Implementation Completion Report - Haiti Emergency Economic Recovery Credit

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16166 IMPLEMENTATION COMPLETION REPORT HAITI EMERGENCY ECONOMIC RECOVERY CREDIT DECEMBER 9, 1996 Country Operations Division 2 Country Department III Latin America and the Caribbean Region This documenthas a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized CURRENCY EQUIVALENTS (As of December2, 1996) CurrencyUnit Haitian Gourde (G) US$1.00 G15.3 SDR1.00 US$1.45 FISCAL YEAR October 1 to September 30 ABBREVIATIONS CAS Countr Assistance Strategy EERC Emergency Economic Recovery Credit EERP Emergencv Economic Recovery Program ERC Emergency Recovery Credit ESAF Enhanced Structural Adjustment Facility EU European Union FY IDA Fiscal Year GDP Gross Domcstic Product GNP Gross Nationial Product ICR Implementation Completion Report IDA International Development Association IDB Inter-American Development Bank IFC International Finance Corporation IMF International Monetary Fund OAS Organization of the American States TAP Technical Assistance Project UN United Nations UNDP United Nations Development Programme USAID U.S. Agency for International Development Vice President: Shahid Javed Burki Director: Paul Iseiiman Division Chief: Philippe Nouvel Staff Member: Axel Peuker (Country Economist) FOR OFFICLAL USE ONLY TABLE OF CONTENTS PREFACE........................................................ ; EVALUATION SUMMARY ........................................................ iii PART 1: PROJECT IMPLEMENTATION ASSESSMENT................................................... I INTRODUCTION ........................................................ I PROJECT OB3JECTIVES ........................................................ 2 ACHIEVEMENT OF OBJECTIVES ........................................................ 2 IMPLEMENTATION RECORD ........................................................ 4 PROJECTSUSTAINABILITY ........................................................ 5 IDA PERFORMANCE ........................................................ 5 BORROWERPERFORMANCE ........................................................ 5 ASSESSMENTOF OUTCOME ........................................................ 5 FUTUREOPERATIONS ........................................................ 6 KEY LESSONSLEARNED ........................................................ 6 PART II. STATISTICAL TABLES ........................................................ 9 TABLE 1: SUMMARY OF ASSESSMENTS ........................................................ 9 TABLE2: RELATEDIDA CREDITS ........................................................ 10 TABLE3: PROJECTTIMETABLE ........................................................ 11 TABLE 4: CREDITDISBURSEMENTS:CUMULATIVE ESTIMATED AND ACTUAL ............................ 11 TABLE 5: KEY INDICATORS FOR PROJECTIMPLEMENTATION .......................... 1........1................ 11 TABLE 6: KEY INDICATORS FOR PROJECTOPERATION ........................................................ 11 TABLE 7: STUDIESINCLUDED IN PROJECT ........................................................ 11 TABLE 8: PROGRAMFINANCING REQUIREMENTS AND DISBURSEMENTS ................. .................... 12 TABLE 9: ECONOMICCOSTSAND BENEFITS ........................................................ 12 TABLE 10: STATuS OF LEGALCOvENANTS ........................................................ 13 TABLE 1 1: COMPLIANCE W1TH OPERATIONAL MANUALSTATEMENTS ................... ..................... 13 TABLE 12: BANK RESOURCES: STAFF INPUTS ........................................................ 13 TABLE 13: BANK RESOURCES: MISSIONS ........................................................ 14 APPENDICES A. BORROWER'SCONTRIBUTION TO ICR B. A FRAMEWORK FORA SUSTAINABLE ECONOMIC RECOVERY C. MAP: IBRDNO.17094R1 This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwise be disclosed wiLhout World Bank authorization. | IMPLEMENTATION COMPLETION REPORT HAITI EMERGENCY ECONOMIC RECOVERY CREDIT (CREDIT NO. 2670-HA) PREFACE This is the Implementation Completion Report (ICR) for the EMERGENCY ECONOMIC RECOVERY CREDIT (EERC) in Haiti, for which Credit 2670-HA in the amount of SDR26.8 million (US$40 million equivalent) was approved on December 20, 1994 and made effective on December 23, 1994. The credit was closed on December 25, 1995, six days before the original closing date, December 31, 1995. It was fully disbursed, and the last disbursement took place on June 6, 1995, The ICR was prepared by Axel Peuker, task manager (LA3C2), and reviewed by Robert Crown, project advisor (LA3DR). Preparation of this ICR was initiated during an IDA mission in January 1996. Following a change in Government in March 1996, it was continued during a mission in June 1996. It is based on material in the project file. The Borrower contributed to preparation of the ICR with comments on the project and statistical data, and prepared a complementary Project Completion Report, which is included as an appendix. IMPLEMENTATION COMPLETION REPORT HAITI EMERGENCY ECONOMIC RECOVERY CREDIT (CREDIT NO 2670-HA) EVALUATION SUMMARY INTRODUCTION 1. In the aftermath of a coup d'etat in September 1991, in which elected President Jean Bertrand Aristide was forced from office and into exile, Haiti experienced a dramatic deterioration in economic and social conditions. After three years of military dictatorship, a negotiated solution was reached which allowed President Aristide to return to Haiti on October 16, 1994, and on November 7, 1994, Parliament confirmed the appointment of a new constitutional Government. At that time, Haiti was in a state of economic and social emergency, characterized by debilitated institutions, large macroeconomic imbalances, a severely dilapidated infrastructure, depleted productive assets, alarming social indicators, and pervasive poverty. 2. In November 1994, the Government prepared an Emergency Economic Recovery Program (EERP) in close cooperation with IDA, IDB, IVF, specialized agencies of the United Nations, and USAID, building on the work of a first multi-agency mission in June 1993. The objective of the EERP was to provide for basic emergency needs through import finance, civil works, and technical assistance. This program, together with the reactivation of ongoing projects, for which the Government received initial pledges of some US$1.2 billion, provided the main stimulus to growth during 1994/95. On December 19, 1994, Haiti's arrears to multilateral agencies of US$82 million were eliminated, allowing IDA, IDB and IMF to resume their operations. This paved the way for the Emergency Economic Recovery Credit (EERC), IDA's key initial contribution to the EERP. The Credit was approved by the Board the following day, on December 20, 1994, and became effective on December 23, 1994. PROJECT OBJECTIVES 3. The objective of the EERC was to provide urgently needed balance of payments support to reactivate Haiti's economy and initiate the economic recovery process in the context of the overall EERP. Specifically, the EERC was designed as a quick-disbursing emergency operation which would finance the CIF value of imports based on a positive list identified as necessary to the EERP. Within the confines of a positive list, EERC funding was not earmarked for specific sectors or activities. The project objective was clearly relevant in view of the binding balance of payments and budgetary constraints which the country was facing. While the overall recovery program was ambitious, the specific objectives of the EERC were modest and attainable. - Iv - IMPLEMENTATION EXPERIENCE AND RESULTS 4. The project was highly successful in achieving its objectives. It rapidly provided the country with the required external financing to initiate the economic recovery, and was fully disbursed by June 1995, six months earlier than expected. The EERC also demonstrated the commitment of the international community to the Government's effort, thus sending an important confidence-building signal to the private sector in Haiti. In addition, the policy dialogue accompanying the preparation of the project, helped to set the stage for a medium-term economic policy reform program. The EERC was further instrumental in establishing a successful Central Implementation Unit (CIU) for emergency projects. 5. The contribution of the EERC needs further to be viewed in the context of the performance of the overall recovery program. Initial donor commitments of US$1.2 billion exceeded by far the estimated requirements of US$402 million for the EERP and US$261 million for arrears clearance, humanitarian aid and governance. In the course of Haitian fiscal years 1994/95-95/96, commitments for Haiti's development even increased to over US$2 billion. The level of disbursements over the first two years amounted to over US$1 billion, also exceeding expectations. 6. As a result of the recovery program, together with sound economic policies, Haiti's economic performance in 1994/95 was encouraging. Real GDP growth amounted to 4.5 percent, consumer price inflation declined from 52 percent by end-September 1994 to 18 percent by end-September 1995, and the Gourde recovered from over G20/US$ during the emergency to G14.5/US$. The Government also proceeded to implement important structural reforms along the lines of its "Framework for a Sustainable Economic Recovery," which accompanied the EERC. 7. Sustainability of the project and program achievements is closely linked to the sustainability of economic reform and recovery in Haiti. In spite of a six month hiatus following a change in Government in October 1995, Haiti's economic reform program is on track. The economic recovery in Haiti remains fragile, but there are signs of a revival of private sector interest. Nonetheless, as in many post-conflict societies, it is likely to take years until political stabilitywill be ensured and the loss in welfare recuperated. 8. The performance of IDA through the project cycle is rated highly satisfactory. Overall, IDA demonstrated strong commitment, responsiveness and flexibility in preparation and implementation of the project. The performance of the borrower was fully satisfactory. Its participation in the preparation was highly satisfactory, which was reflected in the speed with which the operation was designed and made effective. Implementation, too, was highly satisfactory, as reflected in rapid disbursements. Compliance with covenants was satisfactory, even though the aforementioned change in Government led to delays in the preparation of the audit and the comments on the project for this ICR. - v 9. The outcome of the project is considered to be highly satisfactory. The EERC was presented to the Board within two months after the return to constitutional rule, and within a day of clearance of Haiti's arrears to IDA. It was fully disbursed within six months after Board approval. It fully achieved its objectives, and the objectives were highly relevant to address Haiti's state of emergency. SUMMARY OF FINDINGS, FUTURE OPERA1TIONSAND KEYLESSONS LEARNED 10. The implementation record of the project was highly satisfactory due to (i) simple project design; (ii) strong commitment by the Government; (iii) satisfactory management by the Government's Central Implementation Unit together with the Ministry of Finance; and (iv) technical assistance provided by IDA. 11. The EERC was part of an emergency assistance strategy by IDA to provide basic goods and services to address urgent needs and initiate the rehabilitation of priority infrastructure. As the restructuring of ongoing operations took longer than expected, IDA decided to launch another emergency-type operation, the Employment Generation Project, which focused on labor-intensive works. To sustain the economic recovery, IDA is emphasizing the need for sound macroeconomic policies and structural reforms. To this end, IDA is currently preparing a policy-based Second Economic Recovery Credit (ERC II), preceded by a Second Technical Assistance Project (TAP II) which was approved on September 17, 1996. 12. The crisis in Haiti was comparable to other emergency situations in post-conflict societies for which the World Bank Group has provided support through emergency recovery operations. The key lessons learned from this operation confirm that projects of this type can work well if they have well-defined objectives and a simple design. For the rapid preparation and successful implementation of this emergency recovery operation, strong Government commitment and very close communication proved essential. Another critical factor for the success of the EERC was its focus on most immediate needs. This indicates that medium-term development issues should be addressed in follow-up operations, and emergency operations themselves should not be seen as a mechanism to achieve those objectives. At the same time, however, the experience with the EERC suggests a pay-off for initiating a medium-term policy dialogue during the preparation of emergency operations. A final major factor in this operation was flexibility and responsiveness by IDA in the preparation of this operation. Nonetheless, the extent to which emergency recovery operations should focus on financing critical imports relative to implementing rehabilitation works should be judged in the context of the overall emergency program addressing the various needs of a post-conflict society. IMPLEMENTATION COMPLETION REPORT HAITI EMERGENCY ECONOMIC RECOVERY PROGRAM (CREDIT NO. 2670-HA) PART I: PROJECT IMPLEMENTATION ASSESSMENT INTRODUCTION 1. In the aftermath of a coup d'etat in September 1991, in which elected President Jean Bertrand Aristide was forced from office and into exile, Haiti experienced a dramatic deterioration in economic and social conditions. After three years of military dictatorship, a negotiated solution was reached which allowed President Aristide to return to Haiti on October 16, 1994, and on November 7, 1994, Parliament confirmed the appointment of a new constitutional Government. At that time, Haiti was in a state of economic and social emergency, characterized by debilitated institutions, large macroeconomic imbalances, a severely dilapidated infrastructure, depleted productive assets, alarming social indicators, and pervasive poverty. Already during 1980-91, the population had suffered a continuing decline in its standard of living, with real GNP per capita falling by about 2 percent per year. Between 1992-94, Haiti's real per capita income declined at a multiple of this rate, to well below US$250 -- making Haiti by far the poorest country in the Western Hemisphere. 2. Following the return to constitutional rule, the first priority of the Government was to address the overwhelming economic crisis. To this end, it: (i) prepared an Emergency Economic Recovery Program (EERP) to provide for basic emergency needs through import finance, civil works and technical assistance; (ii) cleared its external arrears; and (iii) initiated measures for an economic policy reform program. 3. In November 1994, the Government prepared the EERP in close cooperation with IDA, IDB, IiMF,specialized agencies of the United Nations, and USAID, building on the work of a first multi-agency mission in June 1993. This program, together with the reactivation of ongoing projects, for which the Government received initial pledges of some US$1.2 billion, provided the main stimulus to growth during 1994/95. On December 19, 1994, Haiti's arrears to multilateral agencies of US$82 million were eliminated, allowing IDA, IDB and IMF to resume their operations. This paved the way for the Emergency Economic Recovery Credit (EERC), IDA's key initial contribution to the EERP. The Credit was approved the following day, on December 20, 1994, and became effective on December 23, 1994. On March 31, 1995, the Government entered into a stand-by arrangement with the IMF, reflecting its commitment to economic policy reforms as outlined in its "Framework for a Sustainable Economic Recovery," which accompanied the EERC (see Appendix B). -2 - PROJECT OBJECTIVES 4. The objective of the EERC was to provide urgently needed balance of payments support to reactivate Haiti's economy and initiate the economic recovery process in the context of the overall EERP. Specifically, the EERC was designed as a quick-disbursing emergency operation which would finance the CIF value of imports based on a positive list identified as necessary to the EERP. The imports were to support emergency activities in all sectors covered by the EERP. Within the confines of a positive list, EERC funding was not earmarked for specific sectors or activities and would finance imports of consumption or capital goods for both the public and the private sectors. 5. The project objective was clearly relevant in view of the binding balance of payments and budgetary constraints which the country was facing. While the overall recovery program was ambitious, the specific objectives of the EERC were modest and attainable. ACHIEVEMENT OF OBJECTIVES 6. The project was highly successful in achieving its objectives. It rapidly provided the country with the required external financing to initiate the economic recovery, and was fully disbursed by June 1995, six months earlier than expected. The proceeds of the credit were utilized within the confines of the positive list as follows: 25 percent for industrial equipment and spare parts; 24.7 percent for petroleum products; 17.7 percent for infrastructure equipment; 6.1 percent for health and nutrition products; 5.3 percent for agricultural equipment and inputs; 4.2 percent for power generation, and 17.7 percent for mniscellaneousproducts. The EERC also demonstrated the commitment of the international community to the Government's effort, thus sending an important confidence-building signal to the private sector in Haiti. In addition, the policy dialogue accompanying the preparation of the project, as reflected in the policy letter, helped to set the stage for an economic policy reform program transcending the immediate preoccupation with the emergency. In the context of the EERC preparation, the Government also established a Central Implementation Unit (CIU) in the Office of the Prime Minister, which became a key agency for the implementation of ongoing IDB emergency projects and IDA's Employment Generation Project. 7. The contribution of the EERC needs further to be viewed in the context of the performance of the overall recovery program. Initial donor commitments of US$1.2 billion exceeded by far the estimated requirements of US$402 million for the EERP and US$261 million for arrears clearance, humanitarian aid and governance. In the course of Haitian fiscal years 1994/95-95/96, commitments for Haiti's development even increased to over US$2 billion. The level of disbursements over the first two years also exceeded expectations (text-table 1). However, in some key sectors, disbursements in the first year were slow. In part, this reflected the extreme weakness of the corresponding line agencies. It also, however, reflected the fact that project restructuring proved more difficultthan expected. -3- Table 1: Program Financing Requirements and Disbursements (US$ Million) Area Estimated Requirements --- Effected Disbursements- 1994/95 1994/95-95/96 EERP Balance of Payments 130.0 151.9 248.2 Sector Rehabilitation 238.1 141.4 443.5 Agriculture 31.9 5.6 53.5 Industryand Finance 29.4 0.3 16.2 Power 45.8 8.2 50.7 Transport 26.3 28.6 31.9 Waterand Urban 26.7 22.2 58.5 Health and Nutrition 49.1 14.5 89.9 Education 25.9 4.9 31.6 Environment(*) 3.0 1.4 6.6 Multi-Sector (**) 0.0 55.7 104.6 TechnicalAssistance 34.3 (includedin sectorrehabilitation) EERP TOTAL 402.4 293.3 691.7 OTHER 261.0 222.2 356.7 Arrears Clearance 82.0 66.0 66.0 HumanitarianAid 100.0 88.2 114.8 Governance 79.0 68.0 175.9 TOTAL 663.4 515.5 1048.4 Donors: Argentina,Canada,France, Germany,Japan, Mexico,Netherlands.Spain, Sweden,Switzerland, USA, OtherBilaterals,EU, IDA, IDB,IMF, OAS,UNDP,Other UN Agencies (*) Interventions to address environmental needs are also included in other sectors (**) Includes labor intensive works to prevent soil erosion and rehabilitate feeder roads, and small social infrastructure 8. As a result of the recovery program, together with sound economic policies, Haiti's economic performance in 1994/95 was encouraging. Real GDP growth amounted to 4.5 percent, consumer price inflation declined from 52 percent by end-September 1994 to 18 percent by end-September 1995, and the Gourde recovered from over G20/US$ during the emergency to G14.5/US$. Central Government current revenues reached 7 percent of GDP in 1994/95, compared to 3 percent in 1993/94, while current expenditure amounted to about 11 percent of GDP. Capital expenditure of the public sector, nearly all of which financed with external grants and concessional loans, amounted to 7 percent of GDP, compared to less than 1 percent in 1993/94. As anticipated, the current account deficit soared to about 20 percent of GDP as a result of the largely donor-financed recovery effort. Imports increased dramatically to US$430 million, whereas exports recovered more slowly, reaching US$85 million. In spite of the large current account deficit, net international reserves exceeded by far the initially programmed level of about US$70 million. 9. The Government also proceeded to implement a number of structural measures. Petroleum subsidies were eliminated and all public sector wage contracts signed with the unconstitutional Government established after May 11, 1994 were canceled. The sales tax was extended to cover services. The first phase of the trade reform was put into effect: the 40 percent export surrender requirement and the remaining restrictions on imports were eliminated; the import valuation basis was changed to the market exchange rate; and import tariffs were essentially reduced to the 4-19 percent range. The reserve requirements applicable to commercial banks were unified, and the statutory ceilings on interest rates were eliminated. To facilitate private sector development, the Government entered into an agreement with the IFC to increase efficiency of key public enterprises through private sector participation in management and ownership. In this context, the Government established an independent privatization unit under the Office of the Prime Minister. It further reduced staffing in the public electricity company and raised tariffs as envisaged. Also, the Government moved quickly to establish a Presidential Commission for Growth and Modernization with representation from a wide range of private sector interests. The principal objective of this commission, is to develop a framework conducive to private sector development. 10. Following a hiatus in the economic reform effort during the last 4 months of the term in office of President Aristide, and delays in the implementation of donor projects which resulted in a slow down in economic activity, economic performance recovered again under the successor-President Preval, who took office in February 1996. Nonetheless, real GDP growth for 1995/96 is estimated to have reached only 2 percent, and inflation to have remained at 16 percent by end-1995/96. Also, in spite of slow progress in the area of private sector participation in public enterprises, the key reforms envisioned in the "Framework for a Sustainable Economic Recovery" have been or are being implemented. IMPLEMENTATION RECORD 11. The implementation record of the EERC was highly satisfactory due to (i) simple project design; (ii) strong commitment by the Government; (iii) satisfactory management by the Government's Central Implementation Unit together with the Ministry of Finance; and (iv) technical assistance provided by IDA. 12. As a balance of payments operation, the EERC was compatible with the very weak institutional capacity of the Government. It benefited considerably from strong Government commitment. The Minister of Finance followed personally very closely the preparation and ratification of the project. It was presented to Parliament and ratified in a record time of only two days after Board approval. Incidentally, it was the first project ever to be approved by a democratically elected Parliament in Haiti's history. The CIU and staff assigned from the Ministry of Finance supervised the eligibility of goods imported by public or private entities. While the EERC did not include a technical assistance component, IDA assisted the Government in its implementation through supervision by staff and the assignment of a procurement specialist to help in the review of invoices and the preparation of withdrawal applications. PROJECT SUSTAINABILITY 13. The recovery program supported by the project appears to have taken hold. In spite of the hiatus referred to above, the Government's economic reform program is on track. The Government recently agreed on a three-year Policy Framework Paper, and on October 18, 1996, the Board of Directors of the IMF approved an ESAF arrangement for 1996/97-1998/99. A policy-based adjustment operation, the Second Economic Recovery Credit (ERC II) is currently under preparation by IDA, and is expected to be formally negotiated by end-December 1996. The economic recovery in Haiti remains dependent on donor assistance, and vulnerable to political developments, but there are signs of a revival of private sector interest. Nonetheless, as in many post-conflict societies, it is likely to take years until political stabilitywill be ensured and the loss in welfare recuperated. IDA PERFORMANCE 14. The performance of IDA through the project cycle is rated highly satisfactory. Overall, IDA demonstrated strong commitment, responsiveness and flexibility in preparation and implementation of the project. This is reflected, for example, in the speed with which the EERC was presented to IDA's Board of Executive Directors following arrears clearance, and in the decision to authorize exceptional retroactive financing of 50 percent of the credit amount for eligible imports effected prior to Board approval. IDA's decision to take advantage of the EERC preparation to engage in parallel on a policy dialogue on medium-term reforms also facilitated the sustainability of the recovery process. IDA's contribution would have been further enhanced through more rapid project restructuring. BORROWER PERFORMANCE 15. The performance of the borrower was fully satisfactory. Its participation in the preparation was highly satisfactory, which was reflected in the speed with which the operation was designed and made effective. Implementation, too, was highly satisfactory, with the Ministry of Finance and the CIR demonstrating a strong commitment to ensure rapid disbursement of the Credit. Compliance with covenants was satisfactory, even though a change in Government led to delays in the preparation of the audit and the comments on the project for this ICR. ASSESSMENT OF OUTCOME 16. The outcome of the project is considered to be highly satisfactory. The EERC was presented to the Board within two months after the return to constitutional rule, and - 6 - within a day of clearance of Haiti's arrears to IDA. It was fully disbursed within six months after Board approval, six months before the expected closing date. It fully achieved its objectives, and the objectives were highly relevant to address Haiti's state of emergency. In the context of the overall EERP, it alleviated the import financing constraints and helped initiate the recovery. It also established IDA's role in the policy dialogue, and, through the program it supported, allowed the country to move from overcoming the emergency to addressing medium-term objectives. FUTURE OPERATIONS 17. The EERC was part of an emergency assistance strategy by IDA to provide basic goods and services to address urgent needs and initiate the rehabilitation of priority infrastructure through this credit and the restructuring of ongoing operations. As the restructuring of the ongoing operations took longer than expected, IDA decided to launch another emergency-type operation, the Employment Generation Project, to create 40,000 jobs per month from September 1995 to early 1997. Unlike the EERC, this operation focused strictly on labor intensive works, and did not need to include further balance of payments support. To sustain the economic recovery initiated with the help of the EERP, IDA is emphasizing the need for sound macroeconomic policies and structural reforms. As already envisioned in the policy letter accompanying the EERC, IDA is currently preparing a policy-based Second Economic Recovery Credit (ERC II). This operation is supported by a recently approved Second Technical Assistance Project (TAP II), which was presented to the Board together with the World Bank Group's Country Assistance Strategy (CAS) on September 17, 1996. KEY LESSONS LEARNED 18. The crisis in Haiti was comparable to other emergency situations in post-conflict societies for which the World Bank Group has provided support through emergency recovery operations. The key lessons learned from this operation confirm that projects of this type can work well if they have well-defined objectives and a simple design. For the rapid preparation and successful implementation of this emergency recovery operation, strong Government commitment and very close communication proved essential. This implied higher than average staff resources being devoted to preparation and supervision. Judging by the delays in restructuring ongoing projects, which needed to reconcile emergency and medium-term objectives, another critical factor for the success of the EERC was its focus on most immediate needs. This confirms that reconstruction itself should not be seen as a mechanism to achieve medium-term objectives, which should be addressed in follow-up operations. At the same time, however, the experience with the EERC suggests a pay-off for initiating a medium-term policy dialogue during the preparation of emergency operations, to take advantage of the good-will created by a rapid donor response. A final major factor in this operation was flexibility and responsiveness by IDA in the preparation of this operation. This included streamlining review procedures and, in particular, allowing exceptional retroactive financing of 50 percentof the credit amount,whichprovidedtimelyforeign exchangeresourcesto rapidly financecriticalimports. Nonetheless, the extent to which emergencyrecovery operations should focus on financingcritical imports relative to implementing rehabilitationworks shouldbe judged in the context of the overallemergencyprogram addressingthe various needs of a post-conflict society. -9 - PART II. STATISTICALTABLES Table 1: Summary of Assessments Substantial Partial Negligible Not applicable A. Achievement of obiectives Macro policies V Sector policies V Financial objectives Institutional development V Physical objectives V Poverty reduction , Gender issues V Other social objectives V Environmental objectives V Public sector management V Private sector development V Other: Financing critical imports Likelv Unlikely Uncertain B. Project sustainability V Highly Satisfactory Deficient C. IDA performance satisfactorv Identification V Preparation assistance V Appraisal V Supervision v - 10- Table 1: Summary of Assessments (cont.) Highlv Satisfactory Deficient D. Borrower performance satisfactory Preparation Implementation Covenant compliance Highly Satisfactory Unsatisfactory Highly satisfactory unsatisfactory E. Assessment of outcome / Table 2: Related IDA Credits Credit title Purpose Year of approval Status Precedingoperations n/a n/a n/a Followingoperations 1. Employment Short-term employment FY96 effective Generation generation 2. TAP II Technical assistance for FY97 approved economic management 3. ERC II Support for economic reform FY97 scheduled (policy-based) - 11 - Table 3: Project Timetable Stepsin projectcycle Date planned(*) Date actual Identification(Final/InitialExecutiveProject n/a 08/20/93 Summary) Preparation n/a 09/06/93 Appraisal n/a 09/11/93 Post-appraisal n/a 11/06/94 Negotiations n/a 11/15/94 Letter of development policy n/a 11/18/94 Boardpresentation n/a 12/20/94 Signing n/a 12/20/94 Effectiveness 01/31/95 12/23/94 Final Disbursement/Completion 12/31/95 06/06/95 Creditclosing 12/31/95 12/25/95 (*) Partly unavailable,due to politicaldevelopments settingthe pace for the preparationand implementationof the project Table 4: Credit Disbursements: Cumulative Estimated and Actual (US$million) FY95 FY96 Post-appraisal estimate 30.0 40.0 Actual 40.4 40.4 Actual as % of estimate 133 100 Date of final disbursement 06/06/95 Table 5: Key Indicators for Project Implementation not applicable Table 6: Key Indicators for Project Operation not applicable Table 7: Studies Included in Project not applicable - 12 - Table 8: Program Financing Requirements and Disbursements (US$ Million) Area EstimatedRequirements --- Effected Disbursements------ 1994/95 1994/95-95/96 EERP Balanceof Payments 130.0 151.9 248.2 SectorRehabilitation 238.1 141.4 443.5 Agriculture 31.9 5.6 53.5 Industry and Finance 29.4 0.3 16.2 Power 45.8 8.2 50.7 Transport 26.3 28.6 31.9 Water and Urban 26.7 22.2 58.5 Health and Nutrition 49.1 14.5 89.9 Education 25.9 4.9 31.6 Environment (*) 3.0 1.4 6.6 Multi-Sector (**) 55.7 104.6 Technical Assistance 34.3 (included in sector rehabilitation) EERP TOTAL 402.4 293.3 691.7 OTHER 261.0 222.2 356.7 Arrears Clearance 82.0 66.0 66.0 Humanitarian Aid 100.0 88.2 114.8 Governance 79.0 68.0 175.9 TOTAL 663.4 515.5 1048.4 (*) Interventionsto addressenvironmental needs are also includedin othersectors (**) Includes laborintensiveworksto prevent soil erosionand rehabilitate feeder roads, and small social infrastructure Table 9: Economic Costs and Benefits not applicable - 13 - Table 10: Status of Legal Covenants Agreement Section Covenant Present Original Revised Description Comments type status fulfillment fulfillment of covenant (*) (**) date date Credit 4.01(b) 1 CD 01/31/95 04/11/96 Audit Delayed by Agreement Government change Credit 3.03 5 C 12/23/95 12/20/95 Establish Core unit in Agreement Implement. place by Board Unit presentation Credit 3.04 9 C 04/30/95 n/a Progress Agreement Report Credit 3.05(b) 9 n/a 06/30/95 n/a Midterm Project already Agreement Review fully disbursed (*) 1: accounts/audits; 5: management aspects of executing agency; 9: monitoring, review, and reporting (**) C: completed; CD: completed with delay Table 11: Compliance with Operational Manual Statements There is no evidence of non-compliance Table 12: Bank Resources: Staff inputs Stage of Project cycle Planned (*) Revised (*) Actual (**) Weeks US$ Weeks US$ Weeks US$ Preparation to appraisal 20.7 59.784 Appraisal and post- 81.8 162,731 appraisal Negotiations through 6.0 11,979 Board approval Supervision 8.8 21,855 Completion 4.1 13,656 Total Direct Costs 121.4 270,005 Indirect Costs 57,100 TOTAL 121.4 327,105 (*) Not available, as dependency on protracted political developments made it impossible to anticipate needed staff resources (**) Includes Japanese PHRD Trust Fund - 14- Table 13: Bank Resources: Missions Performancerating Stage of project Month/ Number Days in Specialized Implement. Development Typesof cycle year of persons field (*) staff skills Status objectives problems Through 05/93 1 15 TM (Macro) n/a appraisal _ . Appraisal 09/93 7 100 TM n/a throughBoard Macro approval Infrastructure Social Sector PublicSector Procurement l ~~~~~~~~~~..................... ............................ ........................ ................................. .................................. ................................. ..............:.............. 10/93 4 45 Infrastructure mission curtailed, ..................... ........................... ......... ......... ................................. .................................. ................................. pol instab 11/94 4 44 TM n/a Infrastructure Social Sector Procurement 12/94 4 28 TM n/a Social Sector Legal Procurement Supervision 0 1/95 1 14 Procurement HS HS n/a 02/95 2 35 TM HS HS n/a Procurement ........ .............. ..............I............. ........................ .............................. ..................... ............. .................................. ............................ 05/95 1 5 TM HS HS n/a Completion 01/96 1 5 TM new Gov., hiatus in ............... ... ........................... ....... ........................ ...... ............................. ...................................... ......................................... ......... coop e raIt. 06/96 1 5 TM -- 0/6.1........... .5TM........ ........................... .......... ................... ....... ..... .. .. .... ............................ 09/96 1 3 TM (*) tentative;excludingtravel,stop-overin Washington,DC, and secondment of local consultantsto Government (**) HS: highly satisfactory IMPLEMENTATION COMPLETION REPORT HAITI EMERGENCY ECONOMIC RECOVERY CREDIT (CREDIT NO.2670-HA) APPENDIX A: BORROWER'S CONTRIBUTION TO ICR 1 MINISTERE DE L'ECONOMIE ET DES FINANCES ACCORD DE CR1tDIT IDA 2670-0-HA RAPPORT FINAL (Project Completion Report) Introduction, L'Accord de Cr6dit 2670-0-HA a et6 sign6entre la R6publique'Haiti et I'Association Internationale de D6veloppement le 20 D6cembre 1994, dans ie cadre du Programme d'Urgence et de Redressement ltconoigque (PURE) entrepris par le Gouvernement Constitutionnel de la R6publique des la restauration et le retour du President Aristide au pouvoir le 15 Octobre 1994. Le Programme d'Urgence et de Redressement ltconomique comprenait plusieurs volets: * Une composante de travaux d'urgence, (Pret BID 942/SF-HA), d'un rmontantde vingt huit millions cinq cent mille dollars am6ricains ($US28.500.000) dont l'ex6cution a ete confi6e a 1'Unit6 Centrale de Gestion (UCG), entit6 sous tutelle directe du Premier Ministre. * Une Assistance Technique Non remboursable, (BID-ATN/SF-48 15-HA), d'un montant de quatre millions de dollars am6ricains ($US4.000.000), a la mise en place et au fonctionnement de l'Unit6 Centrale de Gestion. * Une composante sectorielle a deboursementrapide, ( Pret BID 9411SF-HA), d'un montant de quarante millions de dollars arn6ricains ($US40.000.000) consistant en un appui a la balance des paiement et au Budget de la Republique. Version finale (13 septembre 1996) c:\...\2670-O.rap 2 Et enfin, Une composante sectorielle a deboursement rapide, (Accord de Credit IDA 2670-0- HA),d'un montant de vingt six millions huit cent mille Droits de Tirages Speciaux (DTS26.800.000) consistant en un appui a la balance des paiement et au Budget de la R6publique. Objectifs du Programme. L'objectif du Programmeetait d'initier des reformesinstitutionnelles et de politiqueg6neraleafin d'am6liorer le fonctionnement de l'Etat, de parvenir a une croissance durable dans un contexte macro-6conomique stable, et de reduire la pauvrete et les in6galites sociales. Ce Programme est decrit dans la lettre du Ministrede l'Economie et des Finances de la Republique d'Haiti au President de la Banque Mondiale en date du 18 Novembre 1994. Ruts du projet 2670-0-HA Le but du projet etait de fournir un appui d'urgence n6cessaire a: * La reactivation de l'Economie HaYtienne, = La mise en place du processus de recouvrement de cette Economie, et, * La stimulation immediate de la croissance economique. Le projet consistait a financer les importations d'urgence pour les composantes sectorielles cl6s du Programme d'Urgence et de Recup6ration Economique mentionn6es dans l'annexe 4 de l'Accord de Credit correspondant soit: Version finale (13 septembre 1996) cA...\2670-o.rap 3 * Agriculture, * Industrie, * Energie, * Routes et ponts, * Ports et transports maritimes, * Eau potable, assainissement et traitement des d6chets, * Infrastructures urbaines et gen6rales, a SantW et nutrition, * Education, et, * Autres importations. Mise en place et signature du contrat. L'Accord de Cr6dit 2670-0-HA a 6te con,u, r6dig6, sign6 et finalement approuve par le Parlement dans des d6lais records. En effet, sign6 le 20 D6cembre 1994, cet accord a ete approuv6 par le Parlement le 23 D6cembre 1994 et le premier d6caissement a pour date de valeur le jour suivant. Cette efficacite a ete principalement due au climat de grace qui a entoure le retour du President Aristide. Version finale (13 septembre 1996) c\....\2670-O.rap 4 Toutes les parties concernees 6taient intimement convaincues du fait qu'il fallait aller vite compte- tenu de l'etat de d6labrement dans lequel se trouvait 1'economie du pays apres les trois annees du coup d'6tat: Du c6te de la Banque Mondiale, les repr6sentants et 6missaires ont collabor6 avec une efficacit6 et une comprehension qui m6ritentd'etre soulignees. Du c6t6 du Gouvemement, les responsables et representants n'ont m6nag6 ni leurs efforts, ni leur temps, pour arriver a mettre en place ce programme dans les meilleurs delais. Du c6te du Parlement, qui etait en vacances, les membres de la Chambre des Deputes et du Senat se sont r6unis des publication de la convocation a l'extraordinaire et ont ratifi6 l'Accord de Cr6dit avec c6lerit6. N Ex6cution du Contrat. Le contrat a ete execut6 dans les d6lais et conditions pr6vus initialement. L'assistance de la firme "CARRINT", engag6e par la Banque Mondiale pour realiser la compilation des documents de douane devant servir de base aux demandes de d6caissement,a 6t6 d6terminante en ce qui concerne la facilit6 et la rapidit6 avec lesquelles ces decaissements ont et effectues. De meme, la coop6rationdes membres des diverses missions de la Banque Mondiale, a ete complete et sans faille. Le fait que les documents justificatifs des importations 6ligibles aient ete compiles par une firme ind6pendante specialiseechoisie par la Banque Mondiale a ete certainement la principale raison du climat de confiance qui explique la rapidit6 avec laquelleles decaissements concemant l'Accord de Credit 2670-0-HA ont ete effectu6s. En raison de son efficacite. cette maniere de proceder meriterait d'etre retenue, Version finale (13 septembre 1996) c:\...\2670-O.rap 5 Le retour a l'ordre democratique et la mise en place du gouvernement constitutionnel ARISTIDE/MICHEL en octobre 1994ont permis de reddfimir les grandes orientationsmacro- economiques: Une croissance du PIB de 4% I'an lie en grande partie A un vigoureux Programme d'InvestissementPublic. Une reductionde l'inflation a 15% Un accroissement des reservesde changede&68 millionsde gourdesa 1.622milliardsde gourdes. L'elimination des arri6r6sfiscaux. Des mesures sectorieles pour arriverI une stabilisation de l'economie ort ete prises et un accord de confirmationa 6t6signe avecle FondsMondtaireInternational(FMI). BilanSuccinctl La plupart des critres de performancede l'accord de confirmationont et6 respect6s a la fin de septembre 1995. * La croissancedu PIB a ete estirn6ea 4,5% en terme reel, * L'objectif d'augmentation des reservesinternationalesa 6t6largementdepasse, Vaeno inale (13 eptembne 1996) c:d...2 670 0ap 6 * L'indice des prix a la consommationa baisse de 52% en septembre 1994 a 24% en septembre 1995, et, Les resultatsobtenusdansle domainedes FinancesPubliquesont Wte plus que satisfaisants. Un programmefiscala ete adopteen vue de trouverles voies et moyenspourfinancerle programme de depenses. Lesgrandeslignesde ce programmese r6surnentcoimme suit: * Rdvisiondu CodeDouanier * Valorisationdes marchandises import6es au taux de changede referencede la BRA.H. * Elargissement de la Taxe sur le Chiffred'AfTires (TCA). * Introductiond'un acomptede 2% d6ductiblede l'Impot sur le Revenuet applicable aux marchandises importees. a Reductiondu tarifdouaniera l'importation. * Creationd'un droit variablesur les produitspetrolierset 6limination des subventions. Des progres significatifsont et6 realis6sen matierede lib6ralisationfinanciere: Unificationdes taux de ReservesObligatoirespour les BanquesCommerciales. Decret6liminantle plafondstatutairesur les taux d'interets. Annulation par la Banquede la Republiqued'Haiti (BRH) de la mesure obligeant les exportateursa retroceder50%des devises. Version finale (13 septembre 1996) c:%...A2670-.amp 7 La reforme administrative n'a pas et n6glig6e. Si la loi sur les departs volontaires n'a pas 6t6 adoptee celle sur la retraite anticip6e I'a ete et de nombreux fonctionnaires ont pu en b6n6ficier en quittant la Fonction Publique. Une CommnissionPr6sidentielle pour la croissance et la modemisation a et6 cr66e pour marquer 1'engagement du gouvernement au principe d'un partenariat entre le Secteur Priv6 et le Secteur Public. Une s6rie de mesures d6coulant du Symposium Economiquea pu etre adopt6e dans le but de faciliter le cadre r6glementaire des affaires: * Exon6ration du droit du wharfage a l'importation pour les industries de sous-traitance, a Enlevement des int6rets sur les arrieres fiscaux, * Extension de cinq annees de privileges fiscaux et douaniers pour les entreprises travaillant sous l'6gide du code d'investissement, * Disposition exceptionnelle de franchise douaniere pour les h8tels, * D6cret sur le gage sans d6placement par acte notarie ou signature priv6e, * D6cret sur les formalit6s de constitution des societes anonymes, * D6cret sur les cartels et, * D6cret de sanction de la convention portant cr6ation de l'Agence Multilat6rale de Garantie des Investissements. Version finale (13 septembre 1996) c:\...\2670-O.rap 8 Le Fonds d'Assistance Economique et Social (FAES), outil de lutte contre la pauvret6, a ete restaure avec la nomination d'un nouveau Directeur General,la reconstitution du staff et redemarrage de cet organisme qui a fourni, depuis, des resultats d6passant les attentes des bailleurs de fonds. L'Unit6 Centrale de Gestion (UCG) a e cr66e et mise en place pour assurer la gestion centralis6e des grands programmes sectoriels gen6rateurs d'emplois. Les r6sultats obtenus par cette Unit6 ont &6 tres satisfaisants et la Banque Mondiale a decide, en accord avec le Gouvernement, de lui confier la gestion de nouveaux fonds non pr6vus initialement (Programme de Cr6ations d'emplois). Durant l'exercice fiscal 1994-95,les ressourcesdu Tresor ont atteint des niveaux jamais realis6s dans le pass6. , La Direction Generale des Imp6ts (DGI) et I'Administration Generale des Douanes (AGD) ont collect6 2.276 milliards de gourdes, les Entreprises Publiques ont transfer6 a l'Etat 200 millions de gourdes, le Gouvemement a r6cupere 400 millions de gourdes qui etaient gel6s dans les comptes d'assignation (escrow accounts) et la Communaut6Intemationale a d6caissepres de 3.523 milliards de gourdes sous forme d'aide a la balance des paiements et de supports budg6taires. En 1994-95 le Tr6sor Public a g6r6 pres de 6.4 milliards de gourdes. Cette forte expansion des ressources a ete utilisee pour: * Allouer des frais de fonctionnement aux differents Ministeres, * Am6liorer la qualite des services offerts dans les domaines de la Justice, I'Education et la Sante, * Rehabiliter les infrastructures du pays, Version finale (13 septemnbre 1996) c:\...\2670-O.rap 9 Assurer le service de la dette externe suspendue depuis septembre 1991, et, Lancer des progranmmes d'investissement publics generateurs d'emplois, en faveur des couches les plus d6favoriseesde la population. L' Unit6 de D6mocratisation des Entreprises Publiques (UDEP) a 6te creee et mise en place. Le processus entame s'est poursuivi avec la loi sur la Modernisation des Entreprises Publiques, dans laquelle le Gouvernement opte pour un traitement au cas par cas, qui a 6t6 ratifi6e par le Parlement. CONCLUSION, On peut toujours penser que les resultats auraient pu etre meilleurs. Neanmoins, compte-tenu du contexte socio-politique qui a prevalu durant l'exercice 1994-1995, Le Gouvemement estime que le Programme d'Urgence et de Redressement Economigue a ete un succes. Verion finale (13 septembre 1996) c:A....\2670-O.rap IMPLEMENTATION COMPLETION REPORT HAITI EMERGENCY ECONOMIC RECOVERY CREDIT (CREDIT NO.2670-HA) APPENDIX B: A FRAMEWORK FOR A SUSTAINABLE ECONOMIC RECOVERY RUIWJ O14Am MINISTERE )E L DECONOMIE ET DES FIN4NCES s1 Nt4'I. 1,9- . S.Powr/AtI.P3 mc.I.... .............. Mr. LewisT. Preston President IntemationalDevelopment Association Washington, D.C 20433 A FRAMEWORK FOR A SUSTAINABLE ECONOMIC RECOVERY Dear Mr. Preston 1. The Republicof Haiti