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PROGRAM INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB7090 (The report # is automatically generated by IDU and should not be changed) Project Name Region Country Sector Lending Instrument Project ID Borrower(s) Implementing Agency Date PID Prepared Estimated Date of Appraisal Estimated Date of Board Approval Corporate Review Decision Other Decision {Optional} I. Economic Reform Grant AFRICA Comoros Public expenditure, financial management and procurement (20%); Civil service reform (20%); Governance and anticorruption (15%); Fisheries (15%); Energy (15%), Disaster risk management (15%) Development Policy Lending P122941 Union of the Comoros Vice Presidency in Charge of Finance September 7, 2012 October 8, 2012 November 29, 2012 Appraise and Negotiate Introduction and Context 1. Comoros has experienced protracted political instability since independence in 1975. The main source of conflict has historically been the sharing of power and resources between the three islands. Tensions have eased somewhat in recent years. Broadly fair and democratic elections were held in December 2010, and the new President was sworn in May 2011. No major election is expected during 4 years, which presents an opportunity to advance policy reforms. 2. Being one of the smallest African countries, with an estimated 670,000 inhabitants spread among three islands, the country remains mired in poverty. Gross Domestic Product (GDP) per capita is estimated at US$785. According to 2004 estimates, about 45 percent of the population lives below the poverty line and poverty incidence is typically higher in rural areas and on the island of Anjouan. 3. In 2009, the Government adopted the country’s Poverty Reduction and Growth Strategy Paper (PRGSP) 2010-14 which focuses on six clusters, namely, economic stabilization and growth, institution-building and private sector development, strengthening governance and social cohesion, improving health, and promoting education and vocational training and finally promoting environment sustainability and civilian security. 4. Since 2009, the donor community has increased its support to Comoros in light of increased political stabilization and the Union government’s commitment to undertake a sound macroeconomic and structural reform agenda. Given progress achieved on economic reforms, Comoros reached the HIPC decision point in June 2010, and the government is focused on implementing the triggers to reach the HIPC completion point by end December 2012. II. Proposed Development Objective(s) 5. The Development Objectives of the proposed Economic Reform Grant is to strengthen state capacity and accountability, thereby addressing some of the key underlying causes of fragility in Comoros. The reforms supported by this operation are structured around two broad policy clusters: (i) fostering public transparency and accountability; (ii) and (ii) Addressing economic and social vulnerabilities. III. Preliminary Description 6. The proposed Economic Reform Grant, in an amount of US$5 million, supports the implementation of key reforms in Comoros PRGSP. It is a central element of IDA’s FY10-12 Interim Strategy Note (ISN). The ISN, which will soon come to an end and the country is expected to reach the HIPC completion point later in 2012. Therefore, this DPO is a stand-alone, single tranche operation. Going forward, the scope of future reforms and modalities for support will be developed in the upcoming IDA Country Partnership Strategy, to be prepared after Comoros has reached the HIPC completion point. IV. Institutional and Implementation Arrangements 7. The Economic and Financial Reforms Unit (CREF) will be responsible for monitoring reforms supported by the Economic Reform Grant, reporting progress and coordinating actions with all ministries and entities, including at the Island level. The overall reform effort will be reviewed by the Government in close coordination with regular Bank supervision to ensure continued implementation of the program within an adequate macroeconomic policy framework. V. Poverty and Social Impacts and Environment Aspects Poverty and Social Impacts 8. The policy reforms supported by this Economic Reform Grant are expected to have a positive poverty and social impact. Improvement of public financial management, strengthening of public sector efficiency and accountability, better governance and declining corruption, removing economic governance constraints to fisheries and energy sector’s development, and addressing disaster management vulnerabilities have been identified as core objectives under the PRSP. Improved budgetary and expenditure management will benefit the general public and particularly the poor through (i) a reduction in leakages and (ii) a greater focus on poverty reducing expenditures. Increased resources for poverty reduction are expected to be made available through tightened controls over expenditures and stronger Treasury management, as well as through improved management of the wage bill and by reducing the duplication of administrative structures and programs across different levels of government. Taken together, improvements in the reform areas targeted by this Economic Reform Grant should enable the government move forward with implementation of its PRGSP and focus scarce resources on priority social sector expenditures and disaster risk management. Environment Aspects 9. The proposed Economic Reform Grant focuses primarily on institutional reforms and there are no direct significant effects on Comoros’s environment, forests, and other natural resources. However the benefits to the environment stemming from reforms supported under the proposed operation could ultimately be significant, particularly as they reinforce the Government‘s PRSP which has environmental sustainability as one of its six core themes. Through improved disaster risk management, public financial and public sector accountability, the government is expected to be able to make better use of planning and funding instruments to design and implement activities that will help the Comoros sustain its fragile island environment. Through stronger economic governance, especially in the fisheries and energy sectors, the Union and Island Governments will be able to address critical environmental issues, a process that has proved difficult before now. In summary, the proposed operation is helping put in place the institutional fundamentals for disaster risk management that ultimately should yield positive environmental outcomes. VI. Tentative financing ($m.) Source: Borrower/Recipient IDA Total VII. Contact point World Bank Contact: Noro Aina Andriamihaja Title: Economist Tel: 5339+6045 Fax: +261202233338 Email: [email protected] Location: Antananarivo, Madagascar (IBRD) Borrower/Client/Recipient Contact: MOHAMED ALI SOIHILI Title: Vice President in charge of the Ministry of Finance Fax: +2697644101 Email: [email protected] VIII. For more information contact: The InfoShop The World Bank 0 5 5 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop