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PROGRAM INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.: AB5532
Togo: Third Economic Recovery and Governance Grant
Operation Name
(ERGG 3)
AFRICA
Region
General Public Administration Sector (50%); Agricultural
Sector
Extension And Research (20%); Mining and Other Extractive
(20%); General Energy Sector (10%)
P117282
Project ID
GOVERNMENT OF TOGO
Borrower(s)
MINISTRY OF ECONOMY AND FINANCE
Implementing Agency
March 8, 2010
Date PID Prepared
March 24, 2010
Date of Appraisal
Authorization
May 27, 2010
Date of Board Approval
1. Country and Sector Background
Togo is a small-sized country in West Africa with a population of 6.5 million as of 2009,
whose main economic potentials are mining, agriculture and re-exporting. Togo’s highest
export earning sector is clinker/cement, produced from two limestone companies. Togo’s next
important exports are phosphate and cotton, processed and marketed by public enterprises. Togo
produces other cash crops, mainly coffee and cocoa, and has a considerable agricultural potential
due to favorable climatic conditions in large parts of the country. As a small country, Togo’s
successful development lies also in its ability to capitalize on greater integration with its
neighbors, notably by further developing its deep water port (the only one in the region) as a
shipping hub, through private investments. Furthermore, Togo is a member of the West African
Economic and Monetary Union (WAEMU) and of the Economic Community of West African
States (ECOWAS).
2. Operation Objectives
The main objective of the ERGG-3 is to support government-owned reforms to improve
governance, transparency and efficiency in public financial management as well as advance
structural reforms aimed at strengthening governance and transparency in the key sectors
of the economy (phosphates, cotton and energy). Specifically, the ERGG-3 focuses on
continuing and deepening policy reforms initiated by the Government under the ERGG and
ERGG-2 to strengthen budget preparation, execution, controls and public procurement. It would
also contribute to further advance structural reforms aimed at strengthening governance and
transparency in the key sectors of the economy (phosphates, cotton, and energy sectors). It
directly supports the first ISN pillar and provides financial support to the Government in the
challenging context of an exceptional unfavorable global economic environment and Togo’s
annual debt service to IDA expected to remain considerable until attainment of the HIPC
completion point. The proposed reforms are essential to the Government’s ability to use the
public resources freed up by debt reduction efficiently and effectively to support the country’s
economic and social recovery.
3. Rationale for Bank Involvement
Togo’s economy was severely affected by a series of exogenous and domestic shocks,
notably the surge in global food and fuel prices and heavy flooding in the summer of 2008
that affected key transport infrastructure and damaged agricultural output, and the 2009
global economic slowdown. Togo has been among the most adversely affected economies by
the 2008 global price shocks, reflecting the high fuel imports of Togo’s transport, industry, and
power sectors. While Togo is nearly self-sufficient in food production, surging food prices
created social tensions in the first half of 2008 and severely eroded real incomes, particularly for
urban dwellers. In addition, the flooding destroyed critical infrastructure including Togo’s main
traffic artery from the Port of Lomé to the landlocked countries in the north, paralyzing Togo’s
vital trade and transport sector and disrupting exports of goods and services. Floods also reduced
cotton production. The global recession in 2009 contributed to further delay the economic
recovery. In spite of the implementation of countercyclical fiscal policies, real GDP growth is
estimated at 2.5 percent in 2009, whereas earlier projections pointed to a 4 percent rate of GDP
growth. The impact of the global economic slowdown is estimated to have been particularly
strong on FDI and re-exports. Re-exports declined from 25 percent of GDP in 2007 to 14
percent in 2009 (also as a result of the deterioration in infrastructure caused by flooding) while
FDI fell from an average of 3 percent of GDP during the period 2004-07 to 0.8 percent of GDP
in 2009. In spite of the difficult context, the authorities have maintained prudent macroeconomic
policies and continued the implementation of an ambitious reform agenda.
4. Financing
Source:
BORROWER/RECIPIENT
International Development Association (IDA)
Total
($m.)
0
16.3
16.3
5. Institutional and Implementation Arrangements
The Ministry of Economy and Finance will be responsible for overall implementation of the
proposed ERGG-3. Day-to-day monitoring of the program will be the responsibility of the
Comité de Suivi des Programmes et Réformes, an existing high-level team within the Ministry,
headed by the Secretary General. This arrangement is justified by the strength and continuity of
this team within the Ministry of Economy and Finance and their involvement in the ongoing
policy reform dialogue, including with other development partners. The main technical
responsibility for implementation of the public financial management reforms will stay with the
Budget and Treasury Departments, whose representatives are part of the Public Finance Steering
Committee (Comité de pilotage des finances publiques) created in 2005. The sector reforms will
be implemented by the respective technical departments in the sector ministries, under the
oversight of the ministers in charge of agriculture (cotton sector), mining (phosphates) and
infrastructure (electricity), and the overall coordination of the Ministry of Economy and Finance.
6. Benefits and Risks
In IDA’s assessment, the potential benefits of the proposed operation outweigh the residual
risks and warrant IDA’s assistance for implementing critical reforms and policy actions in a
coordinated fashion with other donors, while supporting risk mitigation actions to maximize the
sustainability of the reform agenda.
7. Poverty and Social Impacts and Environment Aspects
Togo remains one of the world's poorest countries, ranking 159 out of 182 countries in the
2009 UNDP Human Development Report. An estimated 62 percent of Togo’s population lived
below the poverty line in 2006,1 with the rural areas accounting for the majority of the poor (74
percent versus 37 percent in urban areas), and Togo’s social indicators are weak.
The measures supported by the proposed ERGG-3 are expected to have significant positive
distributional effects with a positive impact on poverty reduction. Specifically, expected
benefits include: (i) strengthening of public expenditure management, which would enhance
efficiency, transparency and accountability in public resources use; (ii) improving governance in
the cotton sector through measures to improve the accounting system and the representation of
producers in the Board of the company; (iii) enhancing governance in the phosphate sector by
improving transparency and accountability of the sector’s financial contribution to the economy
and public finances; and (iii) contributing to improve the financial situation of CEET and thus
reducing the drain on the state budget thus freeing up resources that can be directed to poverty
reduction expenditures.
While the ERGG-3 does not have a special focus on rural poverty, it supports measures
that will be particularly beneficial to the rural poor. For example, the improvement in
governance in the cotton sector is expected to further increase confidence of farmers in the sector
and thereby facilitate a rebound in cotton production and improve the livelihood of a large sector
of the population (about 300,000) which relies on this cash crop as a dominant source of
earnings. Furthermore, the ERGG-3 would also help fund the provision of basic public services
during 2010 with a high beneficial impact on the poor, in complement to implementation of the
Togo Community Development Project (approved in FY08) and the additional financing
(approved in FY10) under the Global Food Crisis Response Program.
The reforms supported by the proposed development policy grant are part of a broader
program of actions to promote the recovery of key sectors, notably cotton, phosphates and
energy, in addition to strengthening public financial management systems. These reforms,
dealing mainly with economic governance and institutional issues, are not likely to have
significant negative impacts on the country’s environment and natural resources. This applies
also with respect to the actions in the three real sectors as no direct or indirect effects are
expected on the environment.
1
QUIBB 2006.
8. Contact point
Name:
Title:
Tel:
Fax:
Email:
Maria Manuela Do Rosario Francisco
Sr. Country Economist
(202) 473-8209
(202) 473-8136
[email protected]
9. For more information contact:
The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-4500
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