Document of The World Bank

Report No: ICR00003444

IMPLEMENTATION COMPLETION AND RESULTS REPORT

ON

FIRST ECONOMIC GOVERNANCE REFORM GRANT

IN THE AMOUNT OF SDR 3.9 MILLION

(US$6.0 MILLION EQUIVALENT)

TO

THE REPUBLIC OF THE GAMBIA

September 7, 2015

Macroeconomics and Fiscal Management Global Practice (GMFDR) Country Department AFCF1 Africa Region

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CURRENCY EQUIVALENTS

(Exchange rate as of April 27, 2012)

Currency unit = Dalasi (GMD) US$1 = 30.9 GMD SDR1 = US$1.55

FISCAL YEAR January 1 – December 31

ABBREVIATION AND ACRONYMS

ACE Africa Coast to Europe AfDB African Development Bank AGD Accountant General’s Department AM Aide Memoire APL Adaptable Programmatic Loan ASPA Agribusiness Services and Producers Association CBG Central Bank of the Gambia CPI Consumer Price Index CSDMS Commonwealth Secretariat Debt Management System CY Calendar year DPL Development Policy Loan DPO Development Policy Operation DSA Debt Sustainability Analysis EC European Commission ECF Extended Credit Facility ECOWAS Economic Community of West African States EGRG-I First Economic Governance Reform Grant EU European Union GAMTEL Gambia Telecommunications Company GDP Gross Domestic Product GM Gambia GMD Gambian Dalasi GPPA Gambia Public Procurement Authority GSC Gambia Submarine Cable GSCC Gambia Submarine Cable Company HR Human Resource ICRR Implementation Completion and Results Report IDA International Development Assistance IFAD International Fund for Agricultural Development IFI International Financial Institution IFMIS / AF Integrated Financial Management Information System / Additional Financing IMF International Monetary Fund ISR Implementation Status Report JAS Joint Assistance Strategy

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MOBSE Ministry of Basic and Secondary Education MOFEA Ministry of Finance and Economic Affairs MOICI Ministry of Information and Communication Infrastructure MoU Memorandum of Understanding NAO National Audit Office NAT National Assessment Test NAWEC National Water and Electricity Company PAC Public Accounts Committee PAGE Program for Accelerated Growth and Employment PD Project Document PDO Project development objective PEC Public Enterprises Committee PER Public Expenditure Review PFM Public Financial Management PMO Personnel Management Office PPO Public Procurement Organizations PRSP Poverty Reduction Strategy Paper PURA Public Utility Regulatory Authority RCF Rapid Credit Facility READ Results for Education Achievement and Development SLAs Service-Level Agreements SMP Staff Monitored Program TSA Treasury Single Account TTL Task team leader UNDP United Nations Development Program VAT Value Added Tax VoIP Voice over Internet Provider WARCIP West Africa Regional Communications Infrastructure Program WFP World Food Program

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CONTENTS

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 ........................................................................................................ vi

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 ........................................................... 11

3. Assessment of Outcomes ......................................................................................................... 14

4. Assessment of Risks to Development Outcome ...................................................................... 27

5. Assessment of Bank and Borrower Performance .................................................................... 28

6. Lessons Learned ...................................................................................................................... 31

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ......................... 32

Annex 1. Bank Lending and Implementation Support/Supervision Processes ............................... 33

Annex 2. Borrower’s ICR ................................................................................................................ 34

Annex 3. List of Supporting Documents, and Persons Interviewed ................................................ 36

Annex 4: Country Map .................................................................................................................... 38

Annex 5: Office of the President’s Directive on the Exchange Rate of the Dalasi ........................ 39

Vice President: Country Director: Practice Director:

Global Practice Manager: EGRG Task Team Leader: ICRR Task Team Leader:

ICRR Principal Author:

Makhtar Diop Louise J. Cord John Panzer Yaye Seynabou Sakho Annette I. De Kleine Feige Sanja Madzarevic-Sujster Sanja Madzarevic-Sujster

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A. Basic Information

Country: Gambia, The Program Name: GM-Budget Support -DPL (First in the series)

Program ID: P123679 L/C/TF Number(s): IDA-H7760 ICR Date: September 7, 2015 ICR Type: Core ICR

Lending Instrument: DPL Borrower:THE GOVERNMENT OF THE GAMBIA

Original Total Commitment: SDR 3.90M Disbursed Amount: SDR 3.90M Revised Amount: SDR 3.90M Implementing Agencies: Ministry of Finance and Economic Affairs

B. Key Dates

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

Concept Review: 04/28/2011 Effectiveness: Appraisal: 04/16/2012 Restructuring(s): None Approval: 05/31/2012 Mid-term Review: None Closing: 06/30/2013 06/30/2013

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately unsatisfactory Risk to Development Outcome: High Bank Performance: Moderately unsatisfactory Borrower Performance: Moderately unsatisfactory

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

Quality at Entry: Moderately unsatisfactory Government: Unsatisfactory

Quality of Supervision: Moderately satisfactory Implementing Agency/Agencies:

Moderately satisfactory

Overall Bank Performance:

Moderately unsatisfactory Overall Borrower Performance:

Moderately 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: Not applicable Not Applicable

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D. Sector and Theme Codes Original Actual

Sector Code (as percent of total Bank financing) Central Government administration 72 72 Primary education 6 6 Secondary education 5 5 Telecommunications 12 12 Transmission and Distribution of Electricity 5 5

Theme Code (as percent of total Bank financing) Education for all 11 11 Infrastructure services for private sector development 11 11 Public expenditure, financial management and procurement 67 67 Tax policy and administration 11 11

E. Bank Staff Positions At ICR At Approval

Vice President: Makhtar Diop Obiageli K. Ezekwesili Country Director: Louise J. Cord Vera Songwe Practice Manager/Manager: Yaye Seynabou Sakho Miria A. Pigato Program Team Leader: Annette I. De Kleine Feige Carlos B. Cavalcanti ICR Team Leader: Sanja Madzarevic-Sujster ICR Primary Author: Sanja Madzarevic-Sujster

F. Results Framework Analysis Program Development Objectives (PDOs):

The Program Development Objective (PDOs) of the First Economic Governance Reform Grant (EGRG-I) to the Republic of The Gambia is to strengthen transparency, accountability and efficiency in public financial management, to improve public management in the agriculture, education, and energy sectors, and to promote competition in the telecommunications sector. This Development Policy Grant (EGRG-I) was designed as a first in a programmatic series of two operations covering 2012-2013 period.

a) PDO Indicator(s)

The EGRG-I aimed to achieve the above development objectives through the following policy actions:

Policy Actions Indicators 2011

(Baseline)

2012/13 Original Target Values

(from approval documents)

Actual Values Achieved

at Completion or Target Years

Improve transparency and accountability in Public Financial Management 1. Ministry of Finance and Economic Affairs has finalized the 2008, 2009 and 2010 Government financial statements and submitted them to the National Audit Office.

NAO audits for 2008, 2009 and 2010 not available.

Government financial statements for 2008, 2009, 2010 and 2011 submitted to the National Audit Office.

2012 and 2013 financial statements have been submitted and audited by the NAO.

Indicator 1. National Audit Office audits the Government financial statements.

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Policy Actions Indicators 2011

(Baseline)

2012/13 Original Target Values

(from approval documents)

Actual Values Achieved

at Completion or Target Years

Comments: Achieved. The Government financial statements for 2008-2011 were submitted to the NAO and were audited. Those for 2012 to 2013 have also been audited by the NAO, however with delay, in mid-2015, and submission to the National Assembly is expected in September 2015. 2. MOFEA authorized the publication of IFMIS reports on the website of the Ministry of Finance and Economic Affairs.

IFMIS reports became available on the MOFEA website in December 2011.

IFMIS reports regularly available to the public on the website of the MOFEA.

IFMIS reports posted on the public website of the MOFEA

Indicator 2. IFMIS reports published on the website of the MOFEA under http://www.mofea.gov.gm/index.php?option=com_content&view=article&id=33&Itemid=37.Comments: Achieved. Monthly budget reports are being posted, however, this is sporadic and there are significant lags. As of early-August 2015, monthly fiscal reports are available only through December 2014. 3. Appointment of the judges of the Tax Tribunal.

Tax Tribunal has not reviewed any cases

Number of cases reviewed by the Tax Tribunal

No cases have been reviewed because no complaints were received.

Indicator 3. Tax Tribunal cases reviewed. Comments: Partially achieved. The Tax Tribunal has been set up, but no cases have been reviewed, as no complaints have been received so far. 4. Executive directive by the Permanent Secretary of Finance and Economic Affairs sanctioning the removal of the names of the civil servants (excluding servants assigned to the security services) not validated in the IFMIS payroll.

Number of civil servants

Number of civil servants removed from the payroll

727 civil servants removed from the payroll to date.

Indicator 4. The number of civil servants removed from the payroll. Comments: Achieved. The Government validated human resources (HR) and payroll records for all Government employees for implementation of the HR module and payments to ghost workers (invalidated staff) were stopped, as of mid-2012. The payroll module was upgraded and operational in 2014 and includes all central Government employees. From 2014, it is fully integrated with the financial module. All employees with bank accounts are paid directly through these accounts, through the Central Bank. Further validation was conducted on the pension module, removing the deceased. 5. Internal Audit Committee Charter approved and Internal Audit Committee Members appointed.

Internal Audit Committee not yet operational

Number of internal audit reports completed

8 internal audit reports were completed in 2012, 18 in 2013 and 31 in 2014.

Indicator 5. The number of Audit reports approved by the Internal Audit Committee. Comments: Achieved. The approval of the Charter and the Internal Audit Committee members in 2012 led to 57 internal audit reports produced since 2012, of which 31 produced in 2014. 6. Establish the real time clearance and reconciliation of accounts between the Ministry of Finance and Economic Affairs and the Central Bank of The Gambia (CBG).

No reports currently available.

12 Monthly reports generated in 2012

Regular real-time reconciliation and clearance of accounts in place.

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Policy Actions Indicators 2011

(Baseline)

2012/13 Original Target Values

(from approval documents)

Actual Values Achieved

at Completion or Target Years

Indicator 6. Weekly IFMIS budget reports generated at the IFMIS/CBG interface.Comments: Achieved. A real time reconciliation and clearance of accounts between the MoFEA and the CBG has been done via an interface between the IFMIS and the CBG banking module (the T-24), whereby the MoFEA has online access to all Government bank accounts and provides online monitoring of account balances. The MoFEA also downloads bank statements from the banking module to the IFMIS and carry out automated bank reconciliation.Strengthen Energy Sector Management7. Reduction in the arrears of the central Government to the National Water and Electricity Company (NAWEC).

Central Government arrears to NAWEC estimated at D54 million at end 2011.

Reduced central Government arrears to NAWEC in 2012.

The arrears reduced to D28.4 million (0.7 percent of Government tax revenues) in 2012, but further increased to D71.1 million (1.6 percent) in 2013, and GMD157.6 million (2.3 percent) in early-2015. The arrears were offset against NAWEC’s 2014 tax arrears in June 2015.

Indicator 7. Level of central Government arrears to NAWEC. Comments: Not achieved. Although the Government introduced utility tariff rate hikes in August 2013 and in January 2015 to improve cost recovery (prior actions identified under EGRG-II), the outstanding arrears to NAWEC in 2013 increased to GMD71.1 million (1.6 percent of Government tax revenues), while as of February 2015 they stood at GMD157.6 million (2.3 percent of projected revenues in 2015). As a share of GDP, arrears increased from 0.1 percent in 2012, to 0.2 percent in 2013 and to 0.4 percent of projected GDP in early 2015. Promote Private Sector Participation in the Telecommunication Sector 8. Licensing the Gambia Submarine Cable Company (GSCC) Limited

No connections to the Gambia Submarine Cable yet available.

Number of connections to the Gambia Submarine Cable.

Two internet service providers and three mobile operators are connected to the GSC.

Indicator 8. Connections to the Gambia Submarine Cable. Comments: Achieved. Data gateway licenses were also awarded to four operators and 3 Internet Service Providers in May 2013. Enhance Education Sector Management 9. Sign service-level agreements between the Ministry of Basic and Secondary Education and public sector teachers in Basic and Secondary schools.

NAT scores in 2008 for 3rd grade English=20 percent and 3rd grade Mathematics=18 percent

NAT scores for 3rd grade English and 3rd grade Mathematics improved

NAT scores for 3rd

grade English and Math improved to 45.57 percent and 47.21 percent in 2013, respectively.

Indicator 9. National Assessment Test (NAT) scores. Comments: Achieved. The service-level agreements have been in place since 2011, which contributed to the improvement of the teaching quality.

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b) Intermediate Outcome Indicator(s) Not Applicable

G. Ratings of Program Performance in ISRs

No. Date ISR Archived DO IP Actual Disbursements

(USD millions) None. None. None. 6.0

H. Restructuring (if any)Not Applicable

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1. Program Context, Development Objectives and Design1. As initially designed, the First Economic Governance Reform Grant (EGRG-I) was the first of a programmatic series of two budget support operations. However, due to delays tied to an inadequate macroeconomic policy framework and challenges in achieving the prior actions, the series lapsed. The EGRG-I was approved on May 31, 2012, became effective on July 6, 2012, disbursed fully in one tranche on August 6, 2012, and was closed on June 30, 2013. This ICRR covers the implementation of EGRG-I policies and progress on outcome targets set for end-2012.

2. Since EGRG-I was approved in May 2012, the implementation, supervision and tracking of output indicators for EGRG-I were carried out with the preparation of the EGRG-II operation. The EGRG-supported reforms were an integral part of the country’s Poverty Reduction Strategy Paper – the Programme for Accelerated Growth and Employment (PAGE) covering the years CY2012-15.

1.1 Context at Appraisal

3. The EGRG-I was appraised in April 2012, against the backdrop of two major events in The Gambia. First, the Gambian economy was hit hard by the 2011/2012 crop failure that significantly reduced agricultural production and led to falling agricultural incomes and rising poverty. Second, the Presidential and parliamentary elections that were held in late-2011 and early-2012, respectively, also adversely affected macroeconomic policies. Taken together, these developments made it particularly challenging for the Government to implement reforms in a timely manner.

Economic Situation

4. After growing by 6 percent during the 2007-2010 period, real GDP growth was estimated to have sharply decelerated in 2011 and projected to contract in 2012 because of the 2011-2012 crop failure. Prior to the crop failure, strong agricultural and tourism activity more than compensated for a declining re-export business, as neighboring countries upgraded their transport infrastructure and given the convergence of trade and tax policies across the ECOWAS countries, including The Gambia1. It was estimated that the crop failure, due to the severe Sahelian drought, reduced crop production by 60 percent and contribution of agriculture to real GDP growth in 2011 by about 25 percent. Agriculture accounted for approximately one-third of GDP, around 10 percent of overall exports, and more than 60 percent of employment. The second-round effects on growth came from reduced groundnut exports, and the need for additional food imports.

5. Despite the decline in GDP growth, along with a fall-off in transit trade, and a corresponding decline in tax receipts, fiscal discipline was assessed as having been largely maintained. Taxes imposed on re-exports accounted for around 25 percent of overall tax revenues, while, additionally in the run-up to Presidential elections, increases in tax exemptions2 and delayed adjustments of gasoline prices in line with rising world market prices eroded an already low tax base. At the time of appraisal, the 2011 gross fiscal deficit was reduced from 5.4 percent of GDP in 2010 to an estimated 4.4 percent of GDP in 2011. The primary deficit3 was also reduced to an estimated 1.0 percent of GDP in 2011, which still led to an estimated increase in total public debt to above 71 percent of GDP in 2011. Aligning expenditures with revenue inflows (i.e. cash budgeting) helped contain the Government’s net domestic borrowing, cleared its overdraft with the central bank, and was believed to mark an end to the central bank financing of the public deficit.

1 The harmonization of trade policies within ECOWAS and reforms in Senegal has reduced arbitrage opportunities between Senegal and The Gambia that were one of the driving motivations for the re-export trade 2 On import duties, sales taxes and excise taxes on imports. 3 The overall balance excluding interest payments.

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6. Greater fiscal and monetary discipline contributed to lowering consumer price inflation in 2011. While the official inflation numbers at the time of appraisal (April 2012) suggested the CPI had remained below 4.5 percent, as in 2011, official statistics were assessed as inaccurately capturing the impact of higher food prices resulting from the crop failure, which likely led to inflation underestimation4.

7. Despite the 2011/2012 crop failure, terms of trade gains and strong tourism exports contributed to narrowing the current account deficit in 2011 (Table 1). There was a strong recovery in the tourism sector and good performance of domestic exports, due notably to the rise in groundnut prices in international markets. A real depreciation of the Gambian dalasi against the US dollar by 5.7 percent in 2011 contributed to improved competitiveness as well. However, exchange rate stability remained an important stability anchor as food imports accounted for around half of the country’s consumption needs, and crude oil, which represented the country’s main energy source, equaled 10 percent of overall imports. Subsequently, measures had been taken to control the exchange rate stability in early 2012.

Table 1. Selected Macroeconomic Indicators at Appraisal, 2007-2014 (percent of GDP, unless otherwise noted)

Source: EGRG-I Program Document, April 2012

8. Although the poverty headcount index declined between 2003 and 2010, the crop failure raised the vulnerabilities of households, particularly for female-headed households. While the estimated poverty rate for female-headed households at 38 percent was significantly lower than the 51 percent for male-headed households (according to the 2010 Integrated Household Survey), due to their employment in sectors such as education, health and retail trade, female workers represented 60 percent of those employed in rural areas and were thus more affected by the crop failure.

9. At appraisal, while the economy was projected to contract and record higher inflation, due to the external shock, given the Government’s adjustment efforts, the overall macroeconomic framework was assessed as adequate. The economy was projected to contract by 1.7 percent in 2012 due to the crop failure with inflation rising towards 5 percent. An emergency food and seed imports was launched to meet immediate consumer demand and to protect the next planting season.5 Economic growth

4 EGRG-I Program Document. 5 Wide donor support was pledged during the May 2012 development partner meeting in Doha, Qatar, with the concomitant reassurance that additional resources will be used for their proper purpose along with the Government’s commitment to maintain a prudent fiscal policy.

2007 2008 2009 2010 2011e 2012p 2013p 2014pReal GDP growth (% change) 5.2 6 6.7 6.1 3.3 -1.7 9.7 8.3Inflation (end of period, %) 5.4 4.5 4.6 5.8 4.4 4.7 5.5 5.5Broad money growth (% change) 6.7 18.4 19.4 13.7 11 9 14.9 14.1Average Treasury Bill Rate (%) 10 10.5 9.2 11.3 11 … … …Tax revenues and grants 17.8 16.3 18.5 18.9 19.6 22.4 22.6 22.9Expenditures 21.3 20.7 24.4 24.3 24 27.7 25.1 25Interest payments 4 3.1 2.9 2.9 3.4 3.7 3.6 3.1Capital expenditures 4.7 3.7 7.5 9 8 9.6 10.1 10.4Gross Fiscal Balance -3.5 -4.4 -5.9 -5.4 -4.4 -5.3 -2.5 -2.1Total Public debt (% of GDP) 65.1 66.4 70 69.4 71.2 77.4 71.1 66Exports 11.1 8.5 10.1 10.2 11.7 11.5 11.5 11.3o/w domestic goods 0.9 0.7 0.6 1.4 1.8 1.1 1.2 1.3Imports -31.8 -29.9 -31.7 -32.4 -34.3 -39.3 -35.7 -34.9o/w oil imports -3.5 -3.7 -3.3 -4.2 -5.5 -6.1 -5.9 -5.5Services (net) 8 6.1 6.1 3.9 6 5.9 5.7 5.5Current acc. bal. (excl. official transf) -10.7 -13.7 -14 -15.7 -14.1 -18.8 -15.4 -14.6Current acc. bal. (incl. official transf.) -9.7 -12.7 -10.5 -15.7 -14.1 -17.9 -14.9 -14.2Gross official reserves (months) 5.3 4.6 7.3 4.8 5.1 5 5 5

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prior to the crop failure was strong for many years and was expected to resume once the normal rainfall returns. However, the pre-election policy slippages and the weather-shock impacts on growth and fiscal policy led the Government to negotiate a new IMF-supported program that was to be presented to the Board on May 25, 2012. The Fund program was focused on enhancing country’s fiscal discipline6 and achieving primary surplus already in 2013.

10. Prudent fiscal management was emphasized, given a high and rising public debt to GDP ratio, rapidly growing short-term domestic debt, and limited fiscal space to support the Government’s ambitious development objectives. Total public debt was estimated to have breached 71 percent of GDP at end-2011, reflecting the combination of a fast-growing domestic public debt (29 percent of GDP), and slow-growing, mostly concessional external public debt (42 percent). While the real yield on total public debt is relatively low (less than 5 percent), the real yield on the domestic public debt was close to 9 percent. Given the debt dynamics, total public debt was projected to increase to 77 percent of GDP before stabilizing and then falling in 2013 to a projected 71 percent and then further to 66 percent in 2014.7The interest payments for domestic debt accounted for almost one-fifth of fiscal revenues. The average Treasury bill rate (with longest dated maturities of 365 days) was relatively high at 11 percent (6 percent in real terms). There was little refinancing risk arising from foreign currency debt, but a significant domestic debt refinancing exposure and a rising interest rate risks.8 The joint IMF-World Bank Debt Sustainability Analysis (DSA) conducted in 2011 indicated that The Gambia still faced a high risk of debt distress, as the present value of external debt to exports breached its threshold over a protracted period, while other indicators remained vulnerable to adverse shocks. The moderately high level of foreign exchange reserves seemed to be prudent, given the refinancing concerns.

The Political Situation

11. At the time of appraisal, the country continued to maintain a stable political system. President Jammeh was reelected to a fourth five-year term in November 2011 with a reported 72 percent of the vote. Parliamentary elections were held in March 2012, where the President’s party (the Alliance for Patriotic Reorientation and Construction) won the majority in the National Assembly (Parliament).

The Government’s Response

12. In the run up to appraisal, during late-2011 and early-2012, the Government was struggling with a shrinking economy due to crop failure, and the fiscal impact of policies ahead of elections. On March 7, 2012, the Government of The Gambia announced the 2011-12 crop failure, and requested an estimated US$23 million for seeds, fertilizers, and food aid. By the time of appraisal, donors had responded by pledging around US$14.5 million. The EGRG-I aimed to fill in the remaining financing gap. It was believed that after the weather-inflicted shock, the country would shift its focus to the medium-term development strategy.

13. In December 2011, the Gambian Authorities launched the Programme for Accelerated Growth and Employment (PAGE) for 2012-159—the new Poverty Reduction Strategy Paper prepared by the Ministry of Finance and Economic Affairs through a broad participatory and consultative process.10

The PAGE is organized around five pillars: (i) accelerating and sustaining economic growth; (ii) improving and modernising infrastructure; (iii) strengthening human capital stock to enhance employment

6 The ECF program included additional initiatives to maintain and enhance the country’s current fiscal discipline like the full-implementation of the fuel pricing formula in 2012, the introduction of the VAT in 2013, setting the limits on how tax exemptions are awarded, and strengthening tax administration. 7 Assuming completion of the EGRG series, and of the complementary AfDB budget support, and IMF ECF program. 8 The average time to maturity of the external debt is 14.5 years, whereas the average time to maturity of the stock of domestic debt is less than one year. 9 Given delays with implementation, the Government extended the PAGE through 2016. 10 This was the third PRSP. Previous five-year programs were presented to the Boards of IDA and the IMF in April 2002 and 2007.

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opportunities; (iv) improving governance and fighting corruption; and (v) reinforcing social cohesion. The PAGE represents a comprehensive medium-term development strategy, which still faces the challenges of the constrained resource envelope, requiring further prioritization, more efficient mobilization and management of external aid and private sector participation, as well as more stable pool of senior civil servants to ensure operational continuity.

14. The EGRG-I was broadly designed in accordance with the Policy Matrix prepared by the Government, and that sequentially outlines priority PAGE reform measures. The PAGE Policy Matrix has quantitative and qualitative outcome indicators set for the 2012-15 period, and has benefited from broad consultations with key stakeholders, including civil society, private sector and other development partners to identify the appropriate complementary reform measures through investment projects and analytical exercises.

IDA’s Response

15. The EGRG-I was consistent with the Africa Strategy, and was aligned with the IDA and AfDB Joint Assistance Strategy (JAS) FY2012-15. The operation would account for 10 percent of the JAS’ proposed resource envelope, while all preconditions for another budget support operation—in terms of the country’s economic policy and institutional environment and its capacity to carry out its reform program—were considered met. The PAGE delineated a coherent country policy program, including an adequate macroeconomic framework with a new IMF-supported Extended Credit Facility (ECF) program, greater debt sustainability, reasonable dissemination of the Government’s budget information, and an improving governance and institutional framework, particularly with respect to public financial management.

16. More importantly, the EGRG series was aligned with the country’s Programme for Accelerated Growth and Employment (PAGE) for 2012-15, and had mobilized other development partners’ support. The operation itself supported a subset of reforms in the Government’s Policy Matrix in 2012, in particular Pillars I (accelerating and sustaining economic growth), Pillar III (strengthening human capital stock and enhancing access to social services), and Pillar V (reinforcing social cohesion and cross-cutting interventions). The AfDB also provided a budget support policy grant, which was focused exclusively on PFM issues, while IDA, through the EGRG series, retained a broad-based policy matrix, encompassing both core PFM and sector specific issues. A Memorandum of Understanding was signed to formalize the coordination arrangements around the development community’s aid effectiveness agenda.

17. Ongoing investment projects and strong analytical underpinnings complemented the EGRG development policy operation series. There were four investment projects that complemented the EGRG-I: (i) the 2010 Integrated Financial Management Information System (IFMIS) project; (ii) the 2010 Gambia Growth and Competitiveness project; (iii) the 2010 West Africa Agriculture Productivity project; and (iv) the 2010 West Africa Regional Communications Infrastructure Program APL (WARCIP APL 2). These operations had supported institutional reforms and investments in public financial management, management of the agriculture, education, energy and telecommunications sectors. The analytical underpinnings for the EGRG series rested on the large body of reports and technical notes, on which IDA has actively collaborated with the Government and other development partners. They span from poverty analysis, country financial accountability assessments, PERs, technical notes on civil service performance, pension policy reform, public sector pay and employment, youth employment, gender (AfDB), revenue authority enhancement, budgetary management and VAT (IMF), energy, telecommunications and agriculture.

The EGRG Series

18. The Bank’s EGRG series was conceived in response to the Government’s request to support the ongoing reform effort, as outlined in the PAGE 2012-15, to address the economic slowdown and the resulting fiscal vulnerabilities. At appraisal for EGRG-I, at the Government’s request, Bank’s intervention was conceived as a two-operation programmatic series – EGRG-I and EGRG-II. A two-

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operation series was considered appropriate because the reforms being implemented were medium-term in nature. The two-phase reform program outlined in the first, but implemented over two operations, would provide the task team a framework to engage in a policy dialogue with the Government, after the first operation was presented to the Board and the Government was implementing the next phase of the reforms. The EGRG-I was presented to the Board in May 2012, and the AfDB’s complementary budget support operation was delivered later in the same calendar year 2012. However, the EU withdrew its budget support operation following a breakdown in the political dialogue11. The EGRG-II operation was expected to be presented to the Board in mid-2013 and to be followed by another AfDB operation. In retrospect, the anticipated timing of the EGRG-II proved optimistic. As discussed in detail in Section 2.4, many of the key reforms identified for EGRG-II were delayed, and the macroeconomic policy framework repeatedly faltered and was periodically deemed inadequate for the budget support operation to proceed.12 Consequently, due to the delays, the two-operation-programmatic series lapsed in May 2014, which triggered the requirement for the preparation of this Implementation Completion and Results report for EGRG-I, and at which time it was decided to continue processing EGRG-II as a stand-alone operation.

19. The financing provided by the two operations, EGRG-I and EGRG-II, of about US$6 and US$5 million, respectively, should have helped ease the public financing needs. Financing provided by EGRG-I (US$6 million), amounted to around 38 percent of the external debt amortization needs of the economy in 2012 or around 11 percent of the overall borrowing needs13. The Government thus saw the real value of the operation, not just in terms of the financing, but in the donor coordination, analysis and policy advice around the PAGE implementation that came with it. Moreover, the Government also saw the IDA’s operation as a stamp of approval for The Gambia’s structural policies, when it presented its reform efforts to the IMF, AfDB and EU. To some extent this explains the very active engagement with the Government between the two operations described in Section 2.2.

Relationship with the IMF and other Development Partners

20. During the formulation and implementation of EGRG-I, The Gambia was in the process of negotiation of a new IMF-supported Extended Credit Facility (ECF) program that was then under supervision and implementation during the preparation of EGRG-II14. The IDA team closely collaborated with the IMF on macroeconomic policies and in the preparation of the DSA’s during these years. The IMF was consulted on the Policy Matrix for the EGRG series, making the ECF program and the EGRG mutually coherent. Similarly, the European Commission worked in coordination with the IMF in providing technical assistance in public financial management areas related to budget programming, the establishment of a Medium Term Expenditure Framework, and the introduction of the Value Added Tax (VAT), and with the Bank and the EU on public procurement reform.

1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved)

21. At appraisal, there was broad consensus on the development objectives that The Gambia needed to pursue. These were contained in the PAGE prepared by the Government, as well as the Policy Matrix outlining the implementation steps and the results expected. Consistent with this consensus, the

11 While the political dialogue broke down and resulted in the EU’s budget support being dropped, achievement of the agreed policy reforms for the operation were well advanced. 12 Ultimately, in May 2015, although all of the policy actions for EGRG-II were then finally met and cleared by the Bank’s legal department and sectoral specialists at the start of the month, further processing (that entailed submission to the Board) was placed on hold, because of the introduction of exchange rate controls that resulted in an inadequate macroeconomic policy environment. The exchange controls included substantial overvaluation of the Gambian dalasi and restrictions on transfers of hard currencies outside of the country. 13 Deficit and debt amortization requirements.14 An IMF-supported ECF program was presented to its Board on May 25, 2012, and the First Review was completed in May 2013. The ECF program went off track in September 2014, before the Second Review could be completed, and the ECF then expired in early-2015.

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original PDOs of the EGRG-I were to: (i) strengthen transparency, accountability and efficiency in public financial management; (ii) improve public management in the agriculture, education, and energy sectors; and (iii) promote competition in the telecommunications sector. These would be done by supporting prior actions in the following four PAGE priority policy areas:

Improving public financial management through reforms focused on increasing transparency and accountability.

Strengthening accountability in the management of the education sector by having in place service-level agreements between the Ministry of Basic and Secondary Education, its regional directorates and the head-teachers in public basic and secondary schools.

Improve the financial situation of the energy sector by reducing payment arrears to the National Water and Electricity Corporation (NAWEC).

Ensuring private sector participation in telecommunications by licensing the recently established Gambia Submarine Cable Company (GSCC).

22. The specific policies to meet these PDOs were as follows:

Policy Area 1: Improving Transparency and Accountability in Public Financial Management

i) Enhancing transparency in the management of Government’s accounts, through the furnishing of its financial statements for fiscal years 2008, 2009 and 2010 to the National Audit Office (NAO);

ii) Disseminating the monthly IFMIS fiscal reports, through the periodic publication of the monthly IFMIS reports and the budget performance report on poverty on the MOFEA’s website;

iii) Improving public financial management accountability, through the appointment of five judges for the tax and customs tribunal, as required in the Income and Sales Tax Act and the Customs and Excise Tax Act;

iv) Enhancing effectiveness in public spending, through the identification and interruption of payments by the MOFEA to all civil servants not validated by the IFMIS payroll;

v) Strengthening its audit institution, through the approval by the MOFEA of the MOFEA’s internal audit committee’s charter and the appointment of the members of the internal audit committee;

vi) Strengthening budget management, through the establishment of a system of real time reconciliation and clearance of accounts between the MOFEA and the Central Bank establishing an IFMIS interface at the Central Bank.

Policy Area 2: Strengthening Energy Sector Management

vii) Government providing for a reduction of an amount of GMD228.6 million by March 31, 2012 in Public Sector Energy Arrears to the NAWEC.

Policy Area 3: Promoting Private Sector Participation in the Telecommunications Sector

viii) Adopting a strategy to enhance private participation in its telecommunication sector, through the issuance by the MOICI of a license authorizing the operation within its territory of the Gambia Submarine Cable Company (GSCC) Limited in order to improve the quality of the telecommunications infrastructure by allowing connectivity with the Africa to Europe submarine telecommunications cable.

Policy Area 4: Enhancing Education Sector Management

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ix) Enhancing accountability in education services, through the execution of service-level agreements between the Ministry of Basic and Secondary Education and 6 regional directives and at least 498 primary and secondary schools head-teachers to improve the overall performance of students at the basic and secondary levels.

1.3 Revised PDO and Key Indicators, and reasons/justification NA. PDOs and indicators were not revised.

1.4 Original Policy Areas Supported by the Program

23. The policy areas supported by the EGRG-I were grouped into four policy areas, as discussed above. Each of these policy areas contained measures, which constituted prior actions for the EGRG-I as per the legal documents as well as outcome indicators to measure progress of the reform program. Since the EGRG-I was a one-tranche operation, from a strictly legal point of view, all prior actions were met before the grant was submitted to the Board. Table 2 presents the summary of prior actions and the progress on implementation of the policies. The impact of the measures implemented under the EGRG-I, and the progress on outcome indicators is discussed in Section 3.2, on “achievement of program development objectives”.

Table 2. Policy Matrix and Results Medium-Term

Objectives EGRG-I

Prior Actions Results/Implementation Experience

POLICY AREA 1: IMPROVED TRANSPARENCY AND ACCOUNTABILITY IN PUBLIC FINANCIAL MANAGEMENT 1) Enhanced

transparency in the management of Government’saccounts.

Financial statements for fiscal years 2008, 2009 and 2010 furnished to National Audit Office by the Ministry of Finance and Economic Affairs.

Achieved. Evidenced by letters dated March 6, 2012, April 4, 2012, and April 17, 2012 from the Permanent Secretary of the MOFEA to the NAO and copies of the 2008, 2009 and 2010 financial statements. Financial statements for 2011-2013 were also submitted to the NAO for auditing, and the audit reports were finalized, however 2012 and 2013 reports were only finalized in mid-2015. The reporting lag should be shortened and proactive actions taken on the NAO findings.

2) Monthly IFMIS fiscal reports disseminated.

Monthly IFMIS reports, and the budget performance report on poverty published on the MOFEA’s website.

Achieved. Evidenced by letter dated November 29, 2011 from the Permanent Secretary of the MOFEA to the Director of National Treasury. The IFMIS reports have been posted on the website of the MOFEA since December 2011 (www.mofea.gov.gm). The current reporting lag of three or more months could be shortened.

3) Public financial managementaccountabilityimproved.

Five judges for the Tax Tribunal, as required in the Income and Sales Tax Act and the Customs and Excise Tax Act, appointed.

Partially achieved. Evidenced by letter dated March 6, 2012 from the Permanent Secretary of the MOFEA to the Commission General of the Gambia Revenue Authority, the Tax Tribunal has been set up. However, no cases have been reviewed until May 2015 as no complaints

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Table 2. Policy Matrix and Results Medium-Term

Objectives EGRG-I

Prior Actions Results/Implementation Experience

have been received so far. 4) Effectiveness in

public spending enhanced.

All civil servants not validated by the IFMIS payroll identified and payments by the MOFEA to them interrupted.

Achieved. Evidenced by the letter from the Permanent Secretary of the Personnel Management Office to the Director of National Treasury at the MOFEA dated April 16, 2011, that authorized the stoppage in the payment of salaries to the civil servants not validated in the IFMIS payroll. By May 2015, 727 civil servants were removed from the payroll.

5) Audit institution strengthened.

The MOFEA’s internal audit committee’s charter approved and members of the internal audit committee appointed.

Achieved. This has been made operational through (i) the approval of the Internal Audit Committee Charter, as evidenced by the signed charter dated April 13, 2012, and (ii) the appointment of the Internal Audit Committee members, as evidenced by letter dated March 8, 2012 from the Permanent Secretary of the MOFEA to each of the appointed members. By end-2014, 57 internal audit reports were produced, of which 31 produced in 2014.

6) Budget managementstrengthened.

A system of real time reconciliation and clearance of accounts between the MOFEA and the Central Bank established through an IFMIS interface at the Central Bank.

Achieved. Evidenced by letter dated March 9, 2012, from the Permanent Secretary of the MOFEA. The IFMIS interface at the Central Bank of The Gambia (CBG) was established on December 7, 2011. A real time reconciliation and clearance of accounts between the MoFEA and the CBG has been done via an interface between the IFMIS and the CBG banking module, whereby the MOFEA has online access to all Government bank accounts and provides online monitoring of account balances. The MOFEA also downloads bank statements from the banking module to the IFMIS and carry out automated bank reconciliation.

POLICY AREA 2: STRENGTHENED ENERGY SECTOR MANAGEMENT 7) Public sector

energy arrears reduced.

The Recipient has provided for a reduction of an amount of GMD228.6 million by March 31, 2012, in Public Sector Energy Arrears to the NAWEC.

Not achieved. Evidenced by the letter from the Permanent Secretary of the MOFEA providing information on the implementation of the executive order number OP268/318/01/XXV, of November 9, 2011, announcing that outstanding Government arrears to NAWEC were reduced to GMD28.4 million as of March,

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Table 2. Policy Matrix and Results Medium-Term

Objectives EGRG-I

Prior Actions Results/Implementation Experience

31, 2012, down from GMD257 million in 2009. However, the arrears grew again in 2013 to GMD71.1 million and in February 2015 stood at GMD157.6 million. The arrears were offset with NAWEC’s 2014 tax arrears in June 2015, but the new balances are not available as yet.

POLICY AREA 3: PRIVATE SECTOR PARTICIPATION IN THE TELECOMMUNICATION SECTOR PROMOTED 8) A strategy to

enhance private participation in its telecommunication sector adopted.

A license authorizing the operation within its territory of the Gambia Submarine Cable Company Limited issued.

Achieved. Evidenced by license dated March 30, 2012, issued by the MOICI. Two internet service providers and three mobile operators are connected to the GSC. Data gateway licenses were also awarded to four operators and 3 Internet Service Providers in May 2013. However, there are still complaints of poor service for VoIP and access to certain websites.

POLICY AREA 4: EDUCATION SECTOR MANAGEMENT ENHANCED 9) Accountability in

education services enhanced.

Service-level agreements (SLAs) between the Ministry of Basic and Secondary Education and 6 regional directives and at least 498 primary and secondary schools head-teachers, to improve the overall performance of students, signed.

Achieved. Evidenced by letter dated April 18, 2012 from the Permanent Secretary of the MOBSE confirming that the SLAs were signed on November 29, 2011. This contributed to the improvement of the teaching quality, although the teachers’ payroll setting is not informed by their performance based on the SLAs. NAT scores for 3rd grade English and Math improved to 45.57 percent and 47.21 percent in 2013, respectively from 20 and 18 percent.

1.5 Revised Policy Areas

Not Applicable

1.6 Other significant changes

None

1.7 Proposed Triggers for EGRG-II

24. The triggers that were identified in EGRG-I for the second and final operation in the series, EGRG-II, were defined by the Government of The Gambia and IDA. Satisfactory progress on these actions would lead to the preparation of the next operation in this series, assuming that the macroeconomic policy framework was assessed as adequate. Due to delays in achieving reforms in the agricultural sector, tied in part to the disruptions of the drought, agricultural sector policy reforms for the series were back-loaded into the second operation. The triggers for EGRG-II are summarized in Table 3, below.

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Table 3. Proposed Triggers for the EGRG-II Proposed triggers Rationale for the proposed EGRG-II triggers

1. Complete the transition in IFMIS to EPICOR 9 (the web-based IFMIS).

The transition to a web-based IFMIS platform (EPICOR 9) provides the opportunity to broaden the use of the IFMIS by making it more user-friendly and accessible to government offices outside of the Banjul perimeter. Ultimately, this transition to EPICOR-9 should lead to a moretimely and reliable within year budget reporting.

2. Establish and then make operational the interface between the IFMIS and the Commonwealth Secretariat Debt Recording Management Software (CSDRMS).

Debt service currently accounts for 20 to 25 percent of government revenues, placing a premium on prudent and effective debt management in The Gambia. To strengthen the country’s debt management capacity, MoFEA is proposing to establish an interface between IFMIS and the Commonwealth Secretariat Debt Management System (CSDRMS).

3. Include self-accounting projects with the Ministries Finance and Economic Affairs, as well as Information and Communication Infrastructure in IFMIS.

Self-accounting projects are donor funded projects that require separate accounting reports. Combined they represent around 40 percent of government expenditures in any given year, as well as a fair share of the idle-money in government accounts. The extension of the IFMIS to allow these project to transit from designated accounts in donor financed project to government accounts drawing from donor funds should be possible, leading to improved reporting through the IFMIS – one that is consistent with the commitment to greater reliance on country systems established in the donor harmonization agreements reached Paris in 2005 and in Accra in 2008. The current disconnect between these projects and the national budget process leads to unpredictable fluctuations in the net domestic assets in government accounts at the Central Bank, creating difficulties for liquidity management. By increasing the coverage of the IFMIS to include self-accounting projects, the Gambian government will achieve two goals: (i) broaden its within-year reporting of government expenditure; and (ii) improve overall government cash management.

4. Submit a revised Gambia Public Procurement Act, separating the policy and regulatory functions of The Gambia Public Procurement Authority (GPPA), to the National Assembly.

At present, the GPPA has the responsibility for both ex-ante and ex-post clearances of procurement documents, ensuring their conformity to the requirements of the legislation. These overlapping responsibilities create the potential for a conflict of interest, however. To realize this separation, the capacity of the Authority and Public Procurement Organizations (PPOs) is currently being strengthened. Once some progress has been achieved in capacity building for the GPPA and the PPOs, the government will revise and submit to the National Assembly the amendments of the Gambia Public Procurement Act (GPPA) formalizing this separation of responsibilities.

5. Sign a Memorandum of Understanding between Government and the Agribusiness Services and Producers Association (ASPA) aimed at increasing the scope for the private sector to also deliver agricultural inputs.

Government-provided agricultural inputs meet only a part of the country’s demand because there is little additional supply response from the private sector since the government supplies these inputs at below market prices. The goal of this MoU would be to establish a framework to integrate the agriculture inputs provided by government (seed, fertilizers, etc.) into the domestic market, rather than have the government directly manage the sourcing and distribution of these inputs to the private sector. Otherwise, private sector investment in the importation and distribution of agriculture inputs will continue to be discouraged, perpetuating the country’s dependence on development aid. This measure should also improve efficiency of input supply and free up

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Proposed triggers Rationale for the proposed EGRG-II triggers public resources for other purposes.

6. Adopt PURA regulations regarding the adjustment of electricity tariff to levels closer to cost recovery.

The adjustment in electricity tariffs to levels closer to cost recovery is the second stage in the process of rebalancing the finances of NAWEC – the first one being the reduction in arrears achieved under the program supported by the first of this budget support operation.

7. Adopt PURA regulation for open access to the telecommunications backbone.

Opportunities for competition in underdeveloped markets, such as The Gambia, depend on three factors: the demand for new services, the economies of scale and scope that emerge over time and the technological innovations introduced. Competition is important because it allows consumers to enjoy more reliable and cheaper services, and for the economy to benefits from increased investment, job creation and export-led growth. Monopolistic behavior, in contrast, holds markets back, lowers investments, provides services at a higher cost, and places the entire economy in a competitive disadvantage. The three key competition issues facing the The Gambia telecommunications sector at the moment are: (i) the access to the cable, (ii) the control of the international gateway, and (iii) the connection to the national broadband backbone. The arrangement made under the WARCIP project ensures that the first two bottlenecks are removed. The proposed trigger for this second budget support operation aims at removing the third bottleneck.

8. Abolish informal fees charged at public primary schools.

The 2012 budget proposal already allocated GMD 8.0 million to offset the end of these revenues derived by public primary schools from fees charged from parents of students. This trigger for the second budget support operation aims at ensuring that this policy action envisions in the 2012 budget will be completed.

9. Expand programs targeting the most vulnerable, such as Girls Scholarships and Programs for Needy Boys.

The 2012 budget proposal already allocated GMD 14 million for these programs, which aims at reaching approximately 6,000 children, up from 1,500 children in 2011. The inclusion of this trigger for the second budget support operation aims at ensuring that the budget plans will be fulfilled.

2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance

25. Most of the policy reforms initiated in the EGRG-I were implemented as intended, as measured by the results indicators. In a few areas, however, the institutional reforms have not been fully sustained beyond the EGRG-I horizon. These changes and the progress on achieving outcome indicators are discussed in detail in Section 3.2.

2.2 Major Factors Affecting Implementation

26. Since the EGRG-I was a single tranche operation based on prior actions, much of the preparation work was carried out in 2011, prior to Board approval in May 2012. Implementation of the operation thus involved working closely with the Government during 2011 and early 2012 to (a) implement policy and institutional reforms initiated by the EGRG-I, and (b) define the specifics of the second phase of reforms (i.e., triggers) that would constitute prior actions for EGRG-II. As discussed below, the operational support through investment operations, effective donor coordination and the strong analytical basis helped implementation of the operation.

IDA’s investment support. EGRG-I was well linked to key areas of the IDA’s engagement in The Gambia, such as (i) the 2010 Integrated Financial Management Information System (IFMIS) project,

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and the 2012 Additional Financing IFMIS; (ii) the 2010 Gambia Growth and Competitiveness project; (iii) the 2010 West Africa Agriculture Productivity project; (iv) the 2010 Additional Financing for the Third Education Project (Phase II); and (iv) the 2010 West Africa Regional Communications Infrastructure Program APL. These operations had supported institutional reforms and investments in public financial management, management of the agriculture, education, energy and telecommunications sectors.

Effective donor coordination. The Government’s limited institutional capacity to implement the reform agenda was mitigated by the consolidated reform program specified in PAGE 2012-15 around which support for capacity building was received through various other donor projects, including projects supported by the AfDB, EC, IMF, UNDP and the WFP. The joint assessment strategy arrangement by these partners also helped enhance efficiency in program delivery and implementation.

Good analytical basis. The fast preparation and implementation of EGRG-I was facilitated by the extensive analytical work. The Bank’s team provided inputs to the Government in formulating policies in financial accountability, public sector reform, revenue authority enhancement, budget management, energy, telecommunications and agriculture, while it also actively collaborated with other development partners.

27. However, there were a number of exogenous and endogenous factors, which adversely affected the progress towards reaching the outcome targets set in the EGRG-I:

The macroeconomic situation proved to be difficult (see the discussion in Section 3.2). A weather-induced shock in 2011 and the policy slippages tied to election commitments in November 2011 and 2012, led to inadequacy of the macroeconomic framework for the budget operation, and to the initial delays in processing. Namely, increases in indirect tax exemptions and delayed adjustments of gasoline prices in line with rising world market prices eroded an already low tax base. However, post-elections, the Government took appropriate actions, and was able to reach agreement with the Bank on the EGRG series and with the IMF on an ECF program.15 The ECF also included additional initiatives to maintain and enhance the country’s fiscal discipline. However, after effectiveness of the EGRG-I, a number of endogenous and exogenous factors led to some reversals in reforms and deterioration in the macroeconomic policy framework.

The Gambia suffered challenging exogenous shocks following effectiveness of EGRG-I that resulted in lower tax revenues and higher expenditures, straining fiscal balances. In particular, real GDP posted near zero growth in 2014, reflecting in part the outbreak of Ebola in neighboring countries that hit its tourism sector starting in 2014, and another poor harvest for the 2014/2015 crop year. These challenges, and the Government’s responses to them, contributed to the fiscal slippages in subsequent years.

Elections, recurrent policy slippages and reform inertia also contributed to the poor fiscal performance and weaker than expected growth outturns following approval of the EGRG series. The period before the EGRG-I appraisal was one of uncertainty. EGRG-I was presented to the Board in May 2012, six months after the Presidential elections and two months after the parliamentary elections. While the new Government indicated its full support of the reform effort delineated in the EGRG series, and committed to the PAGE reform implementation, reform inertia took hold in some areas, particularly related to macroeconomic policy reforms (fiscal and monetary) and reforms in some sectors (agriculture16, energy and telecommunications). While the continued engagement of the AfDB

15 Presented to the IMF’s Board on May 25, 2012. 16 The proposed agriculture policy reform was subject to support through the EGRG-II operation, and was aimed at supporting increased private sector participation in the delivery of agricultural sector inputs.

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and IDA in the implementation of the Policy Matrix was meant to ensure continuity and build political commitment to reforms, the growth and policy challenges proved substantial.

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

28. Monitoring and Evaluation. Within the Government, the Ministry of Finance and Economic Affairs was responsible for implementing the EGRG-I supported reforms and coordination among various ministries and agencies. The Bank team, led by the TTL in Washington, and supported by the teams working on the supporting investment operations, monitored and followed up on progress. This approach worked well and there was adequate monitoring of reforms and less so on outcome indicators (see Section 5.1). Since the series lapsed in May 2014, the implementation, supervision and tracking of output indicators for EGRG-I were planned to be carried out with the preparation of the EGRG-II operation.

29. Design. The EGRG-supported reforms were an integral part of the country’s Poverty Reduction Strategy Paper – the PAGE 2012-15, which enjoyed a strong country ownership since the monitoring and coordinating entity was the same as for the EGRG-I—i.e. MOEFA. There is a joint Policy Matrix shared by all the donors planning to provide budget support. Prior actions for donor disbursements are identified in the Policy Matrix, thus allowing for aid coordination. Policy dialogues are conducted jointly and joint appraisal missions to assess progress in implementing the Policy Matrix were undertaken. The results framework for assessing EGRG-I outcomes, therefore, was a snapshot of the PAGE Policy Matrix. While it served its purpose of ensuring adequate monitoring, in several cases, design of the outcome indicators did not adequately capture the underlying policy effort by the Government:

In some cases, the link between the reform measure and the output indicator was very tenuous. For example, strengthening energy sector management depends on many factors outside the immediate influence of policies (or rather actions) supported by EGRG-I (i.e. reduction of public sector energy arrears). Clearly, the action supported by the EGRG-I did not lead to sustainable results raising the quality of the policy design.

In the case of education sector, the policy action should have been formulated with the expected outcome suggested (i.e. the SLAs to be signed to improve the teaching quality and thus student performance).

In many cases, the policy matrix did not specify quantitative targets for results that the operation can be judged against. Namely, the original target values were missing numerical targets, which rendered the evaluation of the operation’s achievements difficult.

In some cases reforms affected a small segment of a medium-term objectives, which also set the result indicators as outputs rather than outcomes. For example, the Tax Tribunal establishment, or audit capacity strengthening have led to only marginal improvements of public financial management accountability and budget management strengthening, as there were parallel policies outside the EGRG-I that adversely affected both objectives as evident in fiscal policy deterioration post-EGRG-I. However, other reforms, such as the introduction of IFMIS, have led to meaningful improvements in PFM systems.

2.4 Expected Next Phase/Follow-up Operation

30. As discussed in Section 1, the EGRG-I operation was designed as a programmatic two–operation series. After the EGRG-I was presented to the Board, while the broad reform program stayed unchanged, there were slippages on the macroeconomic front that prevented the continuation of the series. Consequently, the two-operation-programmatic series was discontinued and EGRG-II is currently on hold. It was scheduled for Board presentation as a stand-alone operation in May 2015; however, the macroeconomic policy framework deteriorated with a significantly overvalued exchange rate, so processing of the DPO was put on hold although all prior actions had been met. The EGRG-II builds upon reforms in EGRG-I, providing continuity for these critical areas of reform in public financial management, electricity,

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telecommunications and education. In fact, while the series lapsed, the prior actions that were originally envisioned (triggers identified in the first operation), are being met, or have even been strengthened (like in the critical sector of energy and agriculture), despite the delay in achievement with some of them.

3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation

Rating: Satisfactory

31. Relevance: There was a consensus within the Government, as well as among The Gambia’s main external stakeholders (IMF, AfDB), that the objectives of the EGRG-I were relevant. These objectives are; to strengthen transparency, accountability and efficiency in public financial management, to improve public management in the agriculture, education, and energy sectors, and to promote competition in the telecommunications sector. As stated earlier, the operation has supported the Government reform program PAGE. The AfDB prepared a budget support policy grant in parallel with the EGRG-I operation, complementing the reforms supported by the EGRG-I. The subsequent economic developments in 2013-14 exposed Gambia’s fiscal and macro vulnerability and further reinforced the relevance of the objectives. An assessment of the design and implementation is given in Sections 2.2 and 2.3.

3.2 Achievement of Program Development Objectives

Rating: Unsatisfactory

32. Macroeconomic Growth and Policy Framework. Maintaining a sustainable macroeconomic framework was a precondition for the successful implementation of EGRG-I. Macroeconomic developments during preparation in 2011 and delivery to the Board in May 2012 show that in retrospect, Bank staff and their Government counterparts were optimistic in their assessment of (a) the growth prospects for the Gambian economy, and (b) the Government’s commitment to macroeconomic policy reforms, aside from having (c) underestimated the persistence of challenging governance issues. With respect to growth outturns, at appraisal, staff assessed a relatively modest GDP growth slowdown in 2011 (to 3.3 percent from 6.1 percent in 2010) and projected a recession in 2012 (1.7 percent contraction), due to the 2011/2012 crop-year failure, before posting a projected vibrant recovery in 2013 and 2014 (with growth projected at 9.7 percent and 8.3 percent, respectively). The actual outturn (Table 4) shows that the country was in a deep recession already in 2011 (the economy declined by 4.3 percent), and that the earlier than projected rebound posted in 2012 and 2013 proved much weaker than anticipated (5.6 percent and 4.8 percent, respectively). Notably, the weaker than anticipated outcomes also reflect revisions in national account reporting that the Government introduced in late-201217.

33. The fiscal outturns were encouraging in 2011-12. Despite recessionary developments, and pre-election policy slippages, the fiscal deficit was on declining path over the 2011-2012 period, reaching 4.4 percent of GDP, much improved compared to earlier estimates at the time of appraisal. The IMF-supported ECF program was negotiated in May 2012, and had helped to reverse the expected fiscal deterioration. In fact, by 2012, the Government was close to achieving the targeted primary balance and had managed to stem further public debt growth that stayed at 77 percent of GDP by end-2012.

34. External imbalances improved as well in 2012. The current account deficit declined to below 8 percent of GDP, with both exports of goods and services contributing to a marked improvement. International reserves reached the equivalent of 5.9 months of import-cover, supported by a prudent monetary policy that prevented further deficit financing. Interest rates on Government T-bills had declined to an average of just below 10 percent, signaling improved investor confidence in the Government’s macro-

17 The Authorities decided to capture the sharp contraction in the agricultural sector due to the failure of the 2011-2012 harvest in the calendar year of 2011—instead of spreading it across the calendar years of 2011 and 2012 as in the past.

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policies. Notably, the current account balance outcomes in part reflect accounting changes that were also introduced for the balance of payments, after EGRG-I became effective.18

Table 4. The Gambia: Macroeconomic Projections at Appraisal and Actuals, 2010-2014 (percent of GDP, unless otherwise noted)

Source: IDA (2012) and IDA (2015), World Bank Gambia Macro-Poverty Outlook, April 2015

35. However, fiscal policy slippages, compounded by external shocks in 2014, placed the economy back into recession and close to a balance of payments crisis. Real GDP growth is estimated to have contracted by 0.5 percent in 201419 from an expansion of 4.8 percent in 2013, tied to the sub-regional Ebola outbreak that affected tourism20, and the drag of cumulative policy mismanagement--including pronounced fiscal slippage, ad hoc monetary policy shifts and central bank financing of the deficit. In 2013-14, the fiscal deficit expanded sharply—doubling in 2013 compared to 2012 and then tripled in 2014 (with the deficit expanding from 4.5 percent as a share of GDP to 8.8 percent and 14 percent, respectively). These deficits stemmed in large part from large quasi-fiscal and unbudgeted spending, including to the National Water and Electricity Company (NAWEC) and other state-owned enterprises, and most recently revenue losses and spending impacts tied to the Ebola shock on tourism and to a lesser extent the negative impact of the 2014-2015 poor crop year and agricultural sector losses. Cash budgeting and the VAT introduction could not offset the mounting fiscal pressures, including those created by extra-budgetary spending21. As a consequence, public debt expanded to 101 percent of GDP as of end-2014 from 77 percent in 2012, and high-cost, short-term domestic debt expanded to47 percent as share of GDP from 33 percent in 2012. The interest burden expanded sharply as a consequence, due to the high rollover rate on domestically held Government debt and the deterioration in confidence that was reflected in higher Government borrowing interest rates. Hence, debt servicing costs increased rapidly as debt was rolled over and new debt secured.

36. Slippages on monetary policy emerged as well, with the ad-hoc introduction of exchange rate controls from late-2012 through early-2015, and contributed to heightened policy uncertainty, and

18 These changes reflected the Government and the IMF harmonized their BOP reporting. 19 As reported by MoFEA (September 3, 2015). 20 A decline in tourist arrivals was estimated at 60 percent. 21 Notably, the introduction of the VAT in January 2013 supported a significant increase in revenue collection, along with other tax reforms, evidenced by an increase in tax revenues from 14.5 percent of GDP in 2012 to 16.1 percent in 2014.

2010 2011 2012est 2013f 2014f 2010 2011 2012 2013 2014 estReal GDP growth (% change) 6.1 3.3 -1.7 9.7 8.3 6.5 -4.3 5.6 4.8 -0.5Inflation (end of period, %) 5.8 4.4 4.7 5.5 5.5 5.7 4.4 4.9 5.5 7.0Broad money growth (% change) 13.7 11.0 9.0 14.9 14.1 17.9 11.1 7.0 13.7 …Average Treasury Bill Rate (%) 11.3 11.0 … … … 11.3 11.0 9.6 15.9 …Tax revenues and grants 18.9 19.6 22.4 22.6 22.9 18.9 21.2 25.3 18.5 19.9Expenditures 24.3 24.0 27.7 25.1 25.0 24.0 26.0 29.7 27.1 33.2Interest payments 2.9 3.4 3.7 3.6 3.1 2.9 3.7 3.7 4.0 9.9Capital expenditures 9.0 8.0 9.6 10.1 10.4 8.8 8.7 12.4 7.1 10.2Gross Fiscal Balance -5.4 -4.4 -5.3 -2.5 -2.1 -5.2 -4.7 -4.4 -8.5 -13.3Primary Balance -2.5 -1.0 -1.6 1.1 1.0 -2.3 -1.0 -0.7 -4.5 -3.4Total Public debt (% of GDP) 69.4 71.2 77.4 71.1 66.0 69.6 77.3 77.0 83.3 100.3Exports, % of GDP 10.2 11.7 11.5 11.5 11.3 4.4 10.4 13.4 12.2 12.7Imports, % of GDP -32.4 -34.3 -39.3 -35.7 -34.9 -25.8 -32.2 -37.0 -34.5 -33.5Services (net), % of GDP 3.9 6.0 5.9 5.7 5.5 2.5 7.3 10.1 10.0 8.3Current acc. bal. (incl. official transf.), % of GDP -15.7 -14.1 -17.9 -14.9 -14.2 -16.3 -12.2 -7.9 -10.8 -12.4Gross official reserves (months) 4.8 5.1 5.0 5.0 5.0 5.1 5.1 5.9 5.2 4.0

Projections in EGRG-I Actual Outturn

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economic and financial disruptions. These controls significantly overvalued the Gambian dalasi against the US-dollar, and at times included shipment controls, and resulted in significant economic and financial distortions. Since the EGRG-I went to the Board in May 2012, the authorities introduced exchange rate controls five times and lifted them four times. These were in place during October-November 2012 (with the dalasi about 20 percent overvalued against the US-dollar), June-July 2013 (about 20 percent overvalued), July-August 2013 (about 10 percent overvalued), August-October 2013 (about 15 percent overvalued), and from May 2015 to the present, as of early August 2015, (about 30 percent overvalued). See Annex 5, below, for the latest May 2015 Office of the President’s directive on the exchange rate policy.

37. The ad hoc exchange rate policy shifts and controls contributed to delays in processing the EGRG-II, as well as delays with complementary activities supported by the IMF and AfDB. Forexample, the exchange rate controls introduced in late-2012 contributed to a delay in the First Review of the IMF’s ECF, which was not completed until May 2013. The Second Review of the ECF was subsequently delayed as well, due to both monetary and fiscal policy slippages, and eventually, The Gambia was officially declared off-track from the program in September 2014.22 The authorities re-engaged with the Fund in late-2014, and this led to the approval in early-April 2015of a Rapid Credit Facility and a one-year Staff Monitored Program (SMP, to facilitate a possible successor ECF in 2016). At the time, the new SMP—which included an aggressive fiscal consolidation program that the Government introduced in January 2015 and a commitment to a market determined flexible exchange rate policy, and therewith establishing an adequate macroeconomic policy framework—facilitated going forward with what had originally been intended as the second grant in the lapsed EGRG series, along with the achievement of the EGRG-II prior actions. However, the Government introduced the fifth of the aforementioned exchange rate decrees in early-May 2015 (See Annex 5), which resulted in an inadequate macroeconomic policy framework, and processing of EGRG-II was placed on hold in May 2015 (although by that time all of the prior actions had been met and cleared). The new monetary policy also contributed to the Government’s going off track from the just agreed SMP, less than a month after the IMF’s Board approved it.

38. While the macroeconomic policy framework for the EGRG-I was moderately satisfactory at approval, during the preparation for the EGRG-II, delays in achieving policy actions and deterioration in the macroeconomic framework led to a lapsing of the EGRG series. Deterioration in the macroeconomic policy framework, during the supervision period for EGRG-I and preparation period for EGRG-II, is evident across many indicators, including for example the international reserves position. Notably, despite the challenges posed by the severe drought that took hold during the 2011/2012 crop year, international reserves rose to the equivalent of 5.9 months of import cover in 2012 from 5.1 months in 2011. But, reserves were drawn down thereafter to 5.2 months and 4.0 months of import cover in 2013 and 2014, respectively, and most recently to below 3 months of import cover in May 2015 (as of August 2015). The low import cover position represents significant vulnerabilities for The Gambia, given its heavy reliance on imports for food security and complete dependence on oil imports for power generation. The authorities had recognized the need to rebuild market confidence and periodically pursued fiscal consolidation and consistent monetary policies. These efforts allowed them to conclude the first review of the ECF program that was approved by the IMF’s Board in May 2013 (delayed from 2012), and later the SMP that was approved in April 2015. However, the Government was unable to complete the second review of the ECF, due to macro-policy slippages that took hold in the third quarter of 2013. While the authorities remained engaged with the IMF, the ECF was eventually declared off track in September 2014, when sharp deterioration in the fiscal position became apparent. The new IMF SMP very quickly went off track as well, in May 2015 with the introduction of the exchange rate controls, as discussed above. Apart from putting together a more credible policy mix and legislative framework that would prevent the reoccurrence of policy slippages of that magnitude, the authorities need to accelerate the work on production of the improved

22 The first review of the ECF was cleared by the IMF’s Board on May 28, 2013. Due to policy slippages in late 2013, the IMF put the ECF under an unofficial SMP for the first half of 2014. The second review of the ECF was initiated in mid-2014, however, it was not completed as it became evident that the program targets were out of reach.

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quality and regular official statistics (even for basic indicators). Currently, statistics remains misleading with large ex-post deviations and large reporting lags (i.e. a two-year lag for the national accounts23) that would need to be improved for more effective and credible policy making.

Achieving the Individual PDOs.

Policy Area 1: Improving Transparency and Accountability in Public Financial Management

1) Enhanced transparency and accountability in the management of Government’s accounts through furnishing of 2008-2010 financial statement to the National Audit Office.

Rating: Moderately Unsatisfactory

39. Regularly audited financial statements are a key element of good accountability and Government transparency. Timely publication and auditing of the Government financial statements provide information on the financial situation and performance of the state allowing parliament and the general public to better understand how public resources were used and how they might be better allocated. The impact of the audits is to confirm correct reporting, attesting to the fairness of financial statements and related disclosures, and to indicate needed corrections where this might not be the case. The State Audit Office, with a full independence, is a critical check and balances institution supporting the parliamentary oversight of the Government performance. Prior to the EGRG-I there was a ten-year backlog of financial statements not submitted to the NAO. The EGRG-I attempted to clear the backlog of audited Government financial statements and thus increase its accountability.

40. Implementation experience and outcome targets: Financial statements for 2008-2010 were submitted by the MOFEA to the NAO in March-April of 2012, for auditing and thus the EGRG-I prior action has been met. However, the audit reports for 2009 and 2010 were presented to the Public Accounts and Public Enterprises Committees (PAC/PEC) of the National Assembly only in February 2014. These audit reports were done following the international standards for auditing and have revealed “weaknesses in controls which need urgent attention,” and are mainly related to procurement and adequate payment documentation. The audit backlog accumulated during the previous Auditor General’s mandate that involuntarily seized in June 2013. The new Auditor General had by 2014 cleared the backlog through 2010, and raised the issue of capacity of the NAO, given the large number of unfilled vacancies, including of the directors’ positions. The security of tenure has also been a problem of the Auditor General’s office. By February 2015, financial statements for 2011 were also audited and submitted to the PAC/PEC of the National Assembly; however, although two more financial years, 2012 and 2013, were audited by June 2015, the reports are still waiting to be sent to the National Assembly.

41. The perception of the independence and the credibility of the NAO need to be ensured through high quality and timely audits. The Constitution mandates that the Auditor General must report at least once every year to the National Assembly on the accounts of The Gambia Government, courts and all public enterprises. This should be done within six months of the end of the immediately preceding financial year; i.e. leaving a year and a half to issue audit reports. The audit reports also need to be published after the discussion in the National Assembly. The last audit report publicly available is for 2010, while reports for 2011-2013 are available in hard copies upon request. The authorities have taken steps to reduce the backlog of audited Government financial statements by submitting all but 2014 financial statement to the NAO. This was also made possible due to the establishment of the IFMIS and the strengthening of the accounting and reporting environment within the public sector. However, the standards need to be improved and the time lag shortened.

23 Both IMF and IDA estimates for 2011-2012 real growth suggested a recession for 2011 and a rebound for 2012 well into 2013, as suggested by the Article IV Press Release from September 2013.

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2) Monthly IFMIS fiscal reports disseminated through the periodic publication on the MOFEA’s website.

Rating: Moderately Satisfactory

42. The EGRG-I attempted to ensure timely public access to budget execution reports and thus increase budget transparency, supported by the establishment of an IFMIS. The Government started implementing IFMIS in early 2006, and since 2007 it has been operational at the central Government level to support core budget preparation, execution and reporting functions. It was supported by the IDA credit for Capacity building for Economic Management. The 2010 Country Financial Accountability Assessment and the 2011 Public Expenditure Review Update confirmed that. One of the benefits of the IFMIS was the improved timeliness of financial reporting of the budget execution reports on monthly basis. Prior to that, the lack of timely and relevant financial information for decision making and the use of manual or partially automated routine tasks of planning, preparing and aggregating budget estimates made the budgeting process highly inefficient and staff time-intensive.

43. Implementation experience and outcome targets: Monthly IFMIS fiscal reports have been posted on the website of the Ministry of Finance and Economic Affairs since December 2011, albeit on an ad hoc basis with some delay.24 These reports provide figures on overall fiscal outturns (revenues and expenditures) as well as the breakdown of budget expenditure execution according to the responsible ministries. The reporting lag was initially set at three months from the reporting period, but in the interim the authorities agreed to reduce this to a maximum of a two month lag (under the IFMIS Additional Financing, or IFMIS AF, investment project that was approved by the World Bank’s Board in August 2013). However, the lags in reporting have periodically become substantial, and the latest available monthly report is for December 2014 (as of early-August 2015), with no reports available for 2015 that should be available through May (posted at end-July).

44. While the posting of fiscal reports has been irregular, the format has become more user friendly. Since first agreed under EGRG-I, the Government began posting the reports in Excel-format instead of in PDF (agreed under IFMIS AF), making the data more accessible and user friendly for further analysis and regular monitoring as reports are posted. The dissemination of the IFMIS fiscal reports attempted to encourage greater transparency and efficiency by allowing the public to monitor the use of public resources and help detect wasteful use of resources during the budget execution stage. The umbrella NGO organization – The Association of Non-Government Organizations, TANGO – has created a pro-poor advocacy group (pro-PAG) that has proven quite proactive in using poverty budget information in its policy dialogue. The public availability of financial reports also encouraged the MOFEA to publish the 2014 Citizens Edition of the Budget and limited information on public debt.

45. The authorities have put further efforts in upgrading and rolling out the IFMIS since 2012, supported by IFMIS AF. The IFMIS is now used for budget planning and would allow introduction of the performance budgeting. The transition to a consolidated web-enabled platform (from Epicor 7.3.5 to Epicor 9.05) provided the opportunity to broaden the use of the IFMIS by making it more user-friendly and accessible to Government offices outside of Banjul. Supported by the IDA IFMIS AF investment project (effective until 2018), the system should provide access to around 500 users (including 8 sub-treasury offices and embassies) for various budget preparation, execution and reporting functions. Apart from the planning and the execution modules, the IFMIS also contains accounting, general ledger, HRMS and payroll, procurement, and contract management modules. The consolidation of the IFMIS system will further improve public financial management by allowing the establishment of the Treasury Single Account, implementing interface with the debt management system, central bank systems, customs

24 These reports can be accessed at www.mofea.gov.gm under downloads, or directly for the 2014 reports (latest available) at http://www.mofea.gov.gm/index.php?option=com_content&view=article&id=33&Itemid=37.

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systems, and incorporating donor-funded projects into IFMIS (representing around 40 percent of Government expenditures per year).

46. The purpose of the IFMIS goes beyond the accounting IT tool, and could be more fully exploited by the Government. Both auditors and line ministries still need to fully absorb and implement the policy-making and service delivery characteristics of the system. There have been several workshops conducted by the MOFEA to collect feedback and provide information to the users on what the system can deliver.

3) Improved public financial management accountability through the appointment of five judges for the tax and customs tribunal, as required in the Income and Sales Tax Act and the Customs and Excise Tax Act.

Rating: Moderately Unsatisfactory

47. Faced with the decline in tax revenue collection rate, the Gambian Government was seeking ways to encourage tax compliance. With the establishment of the Tax Tribunal, the Gambian Government aimed to improve the credibility of the tax system by providing the appropriate channels for tax payers to object to their tax liability if they are not in agreement with the tax assessed and believe that the tax and penalty (in case of late payment) need to be reviewed. The Tax Tribunal was envisioned in the 2004 Income and Sales Tax Act and the 2010 Customs and Excise Tax Act, and the EGRG-I supported its operationalization.

48. Implementation experience and outcome targets: The institutionalization of the Tax Tribunal happened only in March 2012, eight years after it was the first envisioned in the legislative framework; it became operational with the appointment of five tribunal judges. The taxpayers can first object to a decision made by the Commissioner General to the Commissioner General. If, after review of the objection by the Commissioner General the taxpayer is still not satisfied with the outcome, it can then appeal to the Tax Tribunal. Further, the appeal can be made to the Court of Appeal. While there are several instances of appeal made available, until May 2015, the Tax Tribunal has reviewed no cases as no complaints were received so far. The authorities had attempted earlier to promote the new service to taxpayers (through billboards, radio announcements, pamphlets, etc.). The Gambian Revenue Authority also suggested that a diagnostic study could be conducted to investigate the possible reasons for the lack of cases being brought forward; no such investigation has been conducted so far. It will be critical to ensure taxpayers a full protection from unnecessary audits after complaints are submitted. Ensuring the Tax Tribunal professionalism and independence could help build trust in this service as a tax administration watchdog. Despite these challenges, the Government has succeeded in generating higher revenues through other measures (supported for instance by the VAT), and domestic tax and other revenues have increased from 16.4 percent of GDP in 2012 to an estimated 18.7 percent in 2014.

4) Enhanced effectiveness in public spending through the identification and interruption of payments by the MOFEA to civil servants not validated by the IFMIS payroll.

Rating: Satisfactory

49. The authorities made an effort to enhance the effectiveness of public spending on civil servants’ wages by ending payments to invalidated civil servants (ghost workers). This was planned to be done through better management and control of the payroll, in particular after the constant increase in the number of civil servants. The development of the payroll module within the IFMIS enabled this process. The EGRG-I supported the validation of the Human Resource records, maintained by the Personnel Management Office, with the IFMIS payroll module, maintained by the MOFEA. This allowed the regularization of these records, with the removal of ghost workers and the elimination of vacant positions. As a consequence of the validation exercise, the Government was able to save the expenditures tied to the ghost workers,

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50. Implementation experience and outcome targets: In April 2011, the Personnel Management Office (PMO) authorized the Treasury of the MOFEA to stop payments of salaries to all civil servants not validated in the IFMIS payroll. Out of close to 36,000 central Government employees (this includes the entire civil service, the army, the National Audit Office and the Judiciary) on the IFMIS payroll, by June 2015, 727 civil servants were removed from the payroll. Further efforts are being made to regularize HR records with the systematic validation of these records. While the PMO is officially in charge of managing HR records and has the authority to create new positions and close existing ones, payroll funding is provided through the MOFEA, which controls the wage bill. These links need to be automatic and need to be linked to the monthly payroll if they are to be up-to-date. The payroll module is already fully integrated with the financial module, so that all employees with the bank accounts are paid directly through the Central Bank Treasury account. Namely, for all Government employees, tax identification numbers need to be entered into the IFMIS if they are to be paid from the budget. Consequently, the number of civil servants registered in the payroll module of the IFMIS increased from 28,246 in 2012 to close to 36,000 by mid-2015. This payroll cleaning measure will be complemented by the capture of photos for all employees (and pensioners) on the IFMIS.

5) Strengthened internal audit institution through the approval of the MOFEA’s internal audit committee’s charter and the appointment of members of the internal audit committee.

Rating: Moderately Satisfactory

51. The internal audit function has been non-existent despite being legislated in 2006. The establishment of the function was a requirement embodied in the 2004 Gambia Budget Management and Accountability Act, while in 2006 the legal mandate for the internal audit function was approved. The benefits of internal audits include establishing the effectiveness and efficiency of the Government’s budget operations, the reliability of financial reporting, and compliance with the relevant laws and regulations, and where needed identifying lapses and areas of improvement. The establishment of an improved accounting environment and the financial reporting availability supported by the IFMIS enabled the effective internal audit function establishment. The internal audit function has been re-established at the MOFEA with the appointment of a Director for Internal Audit (the function has been elevated from a Unit to a Department) in 2011.

52. Implementation experience and outcome targets: The full operationalization of the internal audit function was done through (i) the appointment of the Internal Audit Committee members in March 2012 by MOFEA, and (ii) the approval of the Internal Audit Committee Charter in April 2012. Since March 2012, 57 internal audit reports were produced, of which 31 produced in 2014. Senior management reviews the audit reports from the PFM Department and then liaise with the relevant authorities (usually the Accountant General’s Department-AGD) for necessary actions. If it appears that there is blatant corruption or fraud the AGD forwards the report to the Police for action. There has been also a positive shift from pre-payment auditing to risk-based auditing, concentrating on systemic issues, which received renewed attention with the roll-out of IFMIS and the establishment of an improved accounting environment. Further efforts are needed to broaden the audit focus on conformity of budgetary spending with the Government’s strategy; effectiveness and efficiency of operations; reliability of financial reporting; and compliance with applicable laws and regulations.

6) Strengthened budget management through the establishment of a system of real time reconciliation and clearance of accounts between the MOFEA and the Central Bank through an IFMIS interface.

Rating: Moderately Satisfactory

53. With improved cash balances information, the forecast horizon of liquidity planning can be extended, which enables more efficient cash and debt management. This on the other hand leads to greater predictability of Government financing needs, including through the preannounced T-bill auction

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calendar, helping to lower interest rates and bringing greater stability to the local money market. A real time reconciliation and clearance of accounts between the MOFEA and the CBG, that manages the Treasury account, contributes toward increasing predictability in public borrowing by providing the real-time information on cash balances in Government accounts at the CBG.

54. Implementation experience and outcome targets: The IFMIS interface at the CBG was established on December 7, 2011. The MOFEA is now able to access Government accounts at CBG online, and to download these bank account statements so that they can be uploaded onto the IFMIS. The end-users of this interface were identified and the system is fully operational, providing access to real-time information on budget shortfalls and on the timing of needed public domestic borrowing. The MOFEA can also carry out automated bank reconciliation. This was important because the high cost of servicing the domestic public debt resulted both from high levels of borrowing and from the lack of predictability in the Government’s demand on financing resources. With this real-time reconciliation of bank accounts the benefits of introducing a Treasury Single Account (TSA) could begin to be reaped, as Government borrowings gets informed by Government cash balances, excluding for those earmarked resources related to donor-funded operations. However, the Government has not introduced a TSA, and the potential savings that might be generated by improved management of idle balances through a TSA, for example, are not being generated. Further, while capacity for improved budget management has been enhanced with the upgrade of the IFMIS, the Government’s management of fiscal accounts has deteriorated, if measured by budget outcomes and the extent to which they have deteriorated since the EGRG-I was approved and by the extent to which they have diverged from the programmed budgets.

Policy Area 2: Strengthening Energy Sector Management

7) Public sector energy arrears to the NAWEC reduced by Government providing an amount of GMD228.6 million by March 31, 2012.

Rating: Unsatisfactory

55. Another key concern related to public resource management is the public utility, National Water and Electricity Company, and its strained finances and associated contingent liabilities. The sector was also seen as a major bottleneck for economic growth and the business environment. The power sector of The Gambia requires significant investments to upgrade and expand the country’s generation, transmission, and distribution capacity. However, over the last three years, there were no important investments in the network or generation capacity. At the same time, the sector faced significant operational deficiencies, due to ageing infrastructure, commercial losses and low tariffs. The transmission and distribution systems suffered losses of around 27 percent (technical and commercial) which was high compared to the neighboring African countries. However, public sector energy arrears contributed to the dire situation of the National Water and Electricity Company (NAWEC), the energy sector monopoly25.The public sector energy arrears amounted to over half of all energy arrears which got accumulated to the point of placing the company close to bankruptcy and preventing its ability to carry out needed maintenance and investment. The EGRG-I aimed to support the reduction of central Government stock of arrears towards NAWEC that would be complemented by additional actions that would prevent a further accumulation of arrears, like payment of utility bills automatically deducted from budget transfers to ministries, departments and agencies and introducing of pre-paid meters in these offices. This effort to reduce the stock problem of the arrears was to be complemented by the agreed upon prior action for the successor EGRG-II of a tariff rate hike for the utility to improve cost recovery that would address the flow problem.

56. Implementation experience and outcome targets: The authorities adopted the executive order number OP268/318/01/XXV, on November 9, 2011 that required clearance of public sector energy arrears to NAWEC. By March 2012, the MOFEA had reduced the energy arrears to NAWEC down to GMD28. 4

25 NAWEC is a state-owned enterprise overseen by the Ministry of Energy and covers water, electricity and sewerage services.

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million from its peak of GMD257 million in 2009. However, the arrears grew again in 2013 to GMD71.1 million and further to GMD157.6 million by February 2015, suggesting lack of preventive actions being taken to stop the reoccurrence of energy arrears in the public sector. For example, while automatic budget deduction for utility bills and the pre-paid meters have been installed in some public premises to control consumption, they have not been put in place in hospitals, the social security administration, and for street lightning. The arrears are sizeable, and as a share of GDP, for example, arrears increased from 0.1 percent in 2012, to 0.2 percent in 2013 and to 0.4 percent of projected GDP in 2015. In June 2015, the Government arrears were offset against NAWEC’s 2014 tax arrears; however, the final reconciled arrears balances were not available in September 2015. Therefore, while on the one hand, the prior action was taken and the result of the reduction in arrears by 2012 was accomplished (a satisfactory result), the action was a one-off measure that did not lead to a sustainable results (an unsatisfactory design). Further, the subsequent utility tariff rate hikes that were achieved as prior actions under EGRG-II (with rate increases introduced in August 2013 and January 2015) to support sustainability of the EGRG-I action were insufficient in the face of the emergence of far greater than anticipated arrears given the payment problems incurred by public sector entities.

57. NAWEC still faces serious financial issues—it faced possible bankruptcy in 2014, when the Government took over their debt servicing requirements equivalent to about 2.5 percent of GDP—and there is a need to improve its financial viability and operational performance. The largest public sector arrears to NAWEC since 2013 are coming from the Gambia Telecommunications Company (GAMTEL) and the Gambia Radio and Television Services, both public sector agencies, calling for a stronger state-owned companies’ governance framework. Aging infrastructure and commercial losses, due to failure of consumers to pay bills is still present. The subsequent operation (now suspended), EGRG-II aimed to mitigate the exposure to fuel price volatility (that accounts for 80 percent of its expenditures) by providing for more regular tariff adjustments and lowering the cost of imported fuel. To that extent, electricity tariffs were increased by 12 percent in 2014, as recommended by the 2013 and 2014 reviews, respectively, of the tariff by the national regulator Public Utilities Regulatory Agency. However, the improvement of NAWEC’s finances should also come from a general improvement of company performance and assets efficiency, and not only rely on tariff rate hikes. NAWEC faces important technical challenges that need to be addressed: (i) insufficient and inefficient generation (which is translated into extremely expensive generation costs); (ii) high transmission and commercial losses (translated into a decrease in incomes); and (iii) deficient commercial organization (partially due to the issue of joint accounting with water and sewerage, and reflected on the general lack of visibility about customer payments and high failure payment from big consumers).

Policy Area 3: Promoting Private Sector Participation in the Telecommunications Sector

8) Adopting a strategy to enhance private participation in its telecommunication sector, through the issuance of a license to the Gambia Submarine Cable Company (GSCC) in order to improve the quality of the telecommunications infrastructure.

Rating: Moderately Satisfactory

58. At the time of the EGRG-I, the Gambia telecommunication market faced limited competition, and was offering inadequate services at higher prices to beneficiaries. The industry had a fixed network operator monopoly, GAMTEL, and a vibrant mobile market with four operators. However, the international connectivity was inadequate as it was dependent on the Senegal fiber bandwidth leading to high Internet access prices and the low quality of service. At the same time, the new submarine cable—the Africa Coast to Europe (ACE)26 opened the potential for accessing the international network at more competitive terms.

26 The ACE is a 14,000 km sub-marine cable system that connects South Africa to Europe with a landing stations set down the Western coast of Africa, including The Gambia.

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The EGRG-I aimed to support the new strategy for the telecommunication sector geared to enhance private participation in service delivery.

59. Implementation experience and outcome targets: In March 2012, the Ministry of Information and Communications Infrastructure (MOICI) issued a license to the Gambia Submarine Cable Company Limited (GSCC) owned by multiple stakeholders, including the Government (through MOFEA), that would share the country’s allocated capacity in the ACE system. The operationalization of the GSCC aimed to reap the benefits of the Government investment (supported through the IDA’s West Africa Regional Communications Infrastructure Program-WARCIP) in establishing the link with the submarine cable ACE by allowing the access to the international gateway to be exploited by multiple competing operators. This would then support removing opportunities for monopolistic and discriminatory behavior. By May 2013, there were two internet service providers and three mobile operators connected to the Gambia Submarine Cable (GSC). Prior to the issuance of licenses, Gamtel had a monopoly over the data and voice gateways, constraining operators to originate and terminate international data/voice traffic through Gamtel’s gateway. The market grew further and by June 2014, there were four GSM mobile operators and five Internet Service Providers.

60. Although progress has been made, more needs to be done to move away from monopolistic behavior and towards a level-playing field. While there is a strong demand for mobile service with penetration rate over hundred percent, the access to Internet services is still low – 14 subscribers per 100 people. There are still complaints of poor service for VoIP and access to certain websites. The system still suffers from the need to eliminate the international voice termination fees that are well above the regional average. There is a need to allow the mobile operators to independently negotiate terms with telecom companies outside The Gambia. Gamtel still has a monopoly over the international voice gateway. Further, the GSCC needs to ensure financial viability and sustainability of its operations. The subsequent EGRG-II (for which processing has been suspended) supported the liberalization of the international data (liberalized in March 2013) gateway through issuing licenses to the private operators and service providers to allow for competition in the international segment of the telecommunications market.

Policy Area 4: Enhancing Education Sector Management

9) Enhancing accountability in education services through the execution of service-level agreements between the Ministry of Basic and Secondary Education and regional directives and primary and secondary schools head-teachers to improve the overall performance of students.

Rating: Moderately Satisfactory

61. Gambia has witnessed a significant expansion in school enrollment rates over the past decade that has not been matched by improvements in student performance. While the rise in enrollment rates was followed by continuously high primary completion rates and a low average repetition rate27, inequities and disparities existed when disaggregating this data by income and region. Also, student score performance in assessment tests did not improve at the same pace. In the National Assessment Test, for instance, very few students reached the minimum requirement, with the particularly worrying success rate for Grade 3 English, at 19.5 percent, and Grade 5 Math and Sciences, with an average success rate of just 20 percent.28 The results at upper basic and senior secondary levels were scarcely better, having barely improved since 2002. These poor results would amplify at the higher grades where results would be

27 Gross enrollment rate at lower basic school increased from 70 percent in 2005 to 97 percent in 2014, while the completion rate grew from 65 to 76 percent over the same period. 28 A percent of students who received more than 70 percent score (considered a Mastery score) was 14.5 percent in G3 English and 17.9 percent in G3 math.

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dismal29. The EGRG-I aimed to support improvement in the incentives for delivery of higher quality education service to students. This prior action has been reinforced going forward through the Results for Education Achievement and Development Project (READ).

62. Implementation experience and outcome targets: The challenge for the education system in The Gambia was to raise the quality of teaching and thus improve the student’s scores in the national assessment tests. To meet this first challenge the Government has signed Service Level Agreements (SLAs) between the Ministry of Basic and Secondary Education (MOBSE), its regional directorates, and the head-teachers of the public basic and secondary schools. The SLAs with the regional directorates were first signed in 2009-10 and were extended thereafter. As evidenced by letter dated April 18, 2012 the MOBSE confirmed that the SLAs were signed on November 29, 2011 with 6 Regional Directors and 498 school head-teachers of public basic and secondary schools. The SLAs are defining the strategic medium-term plan for the regional directors and the MOBSE staff, while they define the annual work plan and expected results for the school-level staff. These SLAs have enabled monitoring of the education staff performance as they defined a new level of accountability and service delivery in public basic and secondary education through monitoring teacher attendance and curriculum program. The SLAs are being reviewed every quarter providing feedback on the teaching outputs. The implementation of SLAs was expected to lead to higher scores in the National Assessment Tests (NATs).

63. The new accountability system for delivery of public education led to improvements in the teaching quality as evidenced by NAT scores. NAT scores for 3rd grade English and Math improved to 45.7 and 47.2 percent in 2013, respectively, from 20 and 18 percent in 2008. However, it should be noted that the test items in the NAT are not necessarily comparable over time and therefore it cannot be fully confirmed that student learning indeed improved.30 Nevertheless, the new system involved a cultural change, and challenged long entrenched ways of doing things. The above notwithstanding, there is a question to what extent this would be a long lasting incentive system given the teachers’ payroll setting has not been informed by their performance based on the SLAs, but the payroll is decided by the Public Service Commission that does not look at the delivery of the SLAs.31 Further, there are also issues with how the NATs are being undertaken and monitored. The anecdotal evidence suggests that low performing students are not being subjected to NATs, therefore leading to biased NAT results.

64. Going forward, the sector agenda is focused on improving completion rates and quality of teaching along while reducing disparities in rural areas. Gambian households mad considerable contributions to the education of their children, covering 46 percent of education costs at the lower basic level back in 2009, for example. Informal school fees at public schools contributed to these costs, and the EGRG-II supported their elimination in basic education at public schools. Under the IDA-supported Results for Education Achievement and Development (READ) Project, student per capita school grants are being provided instead for all public upper basic schools in demoted areas.

3.3 Justification of Overall Outcome Rating (Combining Relevance, Achievement of PDOs)

Rating: Moderately Unsatisfactory

65. Based on the relevance, impact of the policies supported by the EGRG-I and an analysis of the outcome indicators, the performance of the EGRG-I operation is rated moderately unsatisfactory. The objectives of the EGRG-I were and remain highly relevant to the country’s

29 At the GABECE assessment test (the Grade 9 exam for senior secondary admission), 76 percent of candidates failed to obtain a credit in any of the four core subjects, and only 4 percent achieved a credit in all 4. Results were the poorest in math, with only 7 percent of candidates obtaining the credit. 30 MOBSE will apply the same test items in the 2016 NAT as in the 2012 NAT to have a comparable data for student performance. 31 The IDA-supported Third Education Project Phase II was providing awards of team performance bonuses to those teachers having fulfilled their annual work plan commitments.

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development needs and fit squarely into the Government’s strategic document (the PAGE). Based on the discussion in Section 3.2, out of the nine policy actions included in the EGRG-I, the outcomes of five are rated moderately satisfactory (MS), the outcome of one satisfactory, the outcome of two prior actions moderately unsatisfactory and the reduction in public sector arrears to NAWEC is rated unsatisfactory. One of the reform measures in terms of its substance supported by EGRG-I has been reversed (arrears reduction to NAWEC), while the institutional framework in each of the reform area is much stronger as a result of the operation.

66. Overall, because of the policies supported by the EGRG-I, the Government has better tools for control over the expenditure policy, through the IFMIS reports, improved cash management, introduction of the payroll system to control the staffing, internal and national audit reports. These policies and those implemented under the follow up EGRG-II, constitute important improvements of the institutional framework that would result in savings over medium term. Similarly, through the interventions in the education sector and the telecommunications, there were important policy changes that would lead to lasting improvements of the business environment and would support the private sector growth once the economy recovers from the double-dip recession.

67. The progress on the outcome indicators set in EGRG-I was adequate. Out of nine outcome indicators set in the operation, the outcomes of two did not meet the numerical targets set in the Program Document. Of these two, outcomes have initially moved in the right direction, but have either stayed the same or worsened (Table ). However, as also discussed in Section 2.2 and 2.3, the progress on outcome indicators did not necessarily adequately capture the underlying reform effort by the Government.

Table 5. Summary of Ratings and Outcome Indicators

Policy area - outcome indicators Rating1/ 2011 Baseline

Original target values 2012

Actual values Achieved at Completion

Policy area 1 - Improve transparency and accountability in Public Financial Management

1. NAO audits the Government financial statements

MU

NAO audits for 2008, 2009 and

2010 not available.

NAO audits for 2008, 2009, 2010

and 2011 submitted to the National Audit

Office.

2012 and 2013 audited by NAO in mid-2015,

but not yet submitted to the National Assembly (expected in September

2015). 2. Monthly IFMIS reports published on the website of the Ministry of Finance and Economic Affairs.

MS

IFMIS reports became available on the MoFEA

website in December 2011.

IFMIS reports regularly available to the public on the

website of the MoFEA.

IFMIS reports posted on the public website of the MoFEA irregularly with sometimes long

delays.

3. Tax Tribunal cases reviewed. MU

Tax Tribunal has not reviewed any

cases

Number of cases reviewed by the

Tax Tribunal

No cases have been reviewed as no

complaints were submitted.

4. Number of civil servants removed from the payroll.

S Number of civil servants

Number of civil servants removed from the payroll

727 civil servants removed from the

payroll to date. Further validation is in place

for people passed away.5. The number of audit reports approved by the Internal Audit Committee.

MSInternal Audit Committee not yet operational

Number of internal audit reports completed

8 internal audit were completed in 2012, 18

in 2013 and 31 in 2014.

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6. Weekly IFMIS budget reports generated at the IFMIS/CBG interface.

MSNo reports currently available.

12 Monthly reports generated in 2012

Regular real-time reconciliation and

clearance of accounts in place.

Policy area 2 - Strengthen Energy Sector Management

7. Reduction in the arrears of the central Government to the National Water and Electricity Company (NAWEC).

U

CentralGovernment

arrears to NAWEC

estimated at D54 million at end

2011.

Reduced central Government

arrears to NAWEC in 2012.

The arrears reduced to D28.4 million in 2012, but further increased to D71 million in 2013.

Arrears continued growing thereafter. Metering in some

public buildings has been introduced.

Policy area 3 - Promote Private Sector Participation in the Telecommunication Sector

8. Connections to the Gambia Submarine Cable

MS

No connections to the Gambia

Submarine Cable yet available.

Number of connections to the Gambia Submarine

Cable.

Two internet service providers and three mobile operators are

connected to the GSC. Policy area 4 - Enhance Education Sector Management

9. National Assessment Test (NAT) scores.

MS

NAT scores in 2008 for 3rd grade

English=20percent and 3rd

gradeMathematics=18

percent

NAT scores for 3rd

grade English and 3rd grade

Mathematics improved

NAT scores for 3rd

grade English and Math improved to 45.7 percent and 47.2 percent in 2013,

respectively.

Source: Bank staff estimates 1/ MU: Moderately unsatisfactory, MS: Moderately satisfactory, S: Satisfactory

3.4 Overreaching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above):

a) Poverty Impacts, Gender Aspects, and Social Development

68. It is unclear whether the EGRG-I reform measures have had positive poverty and social impacts, as expected at the appraisal, but the sharp deterioration in public finances and weak growth outturns point to a reversal, compounded by the two challenging exogenous shocks in 2014. The strengthening of public financial management improved the Government’ capacity to monitor, compile and report on fiscal accounts in a more timely manner to support more effective management of its resources and improve delivery public services over the medium term. Notwithstanding, Government finances deteriorated markedly since 2012, and the deterioration in policy management led to a loss in investor confidence, and Government borrowing interest rates have increased markedly from an average of 10.4 percent in 2012 to 17.1 percent in 2013, and higher in the interim32. Aside from absorbing fiscal buffers (through a higher interest burden), the higher prevailing interest rates have led to crowding out, evidenced by an 8 percent contraction in the growth of credit to the private sector of in 2014. With respect to sectoral policies, the strengthening of the resource management in the energy and education sectors through improvement in NAWEC’s financial position that would enable investments at reducing current system losses and at improving service delivery, as well as through providing accountability mechanisms for

32 Interest rates for one-year treasuries, the longest-dated issuance, have averaged about 20 percent in the first half of 2015.

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upgrading teaching quality, would improve the service delivery over the medium term. This proved temporary, as NAWEC’s financial position deteriorated substantially in the interim. By broadening access to the region telecommunication network to the private sector, the quality of services improved, although still not up to the expectations, while the cost of telecommunication services dropped. Overall, GDP growth has disappointed, and annual per capita income is estimated to have declined from US$407 in 2012 to US$268 in 2014 in constant prices (based on preliminary Government figures).

b) Institutional Change/Strengthening (particularly with reference to impacts on longer term capacity and institutional development)

69. Almost all the policy areas supported in the EGRG-I involved institutional strengthening.These include: the implementation of IFMIS, real-time balance reconciliation with the central bank, and the payroll module; strengthening NAO’s proactivity as well as Internal Audit institutional capacity to act as fiscal watchdogs, implementation of a new accountability system in the education sector, as well as licensing the access to the international gateway allowing entry to multiple competing operators.

c) Other Unintended Outcomes and Impacts (positive and negative):

NA

3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, Required for ILI, details in annex:

NA

4. Assessment of Risks to Development Outcome Rating: High

70. At appraisal, development outcomes were subject to four risks. In the aggregate, these risks were high. As identified in the PD, the first risk pertained to the Government’s limited institutional capacity to implement the reform agenda. In retrospect, the Government received support for capacity building through various complementary IDA projects as well as other donor projects, including projects supported by the AfDB, EC, IFAD, IMF, UNDP and the WFP. The main impact of this risk—aside notably from the aspects of institutional determination of the macroeconomic policy framework—was not so much tied to a reversal of policy reforms (except with the arrears to NAWEC) or a change in the “content” of the reform agenda, but on speed with which these policies were implemented. As a result of these delays, the series lapsed, and processing of the stand-alone EGRG-II has been repeatedly delayed, and indeed was suspended due to an inadequate macro-policy framework in May 2015.

71. With respect to macroeconomic risks, the risk was and remains high. Under the EGRG-I, in the post-election period, the Government had carried out prudent measures in response to external shock, through the support of the EGRG-I, IMF EFC and other IFI support, and was able to stabilize public finances in the post-crisis scenario. However, this was short-lived and the country was unable to conclude the Second Review of the EFC that was officially declared off-track in September 2014, and despite subsequently securing the RCF and agreeing to an SMP in May 2015, the country is now at risk of balance of payments crisis. While the Government continues to maintain a dialogue with the development partners on appropriate policy responses, and possibly securing concessional external aid in the form of grants through the proposed operations by AfDB and IDA, macroeconomic policy mismanagement remains an impediment to moving forward with them.

72. The risk of the country’s weak governance was substantial and is deemed to have deteriorated to high. Policy efforts supported by the EGRG-I mitigated to a certain extent this risk. The continued engagement of the AfDB and IDA in supporting the PAGE implementation via structural reform and investment support ensured the continuity and a commitment to reforms at the technical levels. At the political level, however, the commitment was less clear and credible, and the Government’s implementation

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of reforms has been slow and halting, and in particular tied to the fiscal and monetary policy framework has deteriorated substantially since EGRG-I was approved by the Board.

73. Difficulties in sustaining reforms in energy and telecommunications sector, and in introducing agreed upon reforms in the agriculture sector, proved to be high, and despite continued engagement by the AfDB and IDA. The progress in these sectors is uneven—faster for telecommunications, slower for energy, and particularly for agriculture that was back-loaded into EGRG-II—and has been further hampered by the distressed economic environment, for both the energy and agricultural sectors. However, there is a follow-up support through the complementary investment and structural reform operations that facilitates the continuity of the reform efforts and preserves commitment to address the structural bottlenecks.

5. Assessment of Bank and Borrower Performance 5.1 Bank Performance

a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase)

Rating: Moderately unsatisfactory

74. The EGRG-I program was: (i) aligned with Government’s reform program and the PAGE Policy Matrix; (ii) consistent with the higher-level objectives of the JAS; and (iii) focused on key reform areas (see section 2.2 and 2.3 factors affecting implementation and monitoring).

75. Strong efforts were made by the Bank team to design a robust program, based on considerable analytical work. The EGRG-I team also worked closely and complemented the efforts with the investment project teams and was selecting complementary prior actions supported also through the investment operations. However, the Program Document could have been made clearer in terms of consistent wording of PDOs, policy pillars as well as outcome indicators across the document, and as indicated above, some of the results indicators could have been better defined to more accurately measure outcomes rather than outputs.

76. The Bank team was comprised of staff with the appropriate skills mix. It held regular missions (four DPO missions and several missions on relevant supporting investment projects), and was responsive to the Government’s needs. In addition to the strong policy dialogue maintained with the Government, the Bank participated in joint reviews with the AfDB. Additionally, the Bank’s team conducted ten missions for EGRG-I supervision and EGRG-II preparation, after the Board approval of EGRG-I on May 31, 2012. The missions for the EGRG series included joint missions with the AfDB, and participation in discussions with the authorities and the IMF for the Article IV, ECF and SMP review missions. The list of the EGRG missions and delivery of Aide Memoires (AM) and Action Plans are presented in Table 6. Supporting the dialogue with the Government and macro-policy monitoring, the team also attended the IMF’s Board meetings for the First Review of the ECF in May 2013 and for the RCF and SMP in April 2015, as well as the IMF’s annual and spring meeting discussions with the Government in 2013 and 2014.

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Table 6. EGRG-I Supervision Missions and EGRG-II Preparation Missions

77. In addition to these ten EGRG missions, the team also conducted other related IFMIS- missions during this period for the preparation, Board delivery, and supervision of the IFMIS Additional Financing (IFMIS AF) investment project. The findings and next steps for the IFMIS missions were sometimes combined with those in the AMs for the EGRG and macro-monitoring missions (noted above) and sometimes prepared as stand-alone AMs. The team also led a join IFI Statistical Capacity Building Mission (with the AfDB, IFAD, IMF and UN) to support improved national account statistical reporting, given the urgent need to improve timeliness and reliability of national account data to in turn facilitate improved capacity for macro-policy management and responsiveness to emergent shocks. This was also aimed at improving the sequencing of donor support projects and to reduce redundant efforts. The IFMIS and Statistical Capacity Building missions are listed in Table 7, along with information on the AMs.

Table 7. Related missions for IFMIS AF Preparation and Supervision and IFI Coordination on Statistical Capacity Development

78. However, the design seemed to be too optimistic about the government’s future fiscal management and policy framework, given previous policy slippages. For example, there had been marked policy slippages ahead of the elections in 2011 and 2012, during which time the fiscal position had deteriorated significantly and distortionary exchange rate controls had been introduced, which had temporarily resulted in delays in processing of EGRG-I. In retrospect, the anticipated timing of the EGRG-II proved optimistic as well, and the macroeconomic policy framework repeatedly faltered, was periodically deemed inadequate for the operation to proceed, and ultimately, in May 2015 processing of EGRG-II was suspended. Further, the design of the operation apparently made overly optimistic assumptions about the Government’s capacity to deliver on such a wide range of reforms, and to maintain achievement of reforms

Mission Dates Mission Lead AM and Action Plan25 August – 21 September, 2012 Sr. Country Economist n.a.

9 October - 20 October 2012 Sr. Country Economist n.a.3 March – 20 March 2013 Sr. Country Economist X28 April – 10 May 2013 Sr. Country Economist X

16 October – 31 October 2013 Sr. Country Economist X2 February – 12 February 2014 Sr. Country Economist X

9 June – 18 June 2014 Sr. Country Economist X8 September – 21 September 2014 Sr. Country Economist X

December 2014 Lead Economist n.a.1 June – 22 June 2015 Sr. Country Economist X

Mission Dates Mission Lead AM and Action Plan

A. IFMIS22 - September - 26 September, 2014 Sr. Country Economist X

2 June - 8 June, 2014 Sr. Country Economist X2 February – 12 February 2014 Sr. Country Economist combined with EGRG AM

December, 2013 Sr. Country Economist X16 October - 31 October, 2013 Sr. Country Economist combined with EGRG AM

28 April – 10 May 2013 Sr. Country Economist combined with EGRG AM3 March – 20 March 2013 Sr. Country Economist combined with EGRG AM

B. Joint IFI Statistical Capacity Development 24 October - 25 October 2013 Sr. Country Economist X

30

in some instances, as evidenced by later delays in delivery of audit reports and in regular posting of the IFMIS reports. Also on the design, some of the results indicators measured outputs more than outcomes.

b) Quality of Supervision

Rating: Moderately satisfactory

79. Since the EGRG-I was considered the first of two grants in a programmatic series, the supervision of the operation was to be conducted with the preparation of EGRG-II. Since the EGRG-I operation was based on prior actions, which were implemented before it was approved by the Board of Directors, much of the subsequent supervision should consist of tracking the progress of the reform program ensuring that there was no backtracking and tracking progress in achieving the outcome indicators. Since the EGRG-I was approved, no Implementation Status Reports (ISRs) were prepared—nor were ISRs required, as the project closed a year later in May 2013, before the series lapsed in May 2014. Information on the implementation of EGRG-I reforms and some outcome indicators from the EGRG-I policy matrix were collected during the supervision missions and preparation missions of the EGRG-II (Table 6, above). Additionally, the continuity on the Bank side after the EGRG-I Board approval was disrupted with a change in the task leadership in July 2012, as well as team members and across the complementary investment portfolio in agriculture, IFMIS, energy, telecommunications and education. Although the new team came on board in July 2012, and capably continued with the supervision and the preparation of the new operation, continuity in the case of the programmatic series in The Gambia might have helped to keep the operation within the initially perceived timeline. However, deterioration in the macroeconomic policy framework that became apparent already in late-2012, and deepened markedly in 2013, 2014, and further again in 2015, posed particularly challenging circumstances and also became a factor in the team’s sectoral engagements.

c) Justification of Rating for Overall Bank Performance

Rating: Moderately Unsatisfactory

80. On the basis of ratings for the quality at entry and quality of supervision, the overall Bank performance is rated moderately unsatisfactory.

5.2 Borrower Performance

(a) Government Performance: Rating: Unsatisfactory

81. As discussed in Section 1, the Government struggled to maintain the momentum for reform implementation in the face of a declining economy, given the severe Sahelian drought and an intensive election period in 2011, and subsequent exogenous shocks in 2014. It was able to implement a substantial portion of the prior actions for EGRG-I only in early 2012, a year after the concept for the EGRG-I was approved. It was decided to shift the agricultural sector related reforms into what was originally intended as the second and final operation in the series. In terms of follow-up actions, there were no significant changes in the content of reforms, but there were delays in implementing difficult reform policies, such as in the agricultural and energy sectors, in the face of governance challenges and economic shocks, and policy decisions that contributed to an unsustainable macroeconomic framework. This is most evident in the authorities’ reversals in the macroeconomic policy framework, as reflected in the repeated and ad hoc monetary policy shifts, and repeated and substantial slippages in fiscal consolidation efforts. While the Ebola outbreak in neighboring countries in 2014 and the poor harvest for the 2014/2015 crop year presented significant challenges, the macro-policy reversals also contributed to substantial deterioration in Government finances and generated financial and economic distortions that hampered economic activity (most clearly apparent through the rise in public sector, and correspondingly private sector, borrowing interest rates). For these reasons, the overall borrower performance is rated unsatisfactory.

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(b) Implementing Agency Performance: Rating: Moderately Satisfactory

82. The MOFEA assumed overall responsibility for coordinating the implementation, monitoring and evaluation of the Policy Matrix. MOFEA was also ultimately responsible for reporting on progress with the EGRG-series, and for coordinating actions among other concerned ministries and agencies. It also ensured that the broader consultation with stakeholders took place, and facilitated this engagement. In particular, the MOFEA was very responsive and supportive of the engagement across the stakeholders with the Bank’s teams and other IFIs, which also facilitated monitoring. Data availability and quality for monitoring and reporting progress toward the PDO’s and results indicators was adequate, although provided on occasion with some delay.

(c) Justification of Rating for Overall Borrower Performance: Rating: Moderately Unsatisfactory

83. On the basis of ratings for the Government and Implementing Agency performance, the overall Borrower performance is rated moderately unsatisfactory.

6. Lessons Learned

84. The EGRG-I operation confirmed general good practice lessons, such as to: work closely with the Government, build on the Government’s program, have strong analytical foundation, work closely with sector specialists and focus on a few achievable objectives that have the greatest impact (See Sections 2.2 and 2.3 on the factors affecting implementation and monitoring). The operation reflected the key lessons of Bank experience during the previous JAS period (FY08-12)33. There are, however, several lessons that could guide IDA’s future programmatic lending operations in The Gambia.

Embarking on a programmatic two-grant series in an uncertain macroeconomic and political environment with weak governance poses high risks. As discussed in Section 2.3, macroeconomic and governance risks led to the lapsing of the EGRG series two years after the approval of the first operation. The PD for EGRG-I had indeed highlighted these risks. The coordination with the AfDB on their budget support operation was intended to support mitigation of such risks, aside from the support of the complementary IDA investment projects. The discussions with the Government officials indicate that the Government saw the real value of the EGRG-I operation in supporting the policy design and implementation efforts, in addition to the financing that came with it. Similarly, they valued the complementary IDA investment projects and AfDB budget support operations. In retrospect, the “lesson” from the experience with the EGRG series is not to abandon the two-series route, but to be aware of the high risks associated with an uncertain macroeconomic and political environment, and to be prepared to change course if necessary, as was done with this series with the decisions to delay processing of EGRG-II.

To better mitigate against risks presented by uncertain macroeconomic conditions and weak governance, greater focus should be placed on guiding and supporting an appropriate macro policy mix—and in particular on requiring that the Government demonstrate their commitment to macro-policy reforms at the highest levels. As a small open economy, The Gambia remains highly vulnerable to external shocks, given its relatively undiversified economic base and the vulnerability to natural disasters and climate change. With its rapidly growing public debt and depleted economic buffers, the economy has become much more vulnerable to shocks than when EGRG-I was approved. The country is under high risk of debt distress, despite multiple efforts invested into strengthening public financial management and governance thereof. Therefore, the policy mix in possible future development policy grants should be focused on lasting policy

33 See World Bank JAS FY08-12 Progress Report.

32

management efforts to ensure a sustainable fiscal policy and an independent and prudent monetary policy, and to this end, greater emphasis should be placed on policy makers at the highest levels demontrating upfront their commitment to such reforms.

Focus on policy areas and reform measures where there is ongoing policy dialogue and where there is a clear strategy. The EGRG-I supported actions that maximized the synergies with the Bank’s investment portfolio in telecommunications, education, IFMIS. It was much less successful with the energy sector actions, which at the time of the Board’s approval of EGRG-I did not have a complementary IDA investment project, in part reflecting longstanding governance issues that have persisted. In the interim, efforts to support the sector have progressed in subsequent years, but significant challenges remain. This is important, as the EGRG-I focused on institutional reforms, where progress on capacity building requires a long-term engagement and sustained political commitment.

Stability in the composition of Government teams can facilitate timely implementation of project activities and the achievement of project development objectives. Capacity building and economic adjustment efforts tend to succeed when key performing civil servants are retained in position for a reasonable period of time, and when there is institutional stability to facilitate reform implementation. The Gambian civil service, particularly at the more senior levels, has been beset by a very high turnover of staff and by frequent organizational reforms that have weakened development progress and the sustainability of achieved reforms. A positive example is education, where senior management within the Government has remained relatively intact for many years, which likely contributed to more robust outcomes than in other areas. Given the frequent shifts in staffing in the Government, enlisting buy-in from more senior level Government officials might support stronger reform outturns.

The design of outcome indicators need to adequately capture the policy efforts and the “reach” of the reforms supported by the operation. Setting properly formulated output indicators is critical in assessing the efficacy of an operation, and using quantitative targets that measure outputs instead of desired outcomes cloud the performance. For example, while the results indicator for the first policy area, to support enhanced transparency and accountability in public financial management, was supported with the achievement of real time reconciliation and clearance of accounts between MOFEA and the Central Bank, the desired outcome of strengthened budget management was clearly not (as reflected in the deterioration of the fiscal position and sharp increase in public debt). This is an important lesson for all Bank’s operations in The Gambia, not only this budget operation.

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

b) Cofinanciers: None.

c) Other partners and Stakeholders (e.g. NGOs/private sector/civil society):

33

Annex 1. Bank Lending and Implementation Support/Supervision Processes

Task Team members

Names Title Unit Responsibility/Specialty

Carlos B. Cavalcanti Team Leader, Sr Country Economist AFTP4Bouthenia Guermazi Sr Regulatory Specialist TWIT

Ismaila Ceesay Lead Financial Sector Specialist GGODR

FinancialManagement, Managing Public Finances,InstitutionalReform

Mudassar Imran Sr Energy Economist, Consultant EDS22

Jean-Philippe Tre Sr Agricultural Economist GFADR Agriculture and Food Security

Sidy Diop Sr Procurement Specialist GGODR InternationalProcurement

Wolfgang Chadab Sr Finance Officer CTRRF Daniela Junquiera Counsel LEGAM Badara Alieu Joof Liaison Officer, Education Specialist GEDDR Judite Fernandes Team Assistant GMFDR

Elianne Tchapda Team Assistant ITSID Knowledge and Learning

Yassin Saine Njie Program Assistant AFMGM

Staff Time and Cost

StageStaff Time and Cost (Bank Budget Only)

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

Lending/SupervisionEGRG-I 35.5 233,679.5

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Annex 2. Borrower’s ICR

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35

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Annex 3. List of Supporting Documents, and Persons Interviewed

Documents

Central Bank of the Gambia (2013), Annual Report 2013

Central Bank of the Gambia (2013), Monetary Policy Committee – Press Release, December 2013

Central Bank of the Gambia (2015), Monetary Policy Committee – Press Release, February 24, 2015

Gambia National Account Statistics, Annual Bulletin 2012

IDA (2012), Program Document, The Republic Of The Gambia: First Economic Governance Reform Grant, May 2012

IDA (2013), Project Paper, The Republic Of The Gambia: Integrated Financial Management and Information System Project, Additional Financing, August 2013

IDA (2015), Program Document, The Republic Of The Gambia: Proposed Second Economic Governance Reform Grant, April 2015

IMF (2013), The Gambia, Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding, May 7, 2013

Republic of The Gambia, Programme for Accelerated Growth and Employment (PAGE), Annual Progress Report, January-December 2012

Republic of The Gambia, Ministry of Finance and Economic Affairs, The Gambia Macroeconomic Bulletin, Q4 2013

Republic of The Gambia, Ministry of Finance and Economic Affairs, Budget of the Government of the Gambia, 2014

World Bank (2013a), Mission Aide Memoire, EGRG I Supervision, EGRG II Preparation Mission and IFMIS Monitoring, Republic of The Gambia, March 2013

World Bank (2013b), Mission Aide Memoire, EGRG I Supervision, EGRG II Preparation Mission and IFMIS Monitoring, Republic of The Gambia, April-May 2013

World Bank (2013c), IDA project Paper for the Integrated Financial Management and Information System Project – Additional Financing, Republic of The Gambia, August 2013

World Bank (2013d), Mission Aide Memoire, EGRG I Supervision, EGRG II Preparation Mission and IFMIS Monitoring, Republic of The Gambia, October 2013

World Bank (2013e), Mission Aide Memoire, Joint International Financial Institution Statistical Capacity Development Mission, Republic of The Gambia, October 2013

World Bank (2013f), Mission Aide Memoire, IFMIS Additional Financing Appraisal and Negotiations Mission, Republic of The Gambia, December 2013

World Bank (2014a), Mission Aide Memoire, EGRG I Supervision, EGRG II Preparation Mission and IFMIS Monitoring, Republic of The Gambia, February 2014

World Bank (2014b), Implementation Completion and Results Report, The Republic Of The Gambia: Education for All – Fast Track Initiative Program, April 2014

World Bank (2014c), Mid-term Review Mission, Aide Memoire, West Africa Regional Communications Infrastructure Program, Republic of The Gambia, June 2014

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World Bank (2014d), Mission Aide Memoire, EGRG I Supervision and EGRG II Preparation Mission, Republic of The Gambia, June 2014

World Bank (2014e), Mission Aide Memoire, IFMIS Additional Financing Monitoring Mission, Republic of The Gambia, June 2014

World Bank (2014f), Implementation Completion and Results Report, The Republic Of The Gambia: Third Education Project Phase II, September 2014

World Bank (2014g), Mission Aide Memoire, EGRG I Supervision and EGRG II Preparation Mission, Republic of The Gambia, September 2014

World Bank (2014h), Mission Aide Memoire, IFMIS Additional Financing Appraisal and Negotiations Mission, Republic of The Gambia, September 2014

World Bank (2015a), Implementation Support Mission, West Africa Regional Communications Infrastructure Program, Republic of The Gambia, January 2015

World Bank (2015b), The Gambia, Macro-Poverty Outlook, April 2015

World Bank (2015c), Mission Aide Memoire, EGRG I Supervision and EGRG II Preparation Mission, Republic of The Gambia, June 2015

Persons interviewed

The Gambian Government

Mr. Mohammed Jallow, Director, Ministry of Basic and Secondary Education

Mr. Mod K. Ceesay, Permanent Secretary II, Ministry of Finance and Economic Affairs

Mr. Momodou Lamin Bah, Director, Directorate of National Treasury, Ministry of Finance and Economic Affairs

Mr. Saffie Dambelleh, Project Director, Project Coordination Unit, Ministry of Finance and Economic Affairs

Ms. Amie Khan, Director of PFM, Ministry of Finance and Economic Affairs

Mr. Abdou Salam Jatta, PFM Unit, Ministry of Finance and Economic Affairs

World Bank

Daniel Camos Daurella, Economist, GEEDR

Cem Dener, Sr. Public Sector Specialist, GGODR

Ryoko Tomita Wilcox, Economist, GEDDR

Annette I. De Kleine Feige, Sr. Economist, GMFDR

Naomi Halewood, ICT Policy Specialist, GTIDR

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Annex 4: Country Map

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Annex 5: Office of the President’s Directive on the Exchange Rate of the Dalasi Issued on May 4, 2015