Document of The World Bank Report No: ICR00003170 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-52640) ON A CREDIT IN THE AMOUNT OF SDR 33.4 MILLION (US$50 MILLION EQUIVALENT) TO THE REPUBLIC OF MALI FOR A RECOVERY AND REFORM SUPPORT CREDIT June 25, 2014 Poverty Reduction and Economic Management 4 Country Department AFCW3 Africa Region GOVERNMENT FISCAL YEAR January 1 – December 31 CURRENCY EQUIVALENTS (Exchange Rate Effective June 24, 2014) Currency Unit = CFAF US$1 = CFAF 482 ABBREVIATIONS AND ACRONYMS AFDB African Development Bank AICE Software for Integrated Public Accounting ASYCUDA Automated System for Customs Data BCEAO Central Bank of West African States CPPR Country Portfolio Performance Review CSCRP Growth and Poverty Reduction Strategy Paper CDMT Medium Term Expenditure Framework CGSP General Control Agency for Public Services CREE Electricity and Water Regulatory Commission DP Development Partners DPO Development Policy Operation DNPD National Directorate for Development Planning ECF Extended Credit Facility ECOWAS Economic Community of West African States EDM Electricity of Mali ELIM Integrated Light Household Survey EU European Union FCFA French CFA GDP Gross Domestic Product GFS Government Finance Statistics GoM Government of Mali GPE Global Partnership for Education GPRSP Growth and Poverty Reduction Strategy Paper IDA International Development Association IFRS International Financial Reporting Standards IMF International Monetary Fund ISN Interim Strategy Note MDG Millennium Development Goals MEFB Ministry of Economy, Finances and Budget MISMA African-led International Support Mission to Mali MoA Ministry of Agriculture MTEF Medium Term Expenditure Framework ODA Official Development Assistance ii ON Office of Niger PAGAM-GFP Action Plan for the Improvement and Modernization of Public Finance Management PAP Priority Action Plan PAPAM Fostering Agricultural Productivity Project PAPU Emergency Priority Action Plan PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PRSP Poverty Reduction Strategy Paper PTF Development Partners RCF Rapid Credit Facility RRSC Recovery and Reform Support Credit SIGTAS Standard Integrated Government Tax Administration System SNA System of National Accounts SSN Social Safety Nets UEMOA West African States Monetary Union UN United Nations WAEMU West African States Monetary Union (UEMOA) Vice President : Makhtar Diop Country Director : Paul Noumba Um Sector Director : Marcelo Giugale Sector Manager : Miria Pigato Task Team Leader : Sebastien Dessus ICR Team Leader : Cheikh Diop iii REPUBLIC OF MALI RECOVERY AND REFORM SUPPORT CREDIT CONTENTS DATA SHEET A. BASIC INFORMATION ..................................................................................................................V B. KEY DATES .................................................................................................................................V C. RATINGS SUMMARY ...................................................................................................................V D. SECTOR AND THEME CODES ......................................................................................................VI E. BANK STAFF ...............................................................................................................................VI F. RESULTS FRAMEWORK ANALYSIS ........................................................................................... VII G. RATINGS OF PROGRAM PERFORMANCE IN ISRS........................................................................IX H. RESTRUCTURING (IF ANY) .........................................................................................................IX 1. PROGRAM CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN ................................................ 1 2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES ................................................. 7 3. ASSESSMENT OF OUTCOMES ..................................................................................................... 11 4. ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME ................................................................ 20 5. ASSESSMENT OF BANK AND BORROWER PERFORMANCE ......................................................... 20 6. LESSONS LEARNED .................................................................................................................... 21 7. COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS .......... 22 ANNEX 1: BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES .............. 23 ANNEX 2: SELECTED ECONOMIC AND FINANCIAL INDICATORS .................................................... 24 ANNEX 3: RESULTS FRAMEWORK .................................................................................................. 25 ANNEX 4: BENEFICIARY SURVEY RESULTS ................................................................................... 27 ANNEX 5: STAKEHOLDER WORKSHOP REPORT AND RESULTS ...................................................... 28 ANNEX 6: SUMMARY OF BORROWER’S ICR AND/OR COMMENTS ON DRAFT ICR ........................ 29 ANNEX 7: COMMENTS OF COFINANCIERS AND OTHER PARTNERS/STAKEHOLDERS ..................... 31 ANNEX 8: LIST OF SUPPORTING DOCUMENTS ............................................................................... 32 ANNEX 9: MAP IBRD 133443 ....................................................................................................... 32 iv DATA SHEET A. Basic Information Mali: Recovery and Reform Country Mali Program Name Support Credit Program ID P125866 L/C/TF Number(s) IDA-52640 ICR Date 1.26.2014 ICR Type Core ICR Lending Instrument DPL Borrower GOVERNMENT OF MALI Original Total Commitment XDR 33.40M Disbursed Amount XDR 33.40M Implementing Agencies Ministry of Economy and Finance Cofinanciers and Other External Partners B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 02/28/2013 Effectiveness: 12/04/2013 12/04/2013 Appraisal: 04/16/2013 Restructuring(s): Approval: 06/18/2013 Mid-term Review: Closing: 12/31/2013 12/31/2013 C. Ratings Summary C.1 Performance Rating by ICR Overall Program Rating Outcomes Moderately satisfactory Risk to Development Outcome Substantial Bank Performance Moderately Satisfactory Borrower Performance Moderately satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Moderately satisfactory Agency/Agencies: Overall Borrower Overall Bank Performance Moderately Satisfactory Moderately satisfactory Performance v C.3 Quality at Entry and Implementation Performance Indicators QAG Assessments (if Implementation Performance Indicators Rating: any) Potential Problem Program at No Quality at Entry (QEA) None any time (Yes/No): Problem Program at any time Quality of Supervision No None (Yes/No): (QSA) DO rating before Moderately Closing/Inactive status Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 50 50 General agriculture, fishing and forestry sector 13 13 General industry and trade sector 13 13 Other social services 12 12 Transmission and Distribution of Electricity 12 12 Theme Code (as % of total Bank financing) Public expenditure, financial management and procurement 44 44 Other Private Sector Development 19 19 Rural services and infrastructure 18 18 Vulnerability assessment and monitoring 13 13 Tax policy and administration 6 6 E. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Makhtar Diop Country Director: Paul Noumba Um Ousmane Diagana Sector Director: Marcelo Giugale Marcelo Giugale Sector Manager: Miria Pigato Miria Pigato Task Team Leader: Sebastien C. Dessus Sebastien C. Dessus ICR Team Leader: Cheikh A. Diop ICR Primary Author: Cheikh A. Diop vi F. Results Framework Analysis Program Development Objectives (from Program Document) The proposed stand-alone Development Policy Operation supports the authorities’ efforts to: (i) deepen executive accountability; (ii) protect poverty reduction progress made in recent years; and (iii) prepare for a rapid economic recovery as the political transition ends and the security situation improves. While the credit would primarily translate into financing programs from the Emergency Priority Action Plan 2013-14, particular attention is given to policy actions aimed at: (i) strengthening controls on budget and transparency; (ii) protecting pro-poor expenditures; (iii) restoring financial sustainability and investment capacity in power and irrigation sectors; and (iv) improving public financial and investment management. The proposed operation fully shares the objectives of the proposed World Bank Group’s Interim Strategy Note for FY14-15, and is aligned with the World Bank’s Strategy for Africa. PDO Indicators Original Target Actual Value Formally Baseline Values (from Achieved at Indicator Revised Value approval Completion or Target Values documents) Target Years Indicator 1 : Quarterly budget execution reports produced using AICE Value (number) 0 2 3 Date achieved 12/31/2012 12/31/2013 12/31/2013 Comments Budget execution repots for Q2, Q3 and Q4 were produced using the AICE (incl. % application. achievement) Internal audit reports in Ministries of Health and Education using a risk based Indicator 2 : approach Value (number) 0 2 4 Date achieved 12/31/2012 12/31/2013 12/31/2013 Comments Audit reports were conducted using risk-based approach not only in Education and (incl. % Health sectors, but also in Agriculture sector and in Equipment and Transports. achievement) Compliance of procurement plans with budgetary allocations for health and Indicator 3 : education Value (yes/no) No yes n.a Date achieved 12/31/2012 12/31/2014 12/31/2013 Comments The indicator was chosen from the result framework of the Government action plan (incl. % for Public finance reform (PAGAM). A mid-term evaluation of the PAGAM II was achievement) planned for 2013, but was not completed. Certified year n-2 budget execution reports submitted to Parliament with Budget Law Indicator 4 : for year N Value number) 0 1 0 Date achieved 12/31/2012 12/31/2013 12/31/2013 Comments This target will not be achieved; Failure stems from miscommunication between (incl. % authorities and staff. Staff was referring to N as the budget law year (in line with achievement) WAEMU directives) while authorities were referring to the year of submission to vii Parliament. In fact, Certified budget execution report for year 2011 was available at end 2013. Reports from national audit institutions published on the website of the national Indicator 5 : council of civil society organizations Value (number) 0 4 0 Date achieved 12/31/2012 12/31/2013 12/31/2013 The indicator was chosen from the result framework of the Government action plan for Public finance reform (PAGAM). Most recent reports are not available on the Comments website of the National Council of Civil Society Organizations (CNSC). The CNSC (incl. % referred to logistical problems. Two reports are published on the respective websites achievement) of the two major external audit institutions (VEGAL, SCCS). Indicator 6 : Control of Corruption Value (percentage) 32 40 25 Date achieved 12/31/2011 12/31/2014 12/31/2012 The baseline was 36 in 2011. A p-rank of 40 is targeted for 2014 (corresponding to the level observed in 2008). The latest available data indicate a p-rank of 25 as of 2012, suggesting a deterioration of the indicator. This deterioration in 2012 is not Comments surprising due to the military coup and subsequent institutional crises. Accounting for (incl. % policy actions undertaken to improve public finance management under the Brussels achievement) conference agenda, including the follow up at judiciary level of the reports from audit institutions and the vote of the law on illicit enrichment, the indicator is likely to improve in 2014. Indicator 7 : Share of priority pro-poor expenditure in GDP Value 6 6.5 6.4 (percentage) Date achieved 12/31/2012 12/31/2013 12/31/2013 Based on most recent estimates of 2012 GDP, the baseline is 6.2. The target was not Comments fully met. However, it is important that the share of priority pro-poor expenditure in (incl. % GDP has increased accounting for the fact that GDP was especially low in 2012 due achievement) to the crisis. Indicator 8 : Share of pro-poor expenditure benefiting the two poorest quintiles Value 40 (percentage) Date achieved 12/31/2015 Comments The source of verification is a benefit incidence analysis to be based on forthcoming (incl. % ELIM survey. achievement) Indicator 9 : Share of investment projects in the PIP selected by the selection committee Value (percentage) 0 50% 100% Date achieved 12/31/2012 12/31/2013 12/31/2013 Comments (incl. % As reported by the selection committee. achievement) viii Share of investment project in the budget law submitted to Parliament selected by the Indicator 10 : selection committee Value (percentage) 0 100 n.a Date achieved 12/31/2012 12/31/2015 12/30/2013 The target is on track to be met at end 2015. The selection Committee has been Comments formally set up in 2013 and a budget line was created in the 2014 budget law to (incl. % finance its activity. The Committee has endorsed the objective of reviewing a priori achievement) all the investment projects to be proposed for 2015 budget. Land titles delivered to private entrepreneurs through the financial mechanism for Indicator 11 : irrigation in ONA Value (number) 0 1 0 Date achieved 12/31/2012 12/31/2015 12/31/2013 Comments The extension of irrigated surfaces in the Office du Niger area is set as a priority in (incl. % the current government’s action plan. However, the financial mechanism is not yet achievement) operational. Indicator 12 : Irrigated surface by the financial mechanism for irrigation in ONA Value (hectare(ha) 0 2500 ha 0 Date achieved 12/31/2012 12/31/2017 12/31/2013 Comments The government action plan sets the target at 100,000 ha by 2018. Hence, 2500 ha by (incl. % 2017 may still be on track. achievement) Indicator 13 : Operational subsidies to EDM over GDP Value (percentage) 0.6 0.4 1.1 Date achieved 12/31/2012 12/31/2013 12/31/2013 In 2013, direct subsidies to the state-owned electricity utility (EDM, Electricité du Comments Mali) amounted to FCFA 40 billion (or 0.7% of GDP). To this amount was added (incl. % FCFA 17.5 billion through the writing off of tax debts accumulated by EDM. These achievement) subsidies compensate for large operational losses (FCFA 38.6 billion in 2013) despite the increase by 7% of electricity rates on average, as of February 1, 2013. Indicator 14 : Connections to electricity grid Value (number) 261,000 300,000 303,920 Date achieved 12/31/2011 12/31/2015 12/31/2012 Comments The target set for 2013 is already met. EDM plans about 25,000 connections per year (incl. % going forward. achievement) G. Ratings of Program Performance in ISRs No. Date ISR archived DO IP Actual disbursements (US$ millions) 1 12/31/2013 Moderately Moderately 0.0 satisfactory satisfactory H. Restructuring (if any) Not applicable ix 1. Program Context, Development Objectives and Design 1.1 Context at Appraisal 1. In 2013, Mali was emerging from the most severe crisis of its history. Mali has experienced conflict on a regular basis since independence in 1960. Yet, the northern rebellion starting in January 2012 and the March coup have resulted in unprecedented levels of insecurity and political and social fragility. The coup of March 22, 2012 took place in a country with a strong democratic record in which two non-violent democratic transfers of power have taken place during the past 20 years, and was ready to organize a third one. The crisis was triggered by a combination of recent developments linked to the revolution in Libya and the associated return of fighters and spreading of weapons, as well as growing social tensions, the presence of criminal networks and terrorist groups, and the collapse of the army following the coup d’état. Yet, it should primarily be seen as a manifestation of long-standing problems in Mali’s governance and social structures, which were aggravated by a combination of internal and external pressures. 2. Prompted by a strong mobilization of the international community, constitutional order was progressively restored. On April 2012, an agreement was reached with the military Junta that resulted in the nomination of an interim President tasked to hold elections in 40 days. Failure to achieve this objective (in the face of political disagreements) led to the formation of a national unity government on August 20 2012. In January 2013, the Malian army benefited from the support of an UN-mandated coalition of foreign troops to restore sovereignty over the entire Malian territory. By end January 2013, Malian authorities adopted a roadmap that emphasizes the two main goals of the government of transition: (i) to restore sovereignty over the entire territory of Mali, and (ii) to organize fair and transparent national elections in 2013. The adoption of the roadmap has made it possible to re-engage most bilateral development partners, especially European Union (EU) member countries. By March 2013, major international organizations – including the IMF, African Development Bank (AFDB) and UN bodies – had resumed their operations and programs in Mali. 3. The political and security crisis has had a severe economic and social impact, through the strong reduction of ODA and the deterioration of the security situation. ODA disbursements were cut by FCFA 300 billion in 2012 compared with 2011, strongly affecting demand for investment goods and services, construction in particular. The deterioration of the security situation mainly impacted tourism (both in Southern and Northern parts of the country) and the livelihood of Northern populations. Tourism, which brought in foreign currency receipts of FCFA 150 billion in 2011 (3 percent of GDP), was brought to a standstill after the coup of March 2012. Besides tourism and administration, other economic activities (mainly trade, livestock, and rice cultivation) in the North were severely disrupted with about 31 percent of the northern population being displaced (including civil servants and their families redeployed to the South). Fortunately the economy also benefited in 2012 from improved terms of trade and very good climatic conditions. All in all, Mali’s real GDP was stable in 2012 through the combination of positive and negative developments discussed above. But declining per capita incomes and 1 displacement of populations led the bank to estimate that, by end 2012, the poverty rate had increased to 46% of the population, up from 44% a year before. 4. Faced by the reduced financing opportunities, the government responded with fiscal austerity. The government managed its budget in 2012 by offsetting the loss of revenue with expenditure cuts, especially public investment. This fiscal austerity was maintained in the budget law adopted for 2013, on which the operation under review was built. And while social expenditures remained protected relative to fiscal revenues, they nonetheless also suffered in absolute and per capita terms. Meanwhile, authorities continued to honor external debt service in spite of the suspension of aid programs, with a view to facilitate a quick re-engagement of donors when political conditions would allow. These efforts notwithstanding, the government could not prevent emergence of external debt service arrears in an amount of $58 million by end- 2012, as well as the accumulation of some domestic expenditure arrears (which were, by June 2014, still being audited). 5. Prior to the crisis, Mali adopted its third Growth and Poverty Reduction Strategy Paper (CSCRP-3), for the period 2012-17. The CSCRP-3 aims at promoting shared growth and equitable access to quality social services, and at supporting institutional development, under the prerequisites of peace, security and macro-economic stability. The Priority Action Plan (PAP) listed the programs to be implemented in support of the CSRP-3 objectives, for a total cost of FCFA 9,744 billion over the 6 year period.1 The implementation of the GCSRP-3 hardly started in 2012 as the political and security crisis erupted. Accounting for limited available financial resources in 2013-14, the transition Government selected from the PAP a subset of programs initially envisaged to be implemented in 2012-13. This set of programs regrouped under the Emergency Priority Action Plan 2013-14 (PAPU) aimed in priority at preventing the deterioration of human development indicators. As such, sectors covered under the PAPU included security, education, health, social protection, employment, rural development and public financial management. 6. The Bank continued to support the urgent needs of the Malian people throughout the crisis. In accordance with the relevant Operational Policy (OP 7.30 on Dealing with De Facto Governments), the Bank temporarily suspended disbursements and lending activities, immediately following the military coup, until the reinstatement of an internationally recognized government. A gradual re-engagement was initiated after an assessment mission in June 2012, followed by a fiduciary assessment in August 2012. A Country Portfolio Performance Review (CPPR) was also conducted in December 2012. The Portfolio Review helped identify gaps in the ongoing program and activities to be restructured in light of the new country priorities. In the course of FY13, four new operations have been prepared on a fast track basis for a total of US$180 million including new operations in education, agriculture, safety nets and the budget support operation under review. The Bank also launched the preparation of an Interim Strategy Note (ISN) for FY14-15, which was presented to the Board along with the budget support operation under review. The proposed ISN program aimed to both rapidly provide support to meet the needs of populations across the country and initiate new activities to better address long-term governance challenges. 1 See Mali Joint IDA-IMF Staff Advisory Note on the Third Growth and Poverty Reduction Strategy Paper, World Bank and International Monetary Fund, April 2013, Washington D.C. 2 1.2 Original Program Development Objectives (PDO) and Key Indicators 7. The objective of the one-tranche Recovery and Reform Support Credit (RRSC) was to support the authorities’ efforts to (i) deepen executive accountability, (ii) protect poverty reduction progress made in recent years, and (iii) prepare for a rapid economic recovery as the political transition ends and the security situation improves. Particular attention was given to the policy actions aimed at (i) strengthening controls on budget and transparency, (ii) protecting pro-poor expenditures, (iii) restoring financial sustainability and investment capacity in power and irrigation sectors, and (iv) improving public financial and investment management. Key outcome indicators (as approved) Four outcomes were expected from this operation, and they were captured through 6 medium term outcome indicators completed by 8 intermediary output indicators in the results framework. Outcome 1: controls on budget and transparency are strengthened (i) Compliance of procurement plans with budgetary allocations has improved in the Ministry of Health and the Ministry of Education; (ii) Control of corruption indicator has improved. Outcome 2: pro-poor expenditures are protected (i) Share of priority pro-poor expenditure benefiting poorest quintiles has increased. Outcome 3: financial sustainability and investment capacity in power and irrigation sectors are being restored (i) Surface of irrigated land financed by the mechanism for irrigation for the office du Niger area has increased; (ii) Number of connections to the EDM grid has increased. Outcome 4: public financial and investment management has improved (i) Share of public investment projects retained in the budget laws submitted to the National Assembly which were reviewed and selected by the unique selection committee for public investment has increased. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification N/A 1.4 Original Policy Areas Supported by the Program Policy area 1: Deepening Executive Accountability 3 Accounting and Financial Reporting: In this area the objective of the RRSC was to encourage the implementation of a computerized system to centralize fiscal data, from commitments to accounting entries. This would improve the quality of internal controls and budget execution reporting, reduce the time required to produce annual financial statements and balance sheets and strengthen the role of the Budget Execution Law. 8. PFM measures supported by the RRSC are part of the ongoing Action Plan for the Improvement and Modernization of Public Finance Management (PAGAM/GFP II)2. As part of PAGAM II, the need was stressed to integrate the accounting information system to allow full automation of the expenditure cycle. Such a system would ensure reliability and integration of an information system of budget execution. It would also allow exchanging real-time information on the different stages of credit management, money orders and payments. As the first phase of this reform, the Integrated Application of Accounting of the State – AICE – was implemented at the Paymaster General of the Treasury, which handled 80% of state spending in January 2011. The second phase of deployment of the application AICE concerns revenue management and its accounting. The achievement of the interface of AICE with management applications for tax revenues (SIGTAS) and customs (ASYCUDA), covering all transactions at the central government level, was considered a prior action for the RRSC. Internal audit controls: The objective in this area was to strengthen the effectiveness and efficiency of the internal audit system in monitoring the budget execution trough improving audit methods and risk assessment techniques, using education and health as pilot-sectors. 9. In Mali, internal audit functions are carried out by several entities spread out in the administrative framework. The most important are the Contrôleur General des Services Publics (CGSP, General Control Agency for Public Services), operating under the authority of the Prime Minister; the General Inspectorate of Finance and the Financial Control Directorate under the authority of the Ministry of Finance. There are also various Internal Audit departments in Line Ministries. The complexity of the institutional framework and the lack of formal coordination and communication between internal audit bodies contributed to increase the redundancy risk and undermined the effectiveness and efficiency of internal audit reviews. In the face of it, the Government decided to strengthen the effectiveness of the internal audit spelled out in the National strategy for internal controls. As part of this strategy, the CGSP adopted a risk- based approach for internal controls and piloted its implementation in the Ministries of Health and Education. The implementation of the pilot phase was a RRSC prior action. External Audits and Parliamentary Oversight: The objective in this area was to strengthen the external oversight of budget execution by improving the timeliness of budget execution reports and Budget Review Acts (“Lois de Réglement”) to the Assembly and the legal opinions on it from the Audit Section of the Supreme Court (“Section des Comptes”). 2 The first action plan (PAGAM/GFP I) for the period 2007-10 was adopted in April 2005. It was intended to improve and modernize its public financial management system. The plan was centered on (i) improving the quality of budget preparation and execution; (ii) enhancing the effectiveness of tax and financial administrations; (iii) incorporating external financing into national budgetary procedures; (iv) increasing the effectiveness and transparency of public procurement procedures; and (v) strengthening governance through enhancing accountability, transparency and participation. 4 10. Like internal audits, external audits have remained weak as stressed in the different PEFA reports. In Mali, external oversight is carried out by two major institutions: the Accounts Section of the Supreme Court, which is rooted in the constitution, and the Office of Auditor General (called Bureau du Verificateur General, BVG). The Accounts Section is Mali’s Supreme Audit Institution and is the only one with the power to sanction acts of misuse of public funds. The government has committed itself to transform the Accounts Section into an independent Court of Accounts. But, such transformation could only be done through a referendum. In the shorter run, the Government is committed to enhance the capacity of the Accounts Section to accelerate the judgment of public accounts while improving the timeliness of budget execution reports and Budget Review Acts (“Lois de Réglement”) to the Assembly. In this respect, the RRSC prior action concerned the transmission to the National Assembly of the budget execution reports for fiscal years 2010 and 2011, and the legal opinion on the budget execution report for fiscal year 2010. Transparency: The objective in this area was to improve budget transparency and strengthen executive accountability, in conformity with WAEMU PFM regulations (“Directives”) to be transposed in national legislations. 11. Despite the progress reported by 2011 PEFA regarding budget transparency, much remained to be done to meet international standards and conform to WAEMU guidelines. As part of WAEMU’s guidelines to be translated in national legislations, the transparency code notably clarifies the institutional responsibilities, format and frequency for the publication of information related to budget preparation and execution (central and local levels), audits, public contracts and procurement, and public private partnerships. The Transparency code also stipulates legal obligations for officials to frequently declare their assets, and to denounce any fraud in the management of public resources they could be made aware of by their official functions. Submission to the National Assembly of the transparency code following its adoption by Cabinet was considered a prior action for the RRSC. Policy area 2: Protecting Poverty Reduction Gains The objective in this area was to increase the share of priority pro-poor expenditure3 in the 2013 budget compared to the previous year, with a view to prioritize social spending and protect per capita basic service delivery under the exceptional circumstances that called for an increase in military spending while financial resources remained limited. 12. Until 2011, the Malian government had maintained a concerted effort to improve social sector expenditures in line with the priorities of its poverty reduction strategy. The March 2012 coup d’état and its aftermath hurt the economy and added to the stress from the poor 2011 harvest which put close to 4 million people (or 27 percent of the population) in a situation of food insecurity. In 2011 the pro-poor expenditure executed in Mali’s budget amounted to FCFA 360 billion (7.2 percent of GDP, 28.9 percent of actual total expenditure). In 2012, however, the Government was only able to spend FCFA 313 billion (6.0 percent of GDP and 29.8 percent of actual total expenditure). Through its Budget Law 2013, the Government 3 Priority pro-poor public expenditures in Mali comprise all domestically-financed public expenditures for education (basic, secondary and tertiary), health, and social sectors. 5 committed to increase the share of priority pro-poor expenditures to total expenditure in comparison with the Budget Law 2012. This budget allocation was considered a prior action for the RRSC. Policy area 3: Preparing for the Economic Recovery Public Investment Management: The objective in this area was to improve public investment selection, implementation and evaluation by formally establishing a selection committee for public investment projects. 13. Recent PFM studies pointed out the weaknesses in projects preparation and selection as a major obstacle not only to public investment effectiveness and efficiency, but also to budget execution in Mali. A review of Mali’s public investment management conducted in 2012 had recommended the formal establishment of a selection committee for public investment projects as a first essential step in the improvement of the public investment management framework. Further steps would include: (i) the creation of a fund to finance feasibility studies and ex-post evaluations, and (ii) the constitution of a bank of projects to be budgeted when financing becomes available. The formal establishment of the selection committee would consolidate its institutional authority, mandate and capacity, and mainstream the focus on project preparation. The ministerial instruction formally establishing the selection committee was a prior action for the RRSC. Irrigation financial Scheme: the objective in this area was to increase agricultural productivity and reduce vulnerability to weather-related shocks by encouraging the exploitation of irrigable lands under the control of Office du Niger. 14. Institutional reforms to enable increased private investments in the Office du Niger area have long been delayed despite the crucial needs and donors’ support. A program and cartography of public and private investments for the ON zone during the 2008-12 Plan was approved by the ON Board in 2009. A participatory mid-term review of the plan was carried out in 2010, to build a shared vision for the development of Mali irrigation resources among government, large private investors, producers’ organizations and donors. As part of this strategy, an irrigation funding mechanism for Office du Niger area was designed in order to attract private investments, enhance focus on producer’s participation and co-financing including the involvement of the banking sector. As a prior action, the RRSC supported the adoption by the Government of this financial mechanism comprising the establishment of the land management agency and the irrigation fund. Electricity Tariffs: The objective in this area was to promote the recovery of the financial equilibrium of the national electricity company (EDM), a prerequisite to revive investment in the sector, ensuring access and the quality of electricity service supply. 15. Nominal electricity tariffs were lower in January 2013 than in 2003, in spite of the considerable inflation in costs over the period. This failure to pursue cost recovering tariffs has put the finances of the sector in an unsustainable position. As a result, since 2006, new investments have increasingly been financed with GoM support. This support has however 6 become insufficient to prevent further deterioration of EDM’s cash position and short term debt situation. A strategic vision note on tariffs and subsidies was adopted in March 2009, indicating that EDM’s financial equilibrium could be reached in 2011. The Government also finalized a restructuring plan for EDM, which would be implemented with support from a Bank-financed project. Absent an effective implementation of the different plans and strategy, the GoM has been subsidizing EDM operational expenses in order to allow the utility to purchase enough fuel to run its plant and meet electricity demand. Aware of the heavy burden that subsidies impose to the fiscal framework, the Government committed to have electricity operation costs and investment plans increasingly financed by consumers. A first step in this respect was a tariff adjustment that was considered a prior action for the RRSCC. 1.5 Revised Policy Areas: N/A 1.6 Other significant changes: N/A 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance 16. The RRSC was designed as a stand-alone Development Policy Operation. It was approved on June 18, 2013. The credit became effective on December 4, 2013 and was closed on December, 31, 2013. There were 8 prior actions for the stand alone operation (see Table 1 below). All the prior actions were met before negotiations. 7 Table 1: Prior actions ACTIONS STATUS Deepening Executive Accountability The Recipient’s Ministry of Economy, Finances and Budget installs the AICE software and its interface with management applications for tax 1 revenues (SIGTAS) and customs data (ASYCUDA), covering all Central Government Transactions as to integrate the management of tax and customs Met. revenues in the Recipient’s accounting information system. The Recipient, through the Contrôleur General des Services Publics, adopts a 2 risk-based approach for internal controls in the Ministry of Health and the Met. Ministry of Education. The Recipient adopts and transmits to the National Assembly the budget 3 execution reports for fiscal years 2010 and 2011, and the legal opinion on the Met. budget execution report for fiscal year 2010. The Recipient, through the Council of Ministers, adopts the Budget 4 Transparency Code and submits it to the National Assembly. Met. Protecting Poverty Reduction Gains The Recipient increases the share of priority pro-poor expenditures to total 5 expenditure through the Budget Law 2013 in comparison with the Budget Met. Law 2012. Preparing for the Economic Recovery The Recipient, through the Ministry of Economy, Finances and Budget 6 establishes a selection committee for public investment projects. Met. The Recipient, through the Council of Ministers, adopts a new financial 7 mechanism for irrigation for the office du Niger area. Met. The Recipient, through the Commission de Regulation de l’Electricité et de 8 L’Eau, adopts and implements the automatic electricity tariff adjustment Met. mechanism. 2.2 Major Factors Affecting Implementation: 17. Adequacy of government’s commitment. The Government was strongly committed to maintaining a stable macroeconomic framework and sound fiscal management. The transition authorities were committed to pursuing the reform agenda in PFM, protecting the most vulnerable populations and preparing economic recovery with the support of the donor community. Despite the suspension of ODA, the framework for joint budget reviews was maintained as well as the PRSP review. The increase of electricity tariffs in a crisis period was the most emblematic illustration of the government’s commitment to move forward with reforms. 8 Notwithstanding the authorities commitment, presidential and legislatives elections were scheduled to take place by mid and end 2013 respectively. 18. Soundness of background analysis. Most of the analytical underpinnings were undertaken before the political crisis and aimed at informing the preparation of the PRSP 2012- 2017. These include the Education (#59108-ML) and Health (#70614-ML) country status reports of 2010 and 2011; the review (#53222-ML) of social safety nets of 2011, the Investment Climate Assessment of 2011, and several PFM reviews designed to adjust the PAGAM/ GFP II. With the impact of the crisis and a medium term outlook, various re-engagement notes had been prepared by Bank staff in addition to continuous economic and poverty monitoring. 19. Risk analysis. Given the fluidity of the political and security situation at appraisal, major emphasis was put on risk analysis and mitigation. Beyond structural vulnerabilities related to climatic conditions and commodity price shocks, the analysis insisted on security, political and fiduciary risks. The military conflict in the North and the presence of extremist armed groups could heighten security risks in the South, with potential negative implication on the focus and time required for the Government to implement the reform program supported by the proposed operation. As for political risk, opposition to reforms could be strengthened by the proximity of elections while fiduciary risks stemmed from the exceptional circumstances of budget execution with priorities shifted to Defense and Security. Implementation risks due to low government capacity were assessed as moderate and such risks could be mitigated through the strong country office presence and close dialogue with authorities, as well as the technical assistance in the sectors of public financial management, energy, and agriculture provided by the World Bank and other donors. 20. Mali’s strong track record in macroeconomic management and the conclusion of a program with IMF under the Rapid Credit Facility could mitigate the risk on economic and fiscal management. More generally, continued macroeconomic monitoring and dialogue with authorities (at the national and regional levels, through WAEMU in particular) would help manage the impact of exogenous shocks on budget execution and service delivery. Fiduciary risks would be mitigated through the measures supported by the operation in the area of PFM, especially on audit and controls, budget execution and budget transparency. There was less certainty on potential mitigation measures with respect to security and political risks. 21. Almost all the above mention risks came to materialize and did affect the outcome of the operation despite mitigation measures. With respect to structural vulnerabilities there were severe exogenous shocks that affected the level of production and terms of trade, resulting in lower growth and fiscal revenues than expected. The macroeconomic framework described as mitigation mechanism did ensure sound budget execution and protection of service delivery (pro- poor expenditures as a share of GDP has increased) with low fiscal deficit and inflation. Security risks are still very important in relation to the military conflict in the North, with a negative impact on the focus on long term development objectives. As for political risks, opposition to reforms materialized in the electricity sector, translating into higher government subsidies in 2013 and delayed tariffs adjustment in 2014. Fiduciary risks did also materialized despite mitigation measures, as revealed by recent governance issues surrounding the purchase of a presidential plane and other military expenditures. Implementation risks arose from higher 9 than expected government instability. Overall, the risks analysis was particularly accurate and is still relevant, calling for enhanced mitigation measures. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 22. M&E design. Experience from the implementation of previous operations was taken into account to favor a streamlined but strong multi-sectoral monitoring and evaluation (M&E) framework. The quality and reliability of data to measure outcomes are limited in Mali. Therefore, the RRSC results framework attempted to focus on parsimony and criticality of indicators. The operation used indicators and targets that were chosen and agreed to jointly with the authorities, to ensure ownership and monitoring without imposing additional costs to the Government. In the area of public financial management, most of the indicators were derived from the PAGAM results framework. In the area concerned with the preparation for economic recovery, however, the identification of results indicators measurable in the short term was more difficult due to the fact that policy actions entailed structural reforms which would not translate into immediate outcomes. Ex-post, the results framework may appear optimistic. Targets could have been set at lower level. Given the major crisis that occurred in 2012, one could expect a slow pace of recovery and weak government capacity to implement reforms. One the other hand, the fact that a transition government was able to complete all prior actions including in the most challenging areas was seen as a signal of a new momentum for reforms. Moderately Satisfactory 23. M&E implementation. The Ministry of Economy and Finance (MEF) was responsible for overall coordination of program implementation and for overseeing progress in achieving program objectives. The monitoring of outcomes was expected to be carried out within the M&E framework of the PAGAM GFP II, the joint budget review and the PRSP review framework. In addition to these reviews, a new M&E emerged to monitor the mutual commitment resulting from the May, 2013 Brussels Conference4. However, these mechanisms still lack a solid results framework for efficient monitoring. Moderately Satisfactory 24. M&E utilization. The Bank monitored program implementation through supervision missions and related aide-memoires, and the implementation status and results reports (ISR) were issued in December 2013. The M&E system was successful in ensuring the achievements of prior actions, but less effective with respect to the results framework. Rating: Moderately Satisfactory Overall M&E: Moderately Satisfactory 2.4 Expected Next Phase/Follow-up Operation (if any): 25. In line with the ISN 2013-2015, a programmatic series of two DPOs is under preparation as a follow-up to the RRSC stand-alone operation. The programmatic series will 4 At the May 15, 2013 Brussels conference on Mali Reconstruction, donors pledged over 4 billion dollars in support of the Sustainable Recovery Plan presented by Malian authorities. The Government of Mali and donors agreed to organize a quarterly review of their mutual commitments. 10 support the authorities’ efforts to (i) strengthen executive accountability and transparency and (ii) improve public expenditure efficiency as the political transition ends and the security situation improves. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Relevance of objectives 26. The objectives of the RRSC are relevant to the country’s needs and priorities as translated in the different strategy documents adopted since 2011. In particular, the operation was fully aligned and supported policy reform elements in at least two key objectives of the Government’s growth and poverty reduction framework (GPRSF III) for 2012-2017: (i) strengthening of the foundations for long-term development and equitable access to quality social services and (ii) supporting institutional development and governance. Two prerequisites for achieving these two objectives are the reinforcement of peace and security and a stable macroeconomic framework, including sound public financial management. The operation was also fully aligned with the objectives of the ISN to (i) lay the foundations for longer term accountability and stability, (ii) protect human capital and build resilience, and (iii) prepare the conditions for economic recovery. Recent developments discussed in the risks section suggest that the reform areas supported by the operation are still very relevant. In the area of governance, supporting policy actions to deepen executive accountability, promote transparency and fight against corruption is essential. Protecting pro-poor budget allocations in the face of growing military expenditures sounds like a necessity, while the recovery plan in the electricity sector require a sustained attention to be completed. As illustrated by the volatility of rain-dependent agricultural production scaling up the irrigation area is also key to building Mali’s economic resilience. Rating: Satisfactory Relevance of design 27. The design of the RRSC took into account lessons drawn from the Implementation Completion and Results Report (ICR) for the first (1-2) and second (3-5) PRSC series, in particular the criticality of government commitment and the capacity constraints. Hence, greater realism and selectivity guided the policy reforms targeted for support. In addition the RRSC was designed as a stand-alone operation, which was the most appropriate formula given the post- crisis and pre-electoral context that was prevailing. Yet, the operation has targeted structural reforms in areas such as energy and irrigation that are crucial for the country’s long term development, where critical reforms had been delayed for several years. Notwithstanding the long term approach, a stand-alone operation looked appropriate to support the urgent need of financial support while accounting for high uncertainty with respect to the political and security situation. Rating: Satisfactory 11 Relevance of implementation 28. The operation was prepared on a fast-track basis combined with strong donor coordination, which provided very consistent support to the government facing multiple priorities. It also helped reinvigorate the agenda of reform following a slowdown in 2012. From the approval by the Board in May 2013, the implementation was however hampered due to higher than expected government turnover including at the Ministry of finance, which resulted in significant delays towards effectiveness. Rating: Moderately Satisfactory Overall Relevance: Moderately Satisfactory 3.2 Achievement of Program Development Objectives Overall Achievement of the PDO: Table 2: Anticipated Results and Actual Outcomes of the PCRRG Anticipated result Intermediate output Medium term outcome Deepening Executive Accountability Intermediate output Increased number of quarterly The Ministry of Finance published budget execution reports produced quarterly budget execution reports using the AICE (2013). Baseline (Q2, Q3, Q4) using AICE software 1 (2012): 0; target (2013): 2 (Source: and its interface with management MEFB). applications for tax revenues (SIGTAS) and customs data (ASYCUDA). Met. Intermediate output Increased number of internal audit Audit reports were conducted using reports in Ministries of Health and risk-based approach not only in Education using the adopted risk- Education and Health sectors, but based approach. Baseline (2012): also in Agriculture sector and in 0; target (2013): 2 (Source: Equipment and Transports. Met. CGSP). 2 Medium term outcome The indicator is not available, as Improved compliance of the mid-term evaluation of the procurement plans with budgetary PAGAM II was not finalized. allocations in the Ministry of As part of a reform package Health and the Ministry of supported by a proposed new DPO Education. Baseline (2012): n.a.; series, the Government has adopted target (2014): 100% (Source: in March, 2013 a number of PAGAM indicator). measures aimed at reducing procurement delays. These include 12 Anticipated result Intermediate output Medium term outcome the possibility to launch public procurement plans from the submission of the Budget Law to the National Assembly and the establishment of an inter- ministerial monitoring and evaluation mechanism for public procurement. Such measures do support the achievement of the medium term outcome. Intermediate output Budget execution reports of Year The draft budget execution law for N-2 certified by the audit section 2012 was adopted by the of the Supreme Court submitted to Government in December 2013. National Assembly with Budget Certification by the Audit Section Law for Year N. of the Supreme Court and submission to the National Assembly are planned for 2014. In November 2013, the Audit Section 3 (Section des Comptes) published for the first time since creation its Annual Report, including its legal opinion on budget execution reports for 2005-2010. Certified budget execution report for year 2011 was produced in 2013 and the corresponding law was adopted by the new Parliament in 2014. Partially met. Intermediate output Increased number of reports from Most recent reports are not national audit entities (Bureau du available on the website of the Vérificateur General, Section des National Council of Civil Society Comptes de la Cour Suprême, Organizations (CNSC). The CNSC Contrôle General des Services referred to logistical problems. Publics, Inspection des Finances) Two reports are published on the published on the website of the respective websites of the two national council of civil society major external audit institutions organizations (Conseil National de (VEGAL, SCCS). Not met. la Société Civile). Baseline (2012): 4 0 ;target (2013): 4 (source: PAGAM indicator) Medium term outcome Control of corruption improved as measured by a p-rank of 40 The latest available data indicate a (2014). p-rank of 25 as of 2012, suggesting a deterioration of the indicator. This deterioration in 2012 is not surprising due to the military coup and subsequent institutional crisis. Accounting for policy actions 13 Anticipated result Intermediate output Medium term outcome undertaken to improve public finance management under the Brussels conference agenda, including the follow up at judiciary level of the reports from audit institutions and the forthcoming vote of the law on illicit enrichment, the indicator was expected to improve in 2014. However, given recent governance issues raised by media, the outcome is uncertain. Protecting Poverty reduction gains Intermediate output Share of priority pro-poor Share of priority pro-poor expenditure in GDP increased to expenditure in GDP is slightly 6.5 % in 2013. below the target. However, the government has managed to increase pro-poor expenditure in a context of budget constraints and rising military expenditure. From 28.6% of total public expenditure in 2011, priority pro-poor 5 expenditures increased to 31.4% and 32.9% in 2012 and 2013. Partially met. Medium term outcome The source of verification is a 40% of priority pro poor benefit incidence analysis to be expenditure benefiting the two based on forthcoming ELIM or poorest quintiles in 2015 EMOP survey. The target is to be met in 2015. Preparing for the Economic Recovery Intermediate output Increased share of public The Selection Committee reported investment projects retained in the that it selected all the investment Public Investment Plan which projects retained in the 3-year were reviewed and selected by the public investment plan 2014-16. In unique selection committee for the 2014 budget law, the 6 public investment. Baseline government has provisioned an (2012): 0%; target (2013): 50%. allocation to finance feasibility (Source: MEFB). studies and ex-post evaluations to be carried out by the selection Committee. Met 14 Anticipated result Intermediate output Medium term outcome Medium term outcome Increased share of public In the 2014 budget law, the investment projects retained in the government has provisioned an budget laws submitted to the allocation to finance feasibility National Assembly which were studies and ex-post evaluations to reviewed and selected by the be carried by the selection unique selection committee for Committee. The indicator will be public investment. Baseline assessed with respect to the budget (2012): 0%; target (2015): 100%. law 2015 to be adopted by end (Source: MEFB). 2014. Intermediate output Land titles delivered to private The extension of irrigated surfaces entrepreneurs by the structure in in the Office du Niger area is set as charge of the financing priority in the current government’s mechanism. Baseline (2013):0, action plan. However, the financial target (2015): 1 (Source: MoA). mechanism is not yet operational. Not met. Medium term outcome Increased surface of irrigated land The Government’s Action Plan financed by the mechanism. adopted by the new Malian Baseline (2013): 0 ha; target Authorities have among other (2017): 2,500 ha (Source: MoA). priorities making Mali an agricultural exporting champion by 2018. To this end, the Plan sets as target the doubling of irrigated areas (from 98,531 ha) by 2018. The target of 2500 ha is to be met in 2017. Intermediate output Reduced Government Subsidies Tariffs were increased on average for EDM current operations as a by 6.5 percent in February 2013. percentage of GDP. Baseline: Despite the tariff adjustment, 0.6% (2012); target (2013): 0.4%. operational subsidies to the (Source: MEFB). electricity company largely exceeded budgeted amounts. Transfers from the budget reached 1.1 percent of GDP in 2013 from 7 0.6 percent of GDP in 2012. Not met. Medium term outcome Increased number of connections The number of clients connected to to the grid. Baseline (2011): EDM-SA network has increased to 261,000; target (2015): 300,000. 303,920 in 2013. EDM plans about (Source: EDM). 25,000 connections per year going forward. Met. 15 29. Mali has emerged from a challenging political transition. A successful presidential election took place in July-August followed by parliamentary elections in December 2013. The new parliament is in place, illustrating the full restoration of the constitutional order. Improvements of the security conditions throughout the territory were achieved with the support of the UN mission (MINUSMA) and other donors, though insecurity pockets remain in the Northern provinces, particularly in rural areas. Mali has also continued its path to economic recovery and was able to maintain macroeconomic stability despite its exposure to exogenous shocks. In 2013, aid resumed massively, representing an additional external inflow of over 10% of GDP compared with 2012, surely stimulating demand for domestic goods and services; but agricultural output contracted, due to poor rains. Economic growth rebounded to 1.7% in 2013, up from 0.0% in 2012. Benefiting from the abundant food supply produced in 2012, consumer price inflation strongly decelerated to –0.6% in December 2013, down from 5.4% in 2012. However, there still remains considerable uncertainty on the magnitude of the economic impact of the political crisis in 2012 and its subsequent recovery as security conditions improved from 2013. First post-crisis household surveys suggest that per capita consumption decreased in Southern regions between spring 2011 and 2013, except in Bamako. Objective 1: Deepening Executive Accountability 30. There were some improvements in 2013 as far as executive accountability is concerned. A transparency code and a law against illicit enrichment were adopted by the Government, to be implemented from 2014 (both have now been adopted by the National Assembly). Out of the four intermediate outputs related to the objective, two were fully met and one partially: (i) budget execution reports were delivered using AICE software and its interface with management applications for tax revenues (SIGTAS) and customs data (ASYCUDA), covering all transactions at the central government level; (ii) audit reports were conducted using a risk-based approach not only in the Education and Health sectors, but also in the Agriculture sector and in Equipment and Transports. However, annual Public Accounts are still prepared with some delays. The draft budget execution review law for 2012 was adopted by the Government in December 2013. In November 2013, the Audit Section (Section des Comptes) published for the first time since its creation an Annual Report, including its legal opinion on budget execution reports for 2005-2010. The target on public reports to be posted on the major civil society organization’s website was not met. The reports are available but technical and logistic issues prevented their publication on the designated website. Measure of the first medium term outcome indicator referring to the compliance of procurement plan with budget allocations is not available, although it was selected from a government results framework. The rationale of the indicator is to measure improvement in budget execution through more realistic planning and respect of the budget integrity. This outcome is consistent with progress related to the budget execution monitoring using AICE, the strengthening of PFM systems in health and education, and improvements the investment selection framework. As for the outcome related to the control of corruption, the dialogue built with the international community around the follow up of the 2013 Brussels Conference put strong emphasis on deepening accountability and combatting corruption. This is likely to translate into tangible improvement once the new rules are implemented. Overall, the legal framework has been strengthened to allow for improved governance, even if the perception of corruption may not improve immediately. 16 Component Rating: Moderately satisfactory Objective 2: Protecting Poverty Reduction Gains 31. The government reported an increase by 11 percent of budget allocations for social sectors in 2013 compared to 2012. With respect to the intermediate output, the target in terms of percentage of GDP was not fully met. But the government can be given credit for its efforts and continuous commitment to protecting pro-poor expenditures. As the revised 2013 budget benefited from the resumption of aid, the Government managed to exceed the level of pro-poor expenditures budgeted and supported by RRSC and the IMF RCF. From 28.6% of total public expenditure in 2011, priority pro-poor expenditures increased to 31.4% and 32.9% in 2012 and 2013. The medium term outcome would be measured through benefit incidence analysis based on survey data. This innovation is meant to encourage a better utilization of survey data for more targeted policy interventions. The ongoing analysis of the modular and permanent survey of households (EMOP) surveys as compared to 2011 would provide information on the evolution of private consumption and allow estimating the rate of poverty in Mali at the aggregate level. Since 2011, the Malian National Institute of Statistics has launched the EMOP which is designed to collect a wide range of indicators necessary for monitoring and evaluating the progress made in the improvement of living conditions. These surveys were interrupted during April 2012- March 2013 because of the crisis, and began again in April 2013, though the analysis may be undermined by the fact that EMOP 2013 was not conducted in the North. Component Rating: Moderately Satisfactory Objective 3: Preparing for the Economic Recovery 32. The selection committee for public investment projects was formally established in March, 2013. The committee is headed by the Direction for Development Planning (DNPD) and comprises representatives of Ministry of Economy and Finance, including the directions of Budget, Public Debt, Treasury, Public Procurement, Poverty Reduction Strategy, Local Governments and Foreign Cooperation, as well as from the National Statistical Institute and the Environment and Sustainable Development Agency. The Committee reported that it selected all the investment projects retained in the 3-year public investment plan 2014-16. In the 2014 budget law, the government has provisioned a sizeable allocation to finance feasibility studies and ex-post evaluations to be carried by the selection Committee. Hence the Selection Committee might be able to review public investments projects to be included in the next budget law as targeted. 33. The Government, through its council of Ministers, adopted a new financial mechanism for irrigation for the Office du Niger area. It was expected that the adoption of the mechanism would translate into the establishment of the land management agency and the irrigation fund. Both are included in the reform package. The agency would be made responsible to lease irrigable land to private entrepreneurs on a long term basis, with a view to provide them with the security needed to invest in irrigation infrastructure on a cost-sharing basis. To date, however, follow-up actions were not undertaken to complete the reform process. The Government’s Action Plan adopted by the new Malian authorities has among other priorities 17 making Mali an agricultural exporting champion by 2018. To this end, the Plan sets as a target the doubling of irrigated areas by 2018. The Plan provides for the creation of a land management agency. In this respect there is continuity in the design of reforms. However, a faster pace of implementation is needed to achieve the planned results. 34. Tariffs were increased on average by 6.5 percent in February 2013. This tariff increase resulted from the implementation of the automatic electricity tariff adjustment mechanism by the Electricity and Water Regulatory Commission electricity. Although limited, this tariff increase was an important step towards reducing the gap between the unit cost and the nominal price paid by consumers. Despite the tariff adjustment, operational subsidies to the electricity company largely exceeded budgeted amounts due partially to a rising demand and to repeatedly low investment and maintenance, resulting in inefficient production system. Transfers from the budget reached 1.1 percent of GDP in 2013 from 0.6 percent of GDP in 2012. Besides, the target of 300,000 connections to electricity grids originally set for 2015 is already met and the situation is likely to improve since EDM plans about 25,000 connections per year going forward. The assumption behind the medium term outcome indicator is that restoring the financial equilibrium of EDM would allow the company to increase its investment capacity and be able to satisfy a higher demand for connections without additional government subsidies. In this respect, the outcome is mixed. In November 2013, the new government created a task force to review options to restore financial sustainability of the electricity sector. With technical support from the Bank, the task force drafted a financial recovery plan that foresees a combination of annual tariff increases for industrial and residential consumers from 2014, as well as investments to expand capacity and lower average generation costs, notably through the conversion of thermal plants to heavy fuel and natural gas (imported from Mauritania, with World Bank support). It also includes actions to reduce technical and commercial losses through greater network maintenance and the development of pre-paid meters. By 2018, the plan foresees that the elimination of subsidies needed to cover operational losses. The plan was adopted in May by the Malian Cabinet and is being implemented. A tariff increase is already announced for 2014. Component Rating: Moderately Satisfactory 3.3 Justification of Overall Outcome Rating Rating: Moderately satisfactory 35. The overall outcome rating is a combination of the relevance and the achievement of the objectives. Relevance of objectives and design are assessed as satisfactory, even if delays in implementation due to the particular political context caused the overall rating of the design to be moderately satisfactory. 36. The outcome of the first component of the program, deepening executive accountability, is moderately satisfactory. The prior actions were met, and most of the intermediate outputs were at least partially met. The medium term outcome may take more time to capture in terms of improved budget execution or corruption indicators. 18 37. The outcome of the second component, protecting poverty reduction gain, is moderately satisfactory. Efforts were made to ensure budget allocations and support service delivery. The government managed to increase pro-poor expenditure in a context of budget constraints and rising military expenditure. As the economic outlook is favorable the medium term outcome is likely to be met. Prior to the 2012 crisis, Mali had had a strong record of pro- poor growth and this is expected not to change over the medium term. 38. The outcome of the third component, preparing for the economic recovery, is moderately satisfactory. It is satisfactory concerning the public investment selection committee, moderately unsatisfactory with respect to the irrigation financing mechanism, and moderately satisfactory in the electricity sector. 3.4 Overarching Themes, Other Outcomes and Impacts a. Poverty Impacts, Gender Aspects, and Social Development 39. Measures supported by the proposed operation were expected to have a significant positive and direct effect on poverty reduction, though through various degrees. As short term measure, the protection of priority pro-poor expenditures has ensured the financing of basic service delivery during the transition. From 28.6% of total public expenditure in 2011, priority pro-poor expenditures increased to 31.4% and 32.9% in 2012 and 2013. In addition to the rehabilitation of infrastructures, the government has taken incentive measures to encourage civil servants’ return to the Northern regions. A gradual return of refugees and displaced persons was observed, as well as gradual redeployment of the administration in the northern regions. For instance, estimated 75-80% children are back to school in the north as compared to pre-crisis situation. On the other hand, the Poverty and Social Impact Assessment of electricity tariff increases in 2013 suggests an insignificant impact on poverty. Micro simulations run using household data from 2010 suggest that a 6.5 percent average tariff increase could induce a marginal increase of 0.05 percentage point of the poverty rate. b. Institutional Change/Strengthening 40. One main raison for the quick resumption of budget support in Mali was to support the objective of peaceful policy transition and institutional normalization. The Malian Government was rather successful in conducting the institutional normalization process, which should be completed with the organization of local elections to be held before the end-year 2014. Furthermore, important steps have been taken with a view to improving governance and public finance management. This is reflected in the recent vote by the National Assembly of the law against illicit enrichment, the transcription in Malian legislation and regulations of major WAEMU guidelines related to transparency code, budget laws and public accounting, inter alia. The reform package was supported not only by the Bank operation (transparency code), but also EU budget support (institutional normalization) and the IMF program (law against illicit enrichment and other WAEMU guidelines. c. Other Unintended Outcomes and Impacts N/A 19 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 4. Assessment of Risk to Development Outcome Rating: Highly Satisfactory 41. Though positive, Mali’s macro-economic outlook remains subject to a number of downside risks. In years to come, Mali will continue to be highly exposed to exogenous climatic and commodity price shocks, which could reduce its investment capacity, (in human capital and infrastructure for capacity, national and regional connectivity, and resilience) perpetuating a vicious circle of slow per capita growth and high vulnerability. It will also remain exposed to security threats, originating from within Mali and from neighboring countries, which could prevent the full resumption of ODA and distract Government resources and attention from its governance reform agenda. Nonetheless, if these events would negatively affect Mali’s social and economic development prospects, it is quite unlikely that they would be accompanied with a macro-economic crisis, in the form of a fiscal, financial or Balance of Payments crisis. Indeed, Mali’s fiscal situation and management remained sound during the crisis and should continue to do so given the WAEMU environment, PFM reforms undertaken in recent years and continued economic and financial surveillance from the IMF. The financial sector continues to be highly liquid and Mali benefits from the pooling of WAEMU foreign currency reserves to cover its BoP needs in bad times, including debt service obligations. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 42. The quality at entry is assessed as satisfactory. The design of the RRSC was aligned with the government program focusing on PFM reforms and resilience. The operation was designed in consultation with other development partners, through various meetings held at the local and international levels. All the prior actions were completed without delay. (b) Quality of Supervision Rating: Moderately Satisfactory 43. The supervision of the RRSC is rated moderately satisfactory. Through several supervision missions and review meetings, the team has maintained a strong focus on the results framework. However, this regular supervision was not used to adjust the results framework based on a revealed misunderstanding concerning one indicator (budget execution reports). Information is also lacking on some key results indicators. The delay towards effectiveness was 20 substantial, resulting in delayed disbursement for a fast track operation. This delay was mainly imputable to political change at the highest executive level, and to the electoral agenda. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 44. As Quality at Entry was rated Satisfactory and Quality of Supervision was rated Moderately Satisfactory, the overall Bank performance is rated Moderately Satisfactory. 5.2 Borrower Performance (d) Government Performance Rating: Moderately satisfactory 45. The performance of the borrower is rated moderately satisfactory. The government was successful in maintaining macroeconomic stability and creating the condition for aid resumption. It managed to protect social expenditures and launched important reforms in the area of governance. However, critical actions such as improving the financial situation of EDM and implementing the irrigation financial mechanism were not achieved. (e) Implementing Agency or Agencies Performance Rating: Moderately satisfactory 46. The Ministry of Economy and Finance demonstrated strong leadership and coordination to fulfill the prior actions. Less attention was dedicated to monitoring the results framework. The performance is also undermined by the delay in providing the legal documents for effectiveness declaration. (f) Justification of Rating for Overall Borrower Performance Rating: Moderately satisfactory (as explained above). 6. Lessons Learned 47. The preparation and supervision of the RRSC benefitted from lessons learned from previous operations for improved design and supervision. The reform agenda supported by the operation was focused on areas such as governance and PFM with high strategic relevance, sound analytical underpinnings, and strong government commitment. The government ownership and readiness translated into prior actions being fully completed at negotiations stage. However some major structural reforms entailing adoption of new laws or implementation of a tariff mechanism may take more time to translate into tangible outcome, all the more so as the country is hardly emerging from a deep political institutional and security crisis. In this respect, a stand-alone operation, while justified under the exceptional circumstances that Mali faced in 21 2013, needs to be accompanied by strong follow up actions through other Bank’s operations to ensure effectiveness and sustainability of reforms. Moreover, capacity constraints are a structural feature of Mali’s administration and will still require much realism with the design of operations, close monitoring, and a permanent dialogue with authorities. 48. Notwithstanding improvements in the quality of design and supervision, the outcome is still mixed. Opposition to key structural reforms impacting influential groups remains a major issue, particularly in sensitive areas, such as agriculture, electricity and fiscal policy. Despite the unprecedented crisis in 2012, vested interests seem to still be operating in Mali, opposing resistance to any reform that would reduce its privileges, even if it would benefit a large part of the population. In the electricity sector for instance, the reform agenda is implemented with important delays and require a very strong supervision and focused policy dialogue to move on. Hence, communication actions need to be undertaken during preparation to raise awareness of the major public actors (parliamentarians, civil society organizations, unions) of the true challenges in order to mitigate the influence of vested interests. 49. Borrowers and implementing agencies have a tendency to focus on the realization of prior actions, dedicating less attention to the results framework. This emphasis has to be expected in view of the nature of the Bank‘s instrument. Yet, it can be detrimental to progress over time. In this respect, attention should be paid to the quality of outcome indicators at the outset, making sure that these indicators are relevant to the objectives, that they can be measured at every step of implementation, and that the authorities fully own them. 50. There is a potential for the World Bank to build on his leadership on donors’ coordination to support a more consolidated reform program while leveraging stronger financial support. Dialogue conducted by the Bank and the IMF in 2012 on budget developments was instrumental to the resumption of budget support from the European Commission, African Development Bank and France in 2013. The momentum for coordinated support to resume assistance to Mali culminated with the May 15, 2013 “Together for a New Mali” conference. This momentum is still alive among donors as illustrated by the follow-up conference held in February, 2014 in Brussels. Building on this momentum would favor the focus on limited crucial reform measures and consolidated results matrix, accounting for weak capacity of the government. Recent developments in Mali also suggest that a strong and coordinated donors’ presence is necessary to fill the gap in terms of institutional locks for improved governance. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (g) Borrower/Implementing agencies Borrower’s comments indicated agreement on the document including the ratings. (h) Cofinanciers: N/A (i) Other partners and stakeholders: N/A (e.g. NGOs/private sector/civil society) 22 Annex 1: Bank Lending and Implementation Support/Supervision Processes (a) Task Team Members Supervision Names Title Unit Sebastien C. Dessus Lead Economist and Sector Leader, AFTP4 PREM Boulel Toure Senior Economist AFTP4 Siobhan McInerney-Lankford Senior Counsel LEGAM Fabrice Karl Bertholet Senior Financial Analyst AFTG2 Ruxandra Costache Counsel LEGAM Francois Onimus Senior Water Resources Spec. AFTA3 Maimouna Mbow Fam Senior Financial Management AFTMW Specialist Cheikh Ahmed Diop Senior Economist AFTP4 Yele Maweki Batana Senior Economist AFTP4 Wolfgang M. T. Chadab Senior Finance Officer CTRLA Mariama Daifour Ba Program Assistant AFTPM Judite Fernandes Language Program Assistant AFTP4 Bleoue Nicaise Ehoue Senior Agriculture Economist AFTA1 Jose C. Janeiro Senior Finance Officer CTRLA (b) Staff Time and Cost Stage Staff Time and Cost (Bank Budget Only) No. of staff weeks US$ Thousands (including travel and consultant costs) Lending FY13 55.40 357,800 Supervision/ ICR FY14 3.0 16,501 Total for 2013-2014 58.40 374,301 23 Annex 2: Selected Economic and Financial Indicators 2011 2012 2013 2014 2015 2016 (annual percentage change, unless otherwise specified) National income and prices Real GDP 2.7 0.0 1.7 6.5 6.4 5.5 Real GDP per capita -0.3 -2.1 -1.0 3.1 3.1 2.1 Consumer price inflation (average) 3.1 5.3 -0.6 3.5 2.5 2.2 Money and credit Credit to government (a/) 5.1 10 -2.7 4.1 1.8 1.5 Credit to the economy (a/) 15.8 3.3 7.7 3.1 4.4 6.2 Broad money (M2) 15.3 15.2 6.0 12.0 10.0 10.4 (percentage of GDP, unless otherwise specified) Investment and saving Public investment 8.7 3.2 7.5 10.9 9.1 9.1 Private investment 11.7 11.9 11.0 11.8 13.7 13.1 Public savings 2.1 2.2 3.3 3.2 3.4 3.4 Private savings 13.8 9.6 11.7 12.5 13.6 13.5 Foreign savings 4.5 3.3 3.4 6.9 5.8 5.2 Central government finance Revenue 15.4 15.2 15.4 15.8 16.4 16.9 Grants 3.8 0.2 3.7 4.1 4.0 3.7 Total expenditure 22.9 16.8 21.7 24.4 23.3 23.4 Overall balance (cash basis) -3.7 -1.2 -2.9 -5.1 -3.0 -2.8 Basic fiscal balance (WAEMU def.) -1.1 -0.8 -0.6 -0.5 0.0 0.0 External sector Current external balance -6.2 -2.6 -5.2 -6.8 -5.8 -5.3 Exports of goods and services 26.2 31.2 28.1 24.4 23.5 22.6 Imports of goods and services 36.1 37.9 48.3 47.6 37.2 35.4 Public debt (end of period) 29.1 30.1 30.0 31.1 31.1 31.0 Memorandum items: Nominal GDP (FCFA billion) 5,038 5,328 5,467 5,966 6,394 6,860 Overall balance of payments (US$ million) 45 -96.9 -174.3 -80.6 4.1 -27.5 External debt (end of period) 24.4 25.9 25.8 27.3 27.6 27.7 Gross Int. Reserves (imputed, months of imports) 6.6 5.4 5.0 4.6 4.4 4.6 Terms of trade (annual percentage change) 15.8 15.2 -20.9 -0.7 2.3 2.5 Source: IMF and World Bank Staff calculations, March 2013. a/ contribution to money supply growth 24 Annex 3: Results Framework Expected Outputs, Outcomes and Related Prior Action Indicators Deepening Executive Accountability The Recipient’s Ministry of Economy, Intermediate output: Increased number of Finances and Budget installs the AICE quarterly budget execution reports produced software and its interface with management using the AICE. Baseline (2012): 0; target applications for tax revenues (SIGTAS) and (2013): 2 (Source: MEFB). customs data (ASYCUDA), covering all 1 Central Government Transactions as to integrate the management of tax and customs revenues in the Recipient’s accounting information system. The Recipient, through the Contrôleur General Intermediate output: Increased number of des Services Publics, adopts a risk-based internal audit reports in Ministries of Health and approach for internal controls in the Ministry of Education using the adopted risk-based Health and the Ministry of Education. approach. Baseline (2012): 0; target (2013): 2 (Source: CGSP). 2 Medium term outcome: Improved compliance of procurement plans with budgetary allocations in the Ministry of Health and the Ministry of Education. Baseline (2012): n.a.; target (2014): 100% (Source: PAGAM indicator). The Recipient adopts and transmits to the Intermediate output: Increased number of budget National Assembly the budget execution execution reports of Year N-2 certified by the reports for fiscal years 2010 and 2011, and the audit section of the Supreme Court submitted to 3 legal opinion on the budget execution report for National Assembly with Budget Law for Year fiscal year 2010. N. Baseline: 0 (2012); target 2013: 1. (Source: MEFB). The Recipient, through the Council of Increased number of reports from national audit Ministers, adopts the Budget Transparency entities (Bureau du Vérificateur General, Section Code and submits it to the National Assembly. des Comptes de la Cour Suprême, Contrôle General des Services Publics, Inspection des Finances) published on the website of the national council of civil society organizations 4 (Conseil National de la Société Civile). Baseline (2012): 0 ;target (2013): 4 (source: PAGAM indicator) Medium term outcome: improved control of corruption. Baseline 2011: 32%; target (2014): 40% (Source: Governance Indicators). 25 Expected Outputs, Outcomes and Related Prior Action Indicators Protecting Poverty Reduction Gains The Recipient increases the share of priority Intermediate output: Increased share of priority pro-poor expenditures to total expenditure pro-poor expenditure in GDP. Baseline: 6.0% through the 2013 Budget Law 2013 in (2012); target (2013): 6.5% of GDP. (Source: comparison with the Budget Law 2012. MEFB). Medium term outcome: increased share of 5 priority pro poor expenditure benefiting the two poorest quintiles: baseline (2010): n.a.; target (2015): 40%. (Source: benefit incidence analysis from ELIM, CSLP). Preparing for the Economic Recovery The Recipient, through the Ministry of Intermediate output: Increased share of public Economy, Finances and Budget establishes a investment projects retained in the Public selection committee for public investment Investment Plan which were reviewed and projects. selected by the unique selection committee for public investment. Baseline (2012): 0%; target (2013): 50%. (Source: MEFB). Medium term outcome: Increased share of 6 public investment projects retained in the budget laws submitted to the National Assembly which were reviewed and selected by the unique selection committee for public investment. Baseline (2012): 0%; target (2015): 100%. (Source: MEFB). The Recipient, through the Council of Intermediate output: Land titles delivered to Ministers, adopts a new financial mechanism private entrepreneurs by the structure in charge for irrigation for the office du Niger area. of the financing mechanism. Baseline (2013):0, target (2015): 1 (Source: MoA). 7 Medium term outcome: Increased surface of irrigated land financed by the mechanism. Baseline (2013): 0 ha; target (2017): 2,500 ha (Source: MoA). The Recipient, through the Commission de Intermediate output: Reduced Government Regulation de l’Electricité et de L’Eau, adopts Subsidies for EDM current operations as a and implements the automatic electricity tariff percentage of GDP. Baseline: 0.6% (2012); adjustment mechanism. target (2013): 0.4%. (Source: MEFB). 8 Medium term outcome: increased number of connections to the grid. Baseline (2011): 261,000; target (2015): 300,000. (Source: EDM). 26 Annex 4: Beneficiary Survey Results N/A 27 Annex 5: Stakeholder Workshop Report and Results N/A 28 Annex 6: Summary of Borrower’s ICR and/or Comments on Draft ICR 29 Unofficial English Translation REPUBLIC OF MALI MINISTRY OF ECONOMY AND FINANCE TO World Bank Country Director Mali Bamako Dear Country Director, Comments on the Implementation Completion and Results Report (ICRR) of the Mali Reform and Recovery Support Credit: Your letter Ref: N° PNU/st/183-14 of June 12, 2014 I have the honor to acknowledge receipt of the above referred letter concerning the transmission of the Implementation and Completion Results Report on the Mali Reform and Recovery Support Credit (P125856). In response, I would like to let you know that the report calls no specific comments on our part. I would also like to assure you that action will be taken to address the weaknesses identified in the report with respect to implementation and supervision for the next budget support operations. Sincerely, Signed Ibrahim Traoré Acting Secretary General Ministry of Economy and Finance 30 Annex 7: Comments of Cofinanciers and Other Partners/Stakeholders N/A 31 Annex 8: List of Supporting Documents Memorandum of the Operations Committee (OC) Review Meeting, “Mali Recovery and Reform Support Credit (RRSC)” Decision Note of Operations Committee (OC), “Mali Recovery and Reform Support Credit (RRSC)” Program Document, “Mali Recovery and Reform Support Credit (RRSC)”, (Report No. 67541- ML) Interim Strategy Note for the Republic of Mali for the period FY14-15, Report No. 76233-ML Agreed Minutes of Negotiations, “Mali Recovery and Reform Support Credit” Memorandum and Recommendation of the President (MOP), “Mali Recovery and Reform Support Credit” Project Information Document (PID), Concept Stage and Appraisal Stage, “Mali Recovery and Reform Support Credit” Aide-mémoire for Preparation Mission Implementation Status and Results Report (ISR) Letter of Declaration of Effectiveness Annex 9: MAP IBRD 133443 32 33