Togo - Programmatic Development Credit Series -...

Document of The World Bank

Report No: ICR00004080

IMPLEMENTATION COMPLETION AND RESULTS REPORT(IDA-53280TF - 13880)

ON A

DEVELOPMENT POLICY CREDIT

IN THE AMOUNT OF SDR 9.2 MILLION

(US$14 MILLION EQUIVALENT)

TO

TOGO

FOR THE

PROGRAMMATIC DEVELOPMENT CREDIT SERIES

ECONOMIC GROWTH AND GOVERNANCE CREDIT

February 27, 2017

Macroeconomic & Fiscal Management Global PracticeWest AfricaAfrica Region

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TOGO – GOVERNMENT FISCAL YEARJanuary 1 – December 31

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CURRENCY EQUIVALENTS(Exchange Rate Effective as of August 24, 2016)

Currency Unit US$ 1.00 = XOF582.664

ABBREVIATIONS AND ACRONYMS

AFD Agence Française de DevelopmentAfDB African Development BankAFRITAC African Régional Technical Assistance CentreARMP Agence de Régulation des Marches PubliquesEFF Electronic Frontier FoundationBTCI Banque Togolaise de Commerce et de l’IndustrieCEBCEET`

Communauté Electrique du BéninCommunauté Energique et Electrique du Togo

CFAFCPAR

Communauté Financière d’Afrique FrancCountry Procurement Assessment Report

DFID Department for international DevelopmentDGSCN Direction Générale de la Statistique et de la Comptabilité NationaleDO Development ObjectiveDPC Development Policy CreditDPO Development Policy OperationEI-TAF Extractives industries Technical Advisory FacilityEITI Extractive Industries and Transparence InitiativeEGGC Economic growth and Governance CreditERCG Economic Recovery and Governance CreditEU European unionFSGP Financial Sector and Governance ProjectFY Fiscal YearGDP Gross Domestic ProductGoT Government of TogoHIPC Heavily Indebted Poor CountriesHIV/AIDS Human Immunodeficiency Virus Infected and Acquired Immune Deficiency

SyndromeICRR Implementation Completion and Results ReportICT Information and Communication TechnologyIDA International Development AssociationIFIs International Financial StatisticsIMF International Monetary FundINSEED Institut National de la Statistique et des Etudes DémographiquesISN Interim Strategy NoteISR Interim Strategy ReportISPs Internet Service providersL/C/TF Loan/Credit/Trust Fund

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M MillionMDGs Millennium Development GoalsMDR Multi-Donor ReliefMDRI Multilateral Debt Relief InitiativeMVNO Mobile Virtual Network OperatorNA Not ApplicableNSCT Nouvelle Société Cotonnière du TogoOTR Office Togolaise des RecettesPAI Projet d’Appui InstitutionnelPASA Project d’Appui au Secteur AgricolePDOPEA

Project Development ObjectivePolitical Economy Analysis

PEMFAR Public Expenditure Management and Financial Accountability ReportPEFA Public Expenditure and Financial AccountabilityPFM Public Financial ManagementPI Project IdentificationPPP Purchasing Power ParityPSDP Private Sector Development ProjectPSIA-TF Poverty and Social Impact Analysis-Trust FundPOVMAP Poverty MappingQAG Quality QEA Quality at Entry AssessmentQSA Quality at Supervision AssessmentSCAPE Stratégie de Croissance Accélérée et de Promotion de l’EmploiSDGs Sustainable Development GoalsSIGMAP Système de Gestion Intégré des Marchés PublicsSOE State-Owned EnterprisesSOTOCO Société Cotonnière du TogoTA Technical AssistanceTG TogoTFSCB Trust Fund for Statistical Capacity BuildingUNDP United national Development ProgramUSD United States DollarsUTB Union Togolaise des BanquesWAEMU West Africa Economic and Monetary UnionWARCIP West African Régional Communication and Infrastructure ProgramWB World BankWGI Worldwide Governance Indicators

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Vice President: Makhtar DiopCountry Director: Pierre Laporte

Global Practice Senior Director:Carlos Felipe JaramilloSector Manager: Lars Christian Moller

Project Team Leader: Johannes G. HoogeveenICR Team Leader: Godwill Kan Tange

ICR Primary Author: Godwill Kan Tange

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TOGO

Economic Growth and governance Credit (P132208)

Implementation Completion and Results Report (ICRR)Content

sData Sheet....................................................................................................................................5

A. Basic Information...............................................................................................................5B. Key Dates............................................................................................................................5C. Ratings Summary................................................................................................................5D. Sector and Theme Codes....................................................................................................6E. Bank Staff............................................................................................................................6F. Results Framework Analysis...............................................................................................7G. Ratings of Program Performance in ISRs.........................................................................10H. Restructuring.....................................................................................................................10

Implementation Completion and Results Report (ICRR)..........................................................111. Program Context, Development Objectives and Design...................................................112. Key Factors Affecting Implementation and Outcomes.....................................................183. Assessment of Outcomes...................................................................................................244. Assessment of Risk to Development Outcome.................................................................285. Assessment of Bank and Borrower Performance..............................................................286. Lessons Learned................................................................................................................317. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...................32Annex 1. Bank Lending and Implementation Support/Supervision Processes.....................33Annex 2. Beneficiary Survey Results....................................................................................35Annex 3. Stakeholder Workshop Report and Results...........................................................35Annex 4. Summary of Borrower's ICRR and/or Comments on Draft ICRR.........................35Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders................................35Annex 6. List of Supporting Documents...............................................................................36

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Data Sheet

A. Basic Information

Country: Togo Program Name: Economic Growth and Governance Credit

Program ID: P132208 L/C/TF Number(s): IDA-53280-TG, TF-13880

ICRR Date: 02/27/2017 ICRR Type: Core ICRR

Lending Instrument: DPC Borrower: GOVERNMENT OF TOGO

Original Total Commitment: USD 14.00M Disbursed Amount: USD 13.46M

Revised Amount: USD 14.00MImplementing Agencies: Ministry of Economy and Finance coordinates the Implementation in association with other line Ministries Cofinanciers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 01/16/2013 Effectiveness: 06/14/2014 11/14/2014 Appraisal: 10/09/2013 Restructuring(s): Approval: 12/05/2013 Mid-term Review: Closing: 06/30/2014 11/30/2014

C. Ratings Summary C.1 Performance Rating by ICRR Outcomes: Unsatisfactory Risk to Development Outcome: High Bank Performance: Moderately Satisfactory Borrower Performance: Unsatisfactory

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

Quality at Entry: Moderately SatisfactoryGovernment: Unsatisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies: Unsatisfactory

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Overall Bank Performance: Moderately SatisfactoryOverall Borrower

Performance: Unsatisfactory

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: NA

D. Sector and Theme Codes Original Actual

Sector Code (as % of total Bank financing)Crops 13 13Other Public Administration 25 25ICT Infrastructure 12 12Banking Institutions 25 25Other Energy and Extractives 25 25

Theme Code (as % of total Bank financing)Export development and competitiveness 25 25Infrastructure services for private sector development 12 12Other rural development 13 13Public expenditure, financial management and procurement 25 25

State-owned enterprise restructuring and privatization 25 25

E. Bank Staff Positions At ICRR At Approval

Vice President: Makhtar Diop Makhtar Diop Country Director: Pierre Laporte Madani M. Tall Global Practice Senior Director Carlos Felipe Jaramillo

Practice Manager: Lars Christian Moller Miria Pigato

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Program Team Leader: Johannes G. Hoogeveen Johannes G. Hoogeveen ICRR Team Leader: Godwill Tange ICRR Primary Author: Godwill Tange

F. Results Framework Analysis

Program Development Objectives The Program Development Objective is to support Government-owned reforms to strengthen economic governance, to improve the efficiency of resource use as well as to implement growth-enhancing structural reforms in agriculture, energy, telecommunications, and mining.

Revised Program Development Objectives NA

(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 : Number of years for which budget data are available on line by April of that year

Value (quantitative or Qualitative)

5 7 8

Date achieved 11/30/2013 04/30/2016 04/30/2016Comments (incl. % achievement)

Met. Budget data from 2008 to 2016 is available on the government’s website, togoreforme.com. The budget has also been transformed into the BOOST format and is available online in that format from 2009 to 2014.

Indicator 2 : Number of years for which budget execution data are available on line by April of that year


4 6 7

Date achieved 11/30/2013 04/30/2016 04/302016Comments (incl. % achievement)

Met. Budget execution data is available on the Government’s website, togoreforme, from 2008 to June 2015.

Indicator 3 : Number of ministries that use SIGMAPValue (quantitative or Qualitative)

0 4 0

Date achieved 11/30/2013 04/30/2016 04/30/2016Comments Not met. Five ministries are able to use the automated procurement system

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(incl. % achievement)

SIGMAP: Agriculture, Transport and Infrastructure, Primary and Secondary Education, Health, Higher Education. These Ministries submitted their procurement contracts for processing through SIGMAP in 2015 and early 2016. However, in March 2016, the hard disc containing all procurement information crashed and all procurement data was lost. The Government appears not to have had a back-up system for safeguard purposes. As such, this indicator is considered not to have been met.

Indicator 4 : Number of years that the price paid to producers (cotton) is in accordance with the revised price formula


0 3 3

Date achieved 11/30/2013 04/30/2016 04/30/2016

Comments (incl. % achievement)

Met. A first formula was adopted in 2009 and implemented through 2012. A revised formula was adopted in 2013 and implemented in 2014 and 2015. The revised formula is effective again in 2016, making it 3 years. After 2016, the authorities will review the formula to determine whether adjustments are needed.

Indicator 5 : Non-carbonated phosphate production (million ton)Value (quantitative or Qualitative)

1.1 2.0 1.15

Date achieved 11/30/2013 04/30/2016 04/30/2016


Not met. Non-carbonated phosphate production has not exceeded 1.15 million tons for the past three years. Production stood at 1.2 million tons in 2013, fell to 1.1 million tons in 2014 and increased slightly to 1.15 million tons in 2015. The process of extracting phosphates has become increasingly difficult and costly as reserves are depleted. Initially, phosphates could be extracted from a depth of 7 meters. Today, extraction occurs at depths exceeding 42 meters.

Indicator 6 : Frequency with which the electricity tariff is reviewed using the financial model


Not done At least twice per year Not done

Date achieved 11/30/2013 04/30/2016 04/30/2016


Not met. There is a new financial and pricing model in place, but this model is currently not used to review electricity tariffs. The price of electricity has not been reviewed since 2013. A major current challenge, in an environment where electricity prices do not cover costs, is addressing the debt owed by the electricity company, “Communauté Energique et Electrique du Togo” (CEET) to its electricity provider, “Communauté Electrique du Bénin” (CEB).

Indicator 7 : Number of MVNOs

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0 1 0

Date achieved 11/30/2013 04/30/2016 04/30/2016


Not met. After launching a call for tenders for a third telecom operator, the selection process for a Mobile Virtual Network Operator (MVNO) was cancelled. This followed an earlier 18month unsuccessful effort to select an MVNO.

Indicator 8 : Number of Internet Service Providers (ISPs)Value (quantitative or Qualitative)

2 4 2

Date achieved 11/30/2013 04/30/2016 04/30/2016Comments (incl. % achievement)

Not met. There are two licensed ISPs in Togo: Café Informatique and Togotelecom. Togo Cellular and MOOV also provide internet services in Togo, but they do not have the required licenses to provide this service.

Indicator 9 : Number of licensed telecom operatorsValue (quantitative or Qualitative)

2 3 2

Date achieved 11/30/2013 04/30/2016 04/30/2016


Not met. Togo has two licensed telecom operators. MOOV and Togotelecom. Attempts to encourage the Government to open the sector to a third telecom operator in order to foster competition and encourage better service provision have not yielded results.

Indicator 10 : Number of commercial banks in which the government is a majority shareholder


2 0 2

Date achieved 11/30/2013 04/30/2016 04/30/2016


Not met. The State still holds majority stakes in two major banks in Togo: the BTCI (Banque Togolaise de Commerce et de l’Industrie) and the UTB (Union Togolaise des Banques). These banks both have negative equity positions of CFAF 29.5 billion and about CFAF 46 billion, respectively. The stated intention of the Government is to merge the two banks into a single entity. According to the Privatization Committee in charge of the public bank divestiture process, the privatization process failed because the offers received were so insignificant that the Government preferred to maintain ownership of the banks.

(b) Intermediate Outcome Indicator(s)Not Applicable

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G. Ratings of Program Performance in ISRs

No. Date ISR Archived DO IP

Actual Disbursements(USD millions)

1 N/A N/A N/A -

H. Restructuring Not Applicable

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1. Program Context, Development Objectives and Design

1. This Implementation Completion and Results Report (ICRR) evaluates the results of the “Economic Growth and Governance” programmatic series of Development Policy Credits (EGGC6) for Togo. The programmatic series was designed to support Government reform efforts to strengthen economic governance, improve the efficiency of resource use and to implement growth enhancing structural reforms in agriculture, energy, telecommunications, mining and banking. The first operation in the series, Sixth Economic Growth and Governance Credit (EGGC6) was approved by the Bank’s Board of Directors on December 5, 2013, and disbursed upon loan effectiveness on November 14, 2014 – almost one year later.

2. Disbursement was delayed by almost a year owing to the lack of an adequate macroeconomic framework. The Board approved EGGC6 based on a 2014 budget that was discussed with Bank and IMF during the 2013 Annual Meetings and which was determined to be consistent with an adequate macroeconomic framework. However, the 2014 budget presented to and approved by Parliament on the same day as Board approval of the operation differed considerably from what had been previously agreed to. Two missions were subsequently conducted by the Bank to assess the adequacy of the macroeconomic framework prior to approving disbursement. The first mission took place in January 2014. The report of the first mission, dated April 2014, determined that the 2014 budget as adopted was over-optimistic and not conducive to macroeconomic stability. Total revenue in the 2014 approved budget was expected to increase by more than 30 percent compared to the 2013 budget, with customs revenues increasing by about 60 percent compared to the previous year. This budget was considered not achievable and therefore not conducive to macroeconomic stability. Disbursement was then made contingent upon the adoption of a revised and more realistic budget. The second mission to evaluate the macroeconomic framework in June 2014 insisted once again that the budget be revised as proposed during the first mission of January 2014 as well as including in the budget the pre-financed extra-budgetary public investment expenditures. The Government eventually revised the 2014 budget, adopting a more realistic budget in which the pre-financed contracts were included. The Government also presented an acceptable 2015 budget to both the Bank and the IMF, and the Bank thus disbursed the EGGC6 in late 2014.

2. The series was cancelled due to concerns about the adequacy of macroeconomic framework. These concerns were related to unorthodox public finance management practices, especially in the areas of public investment and debt management. Of particular concern was the use of pre-financed contracts to fund public investment;1 a financing mechanism that was non-transparent, did not follow conventional procurement procedures, was costly, led to significant maturity mismatches, skirted public investment planning and approval processes, and was undertaken off-budget. Moreover, these contracts were not included in the public debt stock, and yet they accounted for a substantial part of public debt.

1 Pre-financing is a practice whereby the government contracts private sector companies, typically on a sole-source basis, to undertake public investment projects. The private firm then arranges commercial bank financing of the project, and the government assumes responsibility for payment of this commercial loan.

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1.1 Context at Appraisal

3. At the time of appraisal, Togo had good prospects for economic growth given its abundant supplies of high quality phosphate and other mineral resources, a favorable climate for agriculture, and a natural deep-sea port. However, Togo was recovering from the effects of a long period of poor economic management, which had caused serious social and political tensions during the 1990s and 2000s. Key state institutions had crumbled in an environment of civil strife, and the economy was significantly under-performing. GDP per capita was lower at appraisal in 2013 than in 1980, and remains so today. Deteriorating financial positions within state-owned enterprises had damaged their ability to service bank loans, in turn affecting the soundness of the financial sector, which had previously been among the strongest in West Africa. The economy was further weakened by the withdrawal of donor support in the 1990s. The economic malaise and long period of isolation from the donor community led to mounting arrears, serious financial difficulties within the leading cotton and phosphate state-owned enterprises, and a large non-performing loan portfolio in the banking sector. These difficulties were still present at the time of appraising the operation in late-2013, though conditions were improving.

4. By the late-2000’s, the political situation was relatively stable, but the economy required ambitious reforms in order to reverse past trends. This included fostering a more dynamic and competitive economy, as well as to strengthen a relatively weak economic and public financial management environment. Political stability was accompanied by an expressed willingness by the authorities to introduce major economic reforms that would help spur growth. This willingness to reform led to Togo reaching the HIPC (Heavily Indebted Poor Countries) completion point in December 2010 and qualifying for additional debt relief under the MDRI (Multilateral Debt Relief Initiative). Several donors then re-engaged with Togo, particularly in the social infrastructure and social services sectors. The World Bank increased its support from USD 178 million in 2008 to USD 193 million in 2013. However, Togo was unable to conclude a program with the International Monetary Fund (IMF) until 2013 and this limited the ability of some key partners, notably the French Development Agency (AFD) and the Japanese Government, to provide assistance.

5. The EGGC series built on reforms supported by the ERGC-5 and its predecessors. But it placed more emphasis on growth enhancing measures and strengthening economic governance and oversight of public enterprises. Previous Development Policy Operations primarily dealt with rebuilding public financial management systems and facilitating economic recovery. Compared to its (stand-alone) predecessors, the focus of the EGGC6 and the broader proposed series shifted from economic recovery (which had largely been achieved at the time of the EGGC6) to economic growth, while the focus on economic governance remained. Furthermore, the ICRR for the ERGC-4 noted that as reforms may take years to complete, annual stand-alone DPCs are less suited for a country with a long-term reform agenda. While a series of annual stand-alone operations could mimic a DPO series, stand-alone operations lack the consistency of a multi-year series. To address this lesson-learned from previous operations, the EGGC6 was presented as the first in a series of three operations.

6. To recover from its period of poor economic management and performance, the

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Government developed a national development strategy as a follow-up and complement to achieving the HIPC completion point. This Government strategy was in line with its second Poverty Reduction Strategy (PRSP II), and included fiscal consolidation and a strategy to promote private sector led growth; the Strategy for Boosting Growth and Promoting Employment (Stratégie de Croissance Accélérée et de Promotion de l’Emploi -- SCAPE). SCAPE offered a medium-term development framework for implementing the Government’s Medium-Term Policy Strategy, for achieving the Millennium Development Goals (MDGs), now the Sustainable Development Goals (SDGs), in furthering the Government’s vision for making Togo an emerging economy in 15 to 20 years, as well as making it a country that respects human rights and promotes the rule of law. 7. Reforms included the establishment of a new cotton company and institutional reforms of the phosphate company with the aim of increasing production. In addition, efforts to develop Togo’s carbonated phosphate reserves were initiated. Togo joined the Extractive Industries Transparency Initiative (EITI), received candidacy status in October 2010 and became a full member in May 2013. In telecommunications, a roadmap to open the sector to competition was adopted and a new Telecommunications Act was approved in January 2013. In the electricity sector, generating capacity was expanded with a 100MW power generation plant operating under a public-private partnership. The Government made progress in clearing arrears to the private sector, and in the financial sector, three state-owned banks were recapitalized. These three banks, plus one other state-owned bank, were subsequently put up for privatization. At the time of appraisal, two of the four banks had been privatized. The Government also implemented Public Financial Management (PFM) reforms guided by directives from the West Africa Economic and Monetary Union (WAEMU).

8. When the DPO series was conceived, there were remaining differences of opinion in Togo between stakeholders opposed to reforms, and those tasked with implementing reforms. Reformers within the Government were committed to the reform agenda and their performance depended on effective reform implementation and the amount of budget support and donor assistance obtained. The Bank team saw the DPO series as an opportunity to support reform champions, especially as Togo had successfully reached the HIPC completion point, had successfully implemented previous Bank DPOs, and had met the EGGC6 prior actions on time.

9. The previous DPO, ERGC-5, had thirteen key results indicators with at least one for each action. ERGC-5 supported Government-owned reforms to improve public financial management as well as structural reforms in cotton, energy, telecommunications and banking. Seven of the results indicators of ERGC-5 were fully met, three were partially met, whereas three others were not met. Of the six indicators related to PFM, five were met. The real sector reforms which ERGC-5 supported were limited since the operation was a stand-alone operation, but were successful to some extent in furthering the reform effort. Reforms in the cotton and electricity sectors managed to lay the foundation for further significant reforms which were ultimately addressed in the EGGC6. The ICRR for ERGC-5 points out that reforms envisaged in the telecommunications and banking sectors fell short of expectations and the report deemed it worthwhile for subsequent reforms to continue focusing on these areas.

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10. During the design stage of the EGGC-6 both the IMF and the Bank had a positive, constructive and close working relationship with the Minister of Finance., This was also the case in the run-up to the HIPC Decision Point and Completion Point. The Minister of Finance had played a critical role in bringing Togo back to the international community following more than a decade of interrupted relations with the donor community under the previous President. At the time EGGC6 was designed, the Minister of Finance was seen as a strong reformer given recent accomplishments. Earlier, in September 2005, the Fund was not even willing to consider a Staff-Monitored Program and the Bank had all but suspended relations. Putting Togo on any credible pathway to a HIPC Completion Point was out of the question at that juncture. It is to the former Minister of Finance’s credit to have turned this situation around from 2007-2011. Relations with the Fund were positive enough that the IMF was favoring a ‘reflection pause’ between the end of the previous program in 2011 and the new program, with little doubt that a new program could be quickly agreed upon. Similarly, there was little reason for the Bank to have doubted the reform commitment of the authorities in 2013 when the program was designed.

11. After accomplishing so much, by 2011-2012, the Minister of Finance had the complete trust of the President. Following debt relief, he started feeling that Togo no longer needed some of its traditional partners. The economy had stabilized compared to previous years and the Government starting taking a few risky decisions without consulting its development partners. The Minister of Finance also starting voicing his discontent that the country had been under so much pressure from development partners in previous years to undertake reforms and an impression emerged that he wanted to affirm the autonomy of the Government in the day-to-day running of their country.

12. Moreover, the regional financial market as well as domestic banks became very liquid and buoyant. This made it easy for the Togolese Government to borrow large amounts of money for the country’s development purposes (despite high costs). The Government therefore started to consider the advice from the World Bank and the IMF to seek concessional loans to finance most of the country’s development projects as a binding constraint to their national development. At the time, neither the Bank nor the IMF could perceive that the Government was beginning to embark on risky deals with commercial banks. These developments and dynamics partly explain the lack of ownership and commitment to reforms that followed.

13. Growth rates increased in 2013 and 2014 as cotton and phosphate production improved and credit to the private sector expanded, but many challenges remained. Togo started to attract interest from private investors. Although the quality of institutions improved, Togo’s CPIA indicator (Country Policy and Institutional Assessment) remained low at 3.0, below WAEMU and IDA averages, and the country was and remains classified as a fragile state. However, growth prospects remained constrained by underdeveloped infrastructure, weak governance structures, inadequate attention to implementation of programs and policies, and vulnerability to trade and weather shocks. Mining activities contributed little to the budget, while some banks remained insolvent. The overall business environment remained poor. Telecommunication services were of low quality and costly.

14. The EGGC series was consistent with the Government’s program as spelled out in

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the Government’s Second Poverty Reduction Strategy 2013-17 (PRSP II), and the Government’s Strategy for Accelerated Growth and Employment Promotion (SCAPE). The program was also consistent with the Bank’s Interim Strategy Note (ISN) for Togo for 2012-13 in that the Program supported the ISN objectives of (i) deepening economic recovery and promoting sustainable development through improvements in the business environment, increased agriculture productivity, and improved access to productive infrastructure; and (ii) improving economic governance through improved management and restructuring of key public enterprises and banks, improved and transparent public financial management, and enhanced procurement system and external budget control.

Table 1: Selected Economic and Financial Indicators2013 2014 2015 2016 2017 2018 2019 2020

Est Proj.

Real GDP (annual % change) 5.4 5.4 5.3 5.0 5.0 5.3 5.4 5.6

Real GDP per capita (annual % change) 2.6 2.6 2.5 2.2 2.2 2.5 2.6 2.8

CPI, inflation (annual % change) 1.8 0.2 1.8 2.1 2.5 2.5 2.5 2.5

Gross Domestic Investment 24.5 25.7 27.0 29.2 27.0 26.2 25.3 25.2

Public sector investment (% of GDP) 9.2 11.3 13.0 15.3 12.6 11.4 10.2 9.8

Private sector investment (% of GDP) 15.3 14.4 14.0 13.9 14.4 14.8 15.1 15.4

Government Budget

Total revenues and grants (% of GDP) 21.3 20.5 21.9 25.6 24.9 24.9 24.7 25.0

Tax revenues (% of GDP) 18.0 18.2 19.6 20.6 21.0 21.3 21.5 21.7

Total expenditure and net lending (% of GDP) 26.5 27.3 30.8 32.7 34.1 28.8 27.3 27.2

Domestic Primary expenditure1 20.7 21.3 22.8 22.9 25.1 20.2 19.3 19.1

Overall Balance, cash basis (% of GDP) -6.8 -7.9 -7.8 -9.0 -9.2 -4.0 -2.7 -2.6

External SectorCurrent account balance (% of GDP) -13.1 -9.9 -11.9 -12.9 -11.3 -10.1 -9.1 -8.2

Exports (% of GDP) 46.2 39.4 36.9 36.9 36.3 36.5 36.5 36.4

Imports (% of GDP) -65.8 -57.3 -56.6 -57.1 -54.7 -53.5 -52.4 -51.3

External public debt (% of GDP)2 14.2 17.1 21.1 23.4 26.3 28.5 30.6 30.4Total public debt (% of GDP)3 55.4 64.8 74.7 76.5 75.0 72.3 68.8 65.0

Source: Government of Togo and IMF estimates and forecasts 1 Revenue minus expenditure, excluding grants, interest, and foreign-financed expenditure2 Includes state-owned enterprises external debt3 Includes arrears and state-owned enterprises

1.2 Original Program Development Objectives (PDO) and Key Indicators

15. The development objective of the EGGC series was to: support Government-owned reforms to strengthen economic governance, to improve the efficiency of resource use as well as

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to implement growth-enhancing structural reforms in agriculture, energy, telecommunications, and mining. 16. The following results indicators were included under the program to pressure progress against the program development objectives:

Pillar 1: Improved budget transparency and procurement practicesNumber of years for which budget data are available on line by April of that year;Number of years for which budget execution data are available on line by April of that yearNumber of ministries that use SIGMAP

Pillar 2: Strengthened economic governance and growth Number of years that the price paid to producers is in accordance with the revised price formulaNon-carbonated phosphate production (million ton)Frequency with which the electricity tariff is reviewed using the financial modelNumber of MVNOsNumber of ISPsNumber of licensed telecom operatorsNumber of commercial banks in which the government is a majority shareholderNumber of microfinance institutions that have been liquidated (or for which another solution has been found)

1.3 Revised PDO and Key Indicators

17. Not Applicable

1.4 Original Policy Areas Supported by the Program

18. Compared to previous operations, including EGGC-5, the program was more selective in the area of public financial management (PFM) reforms, as the European Union (EU) and the International Monetary Fund (IMF) were providing support in this area. The EGGC series thus placed greater emphasis on reforms in the real sectors, including strengthening governance in the cotton, mining, electricity and banking sectors. This included strengthening the foundations for economic growth through enhanced access to fertilizer, fostering an increasingly competitive telecommunications sector, increasing mining output, and strengthening the investment climate. The sectors were chosen because of their relative importance to the economy, their potential to foster growth, and because the Bank was active in these sectors and the proposed policy actions complemented activities under ongoing operations. The programmatic series included two policy areas, which correspond to the pillars of the series: (i) improved budget transparency and procurement practices; and (ii) strengthened economic governance and growth. Each pillar had sub objectives as well.

Policy area / Pillar 1: Improved budget transparency and procurement practices. Enhance the efficiency and transparency of public finance management through the public release of public finance information, by strengthening external oversight and by automating procurement

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19. The reforms supported by the programmatic series under the first pillar sought to improve public financial management by supporting implementation of the Government’s PFM strategy. To improve transparency and efficiency of procurement the EGGC series supported implementation of the public procurement information management system (SIGMAP). It also sought to improve budget transparency by making 2009-2013 budget data and 2009-2012 budget execution data available online through a user friendly interface. Support to strengthening budget oversight was not intended to commence until the second operation in the series. Policy Area / Pillar 2: Strengthen Economic Governance and the Foundations for Growth. Strengthen economic governance in the cotton, mining, electricity and banking sectors, and strengthen the foundations for economic growth through enhanced access to fertilizer, a competitive telecommunication sector, increased mining output, a sanitized microfinance sector and a better investment climate

20. The EGGC series supported reforms aimed at improving the performance of high potential sectors, thus strengthening the foundations for growth. The first was modernization of the agricultural sector focusing on critical reforms related to the cotton value chain and to fertilizer use, though support to the latter was planned to commence with the second operation. Under EGGC, the authorities committed to preparing a cotton strategy including the establishment of a formula for defining the price to be paid to farmers, and in a subsequent operation to the establishment of an inter-professional body for the cotton sector.

21. In the mining sector, the Government was to prepare an evaluation of investments in non-carbonated phosphate under phase 1 of the phosphate strategy along with an action plan to implement the main findings. Actions under the subsequent operations included the identification of a strategic partner to develop carbonated phosphate reserves.

22. The electricity company was to complete its financial model and use it to prepare a commentary assessing the adequacy of the electricity tariff. Under follow-up operations electricity tariffs were to be adjusted using the model.

23. In telecommunications, the Government was to ensure implementation of the telecommunications strategy and increase competition by opening up the mobile phone sector to increased competition through the issuance of Mobile Virtual Network Operator (MVNO) licenses as well as a license for a third operator.

24. To strengthen the financial sector the Government was to continue its withdrawal from commercial banking. This included: (a) creation the Non-Performing Loans Recovery Company and making it functional; and (b) appointing the monitoring committee for the provisional management of BTCI that is mandated to review all commitments under preparation exceeding CFAF 500 million and the holding of its first meeting.

25. All of the prior actions supported by EGGC6 as described above were completed. However, as subsequent operations were dropped, measures intended under EGGC7 and EGGC8

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to reinforce, extend and ensure full implementation of a coherent reform program over time were not undertaken as originally envisaged.

1.5 Revised Policy Areas

26. Not applicable.

1.6 Other significant changes: N/A

The proposed second and third operations in the series did not progress on the basis of the adequacy of the macroeconomic framework as explained earlier in paragraph 3.

2. Key Factors Affecting Implementation and Outcomes

2.1 Program Performance

27. The first DPC in the programmatic series was approved by the Board of Executive Directors (ED) on December 5, 2013. All prior actions were completed by the government prior to the Board presentation. The series was canceled and thus, the second and third operations were not prepared.

Table 2: Prior actions and triggers of the EGGC seriesPrior action EGGC6 Status

Prior action 1 Budget data for 2013 and budget execution data for 2009 – 2012 are released on togoreforme.com

Completed

Prior action 2 SIGMAP has been installed (for testing purposes).

Completed

Prior action 3 A new cotton sector strategy has been adopted. CompletedPrior action 4 An evaluation of the investments in noncarbonated phosphate carried out under phase 1 of the phosphate strategy has been prepared along with an action plan to implement its main findings.

Completed

Prior action 5 CEET finalizes its financial model and uses it to prepare a commentary assessing the adequacy of the electricity tariff.

Completed

Prior action 6 The prequalification to license eligible MVNOs to operate in Togo is completed.

Completed

Prior action 7 A monitoring committee for the provisional management of BTCI that is mandated to review all commitments under preparation exceeding CFAF 500 million has been appointed and has held its first meeting.

Completed

Prior action 8 The Non- Performing Loans Recovery Company has been created and is functioning.

Completed

Trigger EGGC7 Status

Trigger 1 Togoreforme.com publishes detailed revenue information (annually) as well as detailed information about domestic and foreign debt (quarterly)

Not completed

Trigger 2 By the opening of the Parliamentary session Government has sent to Parliament the budget execution report for the 2012 budget as well as the report from the Court of Accounts regarding 2011.

Completed

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Trigger 3 Procurement plans for six ministries are incorporated into SIGMAP.

Not completed

Trigger 4 FNGPC and NSCT agree on a new price formula defining the price that should be paid to farmers.

Completed

Trigger 5 A new approach to the provision of (subsidized) fertilizer which supports increased fertilizer use by smallholder farmers been adopted.

Completed

Trigger 6 Government has launched the call for proposals for the development of Togo's carbonated phosphate reserves in form and substance and in accordance with procedures satisfactory to the Bank.

Completed

Trigger 7 The draft financial model of CEB is available. CompletedTrigger 8 The decree concerning the interconnectivity between electronic communication networks and for access to these networks has been adopted by the Council of Ministers.

Not completed

Trigger 9 Steps to improve the (interim) management at BTCI have been taken in accordance with the recommendations of the Banking Committee.

Completed

Trigger 10 The decree operationalizing the 'Loi Communautaire' of 2007 and transposed in May 2011 has been adopted by the Council of Ministers.

Not completed

Trigger EGGC8 Status

Trigger 1 SYGADE (debt database software) has been integrated into SIGFIP and staff of the debt department have been trained in its use.

Not completed

Trigger 2 SIGMAP is interfaced with SIGFIP. Not completedTrigger 3 The inter-professional body for the cotton sector is operational. Not completedTrigger 4 The new approach to providing fertilizer is being implemented. CompletedTrigger 5 A strategic partner to develop the carbonated phosphate reserves who meets the criteria set out in the call for proposals, has been selected and a new mining code has been submitted to Parliament for approval.

Not completed

Trigger 6 Using the harmonized financial model for CEB and CEET and based on a new law an independent (autonomous) regulator supervises the electricity sector, including the implementation of a tariff (and subsidy) mechanism that ensures that the costs of CEET and CEB are fully covered.

Not completed

Trigger 7 Licenses for at least two additional ISPs to operate in Togo have been issued and the call for bids for a 3rd telecommunications license has been published.

Not completed

Trigger 8 The state no longer owns a majority share in UTB and steps towards the privatization of BTCI have been taken such that before the closing date of the EGGC series (April 2016) the state no longer is majority shareholder in the bank.

Not completed

Trigger 9 The microfinance restructuring strategy is being implemented and restructuring (liquidation of insolvent institutions; formalization of informal institutions) of non-legal micro finance institutions has started.

Completed

Trigger 10 The new API/ZF authority has been created and functions in a transparent and professional manner.

Not completed

28. Only three out of the ten results were met with Pillar 1 performing somewhat better than Pillar 2. Several results were achieved under Pillar 1 (Improved Budget Transparency and Procurement Practices). The Government has published budget data since 2009 on the Government website “togoreforme.com” in the BOOST2 format and at the time this ICRR was

2 The BOOST initiative is a World Bank-wide collaborative effort launched in 2010 to facilitate access to budget data and promote its effective use for improved decision-making processes, transparency and accountability.

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written, budget data spanning from 2009 to 2016 was available online. The second indicator referring to the number of years for which budget execution data are available online was also met. The Government has published budget execution data online on the Government’s website from 2008 to June 2015 for a total of seven years. With respect to the third indicator, “the number of ministries that use SIGMAP”, five ministries with large government budgets processed their procurement contracts through SIGMAP by 2015 against a target of four ministries. In 2016, the disc containing procurement data for the five ministries was damaged and all the information was lost, implying that this result was not met partly for reasons of force majeure.

29. None of the results under Pillar II (Strengthen Economic Governance and Growth) were met except for targets related to strengthening the cotton sector. The other indicators were not met largely because of the Government’s reluctance to proceed with meaningful reforms in these sectors and in the real sector of the economy more broadly. The Government considered the banking and telecommunications sectors as politically strategic sectors and was reluctant to pursue reforms aimed at: (i) privatizing failing state-owned banks. The Government did try to privatize all four state-owned banks but failed to privatize two of these banks as the offers received from institutions willing to purchase these banks were deemed insufficient by the authorities in charge of the privatization process. (ii) Opening the telecommunications sector to greater competition. The Government tried to bring in two MNVO operators but was unable to find suitable candidates. This was seen as important to facilitating commerce, reducing transaction costs in the economy and contributing to economic growth.

2.2 Major Factors Affecting Implementation

Deterioration of the Macroeconomic Framework

30. The most important factor affecting implementation was the deterioration of the macroeconomic framework. Macroeconomic management prior to disbursement and during program implementation was weak. This led to an 11-month delay before disbursement after Board approval in December 2013, due to the adoption of an unrealistic 2014 budget, with projected increases in revenue of more than 30 percent when there was little to justify such a large increase. This was followed by the subsequent cancellation of the programmatic series in 2015 after disbursement of EGGC6 due to increasingly poor macroeconomic management. Over 2013-15, Togo grew at about 5 percent per annum. Growth was driven by the expansion of the services and industry sectors, public investment in infrastructure and increased agricultural production as a result of favorable weather. During this period however, public finances deteriorated and public borrowing, including non-concessional financing, increased rapidly, endangering Togo’s fiscal and debt sustainability. In 2012, the Government embarked on reforms aimed at increasing revenues that included the establishment in 2014 of the “Office Togolaise des Recettes” (OTR), which merged the tax and customs administrations into one independent revenue agency. This effort to mobilize more revenue was accompanied by a simplification of some tax payment procedures. The newly created tax administration (OTR) proceeded with some significant staff changes and salary adjustments to reduce corruption and increase efficiency in tax administration. This effort led to an increase in revenue collection from 18.8 percent of GDP in 2013 to 21.0 percent in 2015. However, the revenue collected

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remained insufficient to cover fast-growing public expenditures, leading to increasing public deficits and mounting arrears. As of December 2015, Togo had an estimated overall fiscal deficit of -7.8 percent of GDP, which did not include deficits of some public enterprises, especially those in the energy sector. The Government has increasingly relied on non-concessional, largely domestic/regional debt to cover the fiscal gap. In 2010, total public debt represented 32.1 percent of GDP and had risen to 54.8 percent of GDP by 2014 and 74.7 percent of GDP in 2015, after including pre-financed investments and debts from State-owned enterprises. Policy dialogue and engagement in following through on sector reforms then became strained and there was little incentive on the part of the authorities to continue with the reform program as agreed to under the DPO series.

Adequacy of Government’s Commitment to Reform

31. A major factor affecting implementation, and related to the preceding, was lack of sustained Government commitment to reform. Despite initial momentum in the run up to the HIPC completion point in 2010 and the period shortly thereafter, reform momentum waned and the relatively ambitious reform program that had begun to be supported by the Bank and the broader donor community faltered. Moreover, there was also a shift in Government focus as attention began to be increasingly focused on key public investment projects and the provision of certain public goods, particularly roads. Other priority projects underway included the construction of the Lomé Container Terminal and a new international airport, and these were successfully completed. This led the authorities to start drifting progressively away from focusing on the reforms and programs that had been agreed upon with development partners and to increasingly pursue unconventional policies in pursuit of quick solutions and rapid results. The unconventional practice of pre-financing to finance an ambitious road construction and rehabilitation effort, and its attendant problems, being a case in point.

Institutional Constraints and Human Resource Capacity

32. Weaknesses within public institutions and limited human capacity is also likely to have compromised the implementation of specific measures. Togo was just emerging from a long period of isolation and political turmoil, and was in the process of rebuilding institutions, creating new institutions, as well as training and developing new young inexperienced executives and managers that had been recently recruited into the civil service. This led to a very centralized decision-making hierarchy within Government. This was particularly evident within the Ministry of Finance, the implementing agency for the series. The Minister of Finance closely controlled all activities and made all important decisions himself. This extremely centralized power structure resulted not only in an inability within the Ministry of Finance to effectively implement the many ongoing reforms, as essentially a single individual was controlling the entire process, but it contributed to an environment where inappropriate PFM, budget management and public investment practices were allowed to proceed unchecked, uncontrolled, without oversight and to a degree that was highly inappropriate to effective use of resources. This contributed significantly to the deteriorating macroeconomic environment and eventual cancellation of the series.

Active Donor Consultation Framework

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33. There was close coordination with the EU, the IMF and other development partners during implementation of the EGGC6 that facilitated supervision and the presentation of common positions to Government. IMF and Bank staff coordinated closely on issues related to advice, missions and technical assistance. The EU, IMF, AfDB and the Bank also coordinated their interventions on PFM reforms. The Bank’s PFM staff participated in the IMF’s inception mission and ensured that the Bank’s activities were complementary to those of the IMF and EU. The Bank also participated in sector groups to help improve donor coordination. This co-ordination effort among donors yielded positive results up to a certain extent, and was especially effective during joint reviews to assess progress in achieving Togo’s development objectives. During these consultation review meetings, to which all development stakeholders, including the Government, the private sector, the civil society and development partners participated, the donor community would generally make a common declaration in which most of the most pressing reforms were included.

Soundness of the Program’s Background Analysis

34. The analytical basis for the individual prior actions and the choice of the sectors of intervention were sound and well-documented. In an environment where the series may have been followed through to completion, a significantly greater achievement of results might have been possible. Thus, the individual prior actions in and of themselves were highly appropriate.

35. The political economy context in which they were set however, proved problematic. The risks that such a context posed to the achievement of program objectives, was well-known, well-analyzed and well-presented by the team. However, the Bank proceeded with the operation hoping that Bank and other donor support would encourage broader commitment to necessary reforms. As a result, it could be argued that the Bank did not fully account for these contextual risks and their potential impact and likelihood, and may have over-estimated the level of political commitment to the supported reform program. In a more benign interpretation, the Bank took substantial, but well-informed risk by pursuing this operation since the overall risk rating of the operation was evaluated as high.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization:

Design

36. The Ministry of Economy and Finance, had responsibility for the coordination, monitoring and ensuring completion of the prior actions under the EGGC. Monitoring and evaluation was to be supported by line ministries and agencies charged with the execution of the various components, and some of the results indicators were to be monitored in coordination with other Bank projects. A separate monitoring system for the series was not set up.

37. Supervision of the EGGC6 was facilitated and complemented by Bank investment projects and technical assistance activities. EGGC’s reform agenda was in this sense supported by the Private Sector Development Operation (FY11), the Financial Sector Reform and Governance Project (FY09), the multi-donor Agriculture Sector Support Project (FY11), the

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West Africa Regional Communications Infrastructure Program (FY13), and the Emergency Infrastructure Rehabilitation and Energy Project (FY09). The Bank also provided technical assistance and training in mining, property rights (cadaster) statistics and poverty analysis. Engagement directly at the sector level through investment operations provided opportunities at diverse levels within the Togolese bureaucracy to influence the reform agenda and to monitor the achievement of results.

38. The results indicators were highly aligned with the prior actions and the grand majority could be said to be directly attributable to the prior actions and proposed triggers. In a few cases, the results indicators went beyond the impact that could be fully attributed to the specific prior actions. For example, including “non-carbonated phosphate production (millions of tons)” as a result indicator for the actions and triggers included in the series may raise questions of attribution. Clearly many external factors could influence non-carbonated phosphate production in addition to and perhaps with greater influence on production than the actions noted in the supported program.

39. Conversely, it could also be argued that some indictors were too narrowly linked to the prior actions and triggers and so did not provide an effective gauge as to the achievement of objectives. For example, does the indicator identified as “frequency with which the electricity tariff is reviewed using the financial model”, provide significant insight into whether the stated objective of “the electricity sector is funded transparently”?

40. Finally, at least one of the indicators could be said to be rather self-fulfilling . The indicator stated as the “number of commercial banks in which the government is a majority shareholder”, with a target of zero, would seem to be ensured of being met, given that one of the triggers, and hence an eventual prior action, was that “The state no longer owns a majority share in UTB and steps towards the privatization of BTCI have been taken such that before the closing date of the EGGC series (April 2016) the state no longer is majority shareholder in the bank.” While the indicator clearly reflects the objective of, “the state withdraws from active engagement in commercial banking”, both the objective and the result seem to be assured by the relevant prior action.

41. Despite these minor criticisms, the results matrix was generally well-designed and the links between the prior actions and triggers, the results indicators and the stated sub-objectives are clear.

Implementation and Utilization

42. The Ministry of Economy and Finance did not monitor indicator progress, and information from official sources was not always available to support supervision. The lack of government data was compensated by close consultation with the IMF, which carried out regular reviews of its own program, and with the AfDB and the EU, which had their own programs and also closely followed reform implementation. Again, complementarity with Bank investment projects and various TA activities allowed for ongoing monitoring of developments and reform progress in individual sectors in which the Bank was active, independently of the monitoring undertaken under the EGGC6. Frequent communication and contact between Bank

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staff and teams allowed for effective tracking of reform implementation and progress. Indicators, as designed, were relatively easy to obtain and verify.

2.4 Expected Next Phase/Follow-up Operation (if any):

43. The EGGC DPO series was cancelled, after the first operation due to serious economic governance issues and there will thus be no follow-up operations in this series. However, the President of Togo has appointed a new Minister of Finance, who is more open to engaging with the Bank around a new DPO series. The new Minister has ceased the unorthodox PFM practices implemented by his predecessor and appears to be more transparent and less centralized in his decision-making and management culture. It is expected that this change, which is the first change in Finance Ministers in 10 years, may trigger a new wave of reforms, which could eventually lead the IMF Board to approve a program with the IMF and renewed policy discussions with the Bank around a potential DPO series provided that the macroeconomic policy framework is deemed adequate.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

44. The objectives of the Economic Growth and Governance Credit (EGGC) DPC series were highly relevant when the operation was appraised and they remain relevant today. The Togolese economy remains constrained in capitalizing on its growth potential amid ongoing economic governance issues, as it was at the time of appraisal. The emphasis placed on reforming the agricultural, mining, energy, financial, and telecommunications sectors as the drivers of growth was highly appropriate. Improving budget transparency and procurement practices were also highly relevant when the DPO was being prepared. Problematic developments on the PFM front subsequent to appraisal affirm that a focus on strengthening transparency, budget oversight and procurement was a high priority, even if the operation wasn’t completely successful in achieving its objectives.

45. Activities envisaged under the EGGC series were consistent with Government’s priorities and reform program and most were also supported by the IMF, EU, AfDB and other development partners. The EGGC6 was aligned with the FY12-FY13 ISN, which had just been prepared at that time. The operation’s two pillars were in line with the objectives identified in the ISN, and the reform program addressed key reforms associated with the ISN. Several Bank investment operations were also supporting implementation of similar reforms and the EGGC6 was thus coherent with ongoing Bank programming as well.

46. In terms of design, the scope of the program was modest with respect to results indicators, as they were tightly focused on the supported actions and were not overly ambitious in going beyond what could be attributed to the supported program. Nonetheless, the coverage was perhaps excessively broad, extending across a number of different sectors. Greater focus would perhaps have better matched the noted capacity and institutional constraints as sectors could have been selected where capacity was greatest and commitment clearly demonstrated.

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47. A programmatic series was selected and well-reasoned at the time because it allowed for deeper reforms at a time when the country was running out of easy, one-off reforms . A longer term program that focused on strengthening and reinforcing the reform agenda over time was also perceived as strengthening the role of the reformists within the Government.

48. With the benefit of hindsight, one could question the wisdom of the decision to proceed with a programmatic series. Given recent past performance of the Togolese authorities at the time of appraisal there may have been benefits in proceeding with a stand-alone policy credit as in previous operations in order to further assess the appetite and commitment to reform. A stand-alone operation may have been able to focus on a smaller number of clearly identifiable reforms, perhaps of less ambition, but that may have represented quick-wins, rather than committing to a programmatic series of more ambitious reforms that also by nature required an ongoing and sustained commitment. This would not only have enabled the Bank to implement a more manageable and more appropriately scaled program given the circumstances, but also would have provided an opportunity to assess Government commitment and its implementation capacity. In this sense, the Bank may have underestimated the risks associated with a multi-year program – risks that could have been attenuated to some degree by choosing a stand-alone initial re-engagement DPO operation. This is clear in hind-sight given recent developments, but at the time the choice of a programmatic series was as noted, well-reasoned and justified.

3.2 Achievement of Program Development Objectives

49. Some reforms aimed at improving budget transparency and procurement were marginally achieved. Togo became the first French speaking country in sub-Saharan Africa to implement the BOOST initiative in increasing budget transparency. The authorities also automated the procurement system in five ministries, but unfortunately the disc containing the data was later damaged and the authorities lost all the information. These were clear indications that there was a desire by the authorities to improve transparency in budget and procurement practices. However, the reforms included in the EGGC6 as the first operation in the series were too insignificant to be considered as reflective of substantially improved public financial management practices. The implementation of measures planned over the subsequent operations in the series would likely have led to more sustainable improvements in PFM practices, but this of course did not occur and as such the higher level objectives in this area must be considered to have not been met. Furthermore, it is apparent that the public is not aware or possess the inclination to go on-line to look at budget data. This may in part be because of the slow internet connectivity, which can discourage many. Thus, it is evident that placing data on-line does not in itself lead to the desired outcome. However, automating the procurement system in some ministries to foster greater transparency, while at the same time encouraging a system of off-budget spending and procurement (pre-financing) poses a serious contradiction. So a significant amount of investment spending and procurement off-budget also highlights the lack of government commitment to meaningful procurement reform.

50. Apart from the result related to the cotton sector, which is bound to have a positive impact because it dealt with prices to farmers, none of the other targets linked to the foundations of growth were met. This is true for phosphate production, public banks,

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telecommunications and the electricity sector. One possible reason why most of the real sector results indicators were not achieved was because the country had reached a stage of reform fatigue, but also because the priorities of the Government started to change when the regional and domestic financial markets became very liquid and the authorities realized that they could borrow significant sums of money from these markets relatively easily and quickly.

3.3 Justification of Overall Outcome Rating

Rating: Unsatisfactory

51. The overall outcome of the program is rated unsatisfactory. While the objectives of the EGGC were relevant when the operation was prepared, and remain relevant today, many of the prior actions did not yield the desired results, in large part because follow-up actions were not taken. As explained above, reform commitment faltered as the Government’s priorities started changing. The Government became more inclined to pursue its road infrastructure projects and less committed to the reforms agreed upon with its development partners. The authorities did not implement measures envisaged under the program necessary for meeting stated results and objectives and the fiscal and budget situation deteriorated significantly. Only three results were met and the others are unlikely to be met over the short and medium term. Cotton measures should have a positive development impact, but the measures on public finance will not yield result in the absence of substantial changes in the preparation and execution of the budget and the management of public debt.

3.4 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts and Social Development

52. Over the operation’s time span, the poverty rate decreased by 3.6 percent; from 58.7 percent in 2011 to 55.1 percent in 2015. While this cannot be directly attributed to the EGGC6, there may be some direct links between the operation and poverty outcomes. Poverty in Togo is largely, though clearly not exclusively, a rural phenomenon, as at the time of appraisal 73 percent of the poor were living in rural areas whereas 35 percent were in urban areas. The operation was designed in such a way as to have a positive impact in terms of poverty reduction, not only through the stated objective of fostering increased growth, but also through the selection of the sectors of focus. The proposed reforms to facilitate and encourage structural transformation and growth were aimed at revising the price paid to producers according to a revised price formula, increasing non-carbonated phosphate production from 1.1 million tons in 2013 to 2 million tons, reviewing the electricity tariff according to an agreed financial model, and increasing the number of internet service providers and licensed telecom operators, were expected to be growth as well as directly welfare enhancing. For example, the cotton sector measure to improve the producer pricing formula was effectively implemented and led to increased cotton production and an increase in cotton farmers’ revenues. Not only was this a growth enhancing measure, but this could be considered a significantly pro-poor measure as the grand majority of cotton producers are poor. Similarly, planned measures in the telecommunications and electricity sectors were also pro-poor in that improving telecommunications services and lowering costs, as well as strengthening the financial viability

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of the electricity sector to facilitate increased investment and improve access to electricity are results that would have had a direct welfare improving impact on the poor. These measures would also have directly increased opportunities for improved livelihoods among poor households by affording access to telecommunications services and electricity. Unfortunately, the fact that the reforms were not fully implemented led to the expected results not being achieved and a less than expected impact on poverty measures.

53. While positive in the operation’s design aspects of focusing on measures with significant poverty impact, given the very limited results achieved, one would have to conclude that measureable and attributable poverty impacts were minimal.

(b) Institutional Change/Strengthening

54. Results achieved in the area of strengthening PFM practices have effectively supported institutional change and strengthening outcomes. Having published budget information and budget execution information for several years now, it could be said that the supported reforms in these areas have instilled a culture of budget transparency in Togo. This institutional change should be sustained and ongoing involvement with the BOOST budget transparency tool should further deepen the commitment and ongoing implementation of a culture of enhanced budget transparency.

55. Other supported measures were significantly less influential is fostering institutional change. Once again, the series was designed to foster meaningful change in a number of institutions, including through the development and implementation of pricing mechanisms in the cotton and electricity sectors, and a new institutional approach to distribution and pricing in the fertilizer sector, as prime examples. The inability to complete the series resulted in these actions not being fully implemented and a less than successful impact on institutional change. Without implementation of the entire program of reforms, the changes supported under EGGC6 were insufficient to inculcate a sustained cultural change and to embed processes and mechanisms within relevant institutions that would have ensured, or at least contributed to, their support and sustainability.

(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: High

56. The risk to outcomes being sustained is high. Many risks identified in the Program Document for the EGGC6 materialized. Risks identified included: (i) the fragile political climate; (ii) vested interests were expected to be more supportive of economic governance enhancing reforms that in the past; (iii) spending pressures which were deemed politically attractive, were thought to be controllable; (iv) fiduciary risks that had to be closely monitored;

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and (v) implementation risks resulting from a lack of coordination within the Ministry of Economy and Finance and between the Ministry of Finance and sector ministries.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating: Moderately Satisfactory

57. The Bank team took time to prepare a well thought out operation in a difficult environment. While the objective of the DPO program was modest as suggested by the choice of results indicators, this DPO was intended to set the stage for key structural reforms in key areas. Cooperation with government counterparts was good throughout the preparation and implementation of the program. The Bank team also coordinated closely and effectively with the IMF, EU, AfDB, UNDP and other development partners. Technically, the operation and the choice of prior actions and triggers could be considered to have been very well-designed.

58. However, following an extended period of isolation from the donor community and a less than stellar performance record, the team could have perhaps expected greater reluctance on the part of the authorities to an ambitious reform program. The Political Economy (PE) study that the team commissioned was a thoughtful addition to the assessment in this regard. Several signs existed that capacity might have been lacking. The PE study helped identify political economy and governance risks and could have led to further design adjustments, such as a stand-alone operation, or greater focus, that may have enabled the operation to be more effective. Political imperatives to re-engage with Togo may have influenced some design aspects, but these were not documented and so it is uncertain to what extent these pressures may have been present.

59. Some performance indicators in the DPO have limitations in assessing progress toward program objectives. For example, for transparency reasons, it is important to have an indicator on the number of years the budget data are available on-line. However, of greater importance is the quality of the budget, which is made public. There is little value-added in doing analysis with a budget which is not credible and which the Government does not use as a tool for economic policy. Nonetheless, publication of the budget does allow critics and analysts an opportunity to begin discussions around the credibility of the budget and the Bank trained civil servants as well as members of civil society in budget analysis and alerted the press and Parliament to the existence of this data. One could also make the same point about opening up the market to a third telecommunications operator. The major question here is whether it would have been possible to address the identified weaknesses of the current telecommunications operators directly, with a view to improving their efficiencies, instead of assuming that opening up the market to a third operator would eventually or automatically lead to greater efficiency. Also, the issue of the efficiency of state-owned banks could have perhaps been addressed by better regulatory practices and not simply affirming that privatization would lead to greater efficiency.

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60. While the selected prior actions and triggers were highly appropriate in and of themselves, they spanned a large number of disparate sectors. The operation might have benefited from greater focus in the number of sectors chosen for support and may have facilitated greater government adherence and commitment had the number of sectors of focus been narrower. Again, this is easier to perceive in hindsight given how things played out, but the choice of sectors was admittedly very broad at the design stage.

61. Finally, the availability of analytical work was considered to be of paramount importance in ensuring a well-designed operation. The development of the EGGC6 and the series benefited from the Country Procurement Assessment Report (CPAR), the Political Economy Analysis (PEA), PEMFAR, the Country Economic Memorandum and the Poverty Assessment. To inform the preparation of the series, team members actively engaged in the preparation of several background notes, including a study on Togo’s political economy. The latter was an explicit recommendation of the ICRR of ERGC-5.

b) Quality of Supervision

Rating: Satisfactory

62. There were two missions undertaken to assess the macroeconomic environment in January and June 2014 prior to disbursement. The first mission concluded that the 2014 budget adopted was not conducive to macroeconomic stability and recommended that the EGGC6 should not be disbursed. The second mission undertaken in June to assess the preparation of a revised 2014 budget recommended that the Government should include some identified off-budget spending (pre-financed contracts) in the revised 2014 budget prior to disbursement. There were equally separate sessions held between the Bank and the Togolese authorities during the Spring and Annual Meetings of 2014 to address these macroeconomic anomalies. The eventual adoption of a revised 2014 budget and a draft 2015 budget acceptable to both the IMF and the Bank led to the disbursement of EGGC6. In this respect supervision was well-done and effective in ensuring the adoption of a realistic budget prior to disbursement. Eventual cancellation of the series as a result of ongoing supervision and assessment activities was also highly appropriate given the turn of events and the inability to proceed with planned reforms. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory

63. Overall Bank performance is rated Moderately Satisfactory for the reasons explained above.

5.2 Borrower Performance

(a) Government Performance

Rating: Unsatisfactory

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64. Government performance is rated unsatisfactory. The Government demonstrated considerable commitment at the time of program preparation, but failed to fully accept ownership of and commitment to the reform objectives once the first operation was disbursed. As mentioned earlier, this can be explained by the change in Government priorities. The reforms supported under EGGC6 required continued support, strengthening and supporting reforms and actions that were planned for subsequent operations in order to ensure full implementation and application. Unfortunately, in the absence of continuing Bank support and the change of Government priorities, the Government did not sustain the reform effort and as a result the reforms undertaken under EGGC6 were not fully supported with follow-up complementary measures.

65. In parallel, a period of serious economic mismanagement followed approval of EGGC6 and was not conducive to the achievement of results or maintenance of a stable macroeconomic framework. This has led to a general state of fatigue in the donor community at large about the rationale for continuing to invest in such reform programs. In addition, the Government did not monitor progress for all targets included in the results framework and took few steps to ensure agreed targets were met.

(b) Implementing Agency or Agencies Performance Rating: Unsatisfactory

66. The Ministry of Economy and Finance was in charge of the overall implementation of the operation. However, day-to-day monitoring of the reform program was undertaken by the Permanent Secretariat in charge of Monitoring Policies and Financial Programs. The sector reforms were implemented by the respective technical departments in the sector ministries, under the oversight of the Ministry of Agriculture and Fisheries (cotton), the Ministry of Mines and Energy (mining and electricity), the Ministry of Post and Telecommunications (telecom), the Ministry of Economy and Finance (banking), and the Presidency (Free Zone and Investment Promotion Authority) with overall coordination provided by the Ministry of Economy and Finance. The Ministry of Economy and Finance was unable to do a proper job of coordinating the implementation of the reforms. The Permanent Secretariat which was in charge of the day-to-day monitoring of the reform program was seriously under-staffed and existing personnel in the Secretariat did not have the required experience and expertise to fulfill their responsibilities. The Ministries in charge of implementation sometimes even failed to realize they were in charge of implementing some of the above reforms because of poor coordination from, and follow-up by the Ministry of Economy and Finance. Some reforms that depended on the Ministry of Economy and Finance were successfully implemented when the reformers within the Ministry had an upper hand in implementing the reforms. However, there were other reforms, which were far beyond their competencies, over which they had little control and which were eventually not implemented – one example being the reforms in the financial sector. Moreover, the Ministry of Economy and Finance, which was in charge of the entire coordination process, did not effectively sensitize or engage line ministry colleagues to bring about the necessary reforms within their sectors. It can also be argued that some of the sector reforms, such as reforms in the telecommunications and energy sectors were sometimes not fully dependent on the sector

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Ministries, but were reforms that depended on substantive support from higher levels within the decision-making process. This may explain the lack of achievement of most of the real sector reforms.

67. The highly centralized approach to decision-making in the Ministry of Economy and Finance as practiced by the Minister of Finance at the time was not conducive to ownership of the reforms. This contributed to poor communication within the Ministry and between the Ministry and line ministries. Staff within the Ministry of Economy and Finance, while tasked with implementation of the operation and monitoring, had little direct ownership as they simply followed directions handed down from the top and were not fully engaged at the decision-making or even analytical level. This led to some lethargy and lack of interest around implementation and monitoring among those assigned the task in both the central ministry and line ministries.

(c) Justification of Rating for Overall Borrower Performance

Rating: Unsatisfactory 68. The overall borrower performance is rated unsatisfactory for the reasons explained above

6. Lessons Learned

69. The DPO program was designed just two years after Togo attained the HIPC Initiative completion point. It was at a moment when Togo’s medium term development strategy, the SCAPE, had just been prepared and many development partners were seriously re-engaging in Togo through various programs and projects. Several lessons emerge from that process:

(i) Demonstrated government commitment is key to the success of program based lending. In the case of a country emerging from a long period of isolation from international assistance it may be that under such circumstances the Government could be less inclined to commit to long term reforms because of fears of a lack of trust and the possibility of a return to a situation of isolation. A certain level of confidence between the authorities and the Bank may be necessary to ensure government credibility and commitment to the reform agenda. A stand-alone approach may be preferable in such cases as a way to build commitment, trust and to establish a track record when re-engaging with a country after a period of absence. At the same time, after 5 stand-alone operations, reforms of a longer duration were needed, so the team had to make a difficult choice.

(ii) Selectivity and demonstrated impact are important aspects to consider when choosing reforms. In many countries, several sectors may be identified as sectors in need of reform. However, for efficiency and capacity reasons, it is preferable that the Bank chooses just a few of these areas and ensures that the chosen sectors have significant impact. The EGGC6 may demonstrate over-ambition in trying to accomplish too much, across too many areas, given not only capacity constraints, but the Government’s ability to remain committed and provide sufficient attention to concluding meaningful reforms across such a broad array of sectors.

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Furthermore, the choice of reform sectors should also be based on the Bank’s comparative advantages in the chosen sectors.

(iii) It is also important to build consensus for the reform program. In the case of the EGGC6 many of the results were not achieved because of a lack of commitment to the reform program. It is important that the Bank engages seriously with the authorities on the proposed reforms and that both parties agree on the potential benefits in pursuing the selected reforms in order to enable the Government to increasingly own the reform effort and to fully consider the selected reforms as important drivers for future growth, development and the advancement of the Government’s own priorities and objectives.

(iv) Coordination with other multilaterals enhances the impact of Bank operations. This lesson applies both to preparation as well as to supervision, since each institution has comparative advantages in different areas, all of which are essential for a comprehensive reform program.

(v) There is need for a good understanding of the political economy environment in implementing a DPO in a country like Togo. It is important to understand the complex political environment and decision-making structure before proceeding with a DPO in such an environment. A sound understanding of political economy issues, as well as the identification of reform champions with whom the Bank can engage and support in furthering reform efforts within a DPO framework is imperative.

(vi) The use of technical assistance and/or investment lending to bolster capacity and accompany implementation of a DPO can be essential for achieving development objectives. In the case of the EGGC6 many of the Bank’s investment projects were instrumental in implementation of the DPC program. Also, technical assistance to support the implementation of some reform programs could have had a significant impact.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/Implementing agencies

(b) Cofinanciers: N/A

(c) Other partners and stakeholders: N/A

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Annex 1. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team membersNames Title Unit Responsibility/

SpecialtyLendingMiria Pigato Sector Manager GMF01 Sector Manager

Volker Treichel Lead Economist and Sector Leader GMF01 Lead Economist and Sector Leader

Johannes G. Hoogeveen Senior Economist GPV07 Task Team LeaderGodwill Kan Tange Senior Economist GMF01 Team memberYemdaogo Tougma Economist GMF01 Team memberFrancisco Ahued Consultant

Eric Brintet Lead Financial Management Specialist GG025 Lead Financial Management Specialist

Alain Hinkati Financial Management Specialist GG026 Team memberBoutheina Geurmazi Telecom Team memberBrigitte Bocoum Mining GEEX2 Team memberChristian Berger Senior Agricultural Specialist GFA01 Team memberBenjamin Billard Operations Officer GFA01 Team memberFranklin Gbedey Energy Specialist GEE07 Team memberBronywyn Grieve Consultant Governance Specialist

Anca Dumitrescu Senior Transport Specialist Sector Specialist

Adja Dahourou Private Sector Development Specialist GTC07 Team member

Philippe Aguera Senior Public Sector Specialist GFM01 Team member

Leonardo Iacovone Senior Economist GTC04 Team memberMagueye Dia Private Sector Development Specialist GTC07 Team memberSylvie Nenonene Communications Officer AFREC Team memberNneoma Nwogu Counsel LEGAM Team memberAissatou Diallo Senior Finance Officer WFALN Team memberJudite Fernandes Language Program Assistant Team memberYutaka Yoshino Senior Economist AFCE1 Peer ReviewerKatherine Bain Senior Governance Specialist Peer Reviewer

Ganesh Rasagam Lead Private Sector Development Specialist AFTFE Peer Reviewer

Overall GuidanceMiria Pigato Sector ManagerVolker Treichel Lead EconomistHerve Assah Country ManagerKatrina Sharkey Country Program Coordinator

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Madani Tall Country DirectorOusmane Diagana Country Director

(b) Staff Time and Cost

StageStaff Time and Cost

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

LendingTotal: 197 933.14

Supervision/ICRRTotal: 3 537.24

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Annex 2. Beneficiary Survey Results

NA

Annex 3. Stakeholder Workshop Report and Results

NA

Annex 4. Summary of Borrower's ICRR and/or Comments on Draft ICRR

NA

Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders

NA

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Annex 6. List of Supporting Documents

Government of Togo – “Strategy for Boosting Growth and Promoting Employment – in French, Stratégie de Croissance Accelerée et de Promotion d’Emploi -(SCAPE)” – January 2013.

IMF (2016b). Togo: Article IV Consultation. Press Release; Staff Report; and Statement by the Executive Director for Togo. November 2015.

Independent Evaluation Group “Guidelines for Reviewing World Bank Implementation Completion Results Reports: A Manual for Evaluators. Last updated, August 2014.

World Bank, “Togo Systematic Country Diagnostics” September 2016.

World Bank “Preparing High Quality Implementation Completion Results Reports (ICRs), December 2015.

World Bank, “Togo Economic Update: Can Cash Transfers Enable Togo to Achieve its Poverty Reduction Goals”, First Edition, January 2015.

World Bank “Implementation Completion and Results Report – Guidelines” August 2006, updated on 22 July 2014.

World Bank “Program Document for a Proposed Loan in the Amount of US$14 million to Togo for the Economic Growth and Governance Credit for Growth Development Policy Loan, November 6, 2013.

World Bank “Interim Strategy Note for Togo for the period FY12/13”, December 2011.

World Bank. Togo: Investment Climate Policy Note: Draft Report. AFR. Finance and Private Sector Development. July, 2010.

World Bank “Interim Strategy Note for Togo for the period FY08/10”, May 2008.

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