Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 10844

PROGRAM COMPLETION REPORT

REPUBLIC OF BENIN

FIRST STRUCTURAL ADJUSTMENT CREDIT(CREDIT 2023-BEN)

JUNE 30, 1992

Occidental and Central Africa DepartmentCountry Operations DivisionAfrica Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVAI-ENTS(annual averages)

'T'he CFA franc (CFAF) is tied to the French Franc (FF) in the ratio ot FF I to CFAF 50. The FF iscurrently floating within the parameters defined by the European Monetary System (EMIS).

ABBREVIATIONS AND ACRONYMIS

ACP - African. Carihbean and Pacitfic CountriesBBD - Banque BNninoise pour lo DNveloppement

(Development Bank of Benin)BCB - Banque (ommerciale dLu 1enin

(Commercial Bank (of lenin)L3CEAO - Banq(ule Centrale des Etats de l'AtriqLue (le l'O(uest

(Central Bank of West African States)CAA - Caisse Autonome d'Amortissen1enft

(The National D.bt Management Agency)CEB - Comrmunaute Electrique do Bchnin

(The Joint Benin'Togo Power Authority)CNSAPAS - Comimlission Nationale diu Suivi de l'Application du Programme d'Ajustement

Structurel (National Comimiission tfOr Monitoring the Adjustment Program)DCA - Development Cred!it AgreementEC - European CommunityFIR - Foonds d'Indeemniisation et de Remhoursement

(Reimbursement Fund for Bank Depositors)IDA - International Developmiient AssociationINIF - Internatilonal Monetary FundPFP - Po!icy; Framework PaperPIP - Public Investment ProgramPRPB - Parti RevoluItionnaire et Populaire du Btnin

(POpular ReoVIutionarv Party of Benin)SAL - StructUral AdiLjustm01ent Ci edit/ProgramSBEE - SOc)i&t 136ninoise (ie I'FatL et de l'Electricite

(I'he Water and Electricit) Parastatal)UNIOA - LUnion %Ionltaire Ouest Atricaine

(West Atrican Monetary Union)

FISCAl \'EAR

January I t) Deemiber 31

FOR OFFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Office of Director-GeneralOperations Evaluation

June 30, 1992

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Program Completion Report on Benin - First StructuralAdjustment Credit (Credit 2023-BEN)

Attached, for information, is a copy of a report entitled "Program Completion Report onBenin - First Structural Adjustment Credit (Credit 2023-BEN)" prepared by the Africa Regional Office.No audit of this program has been made by the Operatiors Evaluation Department at this time.

Yves Rovaniby H. Eberhard Kopp

Attachment

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

FOR OMCIAL USE ONLY

PROGRAM COMPLETION REPORT

REPUBLIC OF BENIN

FIRST STRUCTURAL ADJUSTMENT CREDIT(CREDIT 2023-BEN)

TABLE OF CONTENTS

Page No.

PREFACE ..............................................EVALUATION SUMMARY ................................... iii

PART I: PROGRAM REVIEW FROM THE BANK'S PERSPECTIVE 1........

A. Project Identity .................................... IB. Introduction ...................................... IC. The Historical, Political and Economic Context ................ ID. Preparatior and Design of SAL I ......................... 3E. Program Results ................................... 5F. Macroeconomic Performance ............................ 7G. Implementation and Monitoring of the Program ................ 9H. Conclusions and Lessons of SAL I ........................ 10

PART II: PROGRAM REVIEW FROM THE BORROWER'S PERSPECTIVE ... 11

PART III: STATISTICAL INFORMATION ......................... 12

Project Timetable ..................................... 12Cumulative Credit Disbursement ............................ 12Mission Data ........................................ 12Staff Inputs ......................................... 13SAL I Disbursement Schedule .............................. 14

ATTACHMENTS:

I. Second Tranche Release Memorandum (6/20/90) .................. 17II. Matrix of SAL I Policy Measures ............................ 33

III. Main Economic Indicators ................................. 41

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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PROGRAM COMPLETION REPORT

REPUBLIC OF BENIN

FIRSI STRUCICTURAL ADJUSTMENT CREDIT(CREDIT 2023-BEN)

PREFACE

This is the Program Completion Report (PCR) for the First Structural Adjustment Programin Benin for which Credit 2023-BEN in the amount of SDR 33.5 million was approved by the ExecutiveDirectors in May 1989, and became effective in June 1989. Credit closing, originally anticipated forMarch 1990 was extended to December 1990; the Credit was fully disbursed in November 1990 andwas then closed.

This PCR was prepared by staff of the Country Operations Division of the Occidental andCentral Africa Department (Preface, Evaluation Summary, Parts I and III). The Beninese authoritieshave undertaken an evaluation of the program (Part II), but it has not yet been received. When theBorrower's completion report is finalized, it will be included in the project file. In view of the closecooperation between Bank staff and the Government during the SAL I period, this assessment is notexpected to differ significantly from that of the Bank. The Borrower did communicate that they agreewith Part I and noted a few minor factual corrections which have been incorporated in the PCR.

This report is based, inter alia, on the President's Report, the Letter of Development Policy,the Development Credit Agreement, supervision reports, the memorandum to the Executive Directorsrecommending release of the second tranche, correspondence between the Bank and the Borrowe,discussions with the Resident Mission, and internal Bank memoranda.

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PROGRAM COMPLETION REPORT

REPUBLIC OF BENIN

FIRST STRUCTURAL ADJUSTMENT CREDIT(CREDIT 2023-BEN)

EVALUATION SUMMARY

A. Project Objectives

1. The main quantitative objective of SAL I was to raise real GDP growth to an average of about3% in 1989-91 and 4% thereafter within a viable macroeconomic framework (para. 11). Investment,increasingly financed by national savings, was expected to average 13% of GDP in 1989-91, and asignificant improvement in Benin's overall balance of payments and financial position was projected.Thus, exceptional (non-project) financing needs for 1989-91 were expected to decrease significantly by1991, while the Government's overall deficit, as a percent of GDP was project_d to decline from 5.8%in 1989 to 2.3 % by 1991 (para. 11).'

2. The program's structural components aimed at a fundamental reorientation of Benin'sdevelopment strategy away from state intervention toward greater reliance on market forces (para. loff).Specifically, it sought to: i) reduce the public sector's role in the economy, focusing it on a core setof services whose delivery and management would be improved; ii) reinforce public sector resourcemanagement by improving investment programming and the management of a reduced number of publicenterprises remaining in the Government's portfolio; iii) restructure the banking system as a basis forresuming effective financial intermediation; and iv) reform incentive policies to promote private sectoractivity (para. 12). A detailed description of SAL I policy measures is presented in the policy matrixattached as Annex I.

B. Implementation Experience

3. A major political and social crisis (para. 8) in the second half of 1989 delayed sustainedimplementation of SAL I until early 1990. Thereafter program execution resulted in a significantimprovement in macroeconomic and public finance performance in 1990 and 1991, broadly in lne withprogram targets (para. 23ff). Considerable progress was made in civil service reduction (para. 18),fiscal system (para. 17) and public enterprises reform (para. 20), banking system restructuring(para. 21) and improving the incentive framework for the private sector (para. 22). This progressconstitutes the basis for broadening and deepening the adjustment process under SAL II, approved inJune 1991.

4. Structural Reforms. The initial difficulties in program implementation delayed until 1990/91some aspects of the fiscal reforms aimed at increasing resource mobilization. While the civil servicereduction program was successfully carried out in 1989, lack of external financing hampered its

I An official downward -evision of GDP estimates for the 1982-90 period resulted in an estimated1989 GDP 16 percent lower than the previous estimate. Tne program targets here are expressed in termsof the earlier GDP estimate.

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e.;ecution in 1990 and early 1991. The public investment program could not be carried out as plannedin 1989, and despite better program execution in 1990 and 1991, weaknesses in investmentprogranr ing and monitoring remained, resulting in non-programmed expenditures (para. 19).

5. Despite some delay in restructuring the banking system (para. 23), the liquidation of one statebank was completed and that of the remaining two accelerated. Rehabilitation of the rural creditnetwork was begun. Four private commercial banks were established and attracted an impressivevolume of new deposits. The supervisory and regulatory framework of the banking system wasreinforced. However, progress in reimbursing depositors and reducing government obligations to thecentral bank was significantly less than expected.

6. Major improvemerts were made in the incentive framework for the private sector (para. 24).Most kemaining price controls were removed prior to Board approval of SAL II. Deficiencies in thestudy which was to serve as the basis for rationalizing the system of industrial tariff protection resultedin the delayed implementation of this major reform.

7. Macroeconomic Performance. Performance was broadly in line with progrrm targets i, 1990-91, a!beit with some mixed results. After a 2% contraction in 1989, average GDP growth in 1990-91was 3.5 %: aithough significant, the reduction in the fiscal deficit was less than projected (para. 25) and*n 1989/90 the investment/GDP ratio and national savings rate fell to their lowest levels since 1985.The 1989 external current account deficit was reduced by more than the targeted amount, due essentiallyto sharply reduced imports; normalization of import activity resulted in a 1990 and 1991 deficitscomparable to the level before adoption of the program. Consequently, exceptional financingrequirements increased over the 1989-91 period.

8. Reporting and Auditing. The Government generally fulfilled its reporting and auditingobligations under the Credit Agreement (para. 35).

C. Sustainability

9. Major improvements in the macroeconomic and public finance situation were registered in1990 and 1991, suggesting a significant response to the reform measures whose sustainedimplementation only began after the resolution of the political crisis. The recent fundamental changesin Benin have created a good basis for achieving the medium-term objectives of SAL I; a nationalconsensus now exists on the necessity of pursuing the adjustment program and should enable the deeperdistortions and structural deficiencies resulting from two decades of inappropriate policies to beaddressed.

D. Lessons Learned

10. Two mains lessons can be drawn from SAL I (para. 37): i) the importar.e of maintainingthe policy dialogue even when progress towards adoption of an adjustment program is slow; and ii) thepositive contribution that firmness and joint donor action can make to re-establish conditions conduciveto program implementation and sustainability.

PROGRAM COMPLETION REPORT

REPUBLIC OF BEigN

FIRST STRUCTURAL ADJUSTMENT PROGRAM(CRE:DIT 2023-BEN)

PART I. PROGRAM REVIEW FROM THE BANK'S PERSPECTIVE

A. PROGRAM IDENTITY

Operation First Structural Adjustment ProgramCredit Number : 2023-BENRegion : AfricaCountry : Republic of BeninSector: Non-Project Lending

B. INTRODUCTION

1. A First Structural Adjustment Credit (SAL I) to Benin in the amount of SDR 33.5 million(US$45 million equivalent) was approved by the Executive Directors on May 23, and became effectiveon June 28, 1989. The Credit was released in two equal tranches of US$22.5 million equivalent, thefirst upon effectiveness, and the second upon fulfillment of. the second tranche release conditions.SAL I was preceded and supported by an IDA-financed technical assistance project (TechnicalAssistance III, Credit 1530-BEN, US$5.0 million equivalent) approved in December 1984, and by thePublic Enterprise Rehabilitation Project (Credit 1748-BEN, US$15 million e-quivalent) approved inDecember 1986.

2. Efforts to reform Benin's economy date back to 1982 but the adoption of a comprehensiveadjustment program represented a major shift in economic orientation, as ref.ected in the Government'sStatement of Development Strategy.' SAL I supported the first phase of this program. In addition toIDA support, the program received significant financial assistance from other muitilateral and bilateraldonors, including the European Community (US$31.2 million), the African Development Bank(US$14.0 million), France (US$37.2 million), Switzerland (US$9.7 million), Germany (US$5.7million), Norway (US$3.4 million), anu a first annual arrangement (equivalent to 20% of quota, orSDR 6.28 million) under the IMF's Structural Adjustment Facility.

3. A Second Structural Adjustment Credit, Credit 2283-BEN, of SDR 41.3 million (US$55 millionequivalent) was approved by the Board on June 27, 1991, and became effective on October 15, 1991.

C. THE HISTORICAL, POLITICAL. AND ECONOMIC CONTEXT

4. Benin, then called Dahomey, was brought into France's empire in the 1890s after valiantresistance by the last warrior king, Gbehanzin. For a number of reasons, the Beninese quicklyestablished a relative prominence and were foutid in administrative and professional functions all overFrench West Africa. With independence in the early 1960s, many of this colonial ministerial class were

' Report No. P-4931-BEN, Annex V.

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no longer welcome and had to return to Benin. The country's political and soc;al instability in the1960s was in part due to the presence of this newly dispossessed intellectual elite.

5. In 1972, after a period of repeated changes of government and political aclivism by powerfultrade unions, Mathieu Kerekou seized power in a military coup. Benin officially became arevolutionary socialist state and cultivated close links with the communist bloc. Consistent with marxist-leninist ideology, economic policy from 1975 was driven primarily by government efforts to accelerateeconomic growth and development by increasing state ownership of productive activities. Most privatebusinesses and financiai institutions were nationalized, many public enterprises were created, collectivefarming systems were established in agriculture, and a highly regulated framework was put in place togovern private activity and trade. Large public industrial investments were made, mostly with foreignborrowing. New taxes were introduced and others increased. The expansion of the state's role wasassociated with a triplin. of the civil service. Due in part to oil and uranium booms ia neighboringNigeria and Niger, but also as a consequence of activity under the first state plan, the economic impactof these policies was initially favorable, with growth averaging 5% in 1977-80, in a context of interi.aland external stability.

6. By 1983, the end of the boom in neighboring countries and completion of major public sectorprojects had revealed an economic structure saddled with poorly-designed, low-return investi ants,heavy external debt service, an incentive framework inhosr'table to private activity, and a poorlymanaged and loss-making state-dominated modern sector. The Government then began to lookincreasingly to the West for development assistance. One result of this still tentative opening was theestablishment of a World Bank Resident Mission i:- Cotonou in 1983. By the late 1980s, excessivelyexpansionary macroeconomic policies had resulted in internal and external imbalances that wereunsustainable. In early 1989 the banking system's collapse resulted in a freeze on deposits and a sharpdrop in the proportion of taxes paid in liquid form.

7. The Government's initial response to these difficulties was piecemeal, and included measuresin the area of investment programming, elimination of irregular salary payments, agricultural producerpricing, public enterprise reform, liberalization of transport, and public utility pricing. A number ofIDA-financed projects (including Technical Assistance III and the Public Enterprise RehabilitationProject) supported these efforts. By themselves, bowever, the measures adopted were insufficient tocontain the economic crisis, although they addresse important issues. This was ultimately recognizedby the Government in 1988/89 when it adopted a more comprehensive approach to structural adjustmentsupported by IDA's SAL I and the IMF's first-year SAF.

8. The establishment of the National Commission in charge of SAL negotiations in 1986 to preparean adjustment program (para. 32) marked the decline of the regime's most powerful political structureby removing iesponsibility for macroeconomic policy from the Politbureau of the single political party(le Parti pour la Revolution Populaire du Benin, or PRPB) to the ministers who reported directly to thePresident. Thereafter, the implementation of prior actions for SAL I (e.g. a civil service census,computerization of the payroll, audits of banks, etc.) induced greater transparency in public expendituremanagement and began to reduce political patronage. By early 1989, civil servants, other workers'groups, and the private sector began to view the Bank as an ally in the search for better governance.In December 1989, Colonel Kerekou's government officially abandoned marxism-leninism but popularoutrage at the regime could not be overcome; thereafter, Benin's transition to a more oren and pluralistsociety was rapid. A National 2onference in February 1990 established an interim government and amore broadly representative legislative body; a referendum was held on a new constitution and, iP early1991, multi-party presidential elections gave Nicephore Soglo (Prime Minister in the interimGovernment) an overwhelming victory. Former President Kerekou now leads a quite life in Cotonou.

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This dramatic and bloodless unseating of a totalitarian regime has encouraged and inspired othersseeking orderly political change elsewhere on the African continent. However unintended it was, SAL Iplayed an important part in this transformation (para. 10) by empowering key segments of thepopulation who would settle for nothing less than a complete change in the regime.

D. PREPARATION AND DESIGN OF SAL I

9. The First Structural Adjustment Program was the culmination of a slow and difficult seven-yearpolicy dialogue between the Government -- dominated by the PRPB -- and the Bank. Faced with anincreasingly disastrous economic situation in 1986-87 and evidence that past policies had failed, keymembers of the PRPB's Politbureau softened their ideological opposition to a reform program. Bymid-1988 when SAL I was appraised, the Government had substantially completed preparation of itsStatement of Development Strategy and had made progress in its parallel dialogue with the IMF.

Program Description and Objectives

10. SAL I represented a fundamental reorientation of the Government's development strategy awayfrom dirigisme towards greater reliance on private sector initiative and market forces. The program'smajor focus was consequently on public sector reform and the creation of an incentive frameworksupportive of private sector development. At the outset, the Bank recognized the high risks associatedwith the operation,2 but believed that these were reduced by the large number of prior actionsimplemented and the broad-based domestic participation in the formulation of the program. The Bankcould not of course foresee that the mounting political and social crisis3 would initially impede programimplementation and culminate in the eno of the regime.

11. The macroeconomic objectives established by the Government and the Bank entailed asubstantial increase in real GDP over the program period: in contrast to the virtual stagnation of GDPin 1987-88, average growth rates in 1989-1991 were projected at 3% and thereafter were expected toapproach 4%, with the primary sector serving as the main engine of growth. The investment/GDP ratiowas projected at some 13% over the program period, up from 11.5% in 1988. To finance this levelof investment while reducing external imbalances, the national savings rate was expected to increasegradually to the equivalent of 5.4% of GDP by 1991. Reflecting the projected improvement in theoverall financial and fiscal situation, the external current account deficit/GDP ratio and the overallbudget deficit/GDP ratio were expected to decline to 7.7% and 2.3% respectively by 1991.Accordingly, exceptional financing needs were projected to decrease from US$440 million in 1989 toUS$89 million in 1991.

12. Structural measures under the program focu.;: ;d on: reforming fiscal legislation and the taxsystem; reducing the number of civil servants ar.J administrative reform of the civil service;privatization, liquidation, or rehabilitation of a large number of public enterprises; restructuring thebanking system; reforming the system of industrial tariff protection and the adoption of a newinvestment code and revised labor and commercial legislation. Prior to Board approval of SAL 1, theGovernment implemented a large number of up-front actions in most of these areas.

2 These were identified as: i) further terms of trade losses resulting from lower export prices; ii)domestic political opposition from beneficiaries of the previous dirigiste policies; and iii) difficulties infinding a foreign private bank to establish a branch in Benin.

3 Including the growing perception that the burden of adjustment was not being equally shared.

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13. A major SAL I reform in the field of resource mobilization was the replacement of the internalturnover tax with a general expenditure tax applicable to domestic goods and services and to imports.Through the implementation of the civil service voluntary departure program, SAL I was designed tofurther the key objective of reducing and restructuring current expenditure, in support of which partialmeasures had been introduced beginning in 1986. Some progress had already been made inrestructuring the public enterprise sector since 1986 under the Public Enterprise Rehabilitation Project(para. 7); SAL I was intended to consolidate this progress by further reducing the size of the publicenterprise sector and through better management and financial performance of those enterprisesremaining in the Government's portfolio. In the bankir.g sector, the three defunct state banks were tobe liquidated and their depositors partially repaid, while the establishment of at least one internationallyrenowned private bank and reinforcement of banking supervision/regulation were expected to contributeto more efficient financial intermediation. The incentive framework for the private sector was expectedto be significantly improved through trade policy reform, and deregulation measures.

14. Role of the Bank and IMF: Much of the groundwork for SAL I was laid in the context of otherinvestment projects supported by IDA and through the Bank's economic and sector .ork. Beginningin 1982, the Bank's assistance strategy for Benin shifted from a focus on financing traditional investmentprojects to support of macroeconomic management and rehabilitation of key sectors, with the ultimategoal being the initiation of a comprehensive adjustment program. Economic and sector workemphasized public sector management and sector efficiency issues, and the lending program includedcredits for infrastructure rehabilitation and for adjustment in the parastatal and cotton sectors. With theadvancement of the policy dialogue in 1988 the Bank's assistance strategy was redesigned to make theSAL the centerpiece of IDA lending to Benin. Economic and sector work completed before that time(in particular the 1984 Country Economic Memorandum and the 1987 Public Expenditure Review), aswell as IDA-financed projects already underway (notably the Public Enterprise Rehabilitation Project,the Third Technical Assistance Project, and the Second Borgou Rural Development Project) contributedsignificantly to the design and content of SAL 1. SAL I was appraised in mid-1988 and negotiated thefollowing November but Board presentation was postponed to May 1989 to permit joint processing withthe First-Year Policy Framework Paper (PFP) in concert with the IMF.4 Bank management provedfar-sighted in nurturing the policy dialogue with Benin despite very slow progress over the years.

15. In the years preceding the adoption of the structu.al adjustment program, Benin requested andreceived (in addition to the annual Article IV Consultations) several IMF staff visits to pursue a dialogueon a possible stabilization program. Three IMF technical assistance missions reviewed the fiscal systemand estimated expenditure arrears. The policy dialogue with the IMF was slow for the same reasonsas was the Bank-Benin dialogue but preparation of a sound current budget for 1988 and theGovernment's decision to embrace a comprehensive adjustment program moved it forward considerably,and an IMF mission to Cotonou in July 1988 began preparatory work for a SAF program to be adoptedin parallel with SAL I. Bank and Fund staff assisted the Government in elaborating its First-YearPolicy Framework Paper; the SAF program and the PFP were approved by the Fund Board in June1989.

4 The policy analysis underpinning most of the reforms contained in the PFP was produced primarilyby Bank staff in the 2-3 years preceding SAL I approval. For the most part, the IMF remained highlyskeptical of the Government's commitment to an adjustment program until mid-1988.

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E. PROGRAM RESULmS

16. With more sustained program implementation after the resolution of the political crisis in early1990, and a firm domestic consensus on the need to pursue structural adjustment, performance in 1990and 1991 was broadly in line with program targets.

O7. Although measures were put in place to strengthen the performance of the customs and taxdirectorates both prior to and after Board approval, implementation of other measures aimed atimproving _source mobilization experienced some delays. Thus the introduction of a generalexpenditure/value added tax, a key fiscal reform initially planned to coincide with the 1990 budget, hadto be postponed to 1991 due to administrative delays consequent on the social crisis, the longerpreparatory period required, and given the need to coordinate it with the reform of the main revenuesource, import taxes, which was also delayed. The 30% across-the-board reduction in the value ofimports into Cotonou subject to taxation, introduced by the Government as a transitional measure toraise cash revenue after the collapse of the banking system in early 1989, also provedcounterproductive, particularly in view of a sharp contraction of import volumes that year. Reso,urcemobilization improved dramatically in 1990 and 1991, with the revenue targets being broadly attained;revenue performance in 1991 benefitted significantly from implementation of the value added tax, andalso from improved customs revenue with the restoration of import taxation to the full c.i.f. value, asubstantial increase in import volumes, and the reform of the customs services.

18. Concerning piublic employment, personnel expenditure (including pensions and scholarships)was reduced from CFAF 48.6 billion in 1988 to CFAF 43.5 billion in 1990 through the combinedeffects of normal retirements, a hiring freeze, and departures under the voluntary departure program.The number of departures was, however, below program targets (1,590 had left by end-December 1990,as against a target of 2,500 by end-June 1990), primarily because the external financing required forseverance payments was unavailable and due to donors' insistence that the program be revised to reflectthe organizational needs of the ministries; the absence of any departures in 1991 after the revisedprogram was agreed to reflected the Government's difficulties in negotiations with tht civil servants'unions, and contributed to a slight increase in the wage bill. Although some of the groundwork hadbeen laid prior to SAL I (civil service census, use of computer records, identifying deficiencies in basicpersonnel management texts, etc.), less progress was made in improving the administration andefficiency of the civil service than expected. Payroll irregularities continued partly as the result of theco-existence of two different civil service registers, one at the Ministry of Labor and Social Affairs(responsible for managing the civil service) and the other at the Ministry of Finance. Additionaladministrative reform measures are therefore being pursued under SAL II.

19. Despite a number of reforms introduced and technical assistance provided prior to SAL Iapproval, the public investment programming, implementation, and monitoring process continued toshow significant weaknesses. Notwithstanding the Government's stated policy, PIP proposals submittedfor IDA review during the SAL I period included many projects which lacked econonrc justificationand did not reflect agreed sectoral strategies. Given the overall macroeconomic and public financesituation, the 1989 portion of the agreed 3-year PIP could not be executed as planned. With animproved overall situation in 1990 and 1991, the rate of PIP execution increased, but an appreciableamount of non-programmed expenditures was registered. IDA-financed technical assistance forinvestment programming was also less effective than had been expected. Under SAL II, and with thesupport of the IDA-financed Pre-Investment Project, significant attention is being given to improvingPIP preparation, execution, and monitoring.

20. The restructuring of the public enterprise sector, was one of the more successfully implementedcomponents of SAL I. Three enterprises were liquidated, another three successfully privatized, bids

were issued (but the offers made were unattractive) for sale of another six, and diagnostic studies werecompleted for eight others; these studies are now being used as the basis for further restructuring andprivatization efforts under SAL II. As a result of these and earlier efforts, the Government's portfolio,whkch included 60 industrial and commercial enterprises at end-1986 was reduced to 29 by end-1990.In 19i91 the Government issued bids for the privatization of an additional six enterprises, and a contractfor the most important of these was recently finalized. With external assistance of IDA and otherdonors, key enterprises remaining in the Government's portfolio (such as the public utility and cottonginning/marketing parastatals) were rehabilitated. However, agreement or solutions to the problemsfaced vy two enterprises that occupy strategic positions in the sugar and cement sectors was delayed (inpart due to the reluctance of the Nigerian Government, the co-owner), the financial position of a numberof enterprises (e.g. social security, petroleum distribution) deteriorated further, while monitoring ofe-nterprise financial performance and investment activity was inadequate.

21. Substantial progiess was made in restructuring the banking systerm under SAL I, despite somedelays. The liquidation of the agricultural credit bank (CNCA) was completed in late-1990, liquidationproceedings for the other two state-owned banks (BBD and BCB) were accelerated, and a unitestablished to p!trsue recovery of their loans. After a long search for a foreign private partner toparticipate in the establishment of a new commercial bank, four new private commercial banks wereoperational by early 1990; by end-1990, these banks had collected an impressive amount (aboutCFAF 45 billion) in new deposits, despite their lack of international standing.5 Progress in reimbursingdepositors with accounts frozen in the banking system was, however, significantly less than planned,due to delays in establishing the reimbursement fund (the FIR), failure to use allocated externalassistance, and the delayed response of small depositors in collecting their reimbursements. Paymentsto reduce the Government's obligations to the BCEAO (which had already been rescheduled) also fellfar below targets, due to shortfalls in external disbursements. On the other hand, the banking systemsupervisory and regulatory framework was reinforced as part of the 1989 ECEAO reforms.

22. The implementation of trade reform and deregulation measures gathered momentum after theestablishment of the transitional government in early 1990. A new investment code and revised laborand commercial legislation were adopted in April/May 1990; however the subsidiary legislation requiredto implement these reforms was not passed until December 1990. Although the amendments introducedwere generally in line with the core objectives of the reform, a number of provisions in the newinvestment code and the labor and commercial laws were subsequently found to be unsatisfactory;experience with implementation of the investment code and labor and commercial legislation will bereviewed under SAL II and further revisions are expected before release of the third tranche. Therevised commercial law removed import licensing requirements for the bulk of Benin's imports (i.e.from franc zone, EC, and ACP countries). An action plan tc implement reforms in the system ofindustrial tal iff protection could not be adopted because the study conducted by outside consultants wasdeficient. Based on the technical adjustments to tariff rates introduced in the context of restoring theimport tax base to the full c.i.f. value in early 1991, a thorough reform of the tariff structure will beimplemented before release of the third tranche of SAL II; remaining export taxes will also be removed.

I The search for an internationally renowned bank to take over the sound portion of the BCB'sportfolio was unsuccessful as the concessions demanded by potential candidates proved unaccuptable.It was recognized that less well-placed but acceptable banks should be allowed to set up. These newbanks are regional commercial banks with limited correspondents.

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F. MACROECONOMIC PERFORMANCE

23. The ambitious macroeconomic targets of SAL I were largely unmet in 1989 but program resultswere broadly on target thereafter. Real GDP growth, projected at 2.5% for 1989, was an estimated -2.0%, despite a significant increase in value-added in the agricultural sector (from increased cottonoutput); per capita incomes reached their lowest levels in five years. The rate of inflation, as measuredby the GDP deflator, approximated 3.6%. Reflecting the large contraction in fixed investment, thegross investment/GDP ratio fell to 7.7% as against the program target of 12.6%; the national savingsrate, projected at 3.9%, barely approached 1.7%, the lowest level in several years. The dramaticimprovement in the 1989 current account deficit was largely temporary, reflecting the large contractionof imports, the extraordinary performance of cotton exports, and the accumulation of external arrears.The increase in net official inflows to finance the program and reduction of the trade deficit resultedin a major improvement in the balance of payments.

24. Overall macroeconomic performance improved dramatically in 1990. Largely in response tothe recovery of trade and commerce, real GDP rose by an estimated 4.0% and the rate of inflationremained low at 1.9%. At 11.7% and 3.6% of GDP, respectively, the gross investment and nationalsavings rates showed a major improvement over 1989, although they remained below program targets.As imports returned to more normal levels, the current account deficit widened to the equivalent of8.1% of GDP; with the commercial banks pursuing an extremely prudent lending policy, the netexternal assets of the banking system rose by CFAF 23.5 billion (33 billion in 1989). Preliminaryestimates for 1991 indicate a continuation of the positive trends registered in 1990, with real GDPgrowth of 3.0% and an inflation rate of 1.0%; the 1991 current account deficit deteriorated fuirther,however, reflecting a large expansion of import volumes.

25. Although expenditures were kept below program levels, the overall budget deficit widened tothe equivalent of 10.5% of GDP in 1989, mainly the result of a 27% decline in government revenues.The latter was in turn the consequence of several factors, including the collapse of the banking system,the contraction in aggregate demand, a decrease in transit trade, an increase in illicit imports, and adecline in the efficiency of revenue collection due to intermittent civil service strikes and growing fraud.Current expenditure, on a commitment basis, was kept 4% below program levels, but salary arrearswere nonetheless incurred. Reflecting the non-availability of domestic counterpart funds and the freezein disbursements by some donors in response to the accumulation of arrears, central governmentinvestment expenditure was 15% below program targets. The overall budget deficit was reduced to9.7% of GDP in 1990 reflecting continued restraint on expenditures and an 11% increase in revenue,which, at some 9.6% of GDP, was however still below program targets. At the equivalent of 11% ofGDP, revenue performance in 1991 was broadly in ;ine with program targets, reflecting theimprovement in the overall economic environment, the positive impact of the value added tax introducedin early 1991, as well as improved customs revenue collection. The close to 20% increase in revenuesfacilitated the attainment of a balance in the Government's primary operations6 in 1991. The overallbudget deficit was further reduced to 7.9% of GDP in 1991.

26. The somewhat mixed macroeconomic performance under SAL I are above all the result of theunforeseen social and political crisis during the initial six months of program implementation. Anadditional factor beyond the Government's control was the absence of a banking system throughout 1989

6 Excluding internal and external interest payments, but including the Government's contribution tothe public investment program.

(despite strenuous efforts to attract a private foreign partner).7 This, of course, had a profoundnegative impact on government revenues and the overall economy. Given its transitional nature, theinterim government established in early 1990 demonstrated courage in implementing difficult adjustmentmeasures which subsequently bore fruit in the greatly improved macroeconomic and public financeperformance registered in 1990 and 1991.

27. Sustainability: The major economic and financial restructuring implied by the macroeconomictargets constitute medium-term objectives whose full achievement was not feasible in the relatively shorttime period of SAL 1, which was meant to be only the first in a series of IDA-supported operations forBenin's adjustment efforts. The time-frame for achieving some of these objectives has therefore beenextended to the SAL II period (1991-93). Macroeconomic and public finance developments both in1990 and 1991 were very encouraging, suggesting a lasting response to the implementation ofadjustment measures. The recent profound changes in political and economic orientation, leading toa reinforced consensus on the need for fundamental reform, should contribute to the sustainability ofthe structural adjustment process. Based on these developments, and on the continued rigorousimplementation of the adjustment program, real GDP growth is projected to average 3.4% in 1991-93,thereafter approaching 4%; real increases in per capita income and consumption should become possibleby 1993. However, because medium-term growth is so heavily dependent on cotton, crude oil and re-exports, Benin will continue to be vulnerable to developments in world export and regional markets onwhich the Government's economic policies have no impact.

28. The reduction of budgetary imbalances will require a longer time-span than envisaged underSAL 1. The generation of a current budget surplus, originally programmed for 1990, will not bepossible before 1994; an interim objective of obtaining a surplus in the Government's primaryoperations by 1992 has been agreed upon under SAL II and, based on the encouraging 1991performance, is attainable. Present projections are for a significant deterioration in the external currentaccount deficit in 1991-92 followed by a gradual improvement to the equivalent of 8.5% of GDP by1994; Benin will continue to require significant amounts of exceptional financing (including debt relief)well into the mid-1990's, although these should decline sharply by 1993.

Second Tranche Release

29. A total of 40 broad categories of reform actions were included in the SAL I policy matrix(Annex I), five of which were listed in the Development Credit Agreement as specific conditions forsecond tranche release. These entailed: i) the departure of 750 civil servants by end-December 1989;ii) the liquidation of two enterprises, the privatization of seven others, and the completion of diagnosticstudies for another ten; iii) the abolition of import licenses for goods from the franc zone, the EuropeanCommunity, and the ACP countries; iv) agreement on action plans to (a) implement reforms in theimport taxation and industrial protection systems, (b) replace the domestic turnover tax with a generalexpenditure tax, and (c) adopt a new investment code; and v) the adoption of simplified businessregistration, permit, and reporting procedures, and the amendment of the labor law to simplify hiringand firing.

30. Initially planned for December 1989, second tranche release was approved by the Board in June1990. This delay was mainly the result of unsatisfactory macroeconomic performance in 1989 and ofslower progress than anticipated in fulfilling conditions i, ii, and iv (c) above. The request for thewaiver of condition iv (a), due to the deficient tariff reform study, was granted; eight of the ten

' The SAL I President's Report correctly identified this as one of the main risks to programimplementation.

-9-

diagnostic studies in condition ii were completed, and this condition was therefore deemed to have beensubstantially met, while the other specific conditions were judged to have been fully met. With thesubstantial improvement in revenue performance and the overall macroeconomic situation following theestablishment of the transitional government in early 1990, the Executive Directors agreed that thestructural adjustment program was proceeding satisfactorily and that release of the second tranche wastherefore warranted.

31. Missions visited Benin in November/December 1989 and March/April 1990 to review progresstowards second tranche release. The latter mission concluded that most conditions had indeed beenfulfilled and spelled out in detail the remaining actions required. Additional documentation requestedto confirm implementation of these actions was received in May 1990; the Government was theninformed after Board approval in June 1990 that the second tranche was avaiiable for disbursement, sixmonths later than originally envisaged.

G. IMPLEMENTATION AND MONITORING OF THlE PROGRAM

32. Borrower Performance: The inter-ministerial Commission Nationale du Suivi de l'Applicationdu Programme d'Ajustement Structurel (CNSAPAS), established in 1989, was responsible foroverseeing implementation and monitoring of SAL 1. Chaired by the Minister of Finance, it includedthe Ministers of Planning, Industry, Energy, and Public Enterprises, Commerce, Rural Development,Justice, and Labor and Social Affairs. Due to the prevailing crisis, supervision by the Governmentduring the six months following Board approval was inadequate, but improved significantly thereafter.Day-to-day coordination of the CNSAPAS's various sub-commissions was assured by a technicalsecretariat; the CNSAPAS met regularly during the program period, and beginning in late-1990, thePrime Minister (now President) chaired weekly meetings of the Commission, with the participation ofthe Bank and IMF Resident Representatives. This reflected the significantly increased politicalcommitment to the program after the transitional government assumed office. The Governmentgenerally fulfilled its obligation to submit regular progress reports to the Bank on the adjustmentprogram, although the quality and timeliness of the reporting suggested the need for furtherimprovements, better monitoring, and even closer inter-ministerial/agency coordination.

33. Bank Performance: The first two SAL I supervision missions were relatively brief (Part III);in addition to a change in headquarters staff task management and of the Bank's Resident Representativein Cotonou,8 the second and (longer) third missions were conducted in the midst of the salary-paymentand political crises of October-December 1989. This limited the extent to which the Government'sattention could be focused on the program's structural elements, although the full range of SALmeasures was reviewed during the third mission which overlapped with a parallel IMF mission. Byinforming President Kerekou in December 1989 that continued donor support could not be justified inthe prevailing circumstances, the third mission contributed to the re-establishment of conditionsconducive to the implementation of the program. The fourth (and last) supervision mission whichassessed progress towards second tranche release included the participation of an IMF staff member,and reviewed public finance and overall progress, as well as specific SAL I conditionalities.

34. Disbursement and Procurement: With the exception of some electricity imports by the SocieteBeninoise de l'Eau et de l'Electricite (SBEE) from the CEB in Togo, the bulk of the Credit was

I The Resident Representative departed Cotonou in September 1989. For an interim period betweenNovember 1989 and April 1990 when a new Resident Representative was appointed, the Bank'sRepresentative in Lome, Togo managed the Benin Resident Mission, spending two days a week inCotonou.

- 10 -

disbursed against private sector imports (for which normal commercial practices were found acceptableby IDA at appraisal); there was no use of international competitive biddirg under SAL I, anddisbursements were made upon presentation of proofs of payment. Nonetheless, mobilization of theresources of the first tranche was slow due to serious difficulties experienced by the CAA in amassingimport invoices and customs declarations. With the establishment of new banks in early 1990, thesedifficulties were subsequently overcome, permitting quicker disbursement of the second tranche.

35. Reporting and Auditing: In conformity witl. the Development Credit Agreement (DCA), theGovernment provided reports on progress in implementing the adjustment program prior to supervisionmissions and the required periodic exchange of views with the Bank. The financial audit of SAL Iaccounts for 1989 and 1990 was completed in July 1991 and a qualified opinion submitted to the Bankin October 1991. Given the administrative weaknesses at CAA, including the unsatisfactory accountingsystem, the qualified opinion of the auditors was expected. Contrary to the provisions of the DCA, theCredit accounts were not kept separate from those of CAA; since the latter did not keep copies ofsupporting documentation, the auditors could not verify the justification of import invoices for some33% of SAL I disbursements or rule out the possibility of double usage. The collapse of the bankingsystem made it impossible for some private sector importers to produce satisfactory proofs of payment.In view of this unsatisfactory experience, responsibility for submitting withdrawal applications underSAL II has been transferred from the CAA to the BCEAO, Cotonou.

H. CONCLUSIONS AND LESSONS OF SAL I

36. SAL I was a major breakthrough after many years of a difficult policy dialogue between theBank and the Government of Benin. The core objective of reducing the public sector's role in theeconomy and creating an enabling environment for expanded private sector activity entailed afundamental shift in previous economic policies (para. 10). Initially overshadowed by a profoundpolitical crisis, its implementation resulted in a significant improvement in Benin's macroeconomic andpublic finance performance and in the adoption of major structural reforms in 1990-91.

37. The political crisis was itse:f partly fueled by the failure of the marxist government to deliverthe benefits promised by the adjustment program; that the February 1990 National Conferencesubsequently endorsed the program is evidence of the important role the SAL played in forging adomestic consensus for comprehensive economic reform. Perhaps its most important achievement isthe acceptance, at all levels of Beninese society, of a severely limited role for government in economicactivity. Its most important lessons, applicable for the most part to other country experiences, may besummarized as follows:

(i) Devoting adequate Bank resources to pursuing the policy dialogue with countries in whichprogress is painfully slow can eventually reap important rewards. Over a period of seven yearsBank management remained committed, despite years of frustration, to convincing theGovernment that a fundamental reorientation of its policies was required to lay the basis forsustainable growth. Not only was the Government finally convinced; in addition a nationalconsensus emerged in Benin that structural adjustment was inevitable and beneficial.

(ii) Firmness on the part of donors when a program has gone off track can contribute to theemergence of a better basis for program implementation, and thus to eventual success. Byinsisting to the Beninese authorities in December 1989 that additional donor (including IDA)support was incompatible with the existence of widespread civil servants' and teachers' strikesand the loss of a full academic year, donors (including the Bank) made a positive contributionto the evolution of the program. The concerted and constructive response by donors was animportant element in the peaceful resolution of the social crisis.

- II -

38. In conclusion, initial difficulties in program execution were overcome and permitted a significantimprovement in economic performance once adjustment measures were consistently pursued. Giventhe extent of Benin's economic deterioration prior to adoption of the adjustment program, the progressmade under SAL I in 1990 and 1991 is commendable and forms the basis for deepening the adjustmentprocess under SAL 11. It will, nonetheless, take many years of strong adjustment to remove the deep-seated constraints to growth, particularly in view of the economy's heavy dependence on a few exportcommodities (para. 27).

PART 11. PROGRAM REVIEW FROM THE BORROWER'S PERSPECTIVE

39. The Bank has formally requested that the Government of Benin submit a Program CompletionReport.9 By letter of November 5, 1991, the Government informed the Bank that efforts to producethe Report were underway. The Government's assessment is unlikely to differ from that contained inPart I, since it generally reflects the dialogue between both parties during the SAL I period, and duringthe preparation of SAL II.

9 During SAL 11 Negotiations, through a fax message to the Resident Mission dated September 24,1991, and through a letter from the Resident Representative to the Minister of Plan dated October 1,1991.

- 12 -

PART IlIl. STATISTICAL INFORMATION

Eno=EC TELTABLE

First Mention in Files December 1987

Initiating Memorandum June 1988

Letter Of Development Policy April 1989

Negotiations November 1988

Board Approval May 23, 1989

Credit Agreement May 26, 1989

Effectiveness June 28, 1989

Original Credit Closing March 1990

Actual Credit Closing November 1990

CUMULATIV CREDff DISBUllNM

Amounts (USSmillion)

FY90 FY91

(i) Total Credit Amount 45.0 0

(ii) Actual 21.0 23.1

(iii) (ii) as % of Total 46.7 % 51.3 %

(iii) Cumulave Amount 46.7 % 98.0 % 1/

_ MISSION DATA

Montb/Year No. Of Weeks No. of Persons Staff Weeks

Appraisal June/July 1988 3 8 24

Negotiations November 1988 1 10 10

Supervision I June/July 1989 1 2 2

Supervision E October 1989 2 3 4

Supervision M Nov/Dec. 1989 3 2 5

Supervision IV March/April 3 5 121990

1/ The difference be4ween the original credit amount and actual disbursements is due tofluctations in USSISDR exchange rate over the disbursement period.

- 13 -

S[AFF ERStaff Weekss

._______ .FY88 FY89 FY90 FY91 FY92

LENP 53.8 6.1

LENA 2.7 51.3

LENN . 26.9 . . l

SPN _ 5.0 43.6 .7 ..._ l

PCR I 8.0

TOTAL STAFE INPUTS: 198.1

- 14 -

(US$ equivalent)

07/21/89 3,S10,511.46

07/21/89 1,306,938.54

08/30/89 7,252,946.52

11/06/89 2,568,632.45

11/06/89 -1,224,234,74

07/21/89 3,510,511.46-

07/21/89 1,306,938.54-

07/21/89 3,510,511.46

0712i1l89 1,306,938.54

12/04/89 2,356,255.50

12/04/89 1,305,001.23

12/22/89 1,524,298.54

ITOTAL CY_ 21,040.818.98

07/17/90 1,061,766.72

07/17/90 861,260.37

07/17/90 1,169,845.01

07/17/90 1,105,029.81

07/17/90 1,110,635.54

07/17/90 1,268,730.45

07/17/90 1,608,430.76

07/17/90 1,521,837.47

07/25/90 4,367,313.69-

07/25/90 8,734,627.39

08/41/90 1,704,952.25-

08/21/90 3,409,904.50

08/31/90 769,378.71-

- 15 -

RATE 1 2 AMOLNT(US$ equivalent)

08/31/90 1,538,757.42

09/19/90 301,918.13-

09/19/90 603,836.26

09/25/90 1,811,540.13-

09/25/90 4,368,218.93

10/02/90 268,798.16

11/05/90 3,406,325.77

TOTAXL CY90 23,082,901.65

I.L EYDR C URJ 44,131,720.63

- 17 - Attachment I

Intemational Development Association Paae 1 of 15

FOR OFFICIAL USE ONLY

FOR .or consideration on

EXECUTIVE T7hursday, June 28, 1990

DIRECTORS'MEETING

IDA/R90-110

FROM: Vice President and Secretary June 20, 1990

BENIN: Structural Adjustment Credit (Cr. 2023-B£N)Second Tranche Release - Waiver of Condition

Attached is a memorandum from the President entitled "Benin --

Structural Adjustment Credit (Cr. 2023-BEN) - Second Tranche Release

Waiver of Condition" daced June 20, 1990.

In view of the significant political and economic changes in Benin

which had led to the resumption of the adjustment program this item is

scheduled for discussion at the Executive Directors' meeting to be held

on Thursday. June 28. 1990.

Questions on this document may bs referred to Ms. A. Sayeh

(ext. 34719).

Distribution:

Executive Directors ana AlternatesPresidentSenior Vice PresidentsSenior Management CouncilVice Presidents, IFC and MIGADirectors and Department Heads, Bank, IFC and MIGA

This document has a restncted discribution and may be used by recipients only in the performanceof their ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.

Attachment I- 18- Page .2of 15

FROM: The President June 20, 1090

BENIN -- Structural Adjustment Credit (Cr. 2023-BEN)Second Tranche Release - Waiver of Condition*

1. As provided for in Section 3.01 of the Development CreditAgreement for the Structural Adjustment Program (Cr. 2023-BEN),representatives of the Association and the Government of Benin helddiscussions in Cotonou in November/December 1989, and in March/April 1990to review progress achieved in implementing the structural adjustmentprogram supported by the credit approved in May 1989. Additionaldocumentation requested by the staff was received in May 1990.

2. This memorandum summarizes the conclusions of the mid-termreview, and requests the approval of the Executive Directors for thewaiver of one of the second tranche conditions. It concludes thatoverall progress under the structural adjustment program was initiallyconstrained by a deteriorating public finance situation, as well as bymajor political and social developments, but that the adjustment programis now proceeding satisfactorily, and that the specific conditions forthe release of the second tranche have been substantially met.

- 19 - Attachment IPage 3 of 15

1. BACKGROUND

3. The"Government of Benin and the Association held discussions inCotonou in November/December 1989, and in March/April 1990 to reviewprogress in implementing the structural adjustment program. The programis being supported by a US$ 45 million equivalent Structural AdjustmentCredit from IDA (Cr. 2023-BEN) and by co-flnancing and coordinatedfinancing totalling US$ 121.8 mllion from other multilateral andbilateral donors, including the IM. Amidst a severe economlc andfinancial crisis, including an average 0.3 percent decline in real GDPbetween 1985-87, the collapse of the banking system and the accumulationof a significant volume of domestic and external arrears, the Governmentformulated a program of economic and financial reforms with theassistance of the Bank and the If. A National Adjustment Commission wasset up in Nay 1986 to flrst prepare and subsequently implement theadjustment program; chaired by the Minister of Finance, and including theMinisters of Planning, Justice, Industry and Energy, Rural Development,and Labor and Social Affairs among its members, the work of thisCommission and of its technical sub-commissions allowed the Government toimplement a large number of corrective measures prior to Board approvalof the SAL.

4. The program agreed to was designed to raise the real GDP growthrate over the medium term to about 3 percent annually within a viablemacroeconomic framework, and encompassed the following measures toachieve that objectives i) reform the current budget and general publicsector management; ii) reinforce the quality of investment planning; iii)deepen and amplify the public enterprise sector reform already underway;iv) restructure the banking system; and v) reform trade policy andderegulate markets. This ambitious program reflected a fundamentaldeparture from the previous economic policy orientation involving statedomination of the economy's productive base and a highly regulated systemthat discouraged private enterprise. It also constituted theconcretization of the Government's resolve to abandon piecemealcorrective measures and to embrace a comprehensive program to address themajor economic and financial imbalances afflicting the economy. As suchit represented the culmination of years of a slow and often difficulteconomic policy dialogue betwnen the Government and the Bank. Theprogress made ln advancing this dialogue was also reflected in Benin'sfirst Policy Framework Paper which formed the basis for the IMF's first-year SAP approved in June 1989.

S. This memorandum summarizes the overall progress achieved underthe structural adjustment program and reviews the actions taken by theGovernment to meet the specific conditions for the release of the secondtranche, as spelled out in para. 27 below.

II. OVERALL PROGRESS UNDER THE STRUCTURAL ADJUSTMENT PROGRAM

6. Despite the Government's strong commitment to the economicreform measures, the program very quickly encountered serious

- 20 - Attachment I- 20- Paqe-4-of 15

difficultioe between June 19' and February 1990, in the form of largerevenue shortfalls leading to a renewed fliancial crisis and thus aninability to implement key program components. In short, the Governmentwas unable to strengthen resource mobilization and eliminate waste andcorruption. Instead, both domestic tax and customs revenues declinedthus undermining the financial basis of the entire program. Because thecustoms administration was unable to amass the necessary import invoicesand customs declarations required for disbursements, only about half ofthe quick disbursing external financing comnitments for 1989 could bemobilized. As a consequence a significant level of additional domesticand external arrears were incurred, the public investment program couldnot b executed as planned, and the banking system restructuring wasdelayed. The continued absence of a functioning banking systemthroughout 1989 and the reduction ia incomes of large segments of theurban population due to arrears in salary payments to civil servants andteachers adversely affected the performance of the secondary and tertiarysectors; thus real GDP fell by 1.4 percent in 1989 as against the programtarget of 2.5 percent growth.

7. By the time the SAL was approved by the Board, the Governmenthad already incurred salary arrears from 1988 totalling three monthswhich rose to six months in December 1989. By then the situation hadreached crisls proportions when teachers who had been on strike for mostof the year were joined by civil servants, bringing the governmentadministrative apparatus to a virtual standstill; an entire school yearhad been lost and another one was at risk. From initial demands for theclearance of salary arrears, widespread popular discontent vith the one-party regime of the People's Revolutionary Party of Benin then escalated.The issue had become one of governance, and it was necessary to restorethe consent of the people before the crisis could be resolved. InDecember 1989, the authorities decided that Marxism-Leninism and thesingle-party control system were inconsistent with economicliberalization, private sector promotion and efficiency in the conduct ofpublic affairs, all of which were required by the country's structuraladjustment program. Following this decision, donors made availableemergency financing to clear 1989 salary arrears. A National Conferencewas called to determine the country's political future in February 1990.It established a one-year transitional Government, and a new primeminister and cabinet were appointed in March 1990. A new constitution isbeing drafted and preparations are underway to hold multi-party electionsin early 1991.

8. The population's response to these developments has beenenthusiastic, as they were fully ir.volved and represented in the NationalConference; by end-March 1990, schools had re-opened and civil servantshad returned to work, despite the fact that the three-month salaryarrears from 1988 remain unpaid. The new transitional government, headedby Prime Minister Soglo, a former Bank Executive Director, is convincedof the necessity of continuing the implementation of the adjustmentprogram, which proved to be a unifying theme during the NationalConference. He and his Government consider the Bank as a full partner inthis effort. Other donors also regard the Bank as the central

Attachment I- 21 - Page 5 of 15

coordinating agency for their support, which, based on the track recordof the new GoVernment, they have demonstrated a willingness to continueand expand. Siace the installation of the new Government, themacroeconomic and public finance situation has shown a markedimprovement, and significant progress has been achieved in fulfilling thespecific conditions for the releses of the second tranch.t thesubstantial increase in revenues since Harch will be further buttressedby additional technical assistance vhich donors have agreed to provide.Four new commercial banks are now operational and negotiations areunderway wz n a major French bank to establish a branch in Cotonou. Theunquestioned legitimacy of the transitional Government and the widespreadpopular support it enjoys should facilitate the implemntation ofotherwise politically difficult adjustment measures.

9. Significant amounts of external fLnanci3l assistance will beneeded to permit the smooth implementation of key components of thoadjustment program and to maintain the Government's credibilLty duringthe critical transitional period; the Bank is playLng a central role inmobilizing additional donor support to this end. In this connection.other donors whose funds would normally be tied to the release of thesecond tranche have provided urgently needed resources in anticipation ofimminent action on the Bank's part; thus at the Bank-sponsored informaldonors' meeting in April 1990, donors provided additional emergencyfinancial support in recognition of the efforts undertaken to date. Atthe SPA meeting held in Paris last week, donors agreed to providefinancing for the structural adjustment program through 19903 anessential element in the 1990 financLng package is IDA support from thesecond tranche of SAL I and the first tranche of a second SAL.Negotiations on the Second Policy Framework Paper and on the Df)'ssecond-year SAP, and the pre-appraisal of the proposed SAL 11 arescheduled for end-June 1990; some donors, and the French in particular,are conditioning their further support on the successful conclusion ofthese discussions.

Public Sector Reform

10. Restoring the viability of public sector fLnances was recognizedto be the essential ingredient in re-establishing macroeconomic balanceand improving the allocation of resources: the program sought toaccomplish this objective by: (i) strengthening resource mobilization;(ii) reducing and restructuring current expenditure and taking steps tocontain 1ts subsequent growth; and (iii) increasing expenditures onmaterials and supplies especially for maintenance, agricultural extensionservice, education, and health.

11. Drawing on a 1985 IM@ report on the fiscal systems the Governmenthad put in place a number of measures aimed at improving resourcemobilization prior to Board approval of the SAL. In 1987 the main importtariff (tale fiscale d'entree) was raised on a number of products and theofficially fixed bases used to tax some products were replaced withc.i.f. values; an advance partial payment requirement was introduced forbusiness profit taxes. These measures were followed by the removal of

- 22 - Attachment IPaqe 6 of 15

quantitative restrictions and prohibitions on imports and theirreplacement by import taxes in July 1988. To improve taxadministration, a number of actions were taken in December 1988,includingt installation of the first set o microcomputers to aid recordkeeping; updating the valuation and assessment methods for domestic andexternal taxes; and the introduction of a program of continuous in-service tranining. In March 1989 the statistical tax on imports wasraised to 5 percent and a 3 percent downpayment on imports against profittaxes was introduced. A Fund technical assistance mission in October1988 produced a comprehensive review of tax policy and tax and customsadministration, which ultimately served as the basis for the fiscalreforms under the Structural Adjustment Program. A key measure envisagedthereunder concerns the transformation of the internal turnover tax intoa general expenditure tax applicable to both domestic goods and servicesand to imports. The introduction of this tax, initially planned tocoincide with the 1990 budget, has, however, been postponed to 1991 dueto the longer preparatory period needed for such a fundamentalrestructuring of the tax system and to the need to coordinate it with themore thorough reform of the main revenue source, import taxes, nowplanned for the second phase of the adjustment program (see below); boththe Bank and the IMP recognize that the original timetable for theintroduction of the general expenditure tax was overly ambitious in viewof the adainistrative requirements involved,

12. Despite the Government's efforts to implement the measures aimedat improving resource mobilization, revenue performance was, until Harch1990, the most disappointing aspect of the structural adjustment program.This was attributable to the decline in economic activity in thesecondary and tertiary sectors, the contraction of imports, the absenceof new commercial banks throughout 1989, and, as indicated above, to thesignificant level of inefficiency and corruption which existed in thecustoms administration; the disruption in the government administrativemachinery, particularly from December 1989 through February 1990 alsoadversely affected revenue collection. Thus compared to the programtarget of CFAF 45.8 billion, cash revenues totalled only CFPA 30.9billion in 1989, implying a revenue/GDP ratio of 7.1 percent, as againstthe projection of 9.2 percent. Following the resolution of the politicalcrisis earlier this year, the establishment of new commercial banks, andcivil servants' return to work, there has been an impressive pick-up inrevenues, which appears to be sustainable. Thus from only CFA? 1.7bllion in January, April and Hay treasury revenues rose to CFA? 2.8 and3.6 billion, respectively, the highest recorded since approval of theSAL. The Government is thus in a position to pay salaries on a currentbasis (as has been done since March) and is projected to generate acurrent surplus by 1993. Donors have agreed to finance additionaltechnical assistance on an emergency basis to reinforce revenuecollections by restructuring the Ministry of Finance and strengtheningthe customs admLnistration. The Government recognizes the criticalimportance of a sustained increase in revenues for the success of theadjustment program, and has also reiterated lts commitment to recoup forthe treasury the proceeds of illicit wealth acquired by dignitaries of

- 23 - Attachment IPage 7 of 15

the former regime through the work of the Coumlseion do Verification desBiens which vill be supported by external technical assistance.

13. Among the key means of achieving the SAP's objective of reducingand restructuring current expenditures were the reforms designed in thearea of public emplovment and pal. Prior to the introduction of the SAP,personnel expenditures had already been reduced to CIA? 42 billion in1988 from CIA? 45 billion in 1987 as a result of the implementatLon ofthe following m:asures: 1) use of the results of the 1986 civll servicecensus to eliminate payment irregularities and to reinforce theapplication of retirement regulations; 2) ending the automaticrecruitment of all new graduates into the civil servLce; and 3) achievinga 10 percent reduction in the wage bill by abolishing housing allowancesfor civil servants and the military. The net reduction in the wage billof CFA? 3 billion was smaller than would otherwise have been th. case duetc the regularization of the status of about 1200 employees whose wageshad to be adjusted upwards. Under the SAP the aim was to reduce thecivil service to about 41.000 employees by 1991, with expenditures ofaround CrAF 37 billion, compared to 47.000 employees and personnelexpenditures of CPAF 45 billion in 1987. This would be accomplishedthrough the normal retirement of 2,000 civil servants who had attained 55years of age or 30 years of service and through the departure. on avoluntrary basis of another 4,000. Personnel expenditures, were reducedby 10.7 percent from CFAF 42.0 billion in 1988 to CIAP 37.5 billion in1989, due to the combined effect of normal retirements and otherdepartures, the departure of 751 employees under the Programe de DepartsVolontaires (PDV), reduction in military personnel expenditure.suspension of household allowances, a 50 percent reduction in otherallowances, and a 50 percent reduction in the lncrease that would haveresulted from regularization of the status of some civil servants. Thewage bill is projected to decline further to CFA* 35.9 billion in 1990due to the combined effect of normal retirements and assuming that anadditional 3000 departures under the PDV can be financed.

14. In the area of public administration, the Government has since1988 taken a number of actions with the ultimate objective of modernizingand adapting the public administrative apparatus to its new role as anefficient provider of core public services that support future privatesector-led growth and development. Thesc have includeds 1) usingcomputer records to prepare the profile of the civil service in terms ofsize and distribution by ministries and other agencies, as well asskills, grades, and wage levels; and 2) reviewing the basic personnelmanagement texts to identify provisions that need to be changed to makethe civil service structure lighter and easier to manage. In the nextphase of the SAP the following will be accomplished s 1) analysis of thestructure of the Administration and Ministries' assignments andpreparation of revised organigrame where necessary; and 2) formulation ofa new staffing plan by size, functions and skills, accompanied byproposals for in-depth reform. Given the unsatisfactory nature of thestudy of these issues that was completed by exteral consultants in 1989,and the complexity of such an operation, the more In-depth analysisrequired is now being initiated.

24 Attachment IPaae 8 of 15

15. To improve recurrent cost funding, and to complement the reform.already being introduced to this effect in the area of publicinfrastructure maintenance and services under other IDA-financed projectsin Benin, the SAP included measures relating to utilities and the socialsectors. Prior to approval of the SAL. utility consumption by civilservants, previously paid for from the budget, was transferred to therecipients and financed from fixed monetary allowances included in theirsalaries. To finance health and education sector non-salary recurrentexpenditures, a Social Fund was set up in the context of the IDA-assistedHealth Services Development Project; donor contributions were to bechannelled through the Fund to support these sectors. As a consequenceof the public finance difficulties and administrative disruptions in1989, however, the effectiveness of this project and thus ofdisbursements from the Social Fund were delayed; the year-long closure ofeducational establishments in 1989 would, in any case, have made itimpossible to finance the education sector expenditures envisaged. Sincethe re-opening of schools and civil servants, return to work in March,disbursements from the Social Fund have accelerated and now total CFA?0.5 billion. As a means of improving non-salary recurrent expenditure

allocations for the health and education sectors, budgetary requirementswill continue to be prepared on the basis of detailed work programs thatexplicitly show the implied expenditures for material and supplies, aswas begun in 1989.

16. Significant progress was made in reforming investmentprogrammina prior to the adoption of the SAP. The Government hasattempted to build on this foundation by keeping the general frameworkand the individual projects consistent with the objectives of theadjustment program. Given the overall macroeconomic and public financesituation in 1989, however, the 1989 portion of the three-year rollingpublic investment program agreed with the Bank in the context of the SAPcould not be executed as planned. With insufficient revenues to financecurrent expenditures, Government counterpart funding could not beobtained, while the accumulatLon of arrears to a number of multilateralinstitutions resulted in a freeze on disbursements to importantdevelopment projects, and the deposit3 of public enterprises and local

government agencies frozen in the banking system could not be madeavailable to finance their investment expenditures. Thus compared to theprogram target of CIA? 48.9 billion, the 1989 investment program totalledonly CPA? 36.3 billion, implying a public investment/GDP ratio of 6.8percent as against 7.7 percent forseen under the SAP. The review of the1990 public investment program was satisfactorily completed with the

Bank, but indicates the need for further improvements in the programmingprocess.

17. Concerning public'enterprise reform, significant progress hadbeen achieved in improving the institutional framework, liberalizingpricing decisions, and rationalizing the sector prior to the adoption ofthe SAP, in the context of the IDA-financed Public EnterpriseRehabilitation Project. The SAP sought tO pursue the objectives ofreducing the sector's financial losses tnd increasing its contribution to

Attac&nent I- 2S - Page 9 ort

growth through an appropriate minture of divestiture and restructuringefforts. based on the overall portfolio review completed in July 1988.

Two enterprises were identified for liquid&tion. seven for privatization,

and ten for in-depth diagnostic studies. In line with the action plan

agreed to undeg the SAP, the dec6eeo for the liquidation of l'Office

Beninois d'ELploitation des Produite de l'Elevago at de Peche (OBEPEP)and l'Office Beninois d'Informatiquo (OBI) were issued on January 9, 1989and January 25, 1990, respectively. However, the Government has

presented a convincing case for temporarily retaining the slaughterhouse(the only one in existence in Cotonou), which was previously part of the

various OBEPEP holdings, until an appropriate solution to its ownershipand management in the long-term io found; a study to form the basis forthis determination is now being initiated. Bids for the seven

privatizations have all been issued, on November 24, 1989 for the Societe

Beninoise de Haterlaux de Construction (SOBEMAC) and on January 2, 1990

for the six provincial transport companies. The only offer received sofar for SOBEMAC has been found to be unacceptable, and the Governmentwill re-issue bids to privatize this enterprise in its clearly distinct

parts, which could result in more attractive offers. As of end-Hay 1990,

five offers had been received for the transport companies, and the

Government is now in the process of evaluating them.

18. Of the 10 diagnostic studies planned, 8 have been completed and

the Government has begun the process of implementing the recommended

solutions; the tranche release condition is therefore deemed to have been

substantially met. The privatization of one of these enterprises,Manufacture des Cigarettes et des Allumettes (MANUCIA) was completed onHarch 5, 1990 with the signature of a contract with RothmansInternational Tobacco (UK) for the sum of CPAF 1.7 billion. The

privatizations and other solutions recommended for the remainingenterprises will be pursued in the next phase of the adjustment program.

The diagnostic study for SITUX (textiles) will not be completed before

end-1990 as the enterprise only began operating with Chinese assistance

in late 1989 and the financial data necessary for the study were

therefore not yet available. The diagnostic study of the Societe

Sucriere de Save (SSS), which is jointly-owned by Benin and Nigeria, has

been delayed for a number of reasons, including some degree of reluctance

on the former Government's part. The latter, with the concurrence of the

Nigerians, had proposed awarding a lease-management contract to thecompany that had been running the SSS installations since 1988. TheBank, however, expressed strong reservations about this contract and has

maintained that a full diagnostic study remains necessary. The new

Government has made a decision to not negotiate this contract and to

terminate the presence of the company in question at the SSS, and, with

Bank-financed technical assistance, has recently completed a study of

existing conditions there, with a view to designing an interim

maintenance plan until a longer-term solution is put in place. It has,

in addition, also submitted to the Bank satisfactory terms of reference

for the full diagnostic study uhich will be completed in the course of

1990. The Government ls fully conmitted to finding an efficient solution

to the problems of this important enterprise and has informed itsNigerian partners accordingly. The Government plans the furthsr

- 26 - Attachnent IRacre 10 of 15

divestiture, through privatizations or liquidations, of an additional tenenterprise$ by *nd-1990.

Banking System Reform

19. The virtual collapoe of the Beninese banking system in late 1987was a critical factor in the Government's decision to embrace acomprehensive adjustment programs a nuaber of corrective measures whichit had implemented before thon were patently incapable of providing asolution to the fundamental problems afflictlng the state-owned banks,including the large share of non-porforming loans in their balance sheetsand their illiquidLty. By end-1987 the economy's rediscount facility atthe Central Bank had been exhausted and the commercial bank was unable tohonor clients' requests for wLthdrawals or ezternal transfers, andtemporary facilities outside the normal ceiling had to be granted twice(in January and August 1988). With the assLstance of the Bank and theIM?, the following program of actions was designed with a view toachieving the longer-term viability of the banking system: 1) liquidationof the Caisse Nationale de Credit Agricole (CNCA), already underway, andthe reorganization of the rural credit network; 2) the creation of a newcommercial bank with majority share held by a foreign private bankingentity; 3) the liquidation of the Banque Comerciale du Benin (BCB) andthe Banque Beninoise pour le Developpement (BBD); 4) reschedulLng of thebanks' debts to the BCEAO vith the Government on terms compatible withthe public finance situation: and 6) general reinforcement of thesupervisory and regulatory framework of the banking system.

20. The liouidation of the CNCA has proceeded as planned; theprovisional closing balance sheet at end-December 1989 suggests that theGovernment would need to make up for a probable insufficiency of assetstotalling CPAP 1.8 billion. The completion of the liquidation is nowonly dependent on how quickly a solution to the problem of an appropriatestructure for theoioLnt recovery of the defunct banks' assets can beagreed upon. This issue is expected to be resolved by end-September 1990when arrangements for the establishment of the proposed Cellule deRecouvrement would have been finalized. The reornanization of the ruralcredit network is now underway and ls being assisted by the IDA-financedaural Savings and Loan Rehabiltation project approved by the Board inJanuary 1990. The project provides fort (i) the institutional reform andrestructuring of the existing saving and loan cooperatives: (ii)restoration of cooperative members' savings and equity; (iii)liberalization of interest rate polLcies on savings and loans; (iv)training of cooperative administrators and staff: and (v) establishmentof an accounting and financial control system. Its implementation willassist in transforming the rural credLt network lnto a better managed,more efficient, and financially viable system run lndependently ofgovernment administrative structures.

21. After a long search for one or more private partners toparticipate In the establishment of new comercial banks, four banks arenow operational and have collected a sizeable amount of liquid deposlts;

27 -AttachTmnt IPage 11 of 15

although they &ppear to be treading cautiously in the area of credit forthe time-being, they are nonetheless already providing essential bankingservice@o The modalities for the incentives necessary to place these newbanks in tho position to expand credit will be worked out over the nextfew months. The Government remains convinced that the establishment of abank of intenuational stature such as the Banque Nationale de Paris (BNP)would still be desirable. especially to assure adequate financing ofBenin9s export trade. Although it has expressed serious reservationsabout a Benin operation, the BNP is negotiating to open a branch inCotonou if it can obtain the support of the IFC and the Caisse Centralede la Cooperation Economique (CCCI). The existence of the new banksprovides the necessary conditions for accelerating the process ofliguidating the BCB and the BBD, and the L.W Government is committed todoing so, while ensuring that an appropriate mechanism is established tocontinue the recovery of their outstanding bad debt; as noted in para. 19above, the latter issue is expected to be resolved over the next fewmonths. Measures will also be taken to ensure that the new depositscollected by these banks in 1989 remain liquid in the process of settlingtheir liabilities.

22. Concerning the reimbursement of depositors (both the privatesector and public enterprises) whose accounts were frozen in the bankingsystem9 the progress achieved was significantly less than expected, dueto the public finance difficulties, the shortfall in external assistance,and delays in establishing the reimbursement fund. Thus of the CFA? 13.5billion programmed to be reimbursed in 1989, only CPA? 419 million wasactually effected; the pace of reimbursement has hpwever accelerated witha total of CPA? 1.9 billion having been paid out jiiJanuary-May 1990.The first round of reimbursements (a total of CFAP 2.2 billion which isalready available) is expected to be completed by end-June 1990; in all,a total of CFAP 10 billion is planned for the reimbursement of depositorsin 1990. Donors would therefore need to make available resourcessignificantly in excess of the CFA? 6.0 bllion now planned under thesecond round in order to attain this objectLve and to thereby facilitatean increase in economic activity, the implementation of importantdevelopment projects, as well as the rehabilitation of the CaisseNationale d'Epargne (CNE) and the Centre des Cheques Postaux (CCP) whichare currently experiencing serious difficulties.

23. Agreement had been reached prior to Board approval of the SAL onthe consolidation of CPA? 37 billion in Government obligations to theBCEA0 and on a timetable for the payment of the remainder; subsequently,in September 1989, agreement was also reached on the consolidation ofanother CPAF 4.4 billion in favor of the BBD. Of the CPA? 14.2 (bothinterest and principal) scheduled to be paid in 1989, only CPA? 5.5billion was actually paid, mada possible by the use of IN? SAF resourcesof CFA? 2.7 billion and assistance from the CCCZ. In view of the largefinancing gap for 1990, discussions have been initiated with the BCEAOwith a view to the further consolidation and rescheduling of itsremaining claims on the Government (CPA? 9.5 billion due on behalf of theBCB alone), on terms at least as favorable as those obt4ined earlier, aspart of the coordinated donor assistance effort.

28 - Attachmient I-Pave 12 of 15

24. In the area of reinforci_n evisor and regu1a!orframmeok of the ban1.in s e the creeation of the supra-nationalCommission de Supervision Bancaire, under the ch imenship of theGovernor of the BCEAO, has been a major pooitive developmnt. ThinConmission will have the power to enforco decisions arrived at in thecourse of bank supervision, including banh closures; the pseiouesituation where such recomendations could be effectively ignored bynational governments will thus no longer obtain.

Trade Policy Reform and Deregulation

25. Although the Second State Plan had declared the Government'sintention to have the private sector play a greater role in the economy,concrete action to encourage this had, before the adoption of the SAP,been of a limited nature, and includeds (i) abolition of the statemonopoly on the import of most consumer goodsg (ii) initiation of pricingpolicy reform by shortening the list of goods for which prices are setadministratively and easing the procedures for ex-post control of others;(iii) permitting private agents to operate in food crops; and (iv)abolition of quantitative restrictions and prohibitions on imports ofselected goods produced locally. The SAP sought to go beyond thesemeasures and to give real impetus to the small and medium enterprisesector through a series of trade policy reform and deregulation measures.

26. In the area of trade policy reform, the Government had, in July1988, already removed quantitative restrictions and prohibitions on allimports and replaced them with tariffs. The second stage of the reformwas to involve the evaluation of the framework of industrial tariffprotection and import tazation and to devise measures to rationalize thestructure of industrial incentives in a manner consistent with theprogram's revenue objectives. However, the major shortcomings of thestudy produced by outside consultants on this issue have delayed theexpected progress in this area; the study's lack of operational contentand of country specificity, in addition to the inadequate treatment ofthe issue of simplification and rationalization of the structure oftariff rates, provide an insufficient basis for the complex task offundamentally reforming Benin's tariff and industrial protection systema.The Government remains comitted to the needed reforms and shares theview of the Bank and the IMF that a more thorough analysis of the issuesis required. To this end a new study will be completed by end-September1990, and an action plan agreed upon by end-November 1990, so that thetariff reform can coincide wlth the 1990 budget. In view of theseefforts, and of the expected fulfillment of the condition by end-1990, wepropose that condition 4, item (a) be waived to permit the release of thesecond tranche.

27. The liberalization of food crop marketins and of trade insecondary cash crops put into effect in December 1988 was deeigned topromote the development of food crops and to stimulate the growth of

- 29 - Attach¶nent IPaae 13 of 15

secondary cash crops by allowing greater private Sector involvement inthese areas..- As a means of Antroducing greater ibLilty into the

business enviroment and facilitatina the.functinint of markets, theGovernment had, prior to approval of the SAL, abolished prLce controlsfor all goods except a limited number of essential coodities (7 asagainst 25 previously). The Government has since then made significantprogress in thls area. Thus the legislation concerning businessregistration, licensing and reporting requirements, and the hiring andfiring of labor have all been revised and the relevant texts vere adoptedby the Haut Conseil de la Republique on Hay 7 and 8, 1990g these willhave the effect of easing the prewLoucly cuabersome arrangemeats andallow ths greater flexibilitLy in labor management necessary to encouragelncreased private sector involvement in the economy. The revosedInvestment Code, adopted oan April 30 1990, is scheduled to go into effectby end-June 1990 and is neutral as between public and private enterprisesa* well as regards size and factors of production; its prlvileges are

designed to decrease over time and their application to be moretransparent. The comblned effect of these reform will be to create an

envLronment more conducive to domestic and foreign private investmentswhich can subsequently be built upon.

1II SUMMARY OF STATUS OF TRANCEZ RELEASE CONDITIONS

28. The specific conditions for the release of the second trancheand tLeir status are summariLed below.

0 Condition 1: Progress as scheduled in the implementation of theBorrowers's civil service reduction program for calendar year 1989.Fully met. (para. 12)

Condition 2s Progress as scheduled in the implementation of theBorrower's parastata-l restructuring program, adopted in December 1988.Substantially met. (paras. 16-17)

Condition 3: Abolition of import licenses for goods importedfrom the Franc zone, the European Community and the ACP countries. Fullymet. (para. 26)

Condition 4: Agreement between the Borrower and the Associationonu Item (a) an action plan to implement reforms in the Borrower"s importtaxation and industrial protection systems; will be delayed, and waiverproposed, in view of the unsatisfactory nature of the consultants' studyon tarlff reform and industrial protection expected to provide the basisfor the action plan; at the Government's and the Bank's request, the

study will be redone by end-September 1990 and an actLon plan agreed uponby end-November 1990 (para. 25)1 Item (b) an action plan to replace theBorrower's domestic turnover tax with a general expendLture tax; Fullymet (para. 10); and Item (c) an action plan for the adoption of the new

Investment Code of the Borrower, providing for digreGssive prlvileges,applicable to public and private enterprises alike. Full met. (para. 26)

Attachment I-30- Page 14 of 15

Condition 5: Enhancing of the private investment climate inPeople's Republic of Benin byt Item (a) adoption of simplified businessregistration, permits and reporting procedures (para. 26); Fully met; andItem (b) amendment of labor legislation to simplify hiring andtermination of employment; Fulls met. (para. 26)

IV. Release of the Second Tranche

29. The former Government of the People's Republic of Benininitiated a fundamental reorientation of its economic policy and embraceda comprehensive adjustment program when it recognized that the country'seconomic and financial imbalances could not be addressed throughpiecemeal reform measures and that it was necessary to significantlyreduce the public sector's role in the economy. That Government has nowbeen succeeded by a transitional administration more strongly committedto continuing the adjustment process and putting Benin on the path toboth economic and political liberalization. The structural adjustmentprogram has proved to be a unifying element in Benin's peacefultransition from a one-party Marxist-Leninist regime to a multi-partydemocracy, and the future elected Government is likely to also embraceit.

30. The Beninese economy, however, remains in fundamentaldisequilibrium and will require a sustained effort to stabilize publicfinances, restructure the banking system, and deregulate the economy inorder to remove disincentives to private sector investment: ln thisconnection, Benin will continue to require significant levels of externalassistance. The public finance situation, recognized to be fragile whenthe SAL was approved, deteriorated further in the face of the economicdownturn, significant revenue shortfalls and the administrative collapsewhich took place in the latter part of 1989. since the installation ofthe interim administration, however, there has been a substantialimprovement in revenue performance and in the overall macroeconomicsituation. The present Government views the Bank as its major partner indesigning an appropriate strategy to deepen the reform process and hasbegun the task of preparing the follow-up adjustment operation requiredto accomplish this objective. Given the extremely difficultcircumstances under which it assumed power. the new Government has madeconsiderable progress in implementing the adjustment program and inmeeting the conditions for release of the second tranche. Release of thesecond tranche would constitute evidence of the lank's wlIlingness toassist this Government in relaunching the structural adjustment programby mobilizing available financing to implement key program components,and would also permit it to maintain its credibility in the criticaltransitional period.

31. On June 22, 1989, the Fund Board approved lenin's SAP program,and the first tranche, equivalent to 20 percent of quota (SD& 6.28million), was released, Despite protracted political and socialdifficulties in 1989, IMP staff consider that the Beninese authorities

Attachment I-31 - Page 15 of lS

have made commendable progress in implementing most of the structuralreforms agreed to in the context of the SA? program. Revenue performancesince March 1990 has improved signicantly, and establishes a good basisfor the negotiation of the second-year program which will release thesecond tranche, equivalent to 30 percent of quota (SDR 9.39 million);these discussions will take place beginning end-June 1990.

V. Recommendation

32. I recommend that the Executive Directors approve the waiver ofcondition 4(a). Upon such approval, the Association will advise theGovernment of Benin that the second tranche of US$ 22.5 million equivalentof the Structural Adjustment Credit is available for disbursement.

Barber B. Conable

- 33 - Attachment IIPaqe 1 of 8

IS-Ap W Sect. a1" I Flrt Structural Adjutmont Progf",

Polley Ame I laus/Obemetivee Reefrs Actlons I Reform ActionsI I I_______________ Already Take I To Be Takeo

1. Y"lblle Fl1m

*. u ' of fitS;Incrooo In the .ate - ree an t o &lo pla=1111atle ebII I aotte scal dlentree; for traneforat en theMoblll**lz toblolse et nue _ *11tr d'stfann@teS^"S

Sutae Reourc - Revereal ft. mercurial IC : h1"W i afe aetaireearea" to e.t.f baes for tlng, chiffre d'efftairel soo

s lmporte; inceeaWmercurial base for ethers;

-Institution ef reuiremnt R evi and updote of Custeoto pay advance Ietallments ad d Ise to ad nen domestie buetnse taxes In vl eassessmet entheo a ihi thy are Vse sii o e prcedue-0O ( I) sh o nf oect - Agr.MMnt so so gotten plea

toaie I relation wiath foer application of reoom end-ldustri Ioetn study) atine of the iwort taxation(O btobe 1 I); ud; s-reperation and adotion ofa progras of in-sericetraining for Customs OceicTax Dogartoenta cad freasuryRevenue Service

b. Public Employment Civil Service Rteorm - Conduct of census of elvilcad Pay service (19) I cad urn of

data as new b3e for budgetingpersonnel oxponditum (1900);- Offitcil en to autucilerecrultmet of all graduates;

MOSU)'nlonof wage increa-te following proeotions and

r reclassifleation (1900);-Oncrease In longth of timbetee vlstte for studentsabroad free 2 y"ers to - Reducio b IM of beelcslary of pub serviceofficials on study leave;

-Abelitiol of housing ellow-

try squival et to 101 ofbeasi salary; (March 19O);

-Review of precet personne - Jlesentati of civilmanageMet regulations; service woluntary searetloi

(Ocobr 1 I) pregrem me

- Finalization of list of API - Nodofinitios of Functlonesas of 12/81/07 with their and pecitiboe, and preperattndistribution by salary and of e funtlon-roloatd gradesrade as benchemark for pore- and remneation s"cl (1000-

oel reduction rorePM; and 90)- Introduction of aivilearvico persowle reductionprogeam;

e. e-ag Fuiw N -Adoption af targets for all-Reurrent _ipendit. Resurrt Coa tioen o on-loae recurrt

Ce in e ducatin and heaIthfor 19W (Octobse 19W)

d. Budge Ixocuie iture Prpa on nsd adopoto ofMonitor-ing a"dCnr aeyb e a yte for oniltoring bud-Conrl ducin Ageprori y got *eoctiom with old act

ispecittereS for eopeNditu controetl

of the recendatIene grof3ovrnstetsrn ero_ sodeb study__ _ _ _ _ _ _ _ _ _ _ _

O N nme ~ ~ ~ ~ d SeodTaoe

- 34 - Attachment IIPacre 2 of 8

Poo 1ey Am Ac4^eas notoif ActionsPol.cy Area en/bJscti~~ I _________________ lToy Ta l " T Take

RI=,lS;. ,n.estm_n

a. Eaut Explicitly Prorm - Intitutloa of warly corr-re"o-ami" Transfor. to ParapubIlc ultation with 3ankby oece.b.rPsagamen Setor o eah poor so theo toI tAS yeeros irvestment Program

-Adoption of Wmyae of' programa ptfolio Inve" stnoa Inperapublc aectorCOctebor 80).

b. Multi-yer Medium-ters Program - Adoptlo, of -yewr rllingProgram investmt progea for 1WS-

a. I.prov.~ Pollew-up of Project - Roinferoe t of the proje tManitoring ezecution eulawat;l

. PeoJeet Pr J W1lW ^1ofwayt 4 190 1 d. Project Projec t uality -Adoption of quantitativee1ection crerli froe screeming of

inedutrial and ccamrci l,aegiulturl and infr atrue-tural projects. end least cost

rie1 ria to escial ectorproJet

RU1. Publle EnterpriseReform

a. Enterprise or e -Promulgation of a ow team-Autonomy reltion wofk w in government-

b. Dlvetltur. and Rationalizing the als Oisalutlon/l qudt. of 12Reabbilltation of te sectr C3trpr s C eralees),

I3TRASO (treat le

hUeCUhueoI p lancos, SOIMAS (soolbooks *I TA (JIr l ), B et- PvtIzatIto of o eterp.sSAE(vehcleo"/u nt)*AU (iorted consume

), U ECI (ciames

-Establishment of a Itablesudo horde with key Indicatorsto moitor pubic enterpriselwIltleoi- Prepration and aoptlon ofprocdures to hte followed for

ente risj~rvstiaatsea

- nstiin oa Syt forroviwing all r.oaals forerztl~~0 or _plethe crest ion J nowenterprisses;pbi

. Rlnvlgoratio Rtelsfrre_met of - ltevlew of the sector and L14idatlion and closure ofof Residual objocveslclarificat- ian prpratlo of ner flit 2 sentrprises, solicitation ofPortfollo 1io of oee of enterpriace to he privet- bldo for pcivatiaing 7 and

i1e wholly or partilly to c latin of diagnostic_ lesed ut ortobe liquid- re e1m of 10 *Oated, and another list ofenterprise. to be rehablIft-

___________________________ated

-" #"sNW Trasehe.

- 35 - Attachmint IIPage 3 of 8

Policy Area I Iasuee/Objectives I Reform Actieos Ro Trk e

C. O^:tNO SVSTEII

t. Sector Roeorm of Specislty - Dissolutlon of CNCAReorgeniastion Banking (May 1966)

-Launch ing of agri culturalredWit study (May i966)

- Agree t on a robabiltal,-ion progra for th CRCAM,CLCAV,on th- obasi of agrl-cultural credit study, in *sociation with a reetruct.:'red bank;

tt. Portfolio Restoration of Sector - Roeconstitution of Credit - Implementation ofRestructuring Vlability Cominttae with represt- Restructuring Plan (i919-91)

ation from the BCAP (1I66),

- Complotion of SC'e Port-folio audit, and appraisal ofts tixed ease" (July 19)

- Conclusion of S'so Port-olo audilt (October IOU)

Agremnt with BCEAO oerscheduling of COA's and950's dsbt on conceeional

2SS. Prlvatizotion Introduction of Private - Prelininary contact withCapitol and Manogement prospective partner,

(July 1916)

_ Preparation end adoption ofa progrm to collet recovr-able privet soector ovorduedebt to ONCA BCB, and MB(October 1986)l

IV. Regulatory ank Inspection and - Enlar m.t of theFrameork Cont ol Itonal Credit ComitteI

with the Inclusion of aFrench reprosentative

*s, Second Trnnch*.

- 36 - Attachment IIPa-g-e-T4 Of7

I Pollct Area | Isue/Ob Roform Actions Reform Actton_ IPolicy Area Isauea/Obj.ctiv. I Already Taken To Be Takon

C. TRADE POLICY REFORMAND DEREGULATION

I. EICort Trade Promotion - Liberalization of trading ofLl n IIaStlo of Exports food crope Including for

export.

t. ImportProtection

a. Quntitati, as on Good. Produced - Eliinoation of R8 andreatrictlons, by Now State Enter- their replacement by ImportMonopolies prieo taxes (July 1960)

Iport Licensing -Formulation of proposali for - Adoptlon of the proposalsreplacing licenaea with ox- on removal of importroat dec1 rationa for Franc lcensee aeeo0n, EC and ACP countries;

b. Tariff. High Oisperolon of -Launching of study of Indus- - Agrement on an eatlon planTariff: Complox trial protectlon (in relation for application of reco_md-Protction Schoe with Import taxaton study) atlona of industriol protect-

Ion study *ee

c. Investment Eliminating Public - Agrof nnt I an action planIncentivos Sector Sias Making fr revision of Investnt

Regles* Fa;er and Code ellminatinb the currentSize Neutral public eector bi. and aking

regime neutral *ith respectto factors, and s1iz of enter-prise"; sec

aIa. Legal and - Declaration on opening u ofRag.I atory msctors In *hich GovernmentFramework had abeolute monopoly (Jun.

a. Roui0tration/ Reduction of Red Tp. -R.vl ion & adoption of *I-pl-LTcensing lfied businase reg Itratlon/

licensing procedures *so

b. Labor Practices Liberalization of - Revision of the 'Lol 18-002Decislon-Making concerning the hiring and

laying-off of labor; ose

- Re9ular publication of the

IV. Pricing Policy Deregulation of - Liberalization of pricingMarkets for a11 goods except those on

the liot of essential coemodi-ties (December 196s)

V. Domeo tic Liberasization ofTrade Marketing - Liberallstion of the

trading c all export cropsexcept cotton (Docemer 1966)

ase Second Tranche.

37 Attachment IIPage 5 of 8

Policy Areo I sosRe/Objrctveti I Reform ActionsI_____I_ _ I__ iA lreayA s r.eI To Be Taken

O. AORICULTURE

I. Sctor Strategy Oevelopms_t of long- - Lunching of study on long-term goalo and approach term development of the setor

U1. support 3crvIce

a. Institutional Str.n th.nin reserch -Adoption of nmm accountinga eaxenalon services and financial proceAdreo In

CARDER* sopgu (to be follow.ed by O'DE sZo and

b. Soed Farm Rationallzing So Atecoro) - Agreemnt on main actlonsForm policy and a eslendar of execution

a glob91al seed farmsstrategy *

Its. Cotton Sector

a. clining Separatlon of extension - Adeinlitrativo transfer oferwicee from cei_re- ownership of ginnerlee to1i1 activity SONAPRA

- Legal transfer of ownershipo ginnerleo to SONAPtA

b. Input Subsidies Efficioney pricing of - Elimination of fertilisertInputs bsidies In 197/ga andinputs ~~of insecticide ilagsg

a. Producer Maintenance of producer -Increase of producerr ricePrices Incentives/income progressively from C; Sc

^$Pe ro IU In 9/s9

- Adoption of a Producerpricing system linked toworld mrket trend

d. Marketing Optlilming export - 1OW6elishms_ t of marketreceipte infermaloto service to

support oontra3ting withga" *e"nX S

IV. Food Crops

Food Security Creation of Information - Cretlon of a rapid alertaystm to del with eyotem for monitor in uplytransitory food veristios as ONC'o functlonsecurity problem and redeflitilon of deentral-

ized storae" (village level)

V. Livestock

a. Subectoral Improvement of - Eualnalton of the currentStrategy reeourco allocetion sit* tion of State Forms and

the formulation and adoptionof a new policy on subecnor

so. Secos Trenche.S Conditions In a sector project.

- 38 - Attachnent IIPage 6 of 8

Pollcy Arsa I Zesu/Objectives Rfeorm Actlons Reform ActionsAIIoredy Take To lb Taken

E. TRANPORTI. Road Maintenance Improved road -Reploassnt of h-A-t trans- - Inltlatlon of coverage fr:

mainteeeneo fer eO Itozi Road i *U lighor Road Fund 100l routinenen e ,. tao Randr g aintenance, and Wt3 and 10l

of polodlc "Intonene of.rh*d vovd roods

roepectivery; S

-Limitation of me. of RoadFund for *ogos to road i Intance temo"rary labor and toinceontivee for regular roadmintefenac staff (fromJtanury los) S

II. Pricing Liberalizatlon of -Reviwe of role and performTrucking ce of the National Centre of

Freight Bureaux, end redi;--Ion of Ito coordination fuiwtion S

Efficiency Pricing - Reinforement of coatof Port Servicee accounting In PAC; S

II2. sector Iproevd Financial - Adoption of PAC'o reviseManagsnt/ c Management/Expenditore tariff structure SPolicyent controln

-Meantenance of dabt ouityratloo at or below 55/6 forPAC and 60/40 for 8EIUP(19o9-91); S

- Roduction of PAC & OEMAP - Reduction of PAC staff by _staff by 53 per yer since per yer (199-91); SiN'

- Reduction of O0EMAP staffby 53 per year (1969-91)t 5

Rationalizing Public - Conduct of study of optlonsSector Rol/Increaing in maritime sub-osctorPrivate Sector Role (Co=N;

-, Impleometation of maritimeub-sector study recomsndat-

long- Full libera lsation offrelght forwarding and tran-sIt

ass Second Trancho.S Conditions In a soetor project.

- 39 - Attachnnt IIPage 7 of 8

Poliey Area eauoo/Objective I ojeform Actions Reform Actio________________ Alrea- dA rak. I To lo Taken

UTIUTIE

Z. inotltutional tlpreood Managerial -japlmsntat. of provlolono - Adption of the contratAccountabiltiy o- the Cahior de Chores of dlotr prise and the OPT's

"aE (March IOU);Sate

,Adoption of the contretd'entreprise Sea to 1N?

It. Pricing Etfficiey Piloing of - Istroduction of the third -Reviseio of waor eletriel-wte r, Electrlclty and tranche of SEo s nem tariff tw & telone tariffs la lineTol o'mmlenation etrutureo (MaccA 1953)$ with financial covonanta toServices contrate d'oetreprele (1909-

1531) s

SII. Sector Improved Financial - Definition of proceduresMUnogm_t/ Monagement/Expenditure for tranofering electricity,Policy Control water and tele nopb

esubserlptiono 1 h _ Intoname o be _lene icleol

-Transfer of utility connet- - Valtenance of StE and OPTlone (olectriitY and water), recelvabla below 4 monthsand telophone sub oriptions (s91) SIn home of officiele Intonames of b*eofleairial

Institutional Attraction of Foreigan - Model explorotlon - Update of the model *plo-Capital For Oil Fiold contract develop I n lo" retlee contract to takeExploration and promotlons hed In account of reet indutry

London, Houston da velopmste- Undertking of promotloncampelgnu

Second Tranche.Conditions In a sector projoet.

- 40 - Attachnent II

Page 8 of 8

Policy Arg Iosoo/Objoctlv.a Rotors Actions | Rform Actions~~~~~~~I I Alr"dy TakenI To So Takeon

M. CPULTONNME- Estabilish._nt of humn - Pursult of rovlo of pei

I. Sector Strategy Effoetivo Ro pons resource working groups tles and formulation of SAto DoevelopmentR strategy and policy actlon

- fomlio of perorit. stnd plan for Education & Cultufon ulotlon of *ebor *trnt-*9cyp laon plan forH6lth @soctor

1. institutlonal Coordination end -Inelusion of Hman Rensource.wsmo nt tlon of Sub-cotto In AdjusetentPollcy Co""lolon'

Il. Financing Protect Priority o4etorminatlon of togoetsSectoro n.-salary current oupondi

and Inimm *haro of primaeducetion and primary healcare

IV. Efficiney Internal Savings - Formlotion and adoptiona plon for increasolng evepu l-toech-r ratio In I1*nCry education

- Development and adoptiona plan for redistributingper onnel betwen centre aperiphery, and betweendw nistration and helthervice delivery

- Dovelopmnt and odpiona progrm to lmprovo hoapiadinlaltration and drugdistribution system

Costs of hi iher educat- - Dovolopment and adoptionand Improved link with a prrom to restrucuurLabor market/Economy's chkolarships downaeds andsneeds from oee r levnce diecipl

I. Sector Strategy Devolopmet of - Pview of the current atsoctoral pollcy tegy and proparation of po

Cle on environment proteion

- Adoption of tho policioe

eos Second Trancho.S Conditions In a sctor project.

- 41 - Attachment III

26 Fab 1992 MnIN: PC - FIRST STEIURVL 6A5W6rir C OIT

.............................--. EMIN: AN ElOIC IN ...............................--.----- nl.t ---.-.- tl.---------.t...-ProjZtlasan...........

15 196 1w 1958 1"95 1990 1991 1992 19; 199 195

Anal Rates of Gwt M).........................

0P at ap 7.5X 2.2X -1.5X 3*.0 -2.0X 4.0% 3.0X 3.5X 3.8V 4.1X 4CXGDY 6.9K 1.4X -2.9% 5.94 -3.5X 4.3 2. 2.73 4.5X 4.W 5.6XDY per Csgita 3.6X -4.6 -6.0 2.7X -6.5K 1.0t -1.23 -0.5K 1.V3 1.6a 2.3

Toal Careptricn per Copita -4.0X .7?. -7Y.C 4.23 -4.4 -1.45 0.1X -1.2X -0.3 0.4: 1.0XPrivate Caupsicn per Coits -5.1X -7.4X -7.9X 7.3X -0.9X -1.4X 0.3 -1*. 0.5X 0.5X 1.3

ExtfL Debt:..............

Total DO (in US miltian) 647.8 68.5 742.6 73.9 801.6 in.9 876.8 913.8 975.0 10D.3 109Z.6OD/Inpxwt of G(S 137.6 124.8 116.7 114.7 172.4 38.4 1a.6 1184 124.9 1V.8 128.5

62.0 51.5 47.5 48.4 52.2 43.8 45.9 44.0 44.8 44.5 43.8l Debt Servicoe mlLlticn) 84.8 105.6 99.1 79.0 137.6 79.7 84.3 167.9 K.6 6.6 95.8Service /!npart of (2S 18.0 19.2 15.6 11.6 29.6 13.2 12.4 21.8 12.3 12.0 11.3Service /GDP 8.1 7.9 6.3 4.9 9.0 4.2 4.4 8.1 4.4 4.2 3.8SeviceEnrt of G&S 36.9 57.1 52.2 47.0 75.8 34.3 33.4 62.1 32.5 30.8 28.1SaieMm ortof GSNFS 37.6 58.0 53.1 47.3 76.3 34.6 35.7 63.4 33.4 31.6 29.0

..................

Gross Investumt/WP 8.9 13.5 12.9 12.9 7.7 11.7 13.0 14.3 14.9 15.3 15.7Dawmtic SIvirg/P 1.1 2.5 3.4 1.7 -0.1 2.0 0.8 1.5 3.3 4.9 6.4NatilaL SmvAr.WP 5.0 6.5 6.7 5.2 1.7 3.6 2.6 2.7 5.6 6.8 8.4

rirul SaWirW Rate 0.3 -1.0 0.2 -0.5 -2.3 0.4 -0.2 0.0 0.5 0.2 0.3Plbic Inesunt/oP 6.0 8.7 8.7 8.6 7.7 7.2 7.3 7.9 8.1 8.1 8.0Pblic Sevir-UP -4.2 -4.1 -3.7 -2.6 -4.7 -4.0 -2.5 -2.0 0.3 1.4 2.4Priwte Ir.wst1nt/WP 2.8 4.1 4.7 3.9 3.7 4.2 5.4 5.7 6.2 6.6 7.0Private Saiir/0P 9.1 10.6 10.5 7.8 6.5 7.6 5.1 4.7 5.3 5.4 6.0Ratio of PtAlic/Private Inrwt. 2.1 2.1 1.9 2.2 2.1 1.7 1.4 1.4 1.3 1.2 1.1Ircr. Capitalt/Out Ratio (IIM) 2.8 4.2 -9.0 4.3 -6.4 1.9 3.9 3.7 3.8 3.7 3.2

Pi.tlc Ffrne (M of GDP):..........................

Garem t Revel* I/ 12.7 13.2 12.9 12.7 9.2 9.6 11.0 12.1 12.8 13.2 13.5Qfw: Fiscal Rewua 10.3 11.6 10.7 9.9 7.0 7.6 8.7 9.5 10.5 11.1 11.4

Total E*wdl.trw 21.3 24.2 Z.3 22.3 19.6 19.3 18.9 21.6 18.8 18.1 17.0Q(w prl,mry 15.9 17.1 15.7 13.9 11.1 10.9 10.9 10.6 10.1 9.5 9.1

Primvy Def icit/supls -3.2 -3.9 -2.8 *1.2 -2.0 -1.2 0.1 1.4 2.7 3.7 4.4Overall oeffcft/arplus -8.6 -11.0 -9.4 -9.6 -10.4 -9.7 -7.9 -9.5 -6.0 -4.9 -3.5

Ott0w EUcuilc Indfcastas:..........................

Itplicit GP Deflator (19aMD) 100.0 96.4 99.3 99.0 12.6 10.5 105.5 108.6 111.7 114.7 117.6knlt pwvr ts dog 2.9X -3.6X 3.1K -O. 3.4 1.93 4X 2.93 2.W 2.73 2*

Wts GraM Rate 4853 -8.95 5.3 8.43 -25.9X 1.3 11.0* 5.5 2.8 3.5X 4.3VwtsAw 35.1 283 29.3 29.5 2Z.0 19.9 2.6 21.6 Z.0 2.3 Z.9

prts Gr Rate 31.13 -10.7K -3.3X 3.5X -33.2 9.5K 15.2 4.73 2.93 3.4 4.23Inpot8/l0lP 45.0 41.2 40.7 42.2 30.3 31.7 35.7 37.2 35.3 34.8 34.1

O.rrmit Acc. RlmolN CM milt lt f I/ -41.6 -92.7 -9.8 -l2l.5 -93 -153.8 -199.0 -240.8 -33.5 -197.0 -182.7Orrui ADcoatWP -4.0 -6.9 -6.2 -7.7 -6.0 -81 -10.4 -11.6 -9.4 -8.5 -7.3Extmul Tomru of Trsd1100) 100.0 84.4 83.7 6.7 85.6 79.6 72.3 70.2 70.7 71.4 72.7Rubervas fn sad of ispwtW -0.3 -0.2 -1.7 -1.2 1.0 3.0 3.2 4.2 4.7 5.0 5.3

....................................... ..................................................................................................

1/ Exctulfng official ruts;ME=: Offticil; staff e tird projetlaw.