total Bank financing) Gender 20 20 Other accountability/anti-corruption 5 5 Public expenditure, financial management and procurement

25 25

Social risk mitigation 10 10 Tax policy and administration 40 40 E. Bank Staff

Positions At ICR At Approval

Vice President: Hasan A. Tuluy Pamela Cox Country Director: Carlos Felipe Jaramillo Carlos Felipe Jaramillo Sector Manager: Auguste Tano Kouame Rodrigo A. Chaves Program Team Leader: Bárbara Cunha Bárbara Cunha ICR Team Leader: Luc Razafimandimby ICR Primary Author: Ana Lucia Armijos F. Results Framework Analysis Program Development Objectives (from Project Appraisal Document) The operation's Development Objective is to assist the Government in promoting social development and inclusion, while maintaining a sustainable medium term fiscal framework. In particular, the operation supports the Government's efforts aimed at: (i)

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Creating fiscal space for needed social expenditure by supporting actions to increase tax revenues and to improve efficiency and transparency in the allocation of public resources; and (ii) Protecting and including vulnerable segments of the population by allocating additional public resources towards social programs targeting vulnerable groups such as the elderly, women, and children. Revised Program Development Objectives (if any, as approved by original approvingauthority) (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from approval documents)

Formally Revised Target Values

Actual Value Achieved at Completion or Target Years

Indicator 1 : The number of income tax returns filed by DGII decreased 50 percent by the first quarter of 2013

Value (quantitative or Qualitative)

446,005 223,002 374,004

Date achieved 12/31/2009 12/31/2012 03/31/2013 Comments (incl. % achievement)

Partially Achieved. The number of tax returned filled decreased 17% percent, with respected to baseline, but remained above the target.

Indicator 2 : The share of payments to the Government made through the electronic payments platform (P@GOES) increased from 5.25 percent in 2008 to 9.5 percent in 2012


5.25 percent 9.5 percent 30.1 percent


Achieved

Indicator 3 : Tax revenues as percent of GDP have increased 40 basis points by 2012 as a result of tax administration measures.


13.3 percent, average 2006-2008 period 40 basis points

The net tax revenue increased by 1.2 percentage points


Achieved

Indicator 4 : Total tax revenues have increased from an average of 13.3 percent of GDP in 2006-2008 to 14.8 percent in 2012.

Value (quantitative or

The average for 2006-2008 was 13.3 percent

14.8 percent of GDP 14.4 percent of

GDP

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Qualitative) of GDP Date achieved 06/02/2011 12/31/2012 12/31/2012 Comments (incl. % achievement)

Partially Achieved In 2012 tax revenue/GDP was 14.4%, an improvement compared to the average of 13.3% for 2006-2008, but not sufficient to meet the target

Indicator 5 : The Government balances monitored by DGT's system increased from US$91.9 million in 2009 to US$175 million in 2012.


US$91.9 million US$175 million US$122.54


Not Achieved

Indicator 6 : Ten percent of common used goods and services purchased though Framework Agreements in 2012


A framework agreement does not exist

10 percent of goods and services must be purchased through framework agreements

The framework agreements were left out of the final version of the Procurement Law approve by the National Assembly.


Not Achieved Note: This indicator was going to be substituted during the preparation of the second DPL which was not concluded.

Indicator 7 : No payments to awarded contracts has been made in 2012 unless the business opportunity and results were published in COMPRASAL in due time


Public business opportunities were not published online

100 percent of public business opportunities should be published online

100 percent of the Government business opportunities and results are published online


Achieved

Indicator 8 : Each region of the country has at least one functioning consulting committee for monitoring progress on gender equity in the public sector and a functioning window for information on women's rights by January 2013.


There were no functioning consulting committees nor windows for information

Each region has at least one functioning committee for monitoring gender equity progress

14 consulting committees monitoring progress in gender equality are functioning; and 11 country regions

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and a functioning window for women's rights information by January 2013.

had at least one window on women rights information.


Achieved

Indicator 9 : At least 80 percent of the target elderly individuals in the 52 poorest rural municipalities and 2 urban municipalities receive cash transfers by January 2013


No targeted elderly individuals received cash transfers as of October 2009

At least 80 percent of targeted elderly receive CTs

There are 75 rural municipalities where at least 80% of eligible elders receive cash transfers. The CT was not extended to urban municipalities.


Achieved

Indicator 10 : At least 2000 students of primary and secondary education are studying under the full-school day period modality by January 2013.


No student studied under full-school day period in October 2009

At least 2000 students

10,356 students are studying under the extended-day modality; approximately16,968 students are studying under indirect modality, in 53 education centers


Achieved

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from approval documents)

Formally Revised Target Values

Actual Value Achieved at Completion or Target Years

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G. Ratings of Program Performance in ISRs

No. Date ISR Archived

DO IP Actual Disbursements (USD millions)

1 09/11/2011 Satisfactory Satisfactory 0.00 2 04/30/2012 Satisfactory Satisfactory 99.75 3 01/09/2013 Moderately Satisfactory Moderately Satisfactory 99.75 H. Restructuring (if any) Not Applicable

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Implementation Completion and Results Report for a Public Finance and Social Progress Development Policy Loan to the Republic of El Salvador

1. Program Context, Development Objectives and Design This Implementation Completion and Results Report (ICR) describe the results of the Public Finance and Social Progress Development Policy Loan (DPL) to the Republic of El Salvador. The single tranche loan of US$100 million was approved by the World Bank Board of Executive Directors on June 2, 2011 and disbursed upon loan effectiveness on September 7, 2011. The operation supported strategic areas addressed by two previous DPLs: the Public Finance and Social Sector (PFSS) approved on January 2, 2009 that focused on strengthening the medium-term fiscal sustainability and supporting transparency in the use of public resources and the Sustained Social Gains for Economic Recovery Program (SSGER) approved on November 24, 2009 that supported the process of economic recovery through the design of initiatives and institutional strengthening in the social sectors. The operation supported the Government objective of promoting social development and inclusion, while maintaining a sustainable medium term fiscal framework. In particular, the operation supported the Government's efforts aimed at: (i) Creating fiscal space for needed social expenditure by reinforcing actions to improve tax collection, expand the tax base, increase tax revenues and improve efficiency and transparency in the allocation of public resources; and, (ii) Protecting and including vulnerable segments of the population by allocating additional public resources towards social programs targeting vulnerable groups such as the elderly and children in poor areas. This operation was designed as the first of a series of two development policy loans, but the second operation in the series was not completed. The actions supported by this operation, as well as results indicators and targets were conceived as part of a broader program, including follow up reforms supported by a second loan. However, changes in the economic and political context led the Bank team to delay the preparation of the second operation. As a result, the DPL series lapsed and this loan became a stand-alone operation. On the economic side, weak external and low GDP growth contributed to a slower pace of fiscal consolidation and the interruption of the IMF program in the country. On the political side, a mid-term election changed the political composition in Congress affecting the Government’s support and its ability to approve loans and reforms. Despite the difficult context, El Salvador’s Government remained committed with the objectives of the program. The country implemented most of the reforms contemplated as indicative triggers for the second operation and achieved most targets envisaged for the complete DPL series, despite the absence of the second loan. 1.1 Country Context at Appraisal Appraisal took place approximately two years after president Mauricio Funes came to power. The national political stage is dominated by two main political parties – the National Republic Alliance Party (ARENA) and the Farabundo Marti National Liberation

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Front Party (FMLN). ARENA held the executive branch of the Government from 1991 until March 2009, when the FMLN candidate, Mauricio Funes, won the presidential election. The FMLN’s victory, after 20 years in the opposition, and the smooth handover of political power were milestones in the country’s political history. Nevertheless, the political environment remained polarized. Economic developments prior to appraisal El Salvador’s economic performance was relatively strong in the 2000s until the country was hit by the global crisis. Over the period 2005-2007, economic growth improved steadily from 3.6 percent to 3.8 percent following an improvement in the external environment. Growth was driven mainly by rising remittances, which accounted on average for 18.2 percent of GDP and became a major source of financing for consumption and investment. The mid-2000s were also characterized by improvements on the fiscal front. Revenue increased by 1.1 percent of GDP between 2005 and 2007, while spending was maintained at 19.3 percent of GDP in the same period. As a result, the non- financial public sector deficit narrowed from 3.0 percent of GDP in 2005 to 2.0 percent in 2007. Growth also contributed to improvements in the social indicators. By 2007, about 35 percent of Salvadoran households were poor, including about 11 percent extremely poor (versus 60 percent and 28 percent, respectively, in 1991). In addition, access to basic services such as safe water and sanitation increased by more than 15 percentage points during that period. The global financial crisis severely affected El Salvador. The crisis, and in particular the U.S. recession, impacted the economy, which contracted by 3.1 percent in 2009. The contraction was driven by a sharp fall in remittances (which decreased by about 10%), the collapse in consumption and investment (that fell by 8.6 and 14.8 % respectively), and reduced foreign demand (exports fell by 15%). The slowdown in economic activity led to an increasingly tight fiscal situation. Tax revenues dropped from 13.5 percent of GDP in 2008 to 12.6 percent in 2009, while expenditures remained broadly stable. As a result, the overall fiscal deficit increased from 3.2 percent of GDP in 2008 to 5.7 percent in 2009 while the debt-to-GDP ratio rose from 41 to 50 percent. Social indicators also deteriorate. The poverty rate increase to 40 percent in 2008 and remained relatively high at 37.8 percent in 2009. At the time of appraisal, the Salvadoran economy was starting to recover, but the speed of the recovery was uncertain. The economy grew 0.7 percent in 2010, below expectations. The pace of recovery in El Salvador depended on the dynamics of the U.S. economy and other potential external shock such as a significant increase in commodity prices. El Salvador’s fiscal balance also improved in 2010. Public spending increased 3.3 percent reaching 21.8 percent of the GDP, while tax revenues increased almost 10.4 percent in the same period reaching 13.3 percent of GDP. The overall fiscal public sector deficit ended 2010 at 4.2 percent of GDP, well below projections. The debt sustainability analysis (DSA) indicated that the medium-term public debt position was sustainable, but sensitive to an economic slowdown and to lack of fiscal consolidation.

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Source: Ministry of Finance, Central Bank and IMF and World Bank staff estimates.

1.2 Country context during implementation Structural reforms and external loans were successfully approved by the National Assembly despite the political polarization, but the results of the March 2012 mid-term election affected this trend. Although the Government’s party did not hold a majority in Congress, it was able to reach agreement on a series of important reforms and loans such as the 2011 tax reforms, procurement Law reform, the approval of the access to information Law, and a US$650 million debt rollover in 2011. However, the results of the March 2012 mid-term elections changed the composition of Congress and increased the number of seats held by the opposition party, allowing the opposition to block the approval of multilateral loans, as the Government lost the two-third majority. The country continued recovering from the crisis but at a slow pace. The recovery has been subject to a weak external environment and other exogenous shocks. El

2005 2006 2007 2008 2009 2010 2011

Income and Prices

GDP growth (% change) 3.6 3.9 3.8 1.3 -3.1 1.4 2.0

GDP per capita (% change) 2.9 3.2 3.1 0.6 -3.8 0.7 1.4

Inflation (cpi end of period % change) 4.3 4.9 4.9 5.5 -0.2 2.1 5.1Investment and savingsGross domestic investment 16.1 16.8 16.3 15.2 13.4 13.3 14.4Gross domestic savings 12.4 12.7 10.3 8.1 11.9 10.6 9.8Non Financial Public SectorTotal revenues and grants 16.3 17.2 17.3 17.4 16.5 17.7 18.3

Total tax revenues 12.5 13.4 13.6 13.5 12.6 13.4 13.8Total expenditure 19.3 20.2 19.3 20.6 22.1 22.0 22.2

Current expenditure 16.5 17.1 16.5 17.5 19.0 18.9 19.3Capital expenditure 2.8 3.1 2.8 3.1 3.1 3.2 2.9

Primary balance -0.8 -0.5 0.6 -0.8 -3.1 -1.9 -1.7Overall balance -3.0 -2.9 -2.0 -3.2 -5.7 -4.3 -3.9Public debt

Total debt 40.8 41.0 39.3 41.0 50.0 51.4 51.7O/w External 27.0 29.1 26.3 25.3 30.2 30.7 29.1

Balance of payments

Current account balance -3.6 -4.1 -6.1 -7.1 -1.5 -2.7 -4.6Trade balance -17.8 -19.6 -21.7 -21.8 -15.0 -16.5 -18.4

Exports (including maquila) 20.3 20.4 20.2 21.9 19.0 21.4 23.4Imports (including maquila) 38.0 40.0 42.0 43.8 34.1 38.2 42.5

Foreign direct investment 2.3 1.4 7.2 3.8 1.8 0.5 1.7Remittances 17.7 18.7 18.4 17.5 16.4 16.0 15.8Memorandum item:Nominal GDP (billions of US dollars) 17.1 18.6 20.1 21.4 20.7 21.4 23.1

Table 1. El Salvador Key Economic Indicators 2005-2011

(percentage of GDP, unless otherwise indicated)

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Salvador’s GDP grew by 1.4 percent in 2010, and approximately 2.0 percent in 2011. In 2012, the heavy rains and the repercussion of the Euro debt crisis led to a reduction in growth to 1.6 percent. As the economy resumed growth in 2010-2011, imports recovered and the current account deficit increased from 2.7 percent of GDP in 2010 to 4.6 percent in 2011 and to 5.3 percent of GDP in 2012 due to a decrease in exports. Social outcomes improved modestly in line with the economic recovery, but remained below pre-crisis levels. The poverty rate reached 36.5 percent in 2010, increased in 2011 to over 40 percent, but decreased in 2012 to 34.5 percent, due in part to successful government programs targeting the most vulnerable groups of the population. The fiscal consolidation continued, but at a slower pace. The overall fiscal deficit decreased from 4.3 percent of GDP in 2010 to 3.9 percent of GDP in 2011 and 2012. Tax measures by the central administration led to an increase in tax revenues from 12.6 of GDP in 2009 to 13.8 and 14.4 percent in 2011 and 2012, surpassing the pre-crisis level due to a more effective tax administration. The potential benefits of the increase in tax revenues had been partially compensated by expenditures which edged up to 22.2 and 22.4 percent of GDP in 2011 and 2012, respectively, following spending pressures from the impact of the tropical depression, subsidies, and security. The debt-to-GDP ratio rose to 51.7 percent of GDP in 2011 and to 53.7 percent in 2012. Looking forward, prospects for economic growth are still uncertain. Recovery in El Salvador continues to be tied to the dynamics of the U.S. economy. Current projections foresee growth of 1.6 percent in 2013 and 2014. Inflation is expected to remain under control in the medium term. Following a drop in commodity prices, inflation slowed down to about 0.8 percent in 2012 and would remain close to 2.5 percent for the period 2013-2014. Despite the challenging fiscal situation, projections suggest a sustainable medium-term fiscal outlook. El Salvador’s Development Plan proposed a sustainable medium term fiscal framework and authorities remain committed to fiscal sustainability. The Government designed a fiscal reform program for 2013, including measures to further reduce expenditures and increase revenue collection with the objective of reducing the fiscal deficit. Fiscal projections assume that the Government will continue to implement the intended measures, suggesting a low but continued increase in tax revenues, linked with the implementation of tax reforms, reaching 15.3 percent in 2013 and 15.5 percent of GDP in 2014. This would bring the overall fiscal deficit down slightly to 3.8 percent of GDP in 2014.

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Table 2 Medium Term Macroeconomic Outlook

(Percent of GDP, unless otherwise indicated)

2012 2013 2014 2015

Income and Prices

GDP growth (% change) 2.0 1.6 1.6 1.6

Inflation (cpi end of period % change) 5.1 0.8 2.3 2.6

Investment and savings

Gross domestic investment 14.4 14.6 14.6 14.6

Gross domestic savings 9.8 9.3 9.5 9.5

Non Financial Public Sector

Total Expenditures 22.2 22.4 21.9 22.0 Total tax revenues 13.8 14.4 15.3 15.5

Primary balance -1.7 -1.6 -1.4 -1.3

Overall balance -3.9 -3.9 -3.9 -3.8

Public debt

Total debt 51.7 53.7 55.8 57.5 External public debt service (% of exports of goods

and services) 18.4 9.4 8.1 7.9

Balance of Payments

Current account balance -4.6 -5.3 -5.0 -4.8

Trade balance -18.4 -18.7 -19.1 -19.1

Exports of goods (f.o.b) 23.4 23.0 23.0 23.1

Imports of goods (f.o.b.) 42.5 41.7 42.1 42.3

Foreign direct investment 1.7 2.2 1.0 1.1

Transfers (net) 16.6 16.8 17.0 17.1

Nominal GDP (billions of US dollars) 23.1 23.8 24.6 25.6 Source: IMF estimates. Note: The Government definition of some variables differs from the IMF’s definitions.

1.3 Original Program Development Objectives (PDO) and Key Indicators (as approved) The operation’s Development Objective was to assist the Government in promoting social development and inclusion, while maintaining a sustainable medium term fiscal framework.

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In particular, the operation supported the Government’s efforts aimed at: (i) Creating fiscal space for needed social expenditure by supporting actions to increase tax revenues and to improve efficiency and transparency in the allocation of public resources. (ii) Protecting and including vulnerable segments of the population by allocating additional public resources towards social programs targeting vulnerable groups such as the elderly, women, and children in poor areas. The Key Economic Indicators, expected to be achieved by December 2012, under the two policy areas mentioned above, were the following: I. Improving efficiency in tax collection and expanding the tax base

Decrease by 50 percent the number of income tax returns filed by DGII by the first quarter of 2013 from a baseline of 446,005 tax returns in 2009

Increase of the share of payments to the Government made through P@GOES from 5.25 percent in 2008 to 9.5 percent in 2012.

II. Increasing tax revenues through tax administration actions and fiscal reforms

Increase of 40 basis points of tax revenues as percent of GDP by 2012 as a

result of tax administration measures from a baseline of 13.3 percent which was the average for the period 2006-2008.

Increase of total tax revenues from 13.3 percent of GDP to 14.8 percent in 2012.

III. Increasing efficiency, transparency and accountability in the allocation of public

resources Increase in the Government cash balances monitored by DGT’s system from

US$ 91.9 million in 2009 to US$ 175 million in 2012. 10 percent of commonly used goods and services are purchased though

Framework Agreements in 2012 from a 2009 baseline where no framework agreement was used.

By 2012, no payments to awarded contracts has been made, unless the business opportunity and results were published in COMPRASAL in due time

IV. Protecting vulnerable groups

Each region of the country has at least one functioning consulting committee for monitoring progress with respect to gender equity in the public sector; and a functioning window for information on women’s rights by January 2013. As of October 2009 there were no functioning consulting committees, nor windows for information.

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At least 80 percent of the targeted elderly individuals in the 52 poorest rural municipalities and 2 poor urban municipalities receive cash transfers by January 2013. As of October 2009 no targeted elderly individuals received cash transfers.

At least 2000 students of primary and secondary education are studying under a full-school day period modality by January 2013. As of October 2009, no student studied under full-school day period modality.

1.4 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification There were no revisions to the program development objectives or the core outcome indicators. 1.5 Original Policy Areas Supported by the Program (as approved) The DPL series is designed around two pillars covering four policy areas connected to key priorities in the Government’s development plan (see Annex 1). The first pillar, creating fiscal space for needed social spending comprises three main policy areas: (i) improving efficiency in tax collection and expanding the tax base; (ii) increasing tax revenues; and (iii) promoting efficiency, transparency and accountability in the allocation of public resources. The first pillar is directly linked with the Government’s five-year development plan to increase taxes, increase transparency and efficiency in the allocation of public resources and reduce public debt. The second pillar, protecting and socially including vulnerable groups, is linked to the policy area of protecting vulnerable groups, such as woman, elderly individuals and children in poor regions. This policy area is linked with the Government’s five-year development plan objective to reverse the rise in poverty and expand basic social services to vulnerable segments of the population. Pillar I: Creating Fiscal Space for Needed Social Spending

This pillar supported the Government efforts to improve efficiency in tax collection and expanding the tax base; to increase tax revenues through tax administration actions and fiscal reform; and to increase the efficiency, transparency and accountability in the allocation of public resources. The program set seven outcome indicators under this pillar (Annex 1).

Tax revenues in El Salvador are among the lowest in LAC and they are not sufficient to finance needed social spending. The global crisis and the slowdown in economic activity further worsened the situation as revenues fell by 0.7 percent of GDP and spending need increased. In its efforts expand revenue collection, the Government defined a strategy involving a combination of tax administration and tax policy reforms that would include several actions under the DPL. In particular, the operation supported the strengthening, modernization, and coordination between three tax agencies: Internal Revenue Agency (DGII), the Customs Agency (DGA), and the Ministry of Finance’s Treasury Office (DGT). In parallel, the Government promoted actions to improve the efficiency in spending allocation by shifting resources from non-priority spending areas; to improve resource management and planning; to increase accountability. Actions included the

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centralized monitoring and management of public sector account, and the approval of a comprehensive Access to Information and Transparency Law/ Pillar II: Protecting and Including Vulnerable Segments of the Population. This pillar was aimed to support the Government efforts to reduce social exclusion and poverty incidence among specific vulnerable groups such as women, elderly and children. As shown in Annex 1, there are three outcome indicators under this pillar. Despite the progress achieved during the last decade, poverty and social exclusion are still relatively high compared to pre-crisis levels. Poverty incidence is even higher among specific vulnerable groups (women, elderly and children) which are also among the most affected by external shocks and economic downturns. The Government strategy to protect vulnerable households has been focused on expanding effective and well-targeted safety net programs such as the Cash Transfer Program (Comunidades Solidarias) that supports the consumption of poor rural households and increases their children’s access to basic health, nutrition and education services. This DPL continued supporting policies and programs targeting vulnerable segments of the populations. Taking advantage of the targeting mechanisms developed for Comunidades Solidarias, the Government implemented a new program of monetary transfers to poor elderly individuals, which was supported by the operation. This component also supported the Government efforts to promote gender equality by improving the protection of women, and approving the Law on Equality, Equity and Eradication of Discrimination against Women (2011) that aims at fighting discrimination against women and promoting gender equality; and to publish the Special Integral Law for a Life Free of Violence for Women (2011) aimed at protecting women from violence.

1.6 Revised Policy Areas (if applicable) N/A

1.7 Other significant changes N/A 2. Key Factors Affecting Implementation and Outcomes

2.1 Program Performance Upon the completion of all prior actions, the Public Finance and Social Progress DPL was approved by the Board on June 2, 2011 and signed on July 27, 2011. The single tranche operation became effective on September 7, 2011 and was closed on December 31, 2012. This DPL was the first in a proposed series of two single-tranche programmatic Development Policy Loans (DPLs), but the processing of the second operation was delayed and the series lapsed. It is important to highlight that the government implemented the program actions contemplated as trigger for the second DPL, even though the operation was not completed. (Annex 1)

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Table 3. Policy Areas, Prior Actions and Status

Policy Areas Prior Actions for Board Approval of the first DPL Status Pillar I: Creating fiscal space for needed social spending Improving efficiency in tax collection and expanding the tax base

The Borrower, through the Treasury Office (DGT), entered into separate agreements with Ministry of Health and Social Assistance, Ministry of Agriculture, and the Housing Social on December 16, 21 and 23, 2009, respectively, whereby the ministries and agencies may use the P@GOES to collect electronic payments, in order to improve the efficiency in tax collection.

Met

Increasing tax revenues through tax administration actions and fiscal reform

The Borrower, through Decree 233 of December 16, 2009, published in the Official Gazette (No. 239 of Dec. 21, 2009), has strengthened DGT’s tax recovery instruments by (i) extending the period for processing administrative claims of late tax payments from 10 days to up to 100 days; and (ii) allowing DGT to withhold a certain percentage of income of wage earners and borrower’s service providers, which have tax payments arrears, as established in Art. 273-A of the Tax Code The Customs Agency (DGA) and the Tax Administration Office (DGII) have confirmed that the Directorates have strengthened their respective capacity to fight tax evasion through the implementation of systems that will enable them to select and manage the cases to be audited by the Borrower’s tax authorities, through the following: (i) official letter issued by the head of its Risk Management Unit, dated June 1, 2010; (ii) the approval by its General Director of the technical procedure described in the document entitled “Operability of the Risk Management Unit”, dated October 19, 2010; (iii) the approval by an internal committee of the MH of the Reception Deed of the Programs of Migration/Replication in the Production Environment, dated September 16, 2009, and (iv) the adoption by the head of the Case Selection Unit of the Case Selection Management System, dated August 18, 2010. The DGII has confirmed that in 2010 it started the implementation of new internal processes to monitor and penalize non tax filers and stop tax filers through: (i) an official letter issued by the head of its Tax Omissions Control Section, dated March 31, 2011; and (ii) adoption of technical manuals entitled “Detection, Verification and Control of Late Declaration” dated July 29, 2010, and “Detection, Verification and Control of Tax Omissions and Differences”, dated September 6, 2010.

Met

Increasing efficiency, transparency and accountability in the allocation of public resources

The Borrower, through DGT: (i) has adopted a system that enables it to carry out the daily financial monitoring and control of all Agencies’ bank accounts in the Borrower’s territory, as evidenced by authorization No. 001/2010 of DGT, dated June 23, 2010; and (ii) as a result of the implementation of the above mentioned system, the Borrower has, as of March 31, 2011, attained 100 percent daily financial monitoring and control coverage of the bank accounts

Met

10

Policy Areas Prior Actions for Board Approval of the first DPL Status mentioned in (i), as evidenced by the letters issued by the Bank Accounts Control Department of DGT, dated April 1 and April 11, 2011 respectively.. The Borrower’s Assembly, through Decree No. 534 dated December 10, 2010, has approved the Law on Access to Public Information, which aims at improving transparency and access to public information.

Pillar II. Protection and including vulnerable segments of the population Protecting vulnerable groups

The Borrower’s Assembly, through Decree No. 645 dated March 7, 2011, approved the Law on Equality, Equity and Eradication of Discrimination against Women, which aims at fighting discrimination against women and promoting gender equality. The Borrower’s Assembly, through Decree No. 520 dated November 25, 2010, approved the Special Integral Law for a Life Free of Violence for Women, duly published in the Official Gazette, Tome No. 390 of January 4, 2011, which aims at protecting women from violence. The Borrower, through the Social Protection System Inter-sector Committee, has implemented a cash transfer system for eligible individuals aged 70 years or older in the 32 poorest municipalities located within the Borrower’s territory, in accordance with the Universal Basic Pension for Elderly People Operative Guide, dated November 2009, duly approved by the Borrower's Comité Intersectorial del Sistema de Protección Social Universal on January 29, 2010, as evidenced by the certification issued by the Technical Secretariat of the Presidency of the Republic, on April 15, 2011.

Met

Source: Policy Matrix

2.2 Major Factors Affecting Implementation: The following factors have affected the implementation of the program:

Political Context: The results of the March 2012 mid-term elections and change in the composition of Congress affected implementation. The result of the election intensified the political polarization in the country. Prior to elections, the Government had been able to approve important structural reforms contemplated as an indicative trigger for the second operation, such as comprehensive tax reform, prior to the election. However, after the mid-term election, it was difficult to make progress in issues such as further targeting of subsidies and social programs. This situation contributed to a slower pace of fiscal consolidation. In addition, the increase in the number of seats held by the opposition party allowed the opposition to block loan approvals. Economic context: During implementation of the operation the Salvadoran economy was affected by internal and external shocks. In October 2011, the country was affected by heavy rains that led to important losses on infrastructure and production. The country

11

was also affected by strong fluctuations in commodity prices and the deterioration in the external economic environment following the European debt crisis. These factors impaired growth prospects and imposed fiscal pressures through additional spending, which also contributed to a slowdown in the pace of fiscal consolidation. The fiscal deficit fell to 4 percent in 2011 and to 3.9 percent in 2012, instead of the 3.5 percent and 2.7 percent expected initially. This result against the backdrop of a complicated political context and difficulty implementing stronger consolidation measures led the IMF program to lapse. Despite factors affecting implementation of the operation, the program benefited from: Previous Legal Reforms: The Assembly, through Decree No. 534 dated December 10, 2010 approved the Law on Access to Public Information to improve transparency and access to public information; through Decree No. 645 dated March 7, 2011 approved the Law on Equality, Equity and Eradication of Discrimination against Women, to fight discrimination against women and promoting gender equality; and through Decree No. 520 dated November 25, 2010, approved the Special Integral Law for a Life Free of Violence for Women, to protect women from violence. Implementation also benefited from reforms approved in preparation for the second DPL, such as the 2011 tax reform, the enactment and implementation of a reform to the Tax Law, and the Customs Simplification Law. Consultation with other donors: The DPL was prepared with extensive consultation with the IMF and IADB. The purpose of these consultations was three-fold. First, the meetings intended to promote knowledge sharing and inform participants about the latest analytical work developed by each institution, especially in the areas of tax management, tax policy and public expenditure. Second, the meetings provided an opportunity for coordinating efforts and avoiding overlaps in actions support by the different institutions. Finally, the meetings helped to tune messages and recommendations provided by the different institutions. Government consultations: Finally, the Government has consulted closely with other political and civil society actors during the preparation of the DPL. Taking into account El Salvador’s political context and the potential risk associated with the approval of reform, the Government had promoted consultation on key policies supported by the operation. The Bank continued assisting the Government in the consultation process helping mitigate the risks associated with the approval of the operation in Congress.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: Design, implementation and utilization: Outcome indicators, baseline values, and targets were assigned to each of the four policy areas defined under the DPL program. The design focused on output and outcome indicators that were easy to calculate and that were expected to be achieved by December 2012, closing date of the operation. The M&E sought to align output indicators to indicators and targets frequently monitored by the Government, such as the number of income tax returns filed by DGII, the share of

12

payments to the Government made through P@GOES, the tax revenues as percent of GDP and the Government balances monitored by the DGT’s system. The Ministry of Finance was responsible for the implementation of the program supported by the DPL as well as for coordinating actions among the concerned line agencies, including, in particular, the Central Bank, the Technical Secretariat of the Presidency (for aspects concerning the implementation of social programs), the Ministry of Education (for aspects concerning the education sector) and the Ministry of Health (for aspects concerning the health sector). Together with the Ministry of Finance, these institutions collected the necessary data to assess and report on implementation progress, taking into account both process advances and service statistics, survey and other data that has been used to assess the achievement of the outcome indicators.

2.4 Expected Next Phase/Follow-up Operation (if any): Even though the second DPL was not completed, activities carried out during the preparation helped sustain engagement and supported program implementation. The second DPL in the series developed until appraisal. The analytical and technical work developed during preparation helped inform policy discussion in different areas, such as subsidy targeting, distribution impacts of tax reform, and fiscal rules. This work contributed to the implementation of most indicative triggers for the second operation and continuation of the program beyond the approval of the second loan.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

The policy areas of support under this DPL remain relevant. The DPL was prepared while El Salvador was starting to recover from the impact of the global crisis. Preparation took place shortly after the release of the Government Development Plan and was directly linked to its objectives (see Section 1.5). The program supported by the operation remained relevant and helped the Government through a complicated political and economic environment. In fact, the program continued being implemented despite the lack of a second DPL.

3.2 Achievement of Program Development Objectives Overall, El Salvador has made significant progress toward meeting the target outcomes, but the program was not fully successful in achieving all development objectives. The PDOs were to assist the Government in promoting social development and inclusion by creating fiscal space for social expenditure, while maintaining a sustainable medium-term fiscal framework. The PDO focused on ten outcome indicators under four policy areas, for which the program could be held accountable given the scope of the operation. The DPL fully met six out of ten outcome indicators, and partially met two indicators. Annex 1 details the status of the outcomes as of the closing of the

13

operation. The outcomes and current status of each indicator under each pillar are also discussed below. Policy Area I.1: Improving efficiency in tax collection and expanding the tax base Outcome Indicator 1:The number of income tax returns filed by DGII was expected to decrease by 50 percent from a baseline of 445.005 tax returns in 2009 (equivalent to 84 percent of total tax files), to 223.002 by the first quarter of 2013. This indicator should track the impact of a reform, implemented in 2012, based on the adjustment of the table of tax retentions for wage earners and tax exception of small non labor income. As of April 2013 the number of income tax returns filed by DGII was 374,004, a decrease of 35 percent compared to April 2012 (575,819). The tax reform did not reduce the number of income tax returns filed by the DGII by 50 percent with respect to the baseline, due to delays in the implementation of tax system reforms, but made progress towards the proposed decrease. (Not achieved) Outcome Indicator 2: The share of payments to the Government made through P@GOES was expected to increase from 5.25 percent in 2008 to 9.5 percent in 2012. This DPL supported actions for improving efficiency in tax collection and expanding the tax base included in the El Salvador electronic payment platform (P@GOES), thus reducing tax collection costs and helping improve coordination. As of December 2012 the payments made to the Government through the platform for electronic payments P@GOES was 30.1 percent. This result surpassed the target in terms of percentage of total payments to the government (Achieved) Policy Area I.2: Increasing tax revenues through tax administration actions and fiscal reform Outcome Indicator 1: Tax revenues as percent of GDP have increased 40 basis points by 2012 as a result of tax administration measures from a baseline of 13.3 percent for the period 2006-2008, prior to the economic crisis. As of December 2012 the tax revenue as percent of GDP increased by 1.1 percentage points, with respect to the baseline average of 13.3 percent for 2006-2008, mainly as a result of tax administration measures and custom revenue efforts and not due to tax rate increases (Achieved) Outcome Indicator 2: Total tax revenues have increased from an average of 13.3 percent of GDP in 2006-2008 to 14.8 percent in 2012. In 2012 net tax revenues to GDP were 14.4 percent, an improvement compared to the average of 13.3 percent of GDP for 2006-2008, but not sufficient to meet the target of 14.8 percent due to external and internal conditions that lowered economic activity. (Partially achieved) Policy Area I.3: Increasing efficiency, transparency and accountability in the allocation of public resources Outcome Indicator 1: The Government balances monitored by DGT’s system increased from US$91.9 million in 2009 to US$175 million in 2012. As of December

14

2012, Government balances supervised by the DGT system rose from $91.9 million in 2008 to $122.54 million in 2012 (Not Achieved) Outcome Indicator 2: Ten percent of common used goods and services were expected to be purchased through framework Agreements in 2012 from a baseline in 2009 where no framework agreement was used. The National Assembly did not approve Art 4 of the reform proposed by the Executive containing the Framework Agreements. For this reason, during the preparation of the second operation the Bank was considering a revision to this indicator (Not Achieved). Outcome Indicator 3: No payments to awarded contracts has been made in 2012 unless the business opportunity and results were published in COMPRASAL in due time. By linking the publication of procurement opportunities with payments, the Government would ensure that 100 percent of bidding opportunities are published online. As of December 2012 transparency over public resources management has been significantly improved with the publication of the results and conditions for all public contracts. Additionally, the government implemented in 2012 a mechanism that ensures that no contract can be paid unless results are published in the portal. (Achieved) Policy Area II Protecting vulnerable groups Outcome Indicator 1: Each region of the country has at least one functioning consulting committee for monitoring progress with respect to gender equity in the public sector and a functioning window for information on women’s rights by January 2013. As of October 2009 there were no functioning consulting committees or windows for information. As of December 2012, there were 14 functioning consulting committees monitoring progress in gender equality in the public sector, and 11 regions of the country had at least one functioning information window on women rights. Additionally, there were 570 mobile operational information windows at the country level. (Achieved) Outcome Indicator 2: At least 80 percent of the target elderly individuals in the 52 poorest rural municipalities and 2 urban municipalities receive cash transfers by January 2013. As of October 2009, no targeted elderly individuals received cash transfers. Cash transfer programs for elderly individuals cover more than the number of municipalities targeted at project inception, including the poorest departments in the country. In fact, as of January 2013, 80 percent of the elderly individuals in 75 municipalities receive cash transfers, which include the 52 poorest of the rural area. The CT program was not extended to urban municipalities. (Achieved) Outcome Indicator 3: At least 2000 students of primary and secondary education are studying under the full-school day period modality by January 2013. (Baseline: No student studied under full-school day period in October 2009. By January 2013, approximately 10,356 students are studying under the extended-day modality and an approximate of 16,968 students are studying under indirect modality, in 53 full-day inclusive schools. (Achieved)

15

3.3 Justification of Overall Outcome Rating Rating: Moderately Satisfactory The program supported by the DPL series was almost fully implemented, even though the second DPL did not materialize. This contributed to further progress towards the PDO and improvements in almost all results indicators. Progress under pillar one was partial. Most targets related to improving efficiency in tax collection and increasing efficiency and transparency in the allocation of public resources were fully achieved. By December 2012, the payments made to the Government through P@GOES reached 30.1 percent and transparency over public resources management significantly improved with the publication of the results and conditions for all public contracts. Results related to revenues collection were also strong, although below target. The number of income tax returns filed by DGII decrease 17 percent (instead of 50 percent); tax revenues increase to 14.4 percent of GDP (instead of 14.8 percent) in large due to tax administration measure. It was not possible to increase significantly the amount of Government balances monitored by the DGT, or get the approval from the National Assembly to implement framework agreements for the purchases of goods and services. Pillar two was successfully implemented. Important progress was made in protecting vulnerable groups by: implementing 14 functioning consulting committees monitoring progress in gender equality in the public sector and creating in 11 regions of the country at least one functioning information window on women rights; expanding the cash transfer to 80 percent of the target elderly individuals in 75 municipalities, including the 52 poorest rural municipalities; and increasing to 10,356 the number of students under the extended-day modality and to approximately 16,968 the students studying under indirect modality, in 53 full-day inclusive schools.

3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The actions for strengthening the country’s fiscal position supported by this DPL were expected to have a positive overall distributional impact. The latest PER indicated that high public debt has adversely impacted the poor by reducing fiscal space for priority social spending and investment programs. The gains in poverty reduction achieved during the previous decade were partially reversed by the crisis. The poverty rate reached 40 percent at the end of 2008 and remained relatively high at 37.8 percent in 2009. The operation supported Government efforts to protect the poor and vulnerable groups and included legislative actions aimed at improving gender equality. In the wake of the Government efforts, and despite a challenging external and economic environment, poverty and extreme poverty rates were reduced to 34.5 and 8.9 percent of GDP respectively. There has also been significant progress made in protecting vulnerable

16

groups in rural areas by increasing the coverage of the CT program to 80 percent of the eligible elders in 75 rural municipalities.

(b) Institutional Change/Strengthening The DPL helped promoting institutional changes by supporting actions: to improve efficiency in tax collection by strengthening DGII’s institutional capacity; to increase tax revenues through tax and custom administration actions; and to increase efficiency and transparency in the allocation of public resources given the low levels of tax revenues, increasing pressures from public services delivery, and the adverse effects of external shocks that have limited the financing needed for needed social investments. These actions are fully consistent with the objective of strengthening fundamentals for economic recovery by addressing macro and institutional vulnerabilities. Finally, this operation supported actions towards the protection of vulnerable groups such as designing and implementing a cash transfer system to elderly individuals in the poorest municipalities. Moreover, institutional strengthening continued as the government proceeded with the implementation of prior actions for the second DPL (c) Other Unintended Outcomes and Impacts (positive or negative, if any) N/A

3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A

4. Assessment of Risk to Development Outcome Rating: Moderate Rating: Moderate Political risks: The polarized political climate in El Salvador continues to be a potential obstacle to approve reforms and loans. In addition, the upcoming presidential elections (March 2014) further increase tensions and might impose spending pressures, slowing fiscal consolidation. The difficult political context may affect the ability to continue making progress towards the PDO, but the Government commitment remains, and it is unlikely that the results achieved so far would be reverted. Macroeconomic risks: The prolonged global deceleration and higher volatility continue to impose risks to the El Salvador economy. The potential impacts on the country are similar to the ones associated with the 2008 financial crisis, including low growth, fiscal, social and financial pressures. In some fronts, El Salvador is now better prepared to mitigate the impact of a crisis. Since 2008 the Government has expanded social protection programs and safety nets. In addition, the Government has strengthened the financial sector monitoring and crisis preparedness. In other fronts El Salvador’s position is more vulnerable. Economic growth remains low and, despite fiscal consolidation efforts, the public debt and fiscal accounts are still higher than its pre-2008 levels.

17

Natural disasters risks. El Salvador is highly vulnerable to multiple natural disasters risks –floods, hurricanes and earthquakes. A major climatic or seismic disaster poses a significant threat to economic growth and fiscal stability and can delay the Government’s program. In fact, the latest prolonged tropical storms had significant economic impacts (up to US$850 million). The Government efforts to strengthening disaster management systems help prevent fatalities, but after the full disbursement of the CAT-DDO (US$50 million), the Government counts with fewer instruments for immediate emergency responses. The occurrence of a major natural disaster could imply a reassessment of the country’s development priorities (at least temporarily) and delays progress towards the medium term development objectives.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The design of the DPL was appropriate, timely, and relevant for addressing the challenges faced by the country given external and internal developments, including the risks associated with the polarized political climate. The DPL was designed in close collaboration with the Government to ensure that actions supported by the operation were fully consistent with the country’s long term development goals, in particular, creating fiscal space needed for sustainable social spending, enhancing the social gains achieved during the last decade and protecting vulnerable segments of the population. Moreover, the design of the Public Finance and Social Progress DPL benefited from the findings and recommendations of previous analytical pieces such as the Public Expenditure Review (2010) and the Public Financial Management Performance Measurement Framework (FY09), which explain the link between the analytical findings and the policy actions supported by this DPL. (b) Quality of Supervision Rating: Satisfactory Supervision was carried formally through three supervision missions that followed the Ministry of Finance and the Bank agreement settled during project preparation. These reviews are summarized in three Implementation Status and Results (ISR). The first supervision mission took place on August 2011 with the purpose of monitoring the government's progress towards targeted outcomes. During this first mission the Bank documented improvements on most outcome indicators, with the exception of the fiscal pact. The fiscal reform prepared by the Ministry of Finance had not been presented to the Social and Economic Council for consultations at that time. The second and third supervision missions took place in April and December 2012. The Program Performance was considered satisfactory by the first two ISRs, however during the third supervision mission the progress towards achievement of PDO was rated as moderately satisfactory due to the slowdown in fiscal consolidation (fiscal deficit fell to 3.9 percent instead of the

18

3.5 percent initially projected), and positive but slower progress in some of the result indicators. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The operation supported relevant development objectives, and helped build consensus around those issues. Supported issues, such as fiscal sustainability and efficiency and protection and inclusion of vulnerable segments of the population, remain relevant despite the adverse shocks that affected the Salvadoran economy during the implementation period. Many aspects of Bank performance contributed to this outcome. First, the continued engagement through analytical work and policy dialog helped the implementation of the program supported by the DPL series. Second, the Bank coordinated closely with other donors. Third, the operation correctly identified a number of risks for program sustainability and helped mitigate them. Finally, the monitoring and evaluation system in place allowed both the Government and the Bank to periodically track progress toward the target outcomes. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory Throughout the preparation and supervision process of the operation, the Ministry of Finance coordinated with the different ministries and line agencies involved in the operation including, DGA, DGII and DGT. The coordination was instrumental in shaping the actions of each institution and ensuring the timely implementation of the multiple prior actions under the program (Table 3). However, changes in the economic and political context led the Bank team to delay the preparation of the second operation; the DPL series lapsed and this loan became a stand-alone operation. On the economic side, weak external and low GDP growth contributed to a slower pace of fiscal consolidation and the interruption of the IMF program in the country. On the political side, mid-term election changed the political composition in Congress affecting the Government’s support and its ability to approved loans and sensitive reforms, further slowing fiscal consolidation. Despite the difficult context, El Salvador’s Government remained committed with the objectives of the program. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory The Ministry of Finance was the principal executing agency, responsible for the implementation and overall coordination of the operation as agreed at the inception of the program. The Ministry of Finance was responsible for the implementation as well as for coordinating actions among the concerned line agencies, including, in particular, the Central Bank, the Technical Secretariat of the Presidency (for social programs) and the Ministry of Education (for the education sector).Together with the Ministry of Finance, these institutions collected the data, sometimes with delays or incomplete, to assess

19

implementation progress and report it to the Bank, taking into account both process advances and service statistics, survey and other data used to assess the achievement of the outcomes. Despite the difficult political and economic context, the Government continued implementing the program supported by the operation and completed almost all indicative triggers supported by the second operation. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory The borrower’s engagement during the preparation, implementation and supervision was overall satisfactory. As described above, substantial progress was made in implementation of the program. However, the slowdown in fiscal consolidation, driven by political and economic challenges, affected the achievement of at three of the outcome indicators and interfered with the completion of the DPL series.

6. Lessons Learned Sustaining the dialogue on macroeconomic performance and the program of reforms were critical for the outcome of a Development Policy Loan. This operation was supposed to be the first of a series of two DPLs but ended up as a standalone operation because of the complicate political and economic environment in the country. The Bank continued engagement providing technical support and helping inform the policy debate. Even though these efforts were not sufficient for the completion of the second operation, they contribute to the implementation of the program of reforms and to the fiscal consolidation debate in the country. Sustained engagement developed knowledge and helped the Bank to respond with flexibility to a changing country context. Despite the difficulties encountered in obtaining approval of foreign borrowing in the Assembly, the Bank remained fully engaged, contributing via analytical work, consensus building activities and strategy/program development. The analytical work helped to identify gaps in specific sectors and shortcomings that contributed to cope with the severe effects of the 2009 economic crisis, and was also critical for informing stakeholders and building consensus around important development issues such as the targeting of subsidies, tax reform, and the need for fiscal consolidation In particular, the two previous DPLs, the Public Finance and Social Sector (2009) that focused in strengthening the medium-term fiscal sustainability and supporting transparency in the use of public resources; the Sustained Social Gains for Economic Recovery Program (2009) that supported the design of initiatives and institutional strengthening in the social sectors; and the PER (2010) that provided great support to the DPL series. This DPL was one of the first DPLs to successfully support a gender reform agenda. The National Development identified gender equity as an important challenge for El Salvador. Taking advantage of this favorable context, the Bank team supported the Government in the preparation and approval of two important laws, the Gender Equity Law and Women’s Protection against Violence Law. Gender was introduced to the DPL

20

storyline within a strategy to protect vulnerable segments of the population, and it was appreciated internally at the Bank and by the counterparts in the country. The political climate in El Salvador can impede the approval of reforms. Political risks materialized during implementation which made it difficult to achieve expenditure and revenue targets. The most recent mid-term elections changed the composition of Congress, allowing the opposition to block the two-third majority required by El Salvador’s constitution to approve new legislation and loans. Although the Government tried to mitigate this risk by intensifying consultation on policy reforms and by explaining the content of the reform to the different stakeholders involved in the political process, they were not able to fully obtain the results. The political situation became even more complicated in the lead up to the Presidential election.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies The comments provided by the borrower to the implementation completion report on the Public Finance and Social Progress Development Policy Loan are included in Annex 3. (b) Co-financiers N/A (c) Other partners and stakeholders N/A

21

An

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Aug

ust 1

8, 2

010.

Th

e D

GII

has

con

firm

ed th

at in

201

0 it

star

ted

the

impl

emen

tatio

n of

new

inte

rnal

pro

cess

es to

mon

itor a

nd

pena

lize

non

tax

filer

s and

stop

tax

filer

s thr

ough

: (i)

an

offic

ial

lette

r iss

ued

by th

e he

ad o

f its

Tax

Om

issi

ons C

ontro

l Sec

tion,

da

ted

Mar

ch 3

1, 2

011;

(ii)

the

adop

tion

of te

chni

cal m

anua

ls

entit

led

“Det

ectio

n, V

erifi

catio

n an

d C

ontro

l of L

ate

Dec

lara

tion”

dat

ed Ju

ly 2

9, 2

010,

and

“D

etec

tion,

Ver

ifica

tion

and

Con

trol o

f Tax

Om

issi

ons a

nd D

iffer

ence

s”, d

ated

Se

ptem

ber 6

, 201

0.

An

exec

utiv

e de

cree

aim

ed a

t cre

atin

g a

new

, sim

plifi

ed sc

hedu

le fo

r inc

ome

tax

paym

ents

from

wag

e ea

rner

s and

a n

ew

legi

slat

ion

impl

emen

ting

a si

ngle

-tax

regi

me

for s

mal

l and

mic

ro e

nter

pris

es h

ave

been

ena

cted

. Sta

tus:

The

sim

plif

ied

inco

me

sche

dule

was

impl

emen

ted.

The

tax

regi

me

for

smal

l and

mic

ro e

nter

pris

es w

as

pres

ente

d to

Con

gres

s an

d is

und

er

disc

ussi

on.

The

Gov

ernm

ent h

as st

reng

then

ed ta

x pa

yers

’ mon

itorin

g by

com

plet

ely

inte

grat

ing

DG

A a

nd D

GII

tax

paye

r’s

regi

stry

and

info

rmat

ion

syst

em. S

tatu

s:

Impl

emen

ted.

A

new

fisc

al re

form

, for

mul

ated

in

cons

ulta

tion

with

the

key

stak

ehol

ders

of E

l Sa

lvad

or so

ciet

y, h

as b

een

enac

ted

and

is

unde

r im

plem

enta

tion.

Sta

tus:

Im

plem

ente

d.

1. T

he n

umbe

r of i

ncom

e ta

x re

turn

s file

d by

DG

II

decr

ease

d 50

per

cent

by

the

first

qua

rter o

f 201

3 (B

asel

ine:

446

,005

tax

retu

rns i

n 20

09).

2. T

he sh

are

of p

aym

ents

to

the

Gov

ernm

ent m

ade

thro

ugh

P@G

OES

in

crea

sed

from

5.2

5 pe

rcen

t in

2008

to 9

.5

perc

ent i

n 20

12

3. T

ax re

venu

es a

s per

cent

of

GD

P ha

ve in

crea

sed

40

basi

s poi

nts b

y 20

12 a

s a

resu

lt of

tax

adm

inis

tratio

n m

easu

res.

(Bas

elin

e: 1

3.3

perc

ent,

aver

age

2006

-200

8,

perio

d pr

ior t

o th

e ec

onom

ic c

risis

). 4.

Tot

al ta

x re

venu

es h

ave

incr

ease

d fr

om a

n av

erag

e of

13.

3 pe

rcen

t of G

DP

in

2006

-200

8 to

14.

8 pe

rcen

t in

201

2.

.

Not

Ach

ieve

d

The

num

ber o

f inc

ome

tax

retu

rns f

iled

by D

GII

in

Apr

il 20

13 w

as 3

74,0

04, a

de

crea

se o

f 35%

com

pare

d to

Apr

il 20

12 (5

75,8

19).

The

tax

retu

rns i

n A

pril

2013

hav

e re

duce

d 16

pe

rcen

t with

resp

ect t

o th

e ba

selin

e.

Ach

ieve

d

As o

f Dec

embe

r 201

2 th

e pa

ymen

ts m

ade

to th

e G

over

nmen

t thr

ough

P@

GO

ES w

as 3

0.1%

. Th

is

resu

lt su

rpas

sed

the

targ

et.

Ach

ieve

d

The

tax

reve

nue

as p

erce

nt

of G

DP,

incr

ease

d by

1.2

pe

rcen

tage

poi

nts i

n 20

12,

with

resp

ect t

o th

e ba

selin

e av

erag

e of

13.

3% fo

r 200

6-20

08.

Par

tial

ly a

chie

ved

In

201

2 ta

x re

venu

es to

G

DP

was

14.

4%, a

n im

prov

emen

t com

pare

d to

th

e av

erag

e of

13.

3% o

f G

DP

for 2

006-

2008

, but

not

su

ffic

ient

to m

eet t

he ta

rget

.

22

Ob

ject

ives

an

d

Pol

icy

Are

as

Pri

or A

ctio

ns

for

Boa

rd A

pp

rova

l In

dic

ativ

e T

rigg

ers

for

the

Sec

ond

D

PL

O

utc

ome

Ind

icat

ors

(Dec

emb

er 2

012)

S

tatu

s b

y D

ecem

ber

20

12

I. (c

) Inc

reas

ing

effic

ienc

y,

trans

pare

ncy

and

acco

unta

bilit

y in

th

e al

loca

tion

of

publ

ic re

sour

ces

The

Bor

row

er th

roug

h th

e Tr

easu

ry O

ffic

e (D

GT)

: (a

) has

ado

pted

a sy

stem

that

ena

bles

it to

car

ry o

ut th

e da

ily

finan

cial

mon

itorin

g an

d co

ntro

l of a

ll A

genc

ies’

ban

k ac

coun

ts

in th

e B

orro

wer

’s te

rrito

ry, a

s evi

denc

ed b

y au

thor

izat

ion

No.

00

1/20

10 o

f DG

T, d

ated

June

23,

201

0; a

nd

(b) a

s a re

sult

of th

e im

plem

enta

tion

of th

e ab

ove

men

tione

d sy

stem

, ha

s, as

of M

arch

31,

201

1, a

ttain

ed 1

00 p

erce

nt d

aily

fin

anci

al m

onito

ring

and

cont

rol c

over

age

of th

e ba

nk a

ccou

nts

men

tione

d in

(a),

as e

vide

nced

by

the

lette

rs is

sued

by

the

Ban

k A

ccou

nts C

ontro

l Dep

artm

ent o

f the

DG

T, d

ated

Apr

il 1

and

Apr

il 11

, 201

1, re

spec

tivel

y.

The

Bor

row

er, t

hrou

gh M

OPT

VD

U, C

EPA

, FIS

DL

and

CN

R

has e

nter

ed in

to a

coo

pera

tion

agre

emen

t with

CA

SALC

O a

nd

FUN

DE,

dat

ed A

ugus

t 31,

200

9, w

hich

cre

ated

the

Citi

zen

Obs

erva

tory

of P

ublic

Wor

ks, f

or th

e pu

rpos

e of

, int

er a

lia,

pr

even

ting

corr

uptio

n by

incr

easi

ng th

e tra

nspa

renc

y in

pub

lic

man

agem

ent a

nd in

crea

sing

the

colla

bora

tion

amon

gst c

itize

ns,

entre

pren

eurs

and

the

Bor

row

er.

The

Bor

row

er’s

Ass

embl

y, th

roug

h D

ecre

e N

o. 5

34 d

ated

D

ecem

ber 1

0, 2

010,

has

app

rove

d th

e La

w o

n A

cces

s to

Publ

ic

Info

rmat

ion,

whi

ch a

ims a

t im

prov

ing

trans

pare

ncy

and

acce

ss to

pu

blic

info

rmat

ion.

The

Gov

ernm

ent w

ill c

ontin

ue e

ffor

ts to

im

prov

e pl

anni

ng a

nd ta

rget

ing

of p

ublic

sp

endi

ng b

y ex

pand

ing

the

resu

lt-ba

sed

budg

etin

g R

BB

fram

ewor

k, to

two

addi

tiona

l Gov

ernm

ent a

genc

ies.

Sta

tus:

Im

plem

ente

d.

The

Gov

ernm

ent p

asse

d an

d is

im

plem

entin

g a

regu

latio

n to

ena

ble

fram

ewor

k ag

reem

ents

for u

se in

pub

lic

proc

urem

ent p

roce

ss b

y al

l cen

tral

Gov

ernm

ent a

genc

ies.

Sta

tus:

The

im

plem

enta

tion

of f

ram

ewor

k ag

reem

ents

w

as p

art o

f the

Pub

lic

Pro

cure

men

t Law

re

form

pro

posa

l sub

mit

ted

to C

ongr

ess.

H

owev

er, t

his

elem

ent w

as c

ut d

urin

g co

ngre

ss d

iscu

ssio

ns a

nd w

as n

ot p

art o

f th

e fi

nal r

efor

m a

ppro

ved.

Th

e G

over

nmen

t has

inco

rpor

ated

100

pe

rcen

t of c

entra

l Gov

ernm

ent b

usin

ess

oppo

rtuni

ties a

nd re

sults

pub

lishe

d in

C

OM

PRA

SAL.

Sta

tus:

Im

plem

ente

d.

The

Gov

ernm

ent h

as st

arte

d im

plem

entin

g th

e A

cces

s to

Publ

ic In

form

atio

n La

w b

y: i)

es

tabl

ishi

ng a

n in

depe

nden

t Tra

nspa

renc

y an

d Pu

blic

Info

rmat

ion

over

sigh

t age

ncy

and

ii) e

lect

ing

its g

over

ning

boa

rd. S

tatu

s:

Par

tial

ly I

mpl

emen

ted.

The

gov

erni

ng

body

was

cre

ated

and

bud

get h

as b

een

assi

gned

, but

can

dida

tes

from

the

first

ro

und

of e

lect

ions

of t

he tr

ansp

aren

cy

agen

cy g

over

ning

bod

y w

as v

etoe

d by

the

Pre

side

nt a

nd n

ew e

lect

ions

will

take

pl

ace.

Nev

erth

eles

s th

e co

untr

y ha

s pr

epar

ed a

nd r

elea

sed

the

rele

vant

in

form

atio

n by

May

8,2

012.

(da

te o

f ef

fect

iven

ess

of th

e A

cces

s to

Pub

lic

Info

rmat

ion

Law

).

5. T

he G

over

nmen

t ba

lanc

es m

onito

red

by

DG

T’s s

yste

m in

crea

sed

from

US$

91.9

mill

ion

in

2009

to U

S$17

5 m

illio

n in

201

2.

6. T

en p

erce

nt o

f com

mon

us

ed g

oods

and

serv

ices

pu

rcha

sed

thou

gh

Fram

ewor

k A

gree

men

ts

in 2

012

(Bas

elin

e: n

o fr

amew

ork

agre

emen

t was

us

ed in

200

9)

7. N

o pa

ymen

ts to

aw

arde

d co

ntra

cts h

as

been

mad

e in

201

2 un

less

th

e bu

sine

ss o

ppor

tuni

ty

and

resu

lts w

ere

publ

ishe

d in

CO

MPR

ASA

L in

due

tim

e. B

y lin

king

the

publ

icat

ion

of

proc

urem

ent o

ppor

tuni

ties

with

pay

men

ts, t

he

Gov

ernm

ent w

ill e

nsur

e th

at 1

00 p

erce

nt o

f bi

ddin

g op

portu

nitie

s are

pu

blis

hed

onlin

e.

Not

ach

ieve

d

Gov

ernm

ent b

alan

ces

supe

rvis

ed b

y D

GT

syst

em

rose

from

$91

.9 m

illio

n in

20

08 to

$12

2.54

mill

ion

in

2012

. N

ot a

chie

ved

Th

e A

ssem

bly

didn

’t ap

prov

e A

rt 4

of th

e re

form

(fra

mew

ork

agre

emen

ts),

ther

efor

e it

was

agr

eed

that

this

in

dica

tor w

ould

be

subs

titut

ed d

urin

g th

e pr

epar

atio

n of

DPL

2,

whi

ch w

as n

ot c

oncl

uded

.

Ach

ieve

d A

s of D

ecem

ber 2

012

trans

pare

ncy

over

pub

lic

reso

urce

s man

agem

ent h

as

been

sign

ifica

ntly

im

prov

ed w

ith th

e pu

blic

atio

n of

the

resu

lts

and

cond

ition

s for

all

publ

ic c

ontra

cts

23

Ob

ject

ives

an

d

Pol

icy

Are

as

Pri

or A

ctio

ns

for

Boa

rd A

pp

rova

l In

dic

ativ

e T

rigg

ers

for

the

Sec

ond

D

PL

O

utc

ome

Ind

icat

ors

(Dec

emb

er 2

012)

S

tatu

s b

y D

ecem

ber

20

12

Pil

lar

II. P

rote

ctin

g an

d I

ncl

ud

ing

Vu

lner

able

Seg

men

ts o

f th

e P

opu

lati

on.

II. P

rote

ctin

g vu

lner

able

gro

ups

The

Bor

row

er’s

Ass

embl

y, th

roug

h D

ecre

e N

o. 6

45 d

ated

Mar

ch

7, 2

011,

has

app

rove

d th

e La

w o

n Eq

ualit

y, E

quity

and

Er

adic

atio

n of

Dis

crim

inat

ion

agai

nst W

omen

, whi

ch a

ims a

t fig

htin

g di

scrim

inat

ion

agai

nst w

omen

and

pro

mot

ing

gend

er

equa

lity.

Th

e B

orro

wer

’s A

ssem

bly,

thro

ugh

Dec

ree

No.

520

dat

ed

Nov

embe

r 25,

201

0, h

as a

ppro

ved

the

Spec

ial I

nteg

ral L

aw fo

r a

Life

Fre

e of

Vio

lenc

e fo

r Wom

en, d

uly

publ

ishe

d in

the

Off

icia

l G

azet

te, T

ome

No.

390

of J

anua

ry 4

, 201

1, w

hich

aim

s at

prot

ectin

g w

omen

from

vio

lenc

e.

The

Bor

row

er, t

hrou

gh th

e So

cial

Pro

tect

ion

Syst

em In

ter-

sect

or

Com

mitt

ee, h

as im

plem

ente

d a

cash

tran

sfer

syst

em fo

r elig

ible

in

divi

dual

s age

d 70

yea

rs o

r old

er in

the

32 p

oore

st

mun

icip

aliti

es lo

cate

d w

ithin

the

Bor

row

er’s

terr

itory

, in

acco

rdan

ce w

ith th

e U

nive

rsal

Bas

ic P

ensi

on fo

r Eld

erly

Peo

ple

Ope

rativ

e G

uide

, dat

ed N

ovem

ber 2

009,

dul

y ap

prov

ed b

y th

e B

orro

wer

's C

omit

é In

ters

ecto

rial

del

Sis

tem

a de

Pro

tecc

ión

Soci

al U

nive

rsal

on

Janu

ary

29, 2

010,

as e

vide

nced

by

the

certi

ficat

ion

issu

ed b

y th

e Te

chni

cal S

ecre

taria

t of t

he P

resi

denc

y of

the

Rep

ublic

, on

Apr

il 15

, 201

1.

The

Gov

ernm

ent h

as a

dvan

ced

in th

e im

plem

enta

tion

of it

s gen

der e

quity

age

nda

by p

ilotin

g a

met

hodo

logy

for g

ende

r pe

rspe

ctiv

e in

the

Bud

get f

orm

ulat

ion

proc

ess i

n at

leas

t thr

ee G

over

nmen

t pr

ogra

ms.

Sta

tus:

Im

plem

ente

d.

The

soci

al p

rote

ctio

n pr

ogra

m

“Com

unid

ades

Sol

idar

ias

Urb

anas

” is

op

erat

iona

l in

5 po

or u

rban

mun

icip

aliti

es

and

its b

enef

icia

ries h

ave

been

inco

rpor

ated

to

the

sing

le re

gist

ry. S

tatu

s: I

mpl

emen

ted.

Th

e G

over

nmen

t, th

roug

h th

e M

inis

try o

f Ed

ucat

ion,

has

hel

p pr

otec

t you

ng

indi

vidu

als a

t ris

k by

pilo

ting

of a

full-

scho

ol d

ay p

erio

d in

22

scho

ols.

Sta

tus:

Im

plem

ente

d.

8. E

ach

regi

on o

f the

co

untry

has

at l

east

one

fu

nctio

ning

con

sulti

ng

com

mitt

ee fo

r mon

itorin

g pr

ogre

ss w

ith re

spec

t to

gend

er e

quity

in th

e pu

blic

sect

or a

nd a

fu

nctio

ning

win

dow

for

info

rmat

ion

on w

omen

’s

right

s by

Janu

ary

2013

. (B

asel

ine:

The

re w

ere

no

func

tioni

ng c

onsu

lting

co

mm

ittee

s nor

win

dow

s fo

r inf

orm

atio

n in

Oct

ober

20

09)

9. A

t lea

st 8

0 pe

rcen

t of

the

targ

et e

lder

ly

indi

vidu

als i

n th

e 52

po

ores

t rur

al

mun

icip

aliti

es a

nd 2

urb

an

mun

icip

aliti

es re

ceiv

e ca

sh tr

ansf

ers b

y Ja

nuar

y 20

13. (

Bas

elin

e: N

o ta

rget

ed e

lder

ly

indi

vidu

als r

ecei

ved

cash

tra

nsfe

rs in

Oct

ober

200

9)

10. A

t lea

st 2

000

stud

ents

of

prim

ary

and

seco

ndar

y ed

ucat

ion

are

stud

ying

un

der t

he fu

ll-sc

hool

day

pe

riod

mod

ality

by

Janu

ary

2013

. (B

asel

ine:

N

o st

uden

t stu

died

und

er

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24

Annex 2 Bank Lending and Implementation Support/Supervision Processes (a) Task Team members

Names Title Unit Responsibility/ Specialty

Luc Razafimandimby Senior Economist LCSPE Task Team Leader

Barbara Cunha Senior Country Economist LCSPE DPL Task Team Leader

Alberto Leyton Senior Public Sector Specialist AFTP1 Former Country Manager

Oscar Calvo-Gonzalez Lead Economist and Sector Leader LCSPR Lead Economist and

Sector Leader

Enrique Fanta Senior Public Sector Specialist LCSPS Public Sector Specialist

Michael Drabble Senior Education Specialist LCSHE Education Specialist

Jania Ibarra Operations Analyst LCCSV Operations Analyst

Mateo Clavijo Junior Professional Associate LCSPE Junior Professional

Associate

Patricia Chacon Holt Language Program Assistant LCSPE Team Support

(b) Staff time and cost

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending 4.36 27,057.09

Supervision/ICR 5.0 12,925.00

Total: 39,982.09

25

Annex 3. Summary of Borrower's ICR and/or Comments on Draft ICR On behalf of the Government of El Salvador, the Minister of Finance expressed its agreement with the content of the Implementation Completion Report (ICR) in a letter to the Resident Representative in El Salvador dated June 12, 2013. The letter includes comments and observations that are summarized below: The Government has reviewed the ICR and believes it reflects well the process of implementation and the results of the program. The financial resources of the operation have been of great relevance to assist the Government in creating fiscal space for needed social expenditure by supporting actions to increase tax revenues and to improve efficiency and transparency in the allocation of public resources; and in protecting and including vulnerable segments of the population by allocating additional public resources towards social programs targeting vulnerable groups such as the elderly, women, and children. In this regard, the technical and financial assistance of the World Bank continues to be critical to finance needed social spending for the most vulnerable groups of the population and to contribute to the social agenda of the current Administration. Based on the experience of this first Public Finance and Social Progress Development Policy Loan, the Government of El Salvador reaffirms the convenience of single-tranche operations due to its quick disbursement. With regard to the results of the operation, the Ministry of Finance believes that outcome indicators 1 and 5, related to the number of income tax returns filed by DGII and the Government balances monitored by DGT, have been partially achieved given the progress made. This advance is reflected in a decrease of 16.1 percent of income tax returns versus the target of 50 percent; and the increase of US$30.6 million of Government balances monitored by DGT, versus the targets of US$83.1 million. Finally, in relation to indicator 6, the lack of implementation of framework agreements for the purchases of goods and services was due to the non-approval of legal reforms submitted by the Executive to the National Assembly. Therefore the Government concludes that in future operations there should be a more pragmatic identification of outcome indicators to avoid non compliance

27

Annex 4. List of Supporting Documents

El Salvador - Public Finance and Social Progress Development Policy Loan in the amount of US$100 million to the Republic of El Salvador. Report No. 59896-SV, April 22, 2011

El Salvador- Second Programmatic Public Finance and Social Progress Development in the amount of US$150 million to the Republic of El Salvador. Report No. 67412-SV, June 7, 2012 (Draft)

Country Partnership Strategy Progress Report for the Republic of El Salvador for the period FY2010-14. Report No. 61113-SV, June 24, 2011

Statement by an IMF Mission on the 2013 Article IV Consultation to El Salvador, March 19, 2013

Statement by an IMF Mission on the 2013 Article IV Consultation to El Salvador, May 29. 2012

Implementation Status and Results Report for El Salvador Public Finance and Social Progress DPL, January 9, 2013

Implementation Status and Results Report for El Salvador Public Finance and Social Progress DPL, April 30, 2012

Implementation Status and Results Report for El Salvador Public Finance and Social Progress DPL, September 11, 2011

La LibertadLa Libertad

AcajutlaAcajutla

La HachaduraLa Hachadura

ArmeniaArmenia

ChalchuapaChalchuapa

MetapánMetapán

AguilaresAguilares

IlobascoIlobasco

OlocuiltaOlocuilta

San LuisSan Luis

TecolucaTecoluca

Ciudad BarriosCiudad Barrios

La HerraduraLa Herradura JiquiliscoJiquilisco

IntipucaIntipuca

Santa RosaSanta Rosade Limade Lima

NuevaNuevaEspartaEsparta

OsicalaOsicala

JocoaitiqueJocoaitique

SantiagoSantiagode Maríade María

SuchitotoSuchitoto

NuevaNuevaConcepciónConcepción

TejutlaTejutla

La PalmaLa Palma

Candelaria deCandelaria dela Fronterala Frontera

IzalcoIzalco

NuevaNuevaSan SalvadorSan Salvador

ChalatenangoChalatenango

SensuntepequeSensuntepeque

CojutepequeCojutepeque

San VicenteSan Vicente

ZacatecolucaZacatecoluca

UsulutánUsulután

San MiguelSan Miguel

San FranciscoSan Francisco(Gotera)(Gotera)

La UniónLa Unión

SonsonateSonsonate

AhuachapAhuachapán

SantaSantaAnaAna

SANSANSALVADORSALVADOR

Paz

EmbalseEmbalseCerrón GrandeCerrón Grande

Lago deLago deIllepangoIllepango

Laguna deLaguna deOlomegaOlomega

Lago deLago deCoatepequeCoatepeque

Lago deLago deGüijaGüija

Lempa

Lem

pa

Jiboa

Lempa

Torola

Goa

scor

án

Grande de San Miguel

L AL APA ZPA Z

S A NS A NV I C E N T EV I C E N T E

U S U L U T Á NU S U L U T Á N

S A N M I G U E LS A N M I G U E L L AL AU N I Ó NU N I Ó N

M O R A Z Á NM O R A Z Á N

C A B A Ñ A SC A B A Ñ A S

C H A L AT E N A N G OC H A L AT E N A N G O

S O N S O N AT ES O N S O N AT E

SAN

TA A

NA

A

H U A C H A P Á N

CU

S CA

T L ÁN

SA

N S

ALV

AD

OR

L AL AL I B E R TA DL I B E R TA D

La Libertad

Acajutla

La Hachadura

Armenia

Chalchuapa

Metapán

Aguilares

Ilobasco

Olocuilta

San Luis

Tecoluca

Ciudad Barrios

La Herradura Jiquilisco

Intipuca

Santa Rosade Lima

NuevaEsparta

Osicala

Jocoaitique

Santiagode María

Suchitoto

NuevaConcepción

Tejutla

La Palma

Candelaria dela Frontera

Izalco

NuevaSan Salvador

Chalatenango

Sensuntepeque

Cojutepeque

San Vicente

Zacatecoluca

Usulután

San Miguel

San Francisco(Gotera)

La Unión

Sonsonate

Ahuachapán

SantaAna

SANSALVADOR

HONDURASGUATEMALA

L APA Z

S A NV I C E N T E

U S U L U T Á N

S A N M I G U E L L AU N I Ó N

M O R A Z Á N

C A B A Ñ A S

C H A L AT E N A N G O

S O N S O N AT E

SAN

TA A

NA

A

H U A C H A P Á N

CU

S CA

T L ÁN

SA

N S

ALV

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L AL I B E R TA D

PACIFIC OCEAN

Golfo deFonseca

Bahía de

La Unión Bahía de Jiquilisco

Paz

EmbalseCerrón Grande

Lago deIllepango

Laguna deOlomega

Lago deCoatepeque

Lago deGüija

Lempa

Lem

pa

Jiboa

Lempa

Torola

Goa

scor

án

Grande de San Miguel

To Quezaltepeque

To Nueva

Ocotepeque

To Jutiapa

To Jalpatagua

To Taxisco

To Marcala

To Nacaome

To Ipala

Volcán deVicente

(2,182 m)

Volcán deSan Miguel(2,130 m)

CerroEl Pital

(2,730 m)

Volcán deSanta Ana(2,365 m)

90°W

90°W

89°W 88°W

89°W 88°W

13°N

14°N14°N

EL SALVADOR

0 10 20 30

0 2010 30 Miles

40 Kilometers IBRD 33401R

NO

VEM

BER 2006

E L SALVADORSELECTED CITIES AND TOWNS

DEPARTMENT CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

PAN AMERICAN HIGHWAY

RAILROADS

DEPARTMENT BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.

The World Bank · DATA SHEET A. Basic Information Country: El Salvador Program Name: PUBLIC FINANCE...

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Transcript of The World Bank · DATA SHEET A. Basic Information Country: El Salvador Program Name: PUBLIC FINANCE...