AFRICAN DEVELOPMENT BANK AFRICAN DEVELOPMEENT FUND
MULTI-COUNTRY COVID-19 RESPONSE SUPPORT PROGRAMME
COUNTRIES: BENIN, TOGO, GUINEA
APPRAISAL REPORT
Date: May 2020 Koudeidiatou. ISSABRE - SOW, Principal Governance Officer ECGF Maimouna. DIOP-LY, Health and Social Sector Protection Officer AHHD A. EKPO, Principal Macroeconomist ECGF J-P. VION, Senior Governance Specialist ECGF M.S. BA, Young Professional ECGF H. DICKO, Senior Country Economist ECCE O. MANLAN, Principal Country Economist ECCE R. KOTCHONI, Senior Country Economist ECCE K. AMOUZOUVI, Senior Education Economist AHHD I, MANOMI, Principal Agricultural Economist, RDGW2 C.W. DAKPO, Chief Regional Coordinator, Procurement SNFI.1 S. KEITA, Chief Regional Finance Management Coordinator SNFI.1 J.C. MABUSHI, Procurement Officer SNFI1 R. SARR-SAMB, Procurement Officer SNFI 1 M. DIALLO, Senior Financial Management Officer SNFI2 T. A. BAKAYOKO, Financial Management Officer SNFI2 F. SEBEFOLY, Young Professional SNFI2 B. YUGARIA, Portfolio Officer RDGW D. BELAMINE, Principal Portfolio Manager RDGW N. GAHUNGA GISABO, Chief Gender Officer RDGW2 E. NYIRINKWAYA, Principal Resilience and Fragility Officer RDGW0 I. MOKNI, Senior Legal Counsel PGCL C. MATTIOLI, Legal Consultant PGCL I. DIALLO, Disbursement Officer FIFC B. DEMBELE, Disbursement Officer FIFC S. HOULI, Disbursement Officer FIFC A. BELLA-CORBIN, Chief Regional Environment and Social Coordinator SNSC Abdoulaye COULIBALY ECGF Martha PHIRI AHHD Yero BALDEH RDTS Emmanuel PINTO MOREIRA ECCE Marie-Laure AKIN-OLUGBADE RDGW Serge N’GUESSAN RDGW
AHHD2 Babatunde OMILOLA ECGF Wilfrid ABIOLA
COBJ
COGN
COTG
Tankien DAYO, Country Economist, ECCE Alfred Régis OUEDRAOGO, Social Development Expert, RDGW2 Peer Reviewers Amadou IBRAHIMA, Principal Governance Officer, ECGF
AFRICAN DEVELOPMENT BANK Public Disclosure Disclosure Public AFRICAN DEVELOPMEENT FUND
Authorized
MULTI-COUNTRY COVID-19 RESPONSE SUPPORT PROGRAMME
COUNTRIES: BENIN, TOGO, GUINEA
APPRAISAL REPORT
Public Disclosure A Disclosure Public
uthorized
RDGW/AHHD/RDTS/ECCE
July 2020
Translated Document
TABLE OF CONTENTS I. INTRODUCTION: PROPOSAL ...... 1 II. BACKGROUND ...... 1 III. RATIONALE AND KEY ELEMENTS ...... 4 3.1 Rationale: ...... 4 3.2 Collaboration and Coordination with Other Partners ...... 5 3.3 Compliance with Eligibility Criteria ...... 5 IV. PROPOSED PROGRAMME ...... 5 4.1 Country Programme Goal and Objective ...... 5 4.1.1 Program Objective ...... 5 4.1.2 Programme Content ...... 5 4.2 Financing Needs and Mechanisms ...... 7 4.3 Programme Beneficiaries ...... 8 4.4 Measures Precedent ...... 8 4.5 Policy Dialogue ...... 9 4.6 Impacts on Gender, Poverty and Vulnerable Groups ...... 9 4.7 Environmental and Social Safeguard Measures ...... 9 V. IMPLEMENTATION AND LEGAL DOCUMENTATION ...... 10 5.1 Implementation, Monitoring and Evaluation ...... 10 5.2 Procurement, Disbursement and Financial Management ...... 10 5.3 Legal Documentation ...... 10 5.4 Compliance with Bank Group Policies ...... 11 5.5 Risk Management ...... 11 VI. RECOMMENDATION ...... 11
ANNEXES - BENIN ...... I ANNEXES - GUINEA ...... XVII ANNEXES – TOGO ...... XXX ENVIRONMENTAL AND SOCIAL COMPLIANCE NOTE (ESCON) ...... XLV
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CURRENCY EQUIVALENTS May 2020
Currency Unit Benin = CFAF Togo = CFAF Guinea = GNF
UA 1 = CFAF 825.80 UA 1 = GNF 12849.33 UA 1 = USD 1.36 UA 1 = EUR 1.26
WEIGHTS AND MEASURES
1 tonne = 2204 pounds (lbs) 1 kilogramme (kg) = 2.200 lbs 1 metre (m) = 3.28 feet (ft) 1 millimetre (mm) = 0.03937 inch (“) 1 kilometre (km) = 0.62 mile 1 hectare (ha) = 2.471 acres
FISCAL YEAR January - December
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ACRONYMS AND ABBREVIATIONS
ACRONYM DESCRIPTION ABEDA Arab Bank for Economic Development in Africa ADF African Development Fund AFD French Development Agency AGI Africa Gender Index ANIES National Agency for Economic and Social Inclusion ANLC National Anti-Corruption Agency ANSAT National Food Security Agency of Togo ANSS National Health Security Agency ARCH Insurance for human capital development ARMP Public Procurement Regulatory Authority BCEAO Central Bank of West African States BCRG Central Bank of the Republic of Guinea CDC Cour de Comptes (Audit Bench of Supreme Court) Court of Auditors CFA.F CFA Franc CFR Rapid Response Facility CFRA/ERFP Country Fiduciary Risk Assessment CPIA Country Policy and Institutional Assessment CRBS Crisis response budget support CSPEF Economic and Financial Reforms Monitoring Unit CTSP Programme Monitoring Technical Unit DNCMP General Directorate for Public Procurement Control DNI General Directorate of Taxation ECF Extended Credit Facility ECOWAS Economic Community of West African States EITI Extractive Industries Transparency Initiative ERI-ESI Integrated Regional Survey on Employment and the Informal Sector FDI Foreign direct investment GBV Gender-based violence GDP Gross domestic product GHSI Global Health Security Index HDI Human Development Index IGT General Inspectorate for the Treasury IIAG Annual Ibrahim Index of African Governance IMF International Monetary Fund IPSAS International financial reporting standards IsDB Islamic Development Bank ISS Integrated Safeguards System KSI Higher Institute of Ccontrol LDP Letter of Development Policy LORF Organic Law on Finance Laws MTEF Medium-term expenditure framework MVT Motor vehicle tax NER Net enrolment ratio OHADA Organizsation for the Harmonizsation of Business Law in Africa
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PAR-COVID-19 COVID-19 Response Support Programme PGRGFP Global Public Finance Management Reform Plan PND National Development Plan PNDES National Economic and Social Development Plan PNDS National Health Development Plan PPP Public-Private Partnership PSD Country Strategy Paper RCF Rapid Credit Facility RST Rapid Screening Test SBT Single business tax SDGs Sustainable Development Goals SMEs/SMIs Small and medium-sized enterprises/industries SP-PRPF Permanent Secretariat for Monitoring Reform Policies and Financial Programmes STA Single Treasury account STAR-UEMOA WAEMU Settlement System TFP Technical and Financial Partners TMC Technical Monitoring Committee UGR Public Finance Reform Management Unit UNDP United Nations Development Programme UNS United Nations System VAT Value-added tax VSE Very small enterprise WAEMU West African Economic and Monetary Union WHO World Health Organizsation
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PROGRAMME INFORMATION
BENEFICIARIES: Republic of Benin Republic of Togo Republic of Guinea
SECTOR: Multi-sector
DESIGN MODEL OF THE BSO: Crisis Response Budget Support Operation
EXECUTING AGENCIES: Ministries in charge of the Economy/Finance in Benin, Guinea and Togo
2020 Budget Support Financing Plan (in UA million)
Total FMI BM EU Country ADF TSF (pillar I) AfDB Grant Loan Grant Loan Benin 5.10 5.10 91,98 36,21 Guinea 3.00 9.30 11.70 24.00 109.04 51.47 16,00 Togo 5.01 5.96 9.03 20.00 96,03 51,47 13,49 Total 8.01 8.36 0.00 20.73 49.10
ADF/TSF Loan Financing Information
Country Benin Guinea / Togo Loan Currency . . Interest Type Fixed Fixed Interest Rate Margin* 0% 0% 0.75% per year of the 0.75% per year of the disbursed Service commission disbursed loan amount not loan amount not reimbursed reimbursed 0.5% of the loan amount not 0.5% of the loan amount not disbursed 120 days after Commitment fee disbursed 120 days after signature of the Loan signature of the Loan Agreement Agreement Other Expenses Not applicable Not applicable Maturity 40 years 40 years Grace period 5 years 10 years Timeframe Half-yearly Half-yearly
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Timeframe – Main Milestones (projected) Activities Dates Needs April 2020 Approval July 2020 Effectiveness July/August 2020 Disbursement July/August 2020 First supervision September 2020 Completion 30 June 2021 Closing date June 2021
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I. INTRODUCTION: PROPOSAL
1.1 Management submits the following proposal and recommendation for the award of loans and grants from the African Development Fund (ADF) and the Transition Support Facility (TSF- Pillar I) to the Republics of Togo, Benin, and Guinea to finance the COVID-19 Multi-Country Response Support Program (PAR-COVID-19) for a total amount of UA 49.1 million, comprising UA 5.1 million for Benin; UA 24 million for Guinea and UA 20 million for Togo. This is a Crisis Response Budget Support (CRBS) operation as defined in the Operational Guidelines on Programmatic Support Operations - ADF/BD/IF/2014/35. It will be implemented over a 12-month period starting in June 2020. The programme was evaluated in April 2020, following requests from these countries to the Bank. Its design is based on good practice principles for the application of conditionality and the Bank Group's provisions on non-concessional debt accumulation policy.
1.2 The Programme seeks to provide an emergency response to the health and socio-economic crisis caused by the COVID-19 pandemic in the three abovementioned countries which have many similarities. Their health systems are weak and their economies, which are not very industrialised and are heavily dependent on income from raw materials, are still dominated by agriculture. Their respective COVID-19 response plans are therefore almost identical, with the main objectives of stemming the spread of the pandemic and strengthening social safety nets and the resilience of the productive sector. The measures supported by the Programme will be implemented over the 2020- 2021 period and will contribute to the achievement of the following outcomes: (i) strengthening of screening capacity; (ii) improvement of national coverage in patient isolation structures; and (iii) mitigation of the socio-economic effects of the health crisis.
II. BACKGROUND
2.1 COVID-19 Trends and Health Situation
2.1.1 All three countries recorded their first COVID-19 cases during the period 7-16 March 2020. As of 25 May, a total of 3,050 cases had tested positive in the three countries, including 1949 patients hospitalized and treated, 1,074 cured cases, and 27 deaths (representing an average case-fatality rate of 0.88%).
2.1.2 The health sector in the three countries is characterized by insufficient financing, which makes it impossible to ensure good health coverage. The recommendations of the Abuja agreement and WHO, which respectively call for the allocation of at least 15% and 10% of the national budget to the health sector, are not being implemented. In Benin, the state allocates on average only 7% of the budget to the health sector. In 2020, this allocation was only 5.1% before COVID-19; meanwhile, it was 8.6% in Togo and 5.5% in Guinea. The result is a lack of infrastructure and a chronic shortage of health workers, both in quantity and quality. The health systems in the three countries have indicators that for the most part fall short of the standards recommended by WHO. Benin has only 8 health workers per 10,000 inhabitants, Togo has 5.3 and Guinea has 4.22, which is well below the WHO standard of 25 per 10,000 inhabitants. In terms of infrastructure, there is an average of 0.5 beds per 1000 inhabitants. Moreover, the geographical coverage is very low, with people having to travel an average of 5 to 10 kilometres to reach a health centre. However, Guinea is in a slightly better situation than the other two countries because of its experience in managing the Ebola health crisis.
2.2 Economic, Social and Governance Context
2.2.1 From the economic standpoint, pre-COVID-19 trends in the three countries were good with GDP growth rates ranging from 5.3% (Togo) to 6.7% (Benin). Over the 2018-2019 period,
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the three economies recorded robust growth of 6% on average for Benin and Guinea and 4.8% for Togo. In Benin and Togo, growth was mainly attributed to agricultural sector performance, the buoyancy of the construction and public works sector, the revival of agro-industry, trade and transport and the dynamism of the Cotonou and Lomé ports. In the case of Guinea, growth has been sustained particularly by the mining sector but also by agricultural sector revival. The degree of openness of the three countries, whose ports are heavily used by hinterland countries (Mali, Niger, Burkina) for their trade with the rest of the world, however, increases their vulnerability to the international crisis caused by the pandemic. According to the IMF, a global recession of -2.5% is expected in 2020, due to massive disruptions in global production and value chains.
2.2.2 The growth prospects of the three countries have been sharply revised downwards, particularly for 2020, and major social consequences are expected, given their low level of human development. According to the Bank's estimates, Guinea and Togo will be in recession with rates of -1.8% and -1.3% respectively if global and national lockdown measures are maintained until the third quarter of 2020. Only Benin will maintain positive growth, albeit at a sharply reduced rate (1.2%). The impact of the pandemic on GDP in the three countries would mainly stem from a decline in global demand, which would lead to a reduction in exports, and from a decline in domestic demand. On the supply side, the decline in growth would result from under-performance in the agricultural sector, the slowdown in construction sector activities, sluggishness in trade owing to the slowdown in port activities and tourism, all contributing to the contraction of domestic supply that is largely dependent on imported inputs. The Guinean economy is said to suffer particularly from its heavy dependence on trade with China (94% of the country's total exports, 91% of which are mining products). Togo and Benin, whose economies are relatively open to the outside world thanks to their port and airport infrastructure, are particularly affected by the slowdown in freight and passenger traffic. Lomé airport is a hub for air traffic in the sub-region. As for Benin, its economy remains closely tied to the Nigerian economy which accounts for 67% of its exports and about 25% of its imports (of which about 80% are destined for re-export to Nigeria).
2.2.3 The budget deficit will widen to an average of 3.3% of GDP (worst-case scenario) compared to the 2.3% initially forecast in the 2020 budgets. The contraction of economic activity in the three countries will result in a decline in total government revenue in 2020, on account of mounting social and health spending. In the worst-case scenario, inflation would remain generally under control for Benin and Togo in 2020, standing at 1.4% and 3.2% respectively, compared to 1.2% and 1.7% projected before COVID-19. In the case of Guinea, where inflation was structurally high (9.4%) before COVID-19, a slight increase to 9.9% should also be recorded. The relative control of inflation would be possible particularly through monetary control and the fall in import costs, given the fall in oil prices. The economic findings for each country are detailed below in the country notes.
2.2.4 Meanwhile, from the social standpoint, the pre-COVID-19 situation was already quite disturbing in the three countries, which each had a very low Human Development Index (HDI) in 2018, that placed them in the "low human development" category. According to the 2018 UNDP report, Benin, Togo and Guinea are ranked 163rd, 167th and 174th out of 189 countries with HDIs of 0.520, 0.513 and 0.466, respectively. The social situation in all three countries is marked by persistent poverty and inequality, reflecting the lack of inclusiveness in economic growth. On average, 40.1% of Beninese, 49.2% of Togolese, and 35.3% of Guineans live below the monetary poverty line of less than USD 1.90 a day. Beyond income poverty, the population has limited access 2
to basic public services. According to the UNDP, multidimensional poverty, which covers the multiple deprivations suffered by people in the three dimensions (education, health and standard of living), affects 66.8% of the population in Benin, 48.2% in Togo and 61.9% in Guinea. As mentioned above, the health situation is particularly disturbing in the three countries and is characterized by insufficient geographical coverage in health centres, a lack of medical personnel and poor health infrastructure. Health indicators are below WHO standards with a low Global Health Security Index: 28.8/100 points for Benin; 32.5/100 for Togo and 32.7/100 for Guinea. In the education sector, although the national net enrolment ratio is improving steadily in Benin and Togo (98% and 93.8% respectively in 2017), spatial disparities still persist with a rate of less than 50% in some rural areas. Furthermore, the quality of education and school infrastructure is deemed to be rather low, with a high literacy rate: 38% in Benin (50% for men and 27% for women); 67% in Togo (77% for men and 41% for women). For Guinea, progress is much slower, with a national literacy rate of 44% for men and 22% for women. As regards gender, inequalities are persistent in the three countries where women continue to suffer social and economic discrimination. According to the African Gender Index (AfDB, AGI1 2019), Benin, Togo and Guinea are respectively ranked 30th, 36th and 20th out of 51 African countries. In Togo, 85.3% of women are in vulnerable employment and are over- represented in the informal sector; meanwhile, women in Guinea hold 74.80% of the jobs in the informal sector and live off a daily income from handicraft and commercial activities. In Benin, 48.6% of women make their living from precarious service activities (restaurants, petty trading).
2.2.5 The private sector in the three countries, consisting mainly of SME/SMIs and microenterprises, as well as the informal sector (at least 80% of employment), remain highly vulnerable to exogenous shocks. The repercussions of the health response as adopted by national authorities could be dramatic for the productive sector if adequate and urgent measures are not taken to boost stakeholder resilience. As soon as the first cases of COVID-19 appeared on the territories of the three countries, the respective governments took bold response measures to curb its spread. These measures included the reduction or suspension of air and land transport, the total or partial closure of schools and the rationing of market activities. Furthermore, a health-focused state of emergency has been declared for a minimum period of three months in Guinea and Togo. These highly restrictive measures have drastically reduced economic activity, resulting in job losses and a substantial reduction in income for the most vulnerable social groups.
2.2.6 Food insecurity is also a major concern for a significant proportion of the population in all three countries. The 2018 World Hunger Index report assesses the hunger situation as “serious” in all three countries. Benin is ranked 81st with an index of 24.4. Meanwhile, Togo is ranked 76th with an index of 22.5 and Guinea ranked 94th with an index of 28.6. Highly correlated with income level, food insecurity would be further aggravated by the expected effects of COVID- 19 on households. Furthermore, disruptions in food supply chains and artificial shortages caused by the opportunistic behaviour of economic stakeholders could lead to a surge in the prices of basic necessities. Moreover, existing national school meal programmes, which provided a substantial social safety net to combat child malnutrition, will be severely disrupted by the total or partial closure of schools, which has been decreed to stem the spread of COVID-19.
2.2.7 In the area of governance, efforts must be continued in all three countries, particularly in promoting transparency and combating corruption and illicit financial flows. Meanwhile, under the Ibrahim Index of African Governance, Benin, Togo and Guinea are ranked 13th, 26th and 37th respectively, out of the 54 countries assessed in 2018. In terms of corruption perception, they are ranked 80th, 130th and 138th (out of the 180 countries assessed in 2019), under the Transparency International Index. Although overall performance is uneven between Benin, Togo and Guinea, the fiduciary risk as assessed by the Bank remains "substantial" for all three countries. Indeed, the
1 Africa Gender Index 3
fiduciary risk assessment conducted by the Bank's services in Benin, Togo and Guinea reveals that the overall fiduciary risk, taking into account financial management, procurement and governance, is “substantial”. A detailed analysis of this risk for each country is presented in Technical Annex 1.
2.2.8 To mitigate fiduciary risk, the programme measures will support, inter alia, the establishment of consultation/crisis management frameworks that involve civil society, as well as the conduct of an audit of financial flows and an audit of public contracts awarded within the framework of the COVID-19 response. Moreover, during implementation of the response plan, the authorities will have to take steps to guarantee that: (i) citizens have access to information on the real evolution of the crisis and the measures taken, in order to limit panic behaviour; (ii) safeguard measures are taken by oversight institutions, parliamentarians, and citizen oversight structures; and (iii) spending procedures are rooted in transparency to ensure post-COVID-19 accountability.
III. RATIONALE AND KEY ELEMENTS
3.1 Rationale:
3.1.1 Linkage to Bank Group Strategies:
The program is aligned with the Bank's institutional priority to "improve quality of life for the people of Africa" and with its COVID-19 Rapid Response Framework. It is also aligned with ADF-15's strategic priority of strengthening resilience to economic shocks and helping ADF clients to manage them better. In particular, it is in line with pillar II of ADF-15 by supporting the business environment, commitments on good governance and on strengthening human and institutional capacities to build resilience.
3.1.2 Linkage with the Countries’ Policies
The authorities of the three countries adopted health response plans at a very early stage, which made it possible to have isolation and treatment centres operational very quickly, mainly by requisitioning certain hospital structures. In all three countries, a considerable effort has been made to strengthen testing capacity by rehabilitating existing laboratories and setting up others for in-country testing. These operational response plans, which are aimed solely at the health sector, are intended, in the very short term, to curb the spread of COVID-19 and, in the medium term, to correct the shortcomings of the respective health systems. Strategies to mitigate the socio-economic impacts of the health crisis are being adopted in Benin and Togo; meanwhile in Guinea, the authorities have opted to combine the two health response and mitigation plans into a national strategy to combat COVID-19 (SNLC) for the 2020-2022 period.
3.1.3 The Bank's Comparative Advantage
The Bank has gained relevant experience in supporting RMCs to cope with exogenous shocks, natural disasters, commodity price shocks, or epidemics. Over the past ten years, the Bank has used CRBS seven times to provide rapid responses to crisis situations in countries such as the Central African Republic, Malawi, Mali and Madagascar. Furthermore, during the Ebola epidemic in 2014, the Bank used sector budget support to provide a rapid response to four West African countries including Guinea. To ensure the rapid preparation of this operation, the Bank is relying on its recent experience in policy dialogue and implementation of budget support programmes and institutional projects in the three countries.
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3.2 Collaboration and Coordination with Other Partners
Strategic oversight of the coordination of COVID-19 response is ensured by the highest authorities in the three countries, namely the President and/or the Prime Minister, and it is operationally co- piloted by the UN Resident Coordinator, who regularly consults with and is supported by all other partners (France, USA, Germany, Japan, SNU, AFD, WB, USAID, GIZ, ADB, etc.). In this regard, the Bank, through its country offices in Togo (COTG), Benin (COBJ) and Guinea (COGN), attends the orientation, information and action meetings regularly convened. In Guinea, the TFPs meeting was held in COGN and resulted in the sharing of various analytical notes on COVID, as well as the support measures envisaged by each one. In Togo, a committee of economists from partner institutions, including the Bank, and the Government acting through the Ministry of Economy, was set up to help the authorities get a better understanding of the economic and social impact of the disease. In Benin, all development partners were consulted during the preparation of PAR COVID- 19, and the Bank is involved in a UN-led comprehensive socio-economic impact analysis study.
3.3 Compliance with Eligibility Criteria
All three countries generally meet the CRBS eligibility criteria. Their socio-political situation remains broadly stable, despite some political tensions in Benin, after the legislative elections of April 28 which took place without the participation of opposition political parties; in Togo, in the context of the last presidential elections and in Guinea (regarding a constitutional revision that is contested by the political opposition). The macroeconomic situation in these three countries had improved in the last few years preceding the pandemic. The measures adopted by the various Governments to mitigate the adverse effects of the pandemic are supported by development partners. However, fiduciary risk remains substantial in all three countries due to weaknesses in transparency and in combating corruption and illicit financial flows. To mitigate these risks, the Governments have undertaken to audit the financial flows from the budget support to be disbursed by the Bank and to audit the contracts awarded under the COVID-19 response plans. The assessment of compliance with the eligibility criteria is detailed in Annex 3 of each country note and the analysis of fiduciary risks is presented in the Technical Annex.
IV. PROPOSED PROGRAMME
4.1 Country Programme Goal and Objective
4.1.1 Program Objective
The COVID-19 Response Support Programme (PAR-COVID-19) seeks to help strengthen the health and socio-economic resilience of the three countries to the novel coronavirus pandemic. The supported reforms are aimed at strengthening the health response measures and efforts to mitigate the socio-economic impact of the pandemic. Although supporting urgent measures, the program thus prepares countries for more structuring reforms during the post-crisis period, in line with the pillars of ADF-15, namely improving the business environment and institutional capacity to build resilience.
4.1.2 Programme Content
4.1.3 The programme is structured around two additional components. The first component - (A) Support for the national COVID-19 health response strategy - is intended to strengthen national screening capacities with a view to detecting the maximum number of cases at an early stage and taking the necessary measures to curb the spread of the disease and to strengthen national patient management capacities. This component will also support measures to strengthen the institutional and financial governance of crisis management. The second component - B) Mitigation of the socio- 5
economic effects of COVID-19 - seeks to set up mechanisms to maintain the purchasing power and food security of the most vulnerable persons, and to strengthen private sector resilience to the crisis.
4.1.4 Given the health, economic and social contexts described above, the response plans of the three countries contain measures aimed at, inter alia: (i) revising the 2020 budgets to direct resources towards the financing of new emergencies arising from the pandemic; (ii) strengthening health system capacities to facilitate the detection of and care for infected persons; (iii) mitigating the social impact on the population through subsidization of the price of water, electricity, basic necessities and agricultural inputs as well as cash transfers. Measures are also envisaged for the private sector, which is heavily impacted by the lockdown and border closure measures have also been adopted. These include tax reductions and facilities granted for the payment of certain taxes and duties; and subsidies for the partial payment of employee salaries and electricity bills.
The table below presents an overview of the measures supported by the programme. The country notes presented in Annex 1 provide a detailed explanation of the content of the programme for each country.
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Table 1: Programme Overview
Component Programme measures for each country
Benin Togo Guinea
Support for 1. Amending Finance Law - Reduction of 1. Amending Finance Law - Reduction of certain 1. Amending Finance Law - Reduction of the national certain operating expenses to generate operating expenses to generate savings that certain operating expenses to generate health savings that will be used to finance the will be used to finance the health and savings that will be used to finance the health response health and economic response plan economic response plan and economic response plan strategy and governance of 2. Bringing laboratories up to standard for 2. Equipment of all regions and districts with 2. Provision of medical equipment, inputs and crisis screening tests; standard laboratories for screening tests; drugs for screening and patient care to the management various risk sites; 3. Establishment of additional epidemic 3. Establishment of nine additional treatment treatment centres in other regions; centres in other regions; 3. Strengthening of the technical capacities of health personnel in the areas of surveillance 4. Adoption and implementation of a 4. Adoption of a training plan for all laboratory and care for infected persons; COVID-19 training plan for health technicians focused on COVID-19 diagnosis workers in the public hospital sector and and biosafety issues; 4. Exemption from duties and taxes on health the private faith-based sector. equipment as well as similar and imported 5. Audit of public contracts awarded during products within the framework of COVID19 5. Audit of public contracts awarded management of COVID-19 resources; control; during management of COVID-19 resources; 5. Audit of public contracts awarded during management of COVID-19 resources;
- 1. Strengthening of universal health 1. Implementation of a cash transfer operation 1. Implementation of the cash transfer Strengthening coverage through the RAMU / for the most vulnerable social strata of programme for households; of social Sickness Insurance component of society; protection and the ARCH project; 2. State payment of utility bills for poor food security. 2. Free water and electricity for vulnerable subscribers to the water and electricity 2. Cash transfers to vulnerable groups for a period of 3 months starting in networks during the April-June period; households including those April; headed by women; 3. An Agricultural Response Plan, including 3. Nutritional support to vulnerable the granting of agricultural input credits for people affected by COVID-19 the 2020/2021 crop year is implemented. including women heads of household.
Strengthening 1. Exemption from motor vehicle tax 1. 25% reduction on advance payment of the 1. Freezing (for 3 months) of water and the resilience (MVT) for passenger transport business tax and deferral of advance electricity bills for the tourism and hotel of the companies in 2020 payment of taxes for companies operating in sector; domestic high-impact sectors (transport, hotels, private sector. 2. Partial payment of the salaries of restaurants) for the 2020 fiscal year. 2. Postponement of the payment of taxes to the employees in companies operating in State from April to June for small the most affected sectors for a period of 2. Suspension of penalties for late filing of businesses; 6 months financial statements by the deadlines of 31 March 2020 for sole proprietorships and 30 3. Cancellation (for one quarter) of tax 3. Coverage of 6 months of payroll April for corporate businesses. payments by petty traders and artisans; expenses for companies affiliated to the CNSS (National Social Security Fund) 3. A 50% reduction in the second instalment of 4. Establishment of a monitoring committee for the single professional tax (TPU) for sole companies impacted by the crisis, in order to proprietorships, road hauliers, artisans and manage the employment issue. similar categories.
4.2 Financing Needs and Mechanisms
The macroeconomic and fiscal frameworks have been updated to address the impact of the pandemic in the three countries. These new frameworks reflect the decrease in income and the increase in expenditure to fund unanticipated COVID-19 response plans. Amending finance laws reflecting these changes in the original finance laws are being adopted. The financing needs arising from the new macroeconomic and fiscal frameworks discussed with IMF staff during consultations under the respective programs are summarized in the table below.
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Table 2: Financing Gap (in UA million)
Items Benin Guinea Togo Pre- Post- Pre- Post- Pre- Post-
COVID COVID COVID COVID COVID COVID A Total revenue, including grants 2,153.80 2003.77 2335.57 2008.53 1372.53 1347.98 Tax revenue share 1,696.29 1483.19 2067.89 1711.11 1016.89 993.07 B Grants 144.60 213.60 165.39 196.37 228.29 228.26 Total expenditure and lending minus C 2,419.61 2517.27 2799.49 2553.42 1483.06 1553.84 repayments Interest payments 267.29 267.29 102.27 104.14 164.57 164.57 Capital expenditure 823.44 772.39 1044.93 716.71 542.42 542.42 Overall balance (pay order basis, D -410.40 -727.10 -629.31 -741.26 -338.81 -434.12 excluding grants) Overall balance (commitment basis, -265.81 -513.50 -463.91 -544.89 -110.52 -205.86 including grants) E Accumulation of arrears (-) = reduction) -27.01 -27.01 0.00 0.00 0.00 0.00 Overall balance (settlement basis, F -437.41 -754.11 -629.31 -741.26 -338.81 -434.12 excluding grants) G Net external financing 314.72 411.39 735.68 784.66 485.35 287.71 AfDB 0.00 6.94 0.00 32.64 0.00 27.20 World Bank 50 70 70 M Net domestic financing 122.69 342.72 -106.37 -43.40 -146.54 5:13 PM IMF 125,1 148 131,3 I Financing (G+H) 437.41 754.11 629.31 741.26 338.81 304.84 J Residual financing gap (I+F) 0.00 0.00 0.00 0.00 0.00 -129.28 Source: Country data; IMF Reports, May 2020
4.3 Programme Beneficiaries
PAR-COVID-19 will directly benefit the ministries in charge of the economy and finance in Benin, Togo and Guinea by financing the national budgets and impact their various populations which are the ultimate beneficiaries of budget implementation. More specifically, all vulnerable groups such as low-income households in both urban and rural areas, as well as private sector businesses will benefit from the emergency measures supported by the programme.
4.4 Measures Precedent
Table 3: Measures Precedent
Measures Precedents Evidence BENIN 1. Establishment of the institutional mechanism for 1. Order to establish the COVID-19 Quarantine coordination and management of the pandemic. Supervision Committee and Order to establish the COVID-19 Quarantine Management Operational 2. Adoption of a COVID-19 preparedness and response Technical Committee. plan. 2. Decision of the Minister of State in charge of 3. Partial coverage of the salaries of employees of Planning and Development validating the formally registered businesses operating in the most Document of the preparation and response plan to affected sectors COVID-19. 4. Establishment of subsidies for the informal sector in 3. Minutes of the Council of Ministers adopting the the most affected domains, including for women measure. 4. Minutes of the Council of Ministers adopting the measure to institute subsidies. TOGO 1. Establishment of the institutional mechanism for 1. Decree establishing the institutional mechanism for coordination and management of the pandemic. coordination and management of the pandemic. Decree creating the institutional system. 2. Adoption of a COVID-19 strategic response plan. 2. Report on the adoption of a COVID-19 strategic 3. Implementation of free water and electricity for social response plan and validation decision/report of the groups during the health emergency period. COVID-19 strategic response plan.
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3. Decrees relating to free water and electricity for social groups during the health emergency period. 4. Instructions from the Minister of Economy and Finance and press release from the Togolese Revenue Office.
GUINEA 1. Establishment of an institutional mechanism to 1. Order defining the powers and composition of the coordinate the response to COVID-19. COVID-19 Control Committee. 2. Cancellation of the tax and social charges for the 2. Decree deferring tax charges for SMEs and copy quarter (April-June 2020) for very small businesses of the DNI circular note cancelling tax and social (small businesses and crafts); and deferral of payment charges for very small businesses. obligations for similar taxes for three months (April- June 2020) for SMEs. 3. ANIES technical note on the methods of identification and targeting of beneficiaries of 3. Implementation of the cash transfer programme for transfers. households
4.
4.5 Policy Dialogue
Under this programme, the Bank has conducted a sustained dialogue on strengthening health systems, social protection and targeting of vulnerable households, promotion of private sector resilience and transparency in the management of COVID-19 expenditures in the three recipient countries. Given the significant impact of the pandemic on women, the policy dialogue will be extended to the development of gender-sensitive measures to reduce the growing impoverishment of female household heads and women entrepreneurs (in both the formal and informal sectors), and to prevent gender-based violence and girls dropping out of school. The policy dialogue will also address country-specific issues in which the Bank is already engaged. The policy dialogue focus areas are detailed in the country notes.
4.6 Impacts on Gender, Poverty and Vulnerable Groups
The COVID-19 crisis is having a disproportionately negative impact on women's health and socio- economic status. Indeed, women are over-represented in precarious/informal employment and face an increased risk of contracting the disease because of their traditional occupations (caring for the sick and elderly). Furthermore, the risk of maternal mortality is higher because of the potential diversion of health resources from other health priorities, including mother-child health, to COVID- 19 response. Besides, the risks of violence against women and school dropout are increased by the lockdown measures. Accordingly, the Bank has stepped up dialogue with the authorities in the run- up to this operation to ensure that the social, health and economic response plans of the crisis are highly gender-sensitive and protective of the most vulnerable populations.
4.7 Environmental and Social Safeguard Measures
According to the procedures required by the Bank's Integrated Safeguard System (ISS), the present operation is classified under Category 3. The measures planned by the programme carry low environmental and social risks, but do involve the procurement of goods and services such as increased testing for COVID-19 and the distribution of health kits. Environmental and social risks will relate to medical waste management. Any negative impacts that may arise during implementation will be managed in accordance with the national laws of the three countries and the ISS. During implementation of the programme, the three countries undertake to manage biomedical and other waste in accordance with the relevant national legislation, international best practices recommended by WHO or any practice that is technically and financially feasible for the countries. The executing organs will produce and submit to the Bank a report on implementation of the 9
environmental and social measures at programme completion. The program's Environmental and Social Compliance Note (ESCON) (in English and French) is included in the Technical Annexes of the RAP.
V. IMPLEMENTATION AND LEGAL DOCUMENTATION
5.1 Implementation, Monitoring and Evaluation
The programme will be implemented under the supervisory authority of the Ministries in charge of Finance and the Economy in Benin, Togo and Guinea, through their respective dedicated units (CSPEF in Benin, SP-PRPF in Togo and CTSP in Guinea), in coordination with the Ministries of Health and the other sectoral ministries involved. The mission of these various units is to act as an interface with technical and financial partners in the formulation, negotiation, implementation and monitoring of support and reform programmes in the economic and financial fields. Their capacities are assessed as satisfactory in light of their performance in the implementation of previous budget support operations in each of these countries. Budget support in response to the "COVID-19" crisis will be implemented through all components of the expenditure chain of national public financial management systems. It will be included in each country's 2020 Amending Finance Law under a line specifically labeled "AfDB COVID-19 Support" for this purpose. The teams tasked with monitoring the programme will ensure the regular transmission to the Bank of quarterly programme implementation reports prepared through joint reviews with other stakeholders (Ministry of Health, food security structures, civil society, etc.). Bank monitoring of the Programme will be the responsibility of the country offices in coordination with the TFP group.
5.2 Procurement, Disbursement and Financial Management
Procurement: This operation uses the budget support instrument to support the social response and contribute to the mitigation of macroeconomic risks in response to the crisis. Its implementation raises no issues directly related to the procurement of goods and services. However, given the weaknesses found in the integrity of the procurement systems, the overall fiduciary risk was considered substantial for all three countries.
Disbursement: As soon as the disbursement conditions in each of the countries are met, the financing amounts will be disbursed in a single tranche into the accounts of the public treasuries opened to receive the funds. The specific disbursement provisions for each country are detailed in the legal documents and disbursement letters.
Financial Management: Fiduciary risk was considered substantial in all three countries despite the improvements noted in the various public finance management improvement programmes. In addition to the audit of financial flows as of 31 December 2020, the Supreme Audit Institution (ISC) or ARMP in each country will conduct an audit of contracts awarded under the COVID-19 response plans, based on the terms of reference agreed and approved by the Bank. The Court of Auditors' audit report on the financial flows shall be transmitted to the Bank no later than six (6) months after the end of the financial year during which the single tranche was disbursed. The public procurement audit report will be transmitted no later than 30 September 2021.
5.3 Legal Documentation
The legal instruments that will be used under the Programme are: (i) a Loan Agreement between the Republic of Benin and the ADF; (ii) a Loan Agreement between the Republic of Guinea and the ADF; (iii) a Protocol Agreement between the Republic of Guinea and the ADF; (iv) a Loan Agreement between the Republic of Guinea, on the one hand, and the ADF and the AfDB, on the other hand, acting as administrators of the TSF; (v) a Loan Agreement between the Republic of Togo 10
and the ADF; (vi) an Protocol Agreement between the Republic of Togo and the ADF; (vii) a Loan Agreement between the Republic of Togo, on the one hand, and the ADF and the ADB, on the other hand, acting as administrators of the TSF.
Conditions Precedent to Effectiveness: The effectiveness of the loan agreements shall be subject to fulfilment of the conditions provided for in Section 12.01 of the Fund’s General Conditions for Loan Agreements and Guarantee Agreements. The entry into force of the Agreement Protocols shall be subject to its signature by the respective parties.
Conditions precedent to submission of the programme to the Board: Submission of the programme to the Board shall be subject to fulfilment of the conditions precedent mentioned in Table 3 of section 4.4 above.
Conditions precedent to disbursement: In addition to the entry into force of the loan agreements and agreement protocols, disbursement of the resources of each loan shall be subject to transmission to the Fund of proof, by the Republics of Benin, Togo and Guinea respectively, of the opening (or existence) of a special account in their Central Bank in the name of the Treasurer General to receive budget support resources, including financing for COVID-19 control operations.
5.4 Compliance with Bank Group Policies
The report complies with Bank Group policies and guidelines on CRBS. It is also in line with the Bank Group's proposal for a COVID-19 Rapid Response Facility (CRF 2020). No exemption from Bank guidelines is requested.
5.5 Risk Management
The table below presents the risks that could impact implementation of the program, and the mitigation measures.
Table 4: Risks and Mitigation Measures
Risk Mitigation measures Benin Procurement of testing materials and The sharing of Benin's success story in procuring biomedical equipment taking into account the similarity of supplies and equipment would help mitigate this risk for Togo Togo needs and constraints in the supplier countries and Guinea. In addition, the active collaboration of the WHO Guinea offices in the 3 countries is an advantage. Lack of public support for voluntary screening Intensification of the current awareness campaigns and programmes communication on the real issues of testing will promote greater public support. Global fiduciary risk: The Bank's evaluation An audit of the financial flows in the management of COVID- concluded that the overall fiduciary risk of the 19 response plan resources and an audit of public three countries (including financial procurement will be carried out respectively by the Court of management, procurement and governance) is Auditors or the ARMP according to terms of reference agreed substantial. with the Bank.
VI. RECOMMENDATION
For the purposes and subject to the conditions stipulated in this report, in order to finance the COVID-19 Response Support Program, Management recommends that:
(a) the ADF Board of Directors approves (i) an ADF loan of UA 5.1 million to the Republic of Benin; (ii) an ADF loan of UA 9.30 million and (iii) an ADF grant of UA 3 million to the
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Republic of Guinea; and (iv) an ADF loan of UA 5.96 million and (v) an ADF grant of UA 5.01 million to the Republic of Togo; and
(b) the ADB and ADF Boards of Directors, as administrators of the TSF, approve (i) a TSF (Pillar I) loan of UA 11.70 million to the Republic of Guinea; and (ii) a TSF (Pillar I) loan of UA 9.03 million to the Republic of Togo.
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ANNEXES - BENIN
ANNEX 1 - COUNTRY NOTE - BENIN
I. Health Situation and Macroeconomic and Social Context
1.1 Introduction
The COVID-19 epidemic is currently causing massive disruptions to production, global value chains, trade and investment, global financial markets and transport systems. In 2020, the world economy is expected to enter into a recession with negative real GDP growth estimated at - 2.5% (IMF, 2020). Given Benin's trade and economic links with the rest of the world, the impact of COVID-19 would also result in a slowdown in Benin's economic growth and a decline in social indicators.
1.2 Health Situation and Pandemic Trends
Benin recorded its first case of COVID-19 on 16 March 2020. As of 26 April, the country had a total of 54 confirmed cases, including 40 asymptomatic but isolated and treated positive cases, 13 persons who were not seriously ill, hospitalized and treated, 1 death and 27 persons who were cured.
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Number of cases recorded Number of active cases Number of recoveries Number of deaths
With the evolution and intensification of testing, as of 8 May 2020, Benin had a total of 284 confirmed cases (42 more confirmed cases than the day before) with 220 persons under treatment, 62 cured and 2 deaths. The substantial increase in the number of cases can be explained by the mass screening that has begun in some target groups, especially teachers (in view of the resumption of classes) and health workers. It should be noted that Benin uses two testing methods. From 3 to 8 May 2020, more than 10,000 tests were performed using the polymerase chain reaction (PCR) method and approximately 10,000 tests conducted using the Rapid Screening Test (RST) method.2 In addition, Benin has a care protocol in place and has provided medicines to ensure free care for patients. Newly registered cases are essentially subjects who do not show any signs of the disease.
The health system in Benin is characterized by the lack of infrastructure and a chronic shortage of health workers, both in quantity and quality. Furthermore, the health sector faces major challenges in improving the supply of quality care, considering that it has insufficient funding for better health coverage. The State allocates on average only 7% of the budget to the health sector. The health sector allocation within the State budget is 5.1% (CFAF 70.3 billion) in 2020 compared to an average of 5.9% over the 2015-2019 period. This share falls short of the Abuja agreement (15%) and WHO (10%) targets. On account of the low State allocation to the health sector, households have to bear 42.2% of health expenditure, which limits their access to health care and services. Moreover, investment expenditure in the sector is in relatively steady decline and represents only 21.5% of the
2 The Rapid Detection Test (RDT) entails conducting a blood test and the so-called "PCR" (polymerase chain reaction) or "virological" test entails conducting a nasopharyngeal (throat, nose, nasopharynx) swab to look for traces of the virus. I
Ministry of Health budget in 2020, compared to an average of 31.9% over the 2015-2019 period. Nearly all the indicators fall below WHO standards. Benin currently has 8 health workers per 10,000 inhabitants, which is below the WHO standard of 25 per 10,000 and 0.5 beds per 1000 inhabitants. In addition, people have to travel an average of seven kilometres to reach a health centre. The available health infrastructures (28 functional health zones) are insufficient and their technical platforms need to be strengthened. As regards social protection, only 8.4% of the population is currently covered by health insurance. Like all the countries affected by the pandemic, Benin has nevertheless taken health response measures to partially offset the weaknesses of its health system.
1.3 Transmission Channels of the COVID-19 Health Crisis
1.3.1 Potential Channels of Transmission of COVID-19 Impact to the Economy of Benin
The potential channels of transmission of COVID-19 impact to the economy of Benin could include: (i) the decline in the value of exports, particularly cotton, which accounts for 57% of the country's total exports; (ii) the reduction in foreign direct investment (FDI), particularly from China, which is the second largest provider of FDI in Benin, accounting for 36.2% of net direct investment flows in 2018; (ii) reduced access to world capital markets due to the general reluctance of international investors with regard to bond debt; (vi) the decline in tourism and travel due to restrictions in air traffic, which account for an average 6% of GDP and 5% of employment; and (vii) the reduction in migrant remittances. This analysis will focus on the repercussions of COVID-19 impact on the real sector of the economy, public finance and the external sector.
• Real Sector and Inflation
Before the COVID-19 pandemic, real growth in Benin was projected to be around 6.6% during the 2020- 2021 period. According to the Bank's estimates, the expected impact of COVID-19 will slow down growth to 3.3% in 2020 under the best-case scenario and 1.2% under the worst-case scenario (see Annex 4). On the supply side, the decline in growth would result from the under-performance of the agriculture (especially cotton), construction and public works - due to suspension of construction works under the Government's Action Programme (PAG 2016-2021) - trade, transport and tourism sectors. On the employment side, the slowdown in growth would mainly stem from a contraction in investment, particularly public investments, owing to a decline in budgetary resources. The level of inflation, estimated at 1.2% before COVID-19 in 2020, would be 1.1% (best-case scenario) and 1.4% (worst-case scenario) due to the fall in domestic demand as a result of reduced incomes. Table 1 below shows Benin's macro-economic indicator trends before and during COVID-19.
Benin With COVID Pre-COVID Baseline scenario Worst-case scenario 2019 2020 2021 2019 2020 2021 2019 2020 2021
(e) (p) (p) (e) (p) (p) (e) (p) (p) Real GDP growth 6.7 6.7 6.6 6.4 3.3 4.5 6.4 1.2 4.1 CPI inflation -0.1 1.2 1.7 -0.8 1.1 1.6 -0.8 1.4 1.7 Budget balance % GDP -2.5 -2.1 -1.9 -2.2 -3.0 -2.7 -2.2 -3.3 -3.2 Current account % GDP -5.5 -5.2 -5.1 -5.1 -7.0 -6.4 -5.1 -7.3 -6.7
Sources: AfDB Statistics Department (January and April 2020)
Public finance
The budget deficit initially projected at -2.1% in 2020 is expected to widen to between -3% (best-case scenario) and -3.2% (worst-case scenario) of GDP. Given the impact of COVID-19, the overall budget deficit (including grants), is estimated at CFAF 311.8 billion (USD 52 million) compared to CFAF 161.4 billion (USD 27 million) provided for in the initial 2020 finance law; i.e., an increase of 93.1%. II
Regarding the debt situation, the public debt stock, initially estimated at 40% of GDP in 2020, is expected to increase to 43.3% of GDP, owing to the impact of COVID-19. Benin's debt distress risk is deemed moderate, according to the IMF/World Bank October 2019 debt sustainability analysis. The financing gap is estimated at CFAF 458 billion (USD 76 million), or 3.8% of GDP, and should be filled by mobilizing financial resources from Benin's technical and financial partners, including the Bank through this budget support programme.
• External sector
The external current account, which is structurally in deficit, is expected to deteriorate further with the decline in cotton exports and re-exports to Nigeria and Niger. Thus, the current account deficit will stand at -7.3% of GDP in 2020 according to the worst-case scenario, compared to -5.1% projected before the pandemic. A decline in tourism earnings and transfers is also expected. For the year 2021, the current account balance should improve slightly with the recovery in world demand, and should be between - 6.4% (best-case scenario) and -6.7% of GDP (worst-case scenario).
1.3.2 Potential channels of social transmission of the crisis
Benin is classified among low human development countries, with a score of 0.520, ranking 163rd out of 189 countries. In Benin, 53.9% of the population lives on less than a dollar a day and the poverty rate is estimated at 40.1%, with strong and growing gender and regional inequalities. With regard to gender, inequalities persist between men and women. According to the Integrated Modular Survey on Household Living Conditions (EMICOV 2015), 85.1% of plot owners are men (compared to 14.9% of women), and only 12% of women have access to land through inheritance (compared to 88% of men). If the health crisis worsens, it will lead to the deterioration of already weak social indicators in (i) health, (ii) poverty and gender, (iii) food insecurity and (iv) education.
• Poverty and Gender
An outbreak of COVID-19 in the country would lead to the exacerbation of poverty due to the nature of the economy which remains dominated by the informal sector that accounts for almost 90% of employment (trade, catering, transport) and remains potentially highly exposed to contagion. The country has not yet opted for stay-at-home measures for its population or the closure of high-risk businesses to curb the spread of COVID-19. While this strategy may in the short term limit the drastic and brutal drop in the incomes of the most vulnerable groups, it does, however, present a risk of contagion for stakeholders, especially women whose activities are mostly concentrated in the informal sector. In particular, women are highly exposed to COVID-19 as they are over-represented in the service sector. Indeed, 48.6% of women work in service industries (restaurants, shops)3 involving social contacts. There is risk of an increase in gender-based violence (GBV). The project is classified as Category 2 according to the GMS and includes measures for socio-economic protection for female household heads and gender-sensitive policy dialogue.
• Food Security
The food insecurity situation is quite disturbing, with 33.6% of food-insecure households reported to be in a far worse condition because of COVID-19. Indeed, disruptions in food supply chains can result in soaring prices for basic necessities. Benin remains heavily dependent on food imports to meet its basic consumption needs. Indeed, the country annually imports about 1.6 million tonnes of rice, 121 000 tonnes of wheat and other food products, and has no buffer stocks of these commodities due to recent reforms in the sector.
3 Africa Gender Index III
• Education
In Benin, the net enrolment ratio (NER) in primary education was 97% in 2017. However, primary school drop-out rates remain high, with only 64.5% of girls completing primary school compared to 76.2% of boys. COVID19 has not led to the closure of any schools and universities, with the exception of the "Montaigne” French school. Instead, the government decided on March 23 to extend the Easter holiday period from 30 March to 10 May 2020. Classes resumed on 11 May only for primary school pupils as well as secondary and high school students; the other classes will resume on 10 August 2020, except for nursery schools and day-care centres which will remain closed until the beginning of the next school year. There is a risk of increased drop-out rates for girls, who help their families with household chores and petty trading activities. In the case of universities in particular, the lecture halls will remain closed, and courses will be taught online through a platform created for that purpose. The government's objective is to validate the 2019-2020 school year without compromising the fight against the coronavirus
II. THE PROGRAM
2.1 Program Objective
The COVID-19 Response Support Programme (PAR-COVID-19) seeks to help strengthen the health and economic resilience of Benin to the novel coronavirus pandemic. The supported reforms are aimed at strengthening the health response measures and supporting Benin in its efforts to mitigate the socio- economic effects of the pandemic. The program is designed as a reform-oriented operation financed with UA 5.1 million in budget support to be disbursed in a single tranche in 2020.
2.2 Programme Components
2.2.1 The programme is structured around the two additional components described below. Component A: Support to the national COVID-19 health response strategy: This component seeks to strengthen the national screening capacity to detect as many cases as possible at an early stage and take appropriate measures to control the spread of the disease. It has two sub-components: A.1) Support the COVID-19 health response; and A.2) Strengthen crisis management governance. Component B: Support for the national strategy to mitigate the socio-economic impact of COVID-19: This component seeks to establish mechanisms to maintain the purchasing power and food security of the most vulnerable and to support the productive sector. It has two sub-components: B.1) Support the financing of social and food security expenditure; and B.2) Strengthen the resilience of the domestic private sector.
2.2.2 Component A: Support to the national COVID-19 health response strategy
Situation Analysis: The evolution of the COVID pandemic appears to be relatively slow and even controlled according to the statistical data. It is true that, faced with the weaknesses of the health system, the authorities, with the help of technical and financial partners, have been able to quickly put in place a fairly robust response mechanism, particularly in terms of screening and isolation of patients. Unfortunately, this positive trend - which stakeholders hope would remain sustainable - cannot be considered definitive, given the country's current screening capacity, which, although far superior to that of most WAEMU countries, remains low. Moreover, Benin's health system is fragile and continues to face challenges in improving the supply of quality care and financing to ensure greater universal health coverage. Benin's Global Health Security Index is low (28.8 points/100), ranking the country 150th out of 195 countries worldwide and 32nd out of 54 African countries. With a total of around 22 000 tests performed as of 8 May 2020, or an average of around 1600 per day from the week of 3 May onwards, the risk of underestimating the number of cases remains high, given the highly contagious nature of the disease, which has a relatively long incubation period of at least 14 days, leading to a high probability of community-wide transmission. Moreover, the borders are not closed and are quite porous.
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Government Achievements & Strategies: The authorities took bold measures early on to contain the epidemic. These include the systematic biological diagnosis of symptomatic persons and all contacts of infected persons, as well as the systematic screening of groups considered to be at higher risk, including medical and paramedical personnel, defence and security personnel and the prison community. The government has received additional orders for screening materials, masks, medicines and equipment needed to treat patients as well as equipment needed to operationalize many screening laboratories in the country's 12 departments, thus expanding diagnostic capacity to 16,000 tests per day. In addition, the State has taken a battery of measures including the identification and equipping of sites for the treatment of possible positive cases in all regions of the country, the automatic quarantine of persons coming from abroad, the establishment of a cordon sanitaire to isolate the communes most exposed to the pandemic, mandatory and systematic wearing of masks and the provision of chloroquine at a subsidized price to pharmacies.
Measures Supported by the Programme: Sub-component A.1: Support the health response to COVID- 19: The measures supported under this sub-component are: (i) construction/rehabilitation of laboratories to upgrade them to screening test standards; (ii) establishment of additional epidemic treatment centres in other regions; (iii) adaptation of standard operating procedures for laboratories and for management of COVID-19 cases; (iv) training of health workers in the public hospital sector and the private faith- based sector on COVID-19 (knowledge of the disease, preventive measures, decision-making algorithm, management modalities and biological confirmation). Sub-component A.2: Strengthen governance in the management of the pandemic: The measures supported through this sub-component are : (i) finalization and validation of a COVID-19 preparedness and response plan; (ii) establishment of the Pandemic Coordination and Management Framework; (iii) revision of the macroeconomic and budgetary framework that takes into account the impact of COVID-19; (iv) audit of the financial flows by the Chamber of Accounts and the audit of public contracts awarded as part of the response to COVID 19 by the ARMP.
2.2.3 Component B: Support the national strategy for mitigation of the socio-economic impact of COVID-19
Situation Analysis: Benin's private sector, largely dominated by the informal sector (about 65% of GDP and 90% of jobs) and characterized by very low factor productivity, has very low resilience to the effects of the looming global recession. Businesses in Benin already face structural challenges mainly related to (i) human capital inadequacy; (ii) the high cost of production factors; and (iii) the inadequacy of national policies for the supervision and support of MSMEs/SMIs in the structuring and development of their activities. In such a context, businesses in Benin will be doubly affected by the projected drop in exports to at least 8.58% and the expected 28.45% decline in private investment. The combination of the decline in income due to the reduction of productive activities in the private sector and the increase in food and health expenditure due to the epidemic and the resulting shortage is a risk factor for the aggravation of poverty and the vulnerability of the most disadvantaged social strata.
Government Achievements & Strategies: The government is developing a social action plan aimed at strengthening and expanding existing social net programmes such as (i) the ARCH project and (ii) the ACCESS project. Moreover, discussions are under way on the introduction of essential financial fiscal measures to prevent the collapse of the private sector, particularly SMEs.
Measures Supported by the Programme: Sub-component B.1: Support the financing of social and food security expenditures: The measures supported through this sub-component are: (i) strengthening of universal health coverage through RAMU by increasing the number of the most vulnerable members of the health insurance component of the ARCH project; (ii) cash transfers to vulnerable households including those headed by women; (iii) cash transfers to vulnerable households, including those headed by women; (iv) nutritional support to vulnerable persons affected by COVID-19, including female household heads.
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Sub-Component B.2:Strengthening the resilience of the domestic private sector. The measures supported through this sub-component are : (i) exemption from the motor vehicle tax (MVT) for passenger transport companies; (ii) partial coverage of the salaries of employees of formally registered businesses in the most affected sectors (hotels, restaurants, travel agencies); (iii) coverage of electricity bills over a period of three months for formally registered businesses in the most affected sectors; (iv) introduction of subsidies for the informal sector in the most affected sectors, including for women.
2.3 Measures Precedent
Measures Precedent Evidence
- Establishment of the institutional mechanism - Order to establish the COVID-19 Quarantine for coordination and management of the Supervision Committee and Order to establish the pandemic. COVID-19 Quarantine Management Operational Technical Committee. - Adoption of a COVID-19 preparedness and response plan. - Decision of the Minister of State in charge of Planning and Development validating the Document of the - Partial coverage of the salaries of employees preparation and response plan to COVID-19.Minutes of of formally registered businesses operating the Council of Ministers adopting the measure in the most affected sectors. - Minutes of the Council of Ministers adopting the - Establishment of subsidies for the informal measure. sector in the most affected domains, including for women
2.4 Expected Outcomes
Efficient implementation of the programme will make it possible to strengthen the COVID-19 screening capacity and improve the national coverage rate in patient isolation facilities. The measures will also help to prevent a worsening of food insecurity by maintaining the prevalence of severe or moderate food insecurity below 9.6%. Moreover, the measures supported will help to prevent private sector collapse.
2.5 Financing Needs and Mechanisms
The macroeconomic and fiscal frameworks were updated and discussed with IMF staff during the sixth program review consultations with the IMF, which took place from 9 to 17 April 2020. They project a total revenue level (including grants) of CFAF 1087 billion compared to expenditure of CFAF 1544.9 billion (including payment of arrears); i.e. a financing gap of CFAF 458 billion fully covered by domestic financing and assistance from technical financial partners. The budgetary aid provided for includes, inter alia: USD 125,1 million for the IMF through increased access under the Extended Credit Facility to support countries affected by the pandemic; USD 50 million for the World Bank; and CFAF 15 billion for the WADB. The Bank's budget support contributes UA 5.1 million to the financing gap in the form of an ADF loan.
2.6 Policy Dialogue
The Bank will conduct sustained dialogue on strengthening the country's health system in general and on the effective implementation of the COVID-19 Preparedness and Response Plan in particular. The Bank will also intensify the ongoing dialogue in the following three areas critical to strengthening the country's socio-economic resilience to exogenous shocks, namely: (i) expansion of the budgetary space, mainly by increasing domestic revenue collection; (ii) implementation of WAEMU guidelines, in particular the programme budget, with a view to strengthening the efficiency of resource allocation and
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the management of public investments, including those related to the health sector; and (iii) dialogue on improving the business environment and private sector development.
2.7 Beneficiaries
PAR- COVID-19 will directly benefit the Ministry of the Economy and Finance through the financing of the national budget and indirectly benefit the entire Beninese population which is the ultimate beneficiary of budget execution. More specifically, all vulnerable groups such as low-income households in both urban and rural areas, as well as private sector businesses will benefit from the emergency measures supported by the programme.
Detailed Analysis of Eligibility Criteria - Benin Government The Government's commitment is considered to be strong in view of the attention paid by the authorities commitment to poverty to implementation of the reform programmes agreed upon with its technical and financial partners. In reduction, inclusive terms of poverty reduction, Benin's HDI for 2018 stands at 0.520, placing the country in the "low human growth and reforms development" category and 163rd among 189 countries and territories. It should be noted, however, that between 1990 and 2018, Benin's HDI rose from 0.348 to 0.520, representing an increase of 49.5%. The level of unemployment and underemployment remains high, affecting more than 50% of the labour force, while modern social protection mechanisms remain underdeveloped. In terms of gender promotion, progress remains weak, with the gender inequality index virtually stagnating, only inching up from 0.613 in 2015 to 0.611 in 2017, ranking Benin 146th out of 189 countries. In terms of promoting reforms, the Government has adopted a Government Action Programme (GAP) for the next five years, as well as a National Development Plan (PND 2018-2025) and its operational document, the Growth Programme for Sustainable Development (PC2D 2018-2021). It is structured around the following three pillars: Pillar 1 - Consolidating democracy, the rule of law and good governance; Pillar 2 - Initiating the structural transformation of the economy; Pillar 3 - Improving the living conditions of the population. These three pillars can be broken down into seven strategic areas covering the rule of law, governance, economic policy, education, health and regional planning.
In response to COVID-19, the government has developed a "COVID-19 Preparedness and Response Plan for Benin" which is the reference framework for the health response. A strategic economic response and recovery plan is also being developed to address the systemic risk that the pandemic poses to the country. Macroeconomic Despite a sometimes complex economic and social context, the Government of Benin has succeeded in Stability maintaining a viable macroeconomic framework characterized by continuous growth in real GDP. In 2019, Benin was ranked among the six African economies in the world's ten fastest growing economies. The country recorded an economic growth rate of 6.7%4 in 2019 as in 2018, driven by the good performance of the agricultural sector, particularly cotton, the increase in public investment, and the dynamism of the transport, trade and telecommunications sectors. The tertiary and primary sectors are the engines of Benin's growth. GDP growth rates were forecast to be 6.7% in 2020 and 6.6% in 2021 before the COVID-19 crisis. This favourable outlook remained vulnerable to rainfall and external shocks, including world cotton and oil prices, and changes in Nigeria's trade and exchange rate policies. The extended closure of the Nigerian border (since 21 August 2019) and the negative impacts of COVID-19 are expected to contribute to a slowdown in the growth of Benin's economy in 2020 and 2021. The budget deficit is expected to stand at 3.5% of GDP against the 1.8% initially forecast in the 2020 finance law, according to the government of Benin's projections. Indeed, the slowdown in economic activity due to the COVID-19 pandemic has an impact on public accounts. Total state revenue (including grants) would be CFAF 1216.7 billion compared to CFAF 1307.8 billion in the initial 2020 Finance Law, representing a revenue loss of CFAF 91 billion. Public expenditure is expected to grow from CFAF 1,469.2 billion (2020 Finance Law) to CFAF 1,528.5 billion (impact of COVID-19); i.e. a 4% increase. Given the impact of COVID-19, the overall budget deficit (including grants), is estimated at CFAF 311.8 billion compared to CFAF 161.4 billion provided for in the initial 2020 finance law; i.e., an increase of about 93.2%.
Regarding debt sustainability and according to the projections of the Government of Benin, the public debt stock, initially estimated at 40% of GDP in 2020, is expected to increase to 43.3% of GDP, owing to the impact of COVID-19. Benin's debt distress risk is deemed moderate, according to the IMF/World Bank October 2019 debt sustainability analysis. The country's debt level also remains below the WAEMU convergence criterion (70% of GDP). Benin is rated B+ by Standard & Poor's, and has had access to international capital markets since March 2019. The negative impact of COVID-19 on international capital markets would reduce Benin's room for manoeuvre to borrow on these markets.
4 Source: National data. VII
The financing gap is estimated at CFAF 458 billion, or 3.8% of GDP, and should be filled by mobilizing financial resources from Benin's technical and financial partners, including the Bank through this budget support programme. The current ECF of the IMF makes it possible to support the country in the pursuit of the structural reforms necessary for the efficient implementation of its development strategy. The report of the fifth review of the program with the IMF completed in December 2019 confirms the authorities' commitment to reforms and the success of the program with all quantitative criteria at end-June and the program's structural benchmark at end-September Political stability Benin is recognized as a model of stable democracy, characterized by successive peaceful changes of government since 1989, that have helped to create an environment conducive to economic growth. The political climate deteriorated relatively in 2019 after the parliamentary elections of 28 April, which were held without the participation of opposition political parties. Socio-political tensions in Cotonou and clashes between the security forces and the population in the northern regions (particularly the towns of Savè and Tchaourou) resulted in loss of life, injuries, population displacement, over 80 persons imprisoned, and extensive material damage. In an effort to calm the socio-political climate, the authorities organised a national political dialogue from 10 to 12 October 2019. The recommendations of the national dialogue were endorsed by the National Assembly, leading to a revision of the Constitution of 11 December 1990. As far as the Bank is concerned, the major innovations introduced through the constitutional revision are: (i) the establishment of the Court of Auditors; and (ii) direct ratification of financing agreements by the President of the Republic, who will subsequently submit a summary thereof to Parliament, thereby reducing the time taken to bring loan agreements into force. The political situation is currently marked by the holding of local communal and municipal elections on 17 May 2020. Five political parties participated in these elections. The participation rate was estimated at 49.14%, although disparities were noted. Participation was relatively low in Cotonou (20- 22%), whereas, in rural areas, it sometimes exceeded 60%-65%. Union progressiste and Bloc républicain (2 parties of the presidential movement) won 39.97% and 37.38% of the vote respectively. The only opposition party (Forces Cauris pour un Bénin Emergent) that participated in the elections came third with 14.98% of the vote. The two other parties (Parti du Renouveau Démocratique and Union Démocratique pour un Bénin Nouveau) that participated in the elections won 5.49% and 2.17% respectively, which is below the 10% threshold required to win seats. Fiduciary Risk The country fiduciary risk assessment (CFRA) for Benin conducted during the mid-term review of the Assessment Country Strategy Paper (CSP) reveals significant progress, although fiduciary risk is substantial overall. In order to mitigate this risk, the Government of Benin embarked on public finance management (PFM) reforms, which have helped to maintain a positive PFM trajectory. These include: (i) the communication of budgetary information to local authorities following promulgation of the annual finance law; (ii) the introduction of the citizens' budget; (iii) the introduction of tax tele-payment and the increased use of bank accounts for tax collection; (iv) the establishment in 2018 of a court for economic crimes and the passing of a law to combat money laundering and terrorism financing; (v) the strengthening of controls throughout the administration coordinated by the IGF, in particular the introduction of internal audit; (vi) the full operationalization of the Treasury's single account while improving the quality of cash-flow forecasts; and (vii) operationalization of the SIGFP software to replace the SIGFIP. However, challenges remain in the effective implementation of the PGRGFP and the measures recommended for the 2019-2020 period. These are: (i) the extremely frequent recourse to exceptional procedures for the implementation of budgetary expenditure; (ii) the absence of an effective system for limiting expenditure commitments to available resources; and (iv) the inadequate human resources of the Court of Auditors. With regard to procurement, according to the assessment made during the last CFRA review in May 2019, Benin's procurement system presents an overall risk level that is considered “substantial”. That said, it is worth noting recent government initiatives that could positively impact the system, such as the catching up on the backlog of annual procurement audits by the Public Procurement Regulatory Authority (ARMP). The audits of the 2015 to 2017 contracts were conducted during the second quarter of 2019. Those for the 2018 and 2019 fiscal years have not yet been launched. Given that this is an emergency crisis response budget support operation, fiduciary control should be strengthened by requiring an audit of financial flows and an audit of public procurement by the Court of Auditors and the ARMP respectively. Harmonization Benin's development partners have an aid coordination and harmonization mechanism structured around: (i) a group of Heads of Diplomatic Missions which meets monthly; (ii) a group of Heads of Cooperation Agencies which holds bi-monthly meetings; and (iii) 12 Technical Groups, including the Macro and Public Finance Group. The Bank coordinates its operations with other development partners through the coordination group of the heads of diplomatic missions, the group of heads of cooperation agencies and the sectoral and thematic groups (macroeconomics and public finance, agriculture, energy, water and sanitation, private sector). In the specific area of public finance management, the Bank plays a major role of coordination, complementarity and synergy with the other partners providing budget support to Benin (European Union, World Bank, International Monetary Fund) in the implementation of macroeconomic, public finance management and structural reforms.
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The partners in Benin do not yet have a common budget support reform matrix, but they consult each other regularly in the preparation and implementation of budget support operations. PAR COVID-19 was prepared in synergy with the budgetary support of other donors working in Benin as part of the COVID-19 crisis response. These are in particular the IMF (USD 113.69 million), the World Bank (USD 50 million), and the West African Development Bank (CFAF 15 billion). Other partners were also consulted in the preparation of RAP COVID-19, and they provided comments that were taken into account.
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ANNEX 1: RESULTS-BASED LOGICAL FRAMEWORK
A PROJECT INFORMATION ❚ PROJECT NAME: COVID-19 Response Support Programme (PAR COVID-19) ❚ COUNTRY: BENIN ❚ OBJECTIVE: Contribute in reducing the impact of COVID-19 and in strengthening of Benin's socio-economic resilience to COVID-19. (i) the National COVID-19 Response Strategy, (ii) the Bank's COVID-19 Pandemic Response Framework, (iii) the Bank's Emergency Crisis Response Budget Support Policy
(a) Country goal: to reduce (i) infection and morbidity rates and (ii) the economic and social impacts of the crisis ❚ PROJECT CONSISTENT (b) CRF: Mitigate the impact of COVID-19 on African economies and societies; support economic and social WITH: recovery and resilience; and improve governance, health and supply systems and their preparedness. Alignment indicators: (i) COVID-19 infection and morbidity rates (ii) Health system security rankings
B RESULTS MATRIX RESULTS CHAIN TARGET AT STRUCTURES UNIT BASELINE REPORTING AND INDICATORS PROGRAMME END IN CHARGE ❚ OUTCOME 1: The ability to test and treat COVID-19 patients is improved. INDICATOR 1.1: Activity report of COVID-19 screening No. of tests /day 1,600 2500 the Ministry of Annual capacity Health INDICATOR 1.2: Number of beds Activity report of Capacity in terms of 6,384 600 the Ministry of Monthly health structures for 8% 100% National coverage Health isolation of patients ❚ OUTCOME 2: The impact of the crisis on poor and most vulnerable households is mitigated
INDICATOR 3: % of households Activity report of Prevalence of Annual 9.6 9.6 the Ministry of moderate or severe Agriculture food insecurity ❚ OUTCOME 3: The impact of the crisis on businesses and jobs is mitigated INDICATOR 3.1: Number of jobs Ministry of Number of jobs [% 50000 protected through 0 Labour/ Ministry Quarterly women] 60% business support of Finance measures
OUTPUT 1: The national patient screening and management capacity is improved INDICATOR 1.1: Annual Screening test % of operational Ministry of Health laboratories in all 11% 100% laboratories activity report regions and districts are operational Establishment of Annual additional epidemic Ministry of Health Number 0 9 treatment centres in activity report other regions;
❚ OUTPUT 2: The purchasing power of the most vulnerable people is increased and food security is strengthened INDICATOR 2.1: Vulnerable COVID- 19-affected Number of households Activity report of 544609 Number of households households benefiting supported 0 the Ministry of (54%) supported from the nutritional (% of women) Health support provided
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INDICATOR 2.2: Strengthening of universal health coverage through Activity report of Number of members 105,000 544,609 RAMU by increasing the Ministry of (% of women) (54%) (54%) the membership of Social Affairs the Health Insurance component of the ARCH project
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OUTPUT 3: Approved and effective business support measures INDICATOR 3.1: Passenger Text adopted transport Activity report of companies Text on exemption 0 Annual MEF exempted from motor vehicle tax (MVT) in 2020 INDICATOR 3.2: Salaried employees benefiting from Number of salaried 2500 (55% being Activity report of the partial 0 Annual employees women) MEF payments from the State (% of women)
INDICATOR 3.3: Three (3) months of payroll 7% relief of payroll expenses for expenses for Activity report of Relief from payroll costs 0 companies affiliated Annual MEF companies to the CNSS (National affiliated to the Social Security Fund) CNSS (National Social Security Fund) paid. OUTPUT 4: Pandemic management governance mechanisms are in place INDICATOR 4.1: Adoption of a Plan validated in April COVID-19 Response plan Draft plan Ministry of Health Annual 2020 preparedness and response plan. INDICATOR 4.2: Adoption of texts setting up the 1 order of the Minister Pandemic Order 0 of Health adopted no Ministry of Health Annual Coordination and later than June 2020 Management Framework:
INDICATOR 4.4: Audit of COVID- Ministry of the 1 audit report 19 response Audit report 0 Economy and Annual available in June 2021 public Finance (MEF) procurements INDICATOR 4.5: Presentation of the amending 2020 amending finance Bill adopted by the 0 MEF Annual finance bill to the bill CM in 2020 Council of Ministers
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ANNEX 3: Letter of Development Policy
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Cotonou, on
Mr Romuald WADAGNI
Ministry of the Economy and Finance
Cotonou, BENIN A
Mr. Akinwumi ADESINA
President of the African Development Bank Group
Abidjan, CÔTE D’IVOIRE
Mr. President,
1. This Letter of Development Policy (LDP) reflects the Government's commitment to continue its efforts to implement the economic and social reforms initiated in recent years and to respond to the Coronavirus (COVID-19) pandemic for which it is requesting emergency budget support from the African Development Bank (AfDB).
2. The main actions backed by this emergency budget support are intended to boost ongoing efforts and the implementation of the COVID-19 pandemic response plan.
3. This document is structured around the following points: (i) context and recent trends of the pandemic in Benin, (ii) COVID-19 preparedness and response plan, (iii) programme components and (iv) coordination and monitoring mechanism for the implementation of reform policies.
I. Context and COVID-19 Pandemic Trends in Benin
• Health Context
4. Following the declaration of the COVID-19 pandemic on 11 March 2020 by WHO, Benin recorded its first confirmed positive case on 16 March 2020. As of 16 June 2020, there were 572 cases of COVID-19 in Benin, including nine (09) deaths.
• Economic Context
5. The Coronavirus pandemic, coupled with a regional environment marked by the closure of borders with Nigeria, has led to a readjustment of Benin's macroeconomic forecasts. Hence, the economic growth rate projections for 2020 have been revised downwards to 3.2% while the budget deficit is expected to widen to 3.5% of GDP.
II. COVID-19 Preparedness and Response Plan in Benin
6. To respond effectively to the health challenges posed by the pandemic, the Government has developed a COVID-19 Preparedness and Response Plan for Benin. This response plan is based on the overall strategic framework of the health sector, principally the National Health Policy (PNS) and the National Health Development Plan (PNDS).
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7. The overall objective of the plan is to strengthen Benin's capacity to curb the spread of SARS-CoV-2. This general objective gives rise to the following specific objectives (SOs) and main actions:
➢ SO1: Strengthen preparation capacity: construction/rehabilitation of health infrastructure, procurement of equipment and development of technical capacities;
➢ SO2: Reduction of human-to-human transmission: promotion of information, education communication (IEC) activities;
➢ SO3: Build intervention capacity: procurement of equipment and consumables (for epidemic treatment centres and laboratories), identification and management of cases;
➢ SO4: Increasing the resilience of confirmed COVID-19 cases;
➢ SO5: Strengthening coordination in the management of the COVID-19 epidemic: collaboration with stakeholders, risk identification and monitoring, resource mobilization and management;
➢ SO6: Promote action-research in the management of COVID-19: conduct action- research on epidemic modelling, treatment and prevention.
In addition to this preparedness and response plan, the Government will implement measures to mitigate the socio-economic effects of COVID-19. These measures are specifically targeted at: (i) the most vulnerable social groups, namely the poor and extreme poor; (ii) registered businesses and employees in industries most directly affected by the crisis as well as small and medium-sized enterprises in the leisure and entertainment sector and personal services sector impacted by the measures taken by the Government to curb the spread of the pandemic.
III. Components of the COVID-19 Response Support Programme
8. The programme is structured around two components. The first component concerns support for the national COVID-19 health response strategy and the second component deals with support for the national strategy to mitigate the socio-economic effects of COVID-19.
9. Component A: Support to the national COVID-19 health response strategy: This component seeks to strengthen the national screening capacity to detect as many cases as possible at an early stage and take appropriate measures to control the spread of the disease. The programme has two sub-components: A.1) Support to the COVID-19 health response; and A.2) Strengthen crisis management capacity.
10. The measures supported through this component include the following preliminary measures: (i) finalization and validation of a strategic plan for COVID-19 preparedness and response; and (ii) establishment of the Pandemic Coordination and Management Framework.
11. Component B: Support to the national strategy for mitigation of the socio-economic effects of COVID-19: This component is aimed at establishing mechanisms to maintain the purchasing power and food security of the most vulnerable people and to support the productive sector. It has two sub-components: B.1) Support in the financing of social and food security expenditure; and B.2) Strengthening the resilience of the domestic private sector. XV
12. The measures supported through this component include the following preliminary measures: (i) partial coverage of the salaries of employees of registered businesses in the most affected sectors; and (ii) the introduction of subsidies for informal sector businesses operating in the most affected branches of activity.
IV. Reform Policy Coordination, Monitoring and Implementation Mechanism
13. This programme will be implemented under the authority of the Ministry of the Economy and Finance, through the Economic and Financial Programmes Monitoring Unit (CSPEF), in close collaboration with the sectoral Ministries and other structures concerned by the programme's focus areas. The AfDB will also conduct program reviews as needed. Regular dialogue will be maintained with the Bank during monitoring of the implementation of the operation.
14. The Government hereby undertakes to take all the necessary steps to implement the operation and reiterates its request to the Bank to provide the sought financing.
Romuald WADAGNI
Ministry of the Economy and Finance
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ANNEXES - GUINEA
ANNEX 1: COUNTRY NOTE - GUINEA
I. BACKGROUND
1.1 Introduction
Guinea has been experiencing a relatively peaceful socio-political situation since the 2010 presidential election won by Professor Alpha Condé. However, with the end of his second term approaching, tensions are running high over the constitutional reform initiated by the Head of State and the organisation of the general elections. The country has a young population (50% under 24 years of age) and a significant wealth of natural resources that are still insufficiently exploited. It has the world's largest bauxite reserve, great hydraulic potential and fertile land suitable for agriculture. Despite this natural wealth, Guinea remains a fragile state and ranks among the poorest countries in the world. The country is ranked 174th out of 189 countries in the UNDP human development report for 2018. In terms of transparency and the fight against corruption, the country has made progress in the extractive5industries sector, but combating corruption and money laundering remains a challenge. According to Transparency International's Corruption Perception Index for 2018, the country ranks 138th out of 180 countries, with a score of 28/100, which is one of the lowest scores in sub-Saharan Africa. The National Anti-Corruption Agency (ANLC) established since 2004 is working to reverse this trend.
Taking advantage of the favourable political context after the 2010 general elections, Guinea has begun to accelerate growth, also supported by post-Ebola6 recovery efforts and the good performance of the mining sector. Growth reached high levels of 10.8% and 10% respectively in 2016 and 2017 before stabilizing at around 6% since 2018. Growth was expected to remain at 6% during the 2020- 2021 period, supported by the revival of the agricultural sector and the improvement of the business environment. However, these prospects are undermined by the COVID-19 pandemic that broke out in January 2020. The epidemiological situation as of 20 May 2020 shows that 2796 persons tested positive in the country, including 170 recoveries, 6 deaths and more than 500 hospitalizations. The restrictions on movement that the pandemic imposes on all countries around the world are slowing down international trade and disrupting global supply chains. China, the starting point of the pandemic, is Guinea's leading trading partner and its leading purveyor of foreign direct investment (FDI). The COVID-19 pandemic is therefore expected to have a strongly negative impact on the Guinean economy if no appropriate response plan is adopted. Among other things, a general slowdown in production activities, a decline in export earnings and foreign exchange reserves, a slowdown in FDI, a widening of the budget deficit and a significant decline in the GDP growth rate are expected. Significant negative social, health and humanitarian impacts are also expected.
Faced with such a situation, the Government has drawn up two plans: (i) a COVID-19 Epidemic Alert and Response Plan and (ii) an Economic Response Plan, costing USD 47.3 million and USD 360 million respectively. It called on its TFPs, notably the Bank, to take into account the scope of the needs.
1.2 Economic and Financial Impact of COVID-19
The Guinean economy is dominated by services (45% of GDP), but the agricultural sector, representing 20% of GDP, employs more than half (52%) of the labour force. This sector is
5 In February 2019, the EITI Board validated the 2016 report and concluded that Guinea has made significant progress in implementing the EITI Standard. 6 The Ebola virus disease epidemic in West Africa started in Guinea in December 2013, before spreading to Liberia and Sierra Leone. Several TFPs, including the Bank, provided support to Guinea to contain the epidemic and help revive the economy. XVII
characterized by low output and growth is mainly driven by the revival of mining production. As a result, growth remains highly non-inclusive, with little impact on reducing inequality. Limited access to factors of production has slowed the development of manufacturing industry. The private sector is still embryonic and underdeveloped. It is characterized by a strong predominance of informal businesses (90%).
Disruptions in foreign trade and logistics chains have led to a general slowdown in the productive system and the consequent loss of tax revenue. It should be noted that the Guinean economy is heavily dependent on trade with China (94% of the country's total exports in 2018, of which 91% are mining products). This heavy dependence on export earnings from a single country and a single sector places the Guinean economy in a situation of permanent macroeconomic uncertainty. The fact that China is one of the countries hardest hit by the current pandemic points to the risk of a severe recession in the Guinean economy. According to the Bank's estimates, the impact of the pandemic could slow GDP growth down to 1.4% in 2020, and even to a recession (-1.8%) in a worst-case scenario. The budget deficit is projected to reach -3.1% of GDP (including grants), relative to an initial projection of - 2.8%; and the current account deficit is expected to reach -24.1% of GDP in 2020 compared to an initial projection of -18%, following the expected decline in exports and the increased import of basic necessities.
Public debt, estimated at 45% of GDP in 2019, remains sustainable with a moderate debt distress risk, according to the IMF's 2019 analysis. In December 2017, the country signed an arrangement for a three-year programme financed by the IMF's Extended Credit Facility. The fourth review of the programme carried out in April 2020 was considered satisfactory. However, the unforeseen expenditure arising from the pandemic, in a context of reduced revenues, poses a risk to debt sustainability. The intervention of Guinea's TFPs will be essential to strengthen Guinea's financial capacities and maintain its credit rating.
1.3 Social Impact of the Pandemic
According to data from the National Economic and Social Development Plan (PNDES 2016-2020), the poverty incidence in Guinea is 55.2% (2012 figure) and exceeds 60% in 6 of the country's 8 administrative regions. Provisional results from the Harmonized Survey of Household Living Conditions (EHCVM 2018-2019) indicate that the incidence of poverty fell by 14% between 2012 and 2019, and now stands at 41.2%. Beyond income poverty, Guineans have limited access to good quality health and education services. In 2018, 40% of the population considered that the education system had regressed due to poorly qualified teachers, lack of respect for educational ethics, overcrowding and inadequate infrastructure. It should be noted that the Ebola virus epidemic that affected the country in 2014 greatly weakened the Guinean social system. The nutritional situation is very difficult, with 31% of under-five children suffering from chronic malnutrition and 14% from severe malnutrition. Nearly 20% of children are underweight. The rapid spread of COVID-19 in such an environment could increase the fragility of education and health systems and take many lives if urgent, effective and efficient measures are not taken quickly.
The lockdown measures imposed by the authorities to curb the spread of the virus have been beneficial, but have adverse effects on employment. The country already has a high overall underemployment rate, estimated at 38.2% of the labour force. The informal sector, which employs almost two out of every three workers, has been strongly affected by the lockdown. The vast majority of these workers, who live off their day-to-day income from trade, transport and handicrafts, find themselves facing a drastic reduction or even a total halt to their activities. Women are particularly affected as a result of restrictions on commercial activities in markets. COVID-19 has a greater impact on women both economically and socially, as they account for 74.80% of the jobs in the informal sector which has currently slowed down as a result of the lockdown measures taken by the government. In addition, the spread of COVID-19 is likely to reduce access to maternal and child health services. As regards protection from rights violations, violence against children, including XVIII
sexual violence, which is already recurrent in the country, could intensify as a result of the intensification of poverty. In 2016, a survey revealed that 55.7% and 29% of women have suffered at least one form of physical and sexual violence since the age of 15, respectively. The project is classified as Category 2 and includes women's equal access to socio-economic measures put in place by the government as well as policy dialogue for gender-sensitive measures pertaining to COVID- 19.
III. THE PROGRAMME
2.1 Programme Goal and Objectives
The aim of the programme is to support the Government's efforts to control the pandemic and help mitigate its adverse socio-economic effects. More specifically, the programme seeks to ensure: (i) better health and social care for the population, especially the most vulnerable; and (ii) support for the revival of private sector activities.
2.2 Programme Components and Measures
The programme has three complementary components: (i) Component 1 - Health response; (ii) Component 2 - Social care for vulnerable communities; and (iii) Component 3 - Mitigation of macroeconomic risks and support for the revival of economic activities. The Ministry of Finance will be responsible for monitoring the implementation of the programme, in conjunction with the National Committee for the Management of Epidemics recently created at the Prime Minister's Office to counter the COVID-19 pandemic, and the ministries in charge of health, social affairs, agriculture, trade, industry and handicrafts.
Component 1 - Health Response
This component seeks to support the implementation of the health measures announced by the authorities in the national COVID-19 preparedness and response plan.
▪ Situation Analysis: Guinea faces challenges in providing quality health services to the entire population. It also has to contend with a lack of human resources in terms of quantity and quality, insufficient public health infrastructure and limited equipment. In the face of the pandemic, the country's health system exhibits shortcomings in terms of availability of inputs, adapted equipment, and treatment centres that are up to standards. Screening is only available in three structures (two in Conakry and one in Kindia). Moreover, the country has only one nurse for every 10,000 inhabitants and the health staff is not well prepared to deal with this crisis. Less than 3% of the population has social security coverage. Based on the experience gained in combating the Ebola virus, the country has taken urgent measures to curb the expansion of COVID-19.
▪ Actions Conducted by the Government: The health response is mainly aimed at (i) setting up a system for monitoring and caring for people who test positive; (ii) strengthening the capacity of the National Health Security Agency (estimated at 47 million USD); and (iii) strengthening the health system (62 million USD). It mainly concerns the following sectors: (i) strengthening the surveillance of the various risk entry points; (ii) strengthening the technical capacities of health personnel in the surveillance and care of infected persons; (iii) providing the various risk sites with medical equipment, inputs, drugs for screening and care of patients.
▪ Programme Measures: The programme will support the following measures: (i) establishment of an institutional mechanism to coordinate the COVID-19 response
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(measure precedent); (ii) technical capacity-building for health personnel in the areas of surveillance and care for infected persons; (iii) exemption from duties and taxes on health equipment and similar products imported to combat COVID-19; (iv) the provision of medical equipment, inputs, drugs for screening and treatment of patients at the various risk sites; and (v) the sensitization and distribution of protection kits to the most vulnerable households.
Component 2 - Social care for vulnerable communities
According to the EHCVM, most of the social indicators improved in 2019 compared to 2012, thanks to implementation of the PNDES. For example, the proportion of households having access to drinking water reportedly increased from 67.8% in 2012 to 70.9% in 2019 and the electricity access rate increased from 18.8% to 42.1% over the same period. However, extreme poverty is said to affect nearly 11% of the Guinean population. The country has a high overall underemployment rate, estimated at 38.2% of the labour force. The containment measures taken by the authorities have had a strong impact on the activities of vulnerable populations, especially women, who live off day-to- day petty trading activities that expose them to food and health insecurity. The Government's response plan took into account measures to mitigate the impact of the pandemic on the social status of the population.
▪ Actions taken by the Government: The social response is mainly carried out by the National Agency for Economic and Social Inclusion (ANIES) and is divided into 3 phases: (i) support and awareness-raising among the population to reduce risks of the spread of COVID-19, (ii) strengthening of labour-intensive activities in Conakry and, where appropriate, construction of boreholes to promote access to drinking water in rural areas, and (iii) deployment of a cash transfer programme for 240,000 households. Other attendant measures are also envisaged, including (i) payment by the State of the water and electricity bills of low-income households; (ii) the deferral (for a quarter) of tax payments by petty traders and artisans; and (iii) the establishment of a monitoring committee for enterprises affected by the crisis, in order to manage the problem of employment.
▪ Programme Measures: The Programme will support the following measures: (i) implementation of the household cash transfer programme (the adoption of the transfer arrangements being a measure precedent); (ii) the promotion of labour- intensive activities with emphasis on the construction of boreholes in rural areas, and (iii) payment by the State of the water and electricity bills of poor households for the April-June period; (iv) deferral (for one quarter) of tax payments by petty traders and artisans (measure precedent); and (v) the establishment of a monitoring committee for enterprises affected by the crisis, in order to manage the employment problem.
Component 3: Macroeconomic Risk Mitigation and Support to the Private Sector
▪ Situation Analysis: The decline in economic activity resulting from the lockdown measures has already led to a significant loss of budget revenue. Mining sector revenue collected by the National Tax Directorate (DNI) plummeted by 39% in February 2020 compared to its December 2019 level. Moreover, non-mining revenue fell by 32% between January and February 2020. The private sector, hard-hit by the decline or cessation of activities, is unable to meet its tax obligations. The authorities’ Economic Response Plan (USD 350 million) is aimed at mitigating the macroeconomic impact and boosting private sector resilience.
▪ Actions Conducted by the Government: The measures set out in the Economic Response Plan include (i) readjusting the 2020 budget to focus on the most urgent XX
expenditures; (ii) reducing the financial and fiscal burdens on the sectors most affected by the health crisis; and (iii) relaxing the mechanisms for financing the economy. The following measures have been announced: (i) a 20% reduction in operating expenditure to generate savings of GNF 590 billion to finance the health and economic response plan; (ii) a reduction in the BCRG's key rate and a reduction in the refinancing terms of commercial banks; (iii) the creation of a COVID-19 Response Fund to help the private sector better absorb the economic shock and support the resumption of their activities; (iv) the regular reimbursement of VAT credits (within less than two weeks); and (v) the clearance of audited and validated domestic debts.
▪ Programme Measures: The programme will support the following measures: (i) the establishment of an institutional mechanism to coordinate the response to COVID- 19; (ii) the freezing (for three months) of water and electricity bills for the tourism and hotel sector; (iii) the postponement from April to June of the payment of taxes to the State; (iv) the creation of a COVID-19 Response Fund; and (v) the clearance of audited and validated domestic debts.
Measures precedent to consideration of the Report by the Board
Measures Precedent Evidence Authority in charge Measure 1: Establishment of an Evidence 1: Copy of the decree Office of the Prime Minister institutional mechanism to coordinate defining the powers and composition the response to COVID-19 of the COVID-19 Control Committee Measure 2: Evidence 2: Copy of the decree on Ministry of the Budget, DNI Cancellation of tax and social charges the deferral of tax charges for SMEs for the quarter (April-June 2020) for and copy of the DNI circular note very small businesses (small cancelling the tax and social charges businesses and artisans); and deferral of very small companies of payment obligations for similar taxes for three months (April-June 2020) for SMEs. Measure 3: Implementation of the Evidence 3: Copy of the ANIES ANIES cash transfer programme for technical note on the procedures for households identifying and targeting beneficiaries of transfers.
▪ Policy Dialogue: For more than a decade, the Bank has been leading the dialogue with the authorities on tax and mining revenue collection; public finance reform; and promotion of the local private sector. A project to support resource mobilization and the formalization of businesses is currently being appraised with ADF financing. Under this programme, the Bank will maintain dialogue on measures aimed at ensuring transparency in the application of the fiscal measures announced; the award of contracts; and cash transfers made by ANIES.
2.3 Financing Gap
In view of the loss of revenue and expenditure under the health response plan and the economic recovery plan, the overall deficit based on 2020 commitments is estimated at USD 741 million (- 4.3% of GDP). An Amending Finance Law is currently being adopted to accommodate changes made in the budget initially adopted. Several TFPs have announced budget support to fill the financing gap. To this end, on June 19, 2020, the IMF approved the disbursement in favour of Guinea of 107.1 million SDR (approximately USD 148 million) under the Rapid Credit Facility (FCR). This support, combined with debt relief from the Disaster Assistance and Response Trust Fund, is intended to help the country meet the urgent budget and balance of payments financing needs resulting from the
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COVID-19 pandemic. The World Bank is planning to give budgetary aid of USD 70 million, while France and the EU will give USD 22.92 million and USD 21.85 million respectively. The Bank's budget support of UA 24 million (USD 32.64 million) will supplement the above amounts to reduce the financing gap. Financing will be in the form of grants and concessional loans as follows: an ADF loan of UA 9.30 million, a TSF loan of UA 11.70 million and an ADF grant of UA 3 million.
Beneficiaries
The programme will directly benefit the Ministry of the Economy and Finance; the Ministry of Health; the Ministry of Trade, Industry and Handicrafts; and the Ministry of Social Affairs. The population of Guinea will be the final beneficiary.
Conditions Guinea – Assessment of Fulfilment of the Conditions Government In July 2016, the Government adopted a National Economic and Social Development Plan commitment to (PNDES) 2016 - 2020 which aims to: (1) address the fragility challenge in the country; (2) poverty stimulate structural changes and catalytic investments to increase energy access; and (3) build reduction capacity for the production and processing of agricultural products in order to achieve food self- sufficiency. In efforts to control the COVID-19 pandemic, the Government has adopted a health and economic response plan. The plan’s implementation arrangements are being defined with TFP assistance. Macro- Benefitting from the favourable political context, Guinea began to accelerate growth in 2012, economic recording relatively high growth rates in 2016 and 2017 (10.8% and 10% respectively). Growth stability was estimated at 5.9% in 2019, and has been projected at 6% over the 2020-2023 period. Public finance has a structural budget deficit resulting from a low tax burden (13.5% of GDP in 2019) and public expenditure whose efficiency and effectiveness still need to be strengthened. Public debt, estimated at 45% of GDP in 2019, remains sustainable with a moderate risk of debt overhang, according to IMF’s analysis in 2019. It should be noted that following the outbreak of the COVID-19 pandemic at the beginning of 2020, the economic growth ambitions and control of the budget deficit projected for 2020 have been revised downwards. The pandemic’s induced impacts on the economy could lead to -1.8% recession, and the budget deficit is expected to widen to more than -3.1% of GDP. With TFP support, the country will be able to maintain a viable macroeconomic framework that does not hamper its development objectives. Fiduciary risk The 2018 fiduciary risk assessment under the CSP, its update based on the PEFA of the same assessment year, as well as the IMF staff report under the third ECF review show some progress in public finance management. Some strengths were noted, particularly public finance transparency following improvement of the budget documents appended to the Finance Law, better public access to budget information marked by the publication of the citizen budget, and improved performance in budget relations with local authorities. However, there are still some weaknesses in budget reliability and credibility and in the quality of accounting and reporting, supervision and external audit (lack of external audit reports on management accounts and other financial statements). The Single Treasury Account has also been created, but is not yet operational. As regards the internal audit conducted by the General State Inspectorate (IGE) and the General Finance Inspectorate (IGF), it covers a limited scope and focuses mainly on financial compliance. There is no reference to international standards. In light of the foregoing, the fiduciary risk for the financial management component remains substantial. However, Guinea has put in place a Public Finance Reform Action Plan (PREFIP) for 2019-2022, whose implementation will help keep the national public finance system on track. With regard to procurement, the fact that the Bank used the RBLF prepared in 2018 shows that Guinea's procurement system has an overall risk level that is deemed "substantial". However, the adoption of a new Public Procurement Code and a regulatory framework that draws heavily on WAEMU Directives Nos. 4/2005 and 5/2005 in December 2019 will likely address some of the weaknesses identified and positively impact the system. Although effective since 31 March 2020, the new Public Procurement Code is not yet being implemented for lack of appropriate implementing legislation. In short, Guinea's overall fiduciary risk, including financial management and procurement, is deemed substantial. To mitigate the fiduciary risks, an audit of public procurement contracts awarded under the COVID-19 Response Plan will be conducted by the Court of Auditors in accordance with terms of reference agreed with the Bank. A financial flows audit will be conducted after the Bank's disbursement. XXII
Political The political situation in Guinea has been relatively calm since the 2010 presidential election. stability However, as the end of the President’s second term in office approaches, tensions are running high over his constitutional reform boycotted by the opposition which suspects him of wanting to run for a third term. Despite the boycott and the violence that marred the elections, the constitutional referendum and legislative elections were held in March 2020. The lockdown measures taken by the Government led to some calm, with the Opposition suspending public demonstrations. Harmonisation As regards coordination of development actions, Guinea enjoys the backing of bilateral and multilateral TFPs who support its development. The Coordination and Consultation Framework (CCC) is the strategic coordination body for the Government and TFPs. In addition, there are also the Technical Monitoring Committee (CTS) which strengthens intersector coordination, as well as Thematic Dialogue Groups (GTD). As part of the response against COVID-19, a specific framework has been established, headed by the Prime Minister and assisted by structures and Ministers in charge of the crisis management. The preparation of this programme benefitted from close cooperation between the partners involved in budget support, particularly the World Bank, the European Union, and the International Monetary Fund. The Bank, through the Country Office (COGN) which was opened in October 2017, has played a key role in coordinating development partner activities to ensure a more appropriate response against the pandemic. Indeed, the Bank has organised a virtual meeting with TFPs, and the Country Note has been reviewed by the World Bank, the European Union, the IMF and the French Development Agency. The Bank has also participated in various coordination meetings between partners, expanded to include all agencies of the United Nations system and resident diplomatic representations in Guinea, to ensure a concerted approach that enhances the support given to the Government during this pandemic. In addition to exchange of information, a common socio-economic reforms matrix is being prepared under the budget support and should serve as basis for dialogue over the 2020-2021 period.
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Annex 2: Results-Based Logical Framework
A PROJECT INFORMATION ❚ PROJECT NAME AND SAP CODE: COVID-19 Response Budget Support; SAP ❚ COUNTRY/REGION: Guinea / RDGW
❚ PROJECT GOAL: Support Government's efforts in managing the pandemic and contribute to mitigating its socio-economic impacts.
❚ THE PROJECT IS (a) Country: National COVID-19 Epidemic Preparedness and Response Plan CONSISTENT WITH: (b) Bank: The Bank’s COVID-19 Rapid Response Facility (CRF) (c) Alignment indicators: (i) COVID-19 infection and morbidity rate: XXX (ii) Global Health Safety Index: XXX
B RESULTS MATRIX TARGET AT RESULTS CHAIN AND BASELINE PROJECT MEANS OF REPORTING UNITS INDICATORS SITUATION COMPLETION VERIFICATION FREQUENCY [DEC 2020] ❚ OUTCOME 1: Health care capacities are improved 1. Number of beds available in centres with equipment for Reports of the Number 73 400 Annual screening and care of infected Ministry of Health persons 2. Number of households that 130,900 Reports of the receive protection kits distributed Number 0 Quarterly Ministry of Health by the Government. OUTCOME 2: The pandemic’s social impact is mitigated Number of vulnerable households that receive cash transfers 0 240.000 Number ANIES Reports Quarterly (including% of households headed (21.5%) by women) ❚ OUTCOME 3: The pandemic’s impact on businesses is mitigated Number Number of SMEs benefiting from 0 4.458 Ministry of the Including SMEs owned by Quarterly tax measures 0 1.642 Budget women Ministry of the Percentage of domestic debt Percentage 0 20% Economy and Annual cleared Finance […] ❚ OUTPUT 1: The Government increases the capacity of health facilities Text adopted 1.1 The Government exempts Ministry of the health equipment and related Text on exemption 0 Budget products used to combat COVID-
19 from duties and taxes (measure precedent)
Number of centres 1.2 Centres equipped for care of 3 in December equipped for care of Ministry of Health COVID-19 patients 2020 COVID-19 patients 0
1.3 Presentation of the Amended PLFR adopted Finance Bill (PLFR) to the 0 MF Cabinet Meeting Bill presented OUTPUT 2: Social measures taken to mitigate the pandemic’s impact on the population
2.1 Arrangements for cash transfers to households are Text adopted 0 Text adopted ANIES adopted
OUTPUT 3: Support measures for the private sector implemented 3.1: Government defers taxes (for Ministry of the Text on deferral of taxes 0 Text adopted one quarter) Budget Text on the estimated Text adopted Ministry of the 2.3 Debt clearance arrangements amount and methods of 0 before end May Economy and adopted debt clearance 2020 Finance
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ANNEX 3: Letter of Development Policy
MINISTRY OF PLANNING AND REPUBLIC OF GUINEA ECONOMIC DEVELOPMENT Labour – Justice – Solidarity
No…….0423…/MPDE/SG/CAB Conakry, …18 JUNE 2020
From : The Minister of Planning and Economic Development
To : The President of the African Development Bank (AFDB)
Abidjan, Republic of Côte d’Ivoire
Subject : Letter of Development Policy for COVID-19 Response Emergency Budget Support
Mr. President,
1. This letter of development policy, prepared for the COVID-19 response emergency budget support, describes Guinea's economic and social performance over the past two years (2018/2019). It also describes the policies that the Government intends to implement in response to the health crisis caused by the COVID-19 pandemic so as to mitigate its negative impacts on the country's economic growth and social situation, thereby preserving, to some extent, the achievements of the National Economic and Social Development Plan (PNDES). The policies will be supported mainly by the African Development Bank's Crisis Response Budget Support Programme (CRF).
2. The main objective of the Government's economic policy is to place the country on the path to sustainable and shared growth, promote economic diversification, and create employment opportunities for all so as to improve the population's standard of living. To that end, the Government intends to first contain the socio-economic impacts of COVID-19.
3. The Government recently adopted a response plan against the COVID-19 pandemic; the plan has three (3) components (the Health Component; the Social Component; and Support for the Private Sector). In addition, efforts will be made to continue implementing the National Economic and Social Development Plan (PNDES) for 2016-2020. The PNDES seeks to foster stronger and more inclusive growth, as well as reduce poverty. It focuses on: (i) structural transformation and diversification of the economy driven by investments in the energy and transport sectors, and modernisation of agriculture; (ii) promotion of good governance; (iii) development of human capital; and (iv) efficient management of natural resources.
4. Guinea has a fragile social context, and episodes of unrest and strikes, particularly in the education sector, have intensified since 2018, with significant repercussions on economic activity. There was also social unrest during the local elections held in February 2018, for the first time since 2005. These events and unrest associated with political cycles often result in casualties. In addition, there were violent protests in the Boké mining region against unemployment and the chronic shortage of public water and electricity services. Trade union-led strikes and violent protests paralysed the capital city in July and early August 2018, affecting economic activity and trade. Despite a relatively stable social environment during the first half
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of 2019, it should be noted, however, that protests and demonstrations resurfaced in mid-October 2019. The political and social unrest was further exacerbated by the electoral cycle, particularly the dual legislative and referendum elections. Although there is currently some relative calm, the upcoming presidential elections, scheduled for 2020, could fuel tensions.
5. Guinea’s economy is growing at a steady pace. After a slowdown in 2014-15 due to the Ebola virus epidemic, real growth increased to 10.8% in 2016. Economic recovery has been supported by a significant increase in mining production, higher energy production, strengthening of the manufacturing industry, increased trade activity, and high levels of foreign direct investment (FDI). In 2017, real GDP growth stood at 10.3% and is estimated at 6.2% in 2018, supported by buoyant mining activity, robust construction and trade activity, and good performance of the agricultural sector. In 2019, the growth remained stable and inflation (annual average) is estimated at 9.5%, slightly lower than in 2018 (9.8%), due to tightening of monetary policy by the Central Bank, extended to its public sector interventions. As a result of the COVID- 19 crisis, real GDP growth is expected to fall sharply from the 5.8% forecast before the crisis. The upcoming presidential elections are also expected to negatively affect growth prospects.
6. The overall budget deficit (including grants) improved from 1.3% of GDP in 2018 to 1% in 2019. Tax revenues were 0.6% lower than projected in the revised budget and IMF programme, increasing to just 12.5% of GDP in 2019. Mining tax revenues fell from 3% of GDP in 2018 to 2.3% in 2019 due to the decline in mining production in the second half of 2019. In addition, subsidies to the electricity utility increased from 0.8% of GDP in 2018 to 1.7% in 2019 due to the payment of electricity from the Kaleta project. To control the budget deficit, investment expenditure was under-executed (3.1% of GDP below the budget). The pre-pandemic outlook for 2020 projected a growing budget deficit, which will be even higher as a result of the health crisis and the health, social and economic measures taken to curb its negative impacts. Lower tax revenues are expected following weaker economic growth, a possible decline in tax compliance, and the effects of COVID-19 response measures. Based on preliminary mining tax data estimates, the variation rates will be 21% and 39% lower in January and February 2020 compared to December 2019. The COVID-19 epidemic will require increased health-related expenditure and social measures to protect the poor and vulnerable populations, as well as support for the productive fabric that will involve tax relief and deferral of tax payments. Consequently, the budget deficit will widen to 4% of GDP, creating a financing gap of 14.3% of GDP in 2020 that would require additional subsidies or increased domestic borrowing. The public and external debt overhang risk is expected to remain moderate. Year-on-year inflation could rise slightly to 9.7% by the end of 2020 due to food scarcity resulting from the drop in agricultural production and disruption of food transportation from other regions to Conakry.
7. The current account deficit widened from 2.2% of GDP in 2018 to 9.3% in 2019. International reserves improved slightly from 2.5 months of imports in 2018 to 2.7 months in 2019. External pressures are expected to continue due to declining mining exports and foreign direct investment, particularly in the mining sector. The current account deficit is also expected widen to 14% of GDP in 2020. It would be financed by foreign aid and concessional external borrowing.
8. The programme’s objective is to support Government efforts to control the pandemic and mitigate its adverse socio-economic impacts. More specifically, the programme aims at: (i) better health and social care for the population, especially the most vulnerable groups; and (ii) support for the resumption of private sector activities.
9. The programme has three (3) complementary components aligned with Guinea's COVID-19 Response Plan: (i) Component 1: Health response; (ii) Component 2: Social care for XXVI
the vulnerable population; (iii) Component 3: Mitigation of macro-economic risks and support for the resumption of economic activities.
10. Component 1 aims to support the implementation of health measures announced by the Government in the National COVID-19 Preparedness and Response Plan. Guinea faces difficulties in providing quality health services to the entire population. It also suffers from lack of human resources in quantity and quality, insufficient public health facilities, and limited equipment. The epidemiological situation as at 15 June 2020 showed 4,572 persons tested positive in the country, with 3,259 recoveries, and 26 deaths. With the pandemic, the country's health system is showing shortcomings in the availability of inputs, suitable equipment, and treatment centres that meet required standards. Screening is conducted only in three (3) facilities (2 in Conakry and 1 in Kindia). In addition, the country has only one nurse per 10,000 inhabitants, and the health staff is not adequately prepared to manage the crisis. Less than 3% of the population has social security coverage. Building on experience gained in the fight against the Ebola virus, the country has taken urgent measures to contain the spread of COVID-19.
11. The health response proposed by the Government mainly seeks to: (i) establish a system for monitoring and caring for people tested positive; (ii) build the capacity of the National Health Security Agency (the cost is estimated at USD 47 million); and (iii) strengthen the health system (USD 62 million). The measures are as follows: (i) reinforce surveillance of the various entry points at risk; (ii) build the technical capacity of health personnel to monitor and care for infected people; (iii) provide the various sites at risk with medical equipment, inputs, and drugs for screening and management of patients.
12. The programme will support the following measures: (i) building the technical capacity of health personnel to monitor and care for infected people; (ii) exemption of health equipment and related products imported for the fight against COVID-19 from duties and taxes (measure precedent); (iii) provision of the various sites at risk with medical equipment, inputs and medicines for screening and management of patients; and (iv) sensitisation and distribution of protection kits to the most vulnerable households.
13. Component 2, the social response, is mainly conducted by the National Economic and Social Inclusion Agency (ANIES) and is divided into three phases: (i) support and sensitisation of the population to reduce the risk of the spread of COVID-19; (ii) reinforcement of labour- intensive activities in Conakry and, where appropriate, construction of boreholes to promote access to drinking water in rural areas; and (iii) deployment of a cash transfer programme for 240,000 households. Other support measures will also be taken, in particular (i) Government’s payment of water and electricity bills for low-income households; (ii) deferral (for one quarter) of tax payments by petty traders and artisans; and (iii) establishment of a monitoring committee for businesses affected by the crisis to address the employment problem.
14. The programme will support the following measures: (i) deployment of the household cash transfer programme (adoption of transfer arrangements will be a measure precedent); (ii) reinforcement of labour-intensive activities with focus on the construction of boreholes in rural areas; and (iii) Government’s payment of bills for April-June 2020 for poor households subscribed to the social tariff for water and electricity; (iv) deferral (for one quarter) of tax payments by petty traders and artisans (measure precedent); and (v) establishment of a monitoring committee for businesses affected by the crisis to address the employment problem.
15. Component 3, which focuses on the decline in economic activity resulting from lockdown measures taken by the Government, has already led to a significant loss of tax revenue, particularly mining revenue. Mining sector revenue collected by the National Taxation XXVII
Directorate (DNI) plummeted by 21% and 39% in January and February 2020 respectively, compared to December 2019. In addition, non-mining revenue declined by 32% between January and February 2020. The private sector, hard hit by the decline or shutdown of activities, is unable to meet its tax obligations. The Government's USD 350 million Economic Response Plan for the Coronavirus pandemic aims at mitigating the macro-economic impact and supporting private sector resilience.
16. The Economic Response Plan measures mainly focus on: (i) realigning the 2020 budget to focus on the most urgent expenditure; (ii) reducing the financial and fiscal burden of sectors most affected by the health crisis; and (iii) making the economy’s financing mechanisms more flexible. Consequently, the following measures have been announced: (i) 20% reduction in recurrent expenditure to generate savings of GNF 590 billion to finance the health and economic response plan; (ii) reduction of the BCRG's base rate and mandatory reserve rate, and easing of the refinancing conditions of commercial banks; (iii) establishment of a guaranteed loan mechanism to support cash flow needs due to the decline in activities, and establishment of a COVID-19 Response Fund to help the private sector better absorb the economic shock and support the resumption of their activities; (iv) regular refund of VAT credits (within two weeks); and (v) clearance of audited and validated domestic debt.
17. The programme will support the following measures: (i) 20% reduction in recurrent expenditure to generate savings and finance the health and economic response plan; (ii) deferral (for three months) of water and electricity bill payments for the tourism and hotel trade sector; (iii) deferral of the payment of taxes and duties to the Government over the April-June 2020 period; (iv) establishment of a COVID-19 Response Fund; and (v) clearance of audited and validated domestic debt.
18. The measures to be considered for approval by the Boards are as follows:
• Measure 1: Establishment of an institutional framework for coordinating the response to COVID-19;
• Measure 2: Deferral (for one quarter) of tax payments by petty traders and artisans in the formal sector; and
• Measure 3: Implementation of the household cash transfer programme.
19. For more than a decade, the Bank has maintained dialogue with the Government on tax and mining revenue collection, public finance reform, and promotion of the local private sector. A support project for resource mobilisation and formalisation of businesses is currently being appraised with ADF financing. Under this programme, the Bank will maintain dialogue on measures aimed at ensuring transparency in the implementation of the announced tax measures, procurement and contract awards, and cash and other subsidy transfers by ANIES under the COVID-19 Response Plan.
20. The Government undertakes to publish monthly reports on operations of the COVID- 19 special account opened with the BCRG. The General Finance Inspectorate will conduct timely ex-post controls on the operations of the special account, with the involvement of civil society. It also undertakes to publish online all public procurement contracts of COVID-19-related projects, including the names of contractors and beneficiaries of the said projects. In addition, the Court of Auditors will conduct a full audit of operations on the COVID-19 account.
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21. The programme will be jointly implemented under the authority of the Ministry of the Economy and Finance, through the Technical Programme Monitoring Unit (CTSP), in close collaboration with the relevant sector Ministries. The Bank will, if necessary, conduct periodic reviews of the programme and maintain regular dialogue with the Government in monitoring the implementation of planned activities.
22. The Government is also committed to taking appropriate steps to implement the measures and actions adopted under the COVID-19 Response Plan, and reiterates its request to the Bank to provide the sought financing.
Please accept, Mr. President, the assurance of my highest consideration.
Kanny DIALLO
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ANNEXES – TOGO
ANNEX 1: COUNTRY NOTE – TOGO
I. COVID Pandemic and Transmission Channels of the Crisis
1.1 Introduction
Like nearly all countries in the world, Togo has not been spared by the spread of the COVID-19 pandemic. According to the IMF, the COVID-19 pandemic will lead to global economic recession in 2020 with a significant drop in industrial production, exports and imports. Given the nature of its economy, which is open to the world economy, the impacts on Togo will be significant. The transmission channels of the negative impacts of COVID-19 on the Togolese economy concern the real economy, Government financial operations, international trade, and the social sector.
1.2 Health Situation and Evolution of the Pandemic
Since the first case of COVID-19 recorded on 6 March 2020, the situation has evolved rapidly in Togo as shown in the graph below, even though it calmed down as from 16 April 2020.
08-mai-20 09-mai-20 10-mai-20 11-mai-20 12-mai-20 13-mai-20 14-mai-20 15-mai-20 16-mai-20 17-mai-20 18-mai-20 19-mai-20 20-mai-20 21-mai-20 22-mai-20 23-mai-20 24-mai-20 25-mai-20 As at 12 May 2020, all the five (5) 145 153 174 181 199 219 238 263 298 301 330 338 340 354 363 373 381 381 50 56 74 81 96 112 131 156 188 186 212 219 218 224 230 228 228 228 administrative regions of the country 85 87 89 89 92 96 96 96 99 104 106 107 110 118 121 133 141 141 were affected (23 out of 44 health 10 10 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 districts) and 18 new cases were confirmed, bringing the total number of TOGO confirmed cases to 199, including 24 prisoners and 13 health workers (7.1%). A breakdown of the pandemic situation shows a male/female ratio of about 1.5 (78/50). The median age is 35 years, which is different from the observed Number of recorded cases Number of active cases Number of recoveries Number of deaths situation at the international level where the elderly are more affected. Transmission of the disease is mostly local and community-based compared to imported cases at the beginning of the pandemic. The infected persons include health personnel - 7% (4 doctors, a nurse, a midwife, an intern, a pharmacy assistant, and a nursing aide). This raises the need for protective equipment for health personnel. There is also a very high risk of the pandemic spreading in Togo, given the weaknesses of the health system. To contain the pandemic, however, the Government has taken many measures that are beneficial from a health standpoint but carry a high risk of worsening the social and macroeconomic indicators which are expected to be only average. The management of cases, especially severe cases, will put more pressure on the health system, since resuscitation beds are insufficient.
1.3 Transmission Channels of the Crisis
1.3.1 Potential Channels for Transmission of the Crisis to Togo’s Economy
Togo is one of the most open economies in the West African sub-region, with trade openness exceeding 100% in recent years. The country is a transit hub for goods in West Africa, with its port (the second largest in Africa), which has been made one of the most efficient by major investments. According to data from the BCEAO and the Institute of Statistics, every year since 2015, an average 70% of Togo’s exports go to Africa, with 90% going to ECOWAS, particularly the hinterland countries (Burkina Faso, Mali and Niger). The decline in international trade will have an impact on Lomé Port activities which generate more than 60% of Government revenue. In addition to the port, Lomé Airport, which is also a second showcase of the economy in terms of traffic and revenue generated, will be hard hit by the suspension of air traffic. Togo’s economy is also based on agricultural and mining commodities, particularly cotton, coffee, cocoa, and cashew nuts, as well as phosphate exports. The declining world demand will also affect Togo’s economy. XXX
Togo With COVID Without COVID Baseline Scenario Worst Case Scenario 2019(e) 2020(p) 2021(p) 2019(e) 2020(p) 2021(p) 2019(e) 2020(p) 2021(p) Real GDP growth 5.1 5.3 5.5 5.3 0.9 3.7 5.3 -1.3 2.4 CPI inflation 1.4 1.7 2.0 0.7 1.3 1.5 0.7 1.4 1.6 Budget balance % GDP -2.7 -2.1 -1.5 -2.2 -5.2 -1.6 -2.2 -6.4 -2.5 Current account % GDP -6.0 -5.2 -5.0 -3.1 -5.7 -4.7 -3.1 -7.0 -5.1 Source: AfDB Projections, April 2020
There are several transmission channels of the pandemic’s impacts at the macroeconomic level, in particular: (i) the terms of trade with its main partners such as China, India, France and the European Union, Burkina Faso, etc.; (ii) port and airport traffic, leading to a significant drop in Government and private sector revenue; (iii) declining global demand for commodities (agricultural and mining); (iv) contraction of activities in the tourism, trade and transport sectors; and (v) the flow of foreign investment, migrant remittances, and external financing (grants and loans).
• Real Sector and Inflation
In 2019, real GDP increased by 5.3% compared to 4.9% in 2018. While the Government was anticipating a growth rate of 5.5% in 2020 driven by the good performance of agriculture and services, a preliminary assessment of the macro-economic impact has concluded that the projection be revised downwards. According to the Government, there are two likely scenarios: (i) Scenario 1 (S1) which assesses the anticipated cost on economic growth in 2020 by assuming that the COVID-19 pandemic will last six (6) months with partial lockdown of the population. Here, real GDP growth, which was projected at 5.5%, is now projected at 1.3%; and (ii) Scenario 2 (S2) which assesses the anticipated cost on economic growth in 2020 by assuming that the COVID-19 pandemic will last nine (9) months with partial lockdown of the population. Here, real GDP growth, which was projected at 5.5%, is now projected at -1.5% and the economy would go into recession.
The projected inflation, as measured by the GDP deflator, would be 3.1% in 2020, compared to 2.8% projected before COVID-19. The relative control of inflation would stem from BCEAO’s good monetary policy and a decline in imports, including oil prices (hydrocarbons account for 12% of imports), as well as the abundance of food products on the markets due to large stocks held by producers.
• External Sector
The external current account deficit stood at 6.8% and 6.6% of GDP in 2018 and 2019 respectively. The deficit is expected to worsen with the anticipated decline in imports, exports, and migrant remittances. Scenarios 1 and 2 therefore project a current account deficit of 6.0% and 7.3% of GDP respectively in 2020 instead of the 4.6% projected before COVID-19.
• Public Finance
Over the past two years, the budget deficit stood at 0.4% of GDP in 2019 and 0.8% of GDP in 2018. Projected at 0.5% in 2020, the deficit is expected to widen under both scenarios. In Scenario 1, the deficit would be 5.0% of GDP, while in Scenario 2, it would be 8.8% of GDP, compared to 1.9% of GDP before COVID-19. Revenue losses would amount to 3.0% of GDP in Scenario 1 and 4.3% in Scenario 2, while current expenditure, driven by increased public consumption, would increase by 5.7% of GDP in Scenario 1 and by 8.1% of GDP in Scenario 2.
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1.3.2 Social Sector Situation and Impact of the Pandemic
Togo's social indicators have been improving over the past few years, even though progress has been slow and has kept the country in the bottom quintile of the Human Development Index (HDI) with a score of 0.513, ranking it 167th out of 189 countries. Overall, the net enrolment ratio (NER) in primary education improved to 94.3% in 2015. The incidence of poverty reduced from 61.7% in 2006 to 55.1% in 2015 and 53.5% in 2017. However, there was no tangible improvement in extreme poverty, which rose from 28.6% in 2006 to 28.7% in 2015. In addition, there are still spatial and gender inequalities in rural areas: nearly 7 out of 10 Togolese are poor and only 50% of women are literate compared to 77% of men. To contain the pandemic, the Government has taken many restrictive measures since the first recorded case; although the measures are useful for the health response, they carry a high risk of worsening the social indicators.
• Impact on the Health Sector
As regards health, Togo ranks 129th out of 195 countries for preparedness to deal with an epidemic or other health emergencies according to the Global Health Security Index (2019). This rating is based mainly on screening capacities, rapid response, the health system, compliance with international standards, and environmental risks. With respect to capacity, the Global Health Security Index stands at 32.5/100, the prevention index is 23.7/100, while the average is 34.8/100 and the rapid response index is 30.4/100. This shows that the country encounters difficulties in effectively dealing with the COVID-19 pandemic. It should also be noted that the rapid response index is based on specific criteria including the preparation and implementation of a response plan, linkages between public health and health authorities, communication risks, etc. Furthermore, COVID-19 has an immediate impact on Togo's health system, which is already fragile and not very resilient, with 5.3 doctors per 10,000 inhabitants, 27.4 nurses per 10,000 inhabitants, 0.7 beds per 1,000 inhabitants, insufficient and deficient health facilities with inadequate personnel, and poor organisation of the health sector. In addition, the population's health behaviour needs to be improved given the low education level. The infant mortality rate is 43.70‰ (2017). The infant and child mortality rate (123‰) is still high due to infectious and parasitic diseases, and maternal mortality (350 per 100,000 live births). The inadequate services are also impacting unmet demand for family planning services, despite the fact that the country’s contraceptive use is among the lowest in the world (13.5%).
• Poverty, Employment and Gender
The restrictions or closure of markets to curb the spread of COVID will lead to job and income losses for already disadvantaged groups operating mainly in the informal sector. According to the Integrated Regional Employment and Informal Sector Survey (ERI-ESI) conducted in 2017, more than nine out of ten jobs (91.6%) are provided by the informal sector, in which most workers live on a day-to-day basis without savings. Almost the entire agricultural sector is dominated by informal employment (99.7%). Informal employment also dominates the non-agricultural sector (87.9%), particularly trade (41.2%), small retail trade (33%), manufacturing (22.1%), hotel trade and catering (18.8%), and services such as tailoring, hairdressing (6.1%) or transport (3%). These informal jobs are mostly held by women (69.7%), which exposes them more to the negative impacts of the health crisis and further exacerbates gender inequalities. The project is classified in Category 2 according to the Gender Marker System (GMS), and includes gender-sensitive policy dialogue and socio-economic interventions.
• Food Security
The food security situation is already delicate, with half the population (49.8% according to 2015 estimates) living on less than USD 1.90 a day and 16.1% undernourished. With respect to the youngest population – i.e, children under 5 years of age - 15.2% are underweight and 23.8% are stunted. Disruptions in food supply chains and artificial shortages caused by the opportunistic behaviour of traders can push up the prices of basic necessities. The combined effects of declining incomes and rising food prices will exacerbate inequalities, with an increased risk of food insecurity in the short term. To counter soaring prices, the food security agency XXXII
(ANSAT) has already announced the building-up of stocks and the selling of cereals throughout the country to cover any needs. The basic necessities will be sold at prices set according to the different cereals and quantities. Cash transfers are also being made through the Novissi platform to compensate for workers’ loss of income, particularly those in the informal sector. In the medium term, measures need to be taken to ensure good performance of the next crop year, adequate supply of traditionally imported products or their substitution with local products so as to enhance food and nutrition security in 2021.
• Education
As regards education, the Government has decided to temporarily close all schools and universities in Togo to contain the spread of the disease. Given that in the short term it is impossible to give courses through distance learning, this will have an impact on the education system with a high risk of slowing down enrolment that has been growing over the past few years.
II. THE PROGRAMME
2.1 Programme Objective
The COVID-19 Response Support Programme (PAR-COVID-19) seeks to help strengthen Togo’s economic and health resilience to the new coronavirus pandemic. The proposed reforms are intended to support health response measures and the country in its efforts to mitigate the socio-economic impacts of the pandemic. The programme is designed as a reform operation supported by an emergency budget support of UA 20 million to be disbursed in a single tranche in 2020.
2.2 Programme Components
The programme has two components as described below: (i) Component A: Support for the National COVID-19 Health Response Strategy: This component aims to strengthen national capacities for the prevention, control and management of the pandemic mainly through screening to detect the maximum number of cases at an early stage and take appropriate measures to control the spread of the pandemic. It is divided into two sub-components: A.1 Support for the COVID-12 Health Response, and A.2 Strengthening governance in the crisis management. (ii) Component B: Support for the national strategy for mitigating the socio-economic impacts of COVID-19: This component aims to establish mechanisms to maintain the purchasing power and food security of the most vulnerable groups, as well as to support productive activity. It has two sub-components: B.1 Strengthening social protection and food security, and B.2 Building the resilience of the national private sector.
2.2.1 Component A: Support for the National COVID-19 Health Response Strategy
Context: Two weeks after the first recorded case on 6 March 2020, the number of cases has been increasing steadily, leading to fears of an outbreak of the pandemic throughout the country in the short term. However, since 16 April 2020, there has been a lull, with the number of cured cases exceeding the number of active cases. Unfortunately, this positive trend, which is expected to be sustainable, cannot last long, given the country's very low screening capacity. Indeed, with only a total of 25,526 tests performed as at 15 June 2020 - i.e., an average of about 250 tests per day - the risk of underestimating the number of cases is high given that the disease has a relatively long incubation period of at least 14 days, with a high probability of community transmission.
Government Achievements and Strategies: When the first case appeared, the Government took a number of response measures to contain the disease and limit its spread, in particular: (i) requisitioning the 120-bed Lomé Commune Regional Hospital Centre as a treatment centre; (ii) requisitioning a hotel for the isolation of asymptomatic positive contacts; (iii) continuing health control at entry points; (iv) disseminating prevention messages (SMS, mass media, social networks); (v) declaring a state of health emergency for a period of 3 months; and (vi) establishing mobile laboratories for screening within the country.
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Measures Supported by the Programme: Sub-Component A.1 - Support for the COVID-19 health response: Measures supported in this sub-component are: (i) equipping all regions and districts with laboratory facilities that meet standards for screening tests; (ii) establishing nine (9) additional treatment centres in the other regions; (iii) adopting a training plan for all laboratory technicians in COVID-19 diagnosis and biosafety issues; (iv) revising and establishing an early warning system network for epidemiological monitoring; and (v) adopting the Contacts Monitoring Strategy that has been put in place.
Sub-Component A.2 - Strengthening Governance in the Crisis Management: The measures supported through this sub-component are: (i) finalisation, adoption and implementation of a COVID-19 response strategic plan; (ii) establishment of the Pandemic Coordination and Management Framework; (iii) adoption of the Amended Finance Law taking into account all additional pandemic-related expenses; and (iv) audit of public procurement contracts awarded in the management of COVID-19 resources.
2.2.2 Component B: Support for the National Strategy for Mitigating the Socio-economic Impacts of COVID-19
Context: Like several other countries, Togo has taken restrictive measures to deal with the COVID-19 health crisis. These measures, in addition to those taken by partner countries, have reduced economic activity. In addition to the suspension of all air and land transport routes, all public, private and denominational primary and secondary schools and universities have been closed and market activities have been rationed. These restrictive measures have led to a substantial reduction in income for the most vulnerable social groups. Furthermore, existing social protection and social safety net programmes could be affected by the reallocation of resources to finance the health or macroeconomic response or by the inaccessibility of target populations due to movement restrictions. Given the nature of Togo’s private sector, the impact of the pandemic could be horrendous for SMEs and microenterprises if adequate and urgent measures are not taken to build their resilience. It should be noted that Togo’s private sector is highly concentrated in trade and services, and dominated by non-resilient microenterprises with a daily turnover of less than CFAF 8,000.7 National statistics show that more than 77% of businesses are sole proprietorships, and 95% operate in the tertiary sector, 70% of which are in trade. Similarly, the few existing large enterprises with activities highly dependent on import and export flows will be forced to reduce their production and, subsequently, their staff, with the result that unemployment will increase.
Government Achievements and Strategies: Under the PND, social protection and inclusion programmes have been adopted by the Government and are being implemented. In addition to school meal programmes for 304 schools in the five regions of the country with a population of about 92,000 students, a cash transfer programme is being established for 61,000 households in 585 villages in the 209 poorest districts. However, increased insecurity and worsening inequalities induced by the pandemic will require measures to adjust existing programmes, as well as the introduction of additional measures to strengthen food security. Moreover, in anticipation of the repercussions of the health crisis, the Government immediately launched numerous studies and analyses on economic transmission channels. The study titled "Analysis of the impacts of the COVID-19 pandemic on the economy and the socio-economic conditions of vulnerable households and groups in Togo" considered a diagnosis of the vulnerability of the private sector and made recommendations for emergency support to businesses. An operational plan to support the private sector is being prepared.
Measures supported by the Programme: Sub-component B.1 - Strengthening social protection and food security: The measures supported under this sub-component are: (i) the establishment of a cash transfer operation for the most vulnerable social groups (including women); (ii) free water and electricity for social groups for a period of three months starting from April 2020 and the establishment of a similar mechanism to support such expenses in rural areas (including women); and (iii) the establishment of a credit programme for farmers: inputs and/or ploughing (required in the agricultural sector to ensure a good crop year).
7 Report of the study "Analysis of the impacts of the COVID-19 pandemic on the economy and the socio-economic conditions of vulnerable households and groups in Togo" XXXIV
Sub-component B.2 - Strengthening the resilience of the national private sector: The measures supported under this sub-component are: (i) deferral, upon request, of tax instalments for businesses in sectors hard-hit by the pandemic (transport, hotels, bars, restaurants, and entertainment and recreational activities); (ii) deferral of penalties for late payment of taxes falling due during the second quarter, with the exception of VAT; (iii) exemption from customs duties and taxes, other than community levies and taxes, on medical equipment and products used exclusively in the fight against COVID-19 during this period; (iv) deferral of late penalties for businesses that are unable to submit their financial statements before 31 March 2020 for sole proprietorships and April 30 for corporate businesses; (v) deferral of tax penalties in the event of tax reassessment. However, for tax statistics purposes, these legally notified penalties will be taken into account; (vi) 50% reduction on the second instalment of the single business tax (TPU) provided for in Article 57 of the Tax Procedures Code (LPF) is granted to sole proprietorships, road hauliers, artisans and similar entities subject to the TPU; (vii) 25% special reduction on the tax instalment referred to in Article 118 of the General Tax Code (CGI) and Article 83 of the LPF is granted to businesses operating in the transport sector, hotels, restaurants and similar registered entities, as well as to approved tour operators, for fiscal year 2020.
2.3 Measures Precedent
Measures Precedent Evidence
1. Establishment of an institutional framework for coordinating and 1. Decree creating an institutional mechanism for the managing the pandemic. coordination and management of the pandemic.
2. Adoption of a COVID-19 response strategic plan. 2. Adoption report of the strategic response plan to COVID-19 and decision of validation of the 3. Implementation of free water and electricity for social groups strategic response plan to COVID-19. during the health emergency period. 3. Decrees on free water and electricity for social 4. Implementation of the 10% reduction in the rate of VAT on hotel groups during the health emergency period. and restaurant activities. 4. Instructions from the Minister of Economy and Finance and press release from the Togolese Revenue Office.
2.4 Expected Outcomes
Efficient implementation of the programme will strengthen COVID-19 screening capacity and improve the national coverage rate in patient isolation facilities. The measures will also help prevent the worsening of food insecurity by maintaining the undernourishment rate at no more than 16.1% of the population. In addition, the measures will prevent the collapse of the private sector.
2.5 Financing Requirements and Arrangements
The macroeconomic and budget frameworks are being updated to reflect the pandemic’s impact. An interim budget with a decline in revenue and an increase in expenditure to fund contingency COVID-19 response plans will be approved in 2020. The budget deficit, excluding grants, is estimated at CFAF 263.6 billion (about USD 434 million). It is partially covered by domestic financing and assistance from technical and financial partners, including the Bank. The Bank's support of UA 20 million (about USD 27.2 million) is financed by grants and concessional loans as follows: an ADF loan of UA 5.96 million, an ADF grant of UA 5.01 million, and a TSF loan of UA 9.03 million.
2.6 Policy Dialogue
Under this programme, the Bank will maintain steady dialogue on strengthening the country's health system in general, and the epidemiological surveillance system and effective implementation of the COVID-19 Response Plan in particular. The Bank will also intensify ongoing dialogue in the following three areas XXXV
critical to strengthening the country's socio-economic resilience to external shocks: (i) expansion of budgetary space, particularly by increasing domestic resource mobilisation; (ii) implementation of WAEMU directives, particularly the programme budget, to strengthen the management of public investments, including those related to the health sector; (iii) improvement of the business environment and development of financial engineering with special focus on public-private dialogue and gender-sensitive measures in response to COVID.
2.7 Beneficiaries
PAR-COVID-19 will directly benefit the Government through the Ministry of the Economy and Finance by funding the national budget, and also indirectly benefit the entire Togolese population which is the ultimate beneficiary of budget implementation. More specifically, all vulnerable groups such as low-income households in urban and rural areas and private sector businesses will benefit from the emergency measures supported by the programme.
Detailed Analysis of Eligibility Criteria – Togo Government Generally speaking, the Government's commitment is deemed strong because of the attention paid commitment to to the implementation of macroeconomic and social reform programmes. At the social level, the Mo poverty reduction, Ibrahim Foundation report "Agendas 2063 & 2030: is Africa on track?" on the assessment of inclusive growth and African governance shows that Togo has steadily improved its ranking in the two key areas of health reform and education since 2014. The National Development Programme (PND) 2018-2022, the new reference framework for government action, has considered and amplified the guidelines of the Accelerated Growth and Employment Promotion Strategy (SCAPE) with the main objective of achieving the SDGs. The PND has three pillars: (1) Services: "Establishing a logistics hub of excellence and a first-rate business centre in the sub-region"; (2) Agriculture and industry: "Developing agricultural, manufacturing and extractive industries transformation hubs"; and (3) Social: "Consolidating social development and strengthening inclusiveness". With the support of the Bank's previous operations (PARG-1, PARG-2, PARCI-1, PARCI-2, PAMOCI and PAGFI), the country has carried out major reforms, including establishment of the OTR, development of SIGFIP, compliance of the Public Procurement Code, and establishment of the Business Window, which is a one-stop shop for business creation. The IMF Article IV review report of July 2019 confirms the Government’s commitment to reforms and the success of the programme with 5 of the 6 performance criteria and 5 of the 7 structural benchmarks achieved by end 2018. To address COVID-19, the Government has prepared "an operational action plan to combat COVID-19 in Togo" which is the reference framework for the health response. Strategic plans for the social and economic response are also being adopted to address the pandemic’s systemic risk for the country. Macro-economic Despite the recurrent regional socio-economic and financial crises, the Togolese Government has stability managed to maintain a viable macroeconomic framework with steady real GDP growth since 2008. Indeed, the GDP growth rate, which stood at 1.8% in 2008, has steadily improved to an average of 5.2% over the 2014-2016 period. Since then, growth has been maintained at a good level with 4.4% in 2017 and 4.9% in 2018, despite political and social unrest. The IMF medium-term growth target is 5.5%. Headline inflation has been curbed to 2% annual average calculated in March 2019. This good result stems from the stabilisation of food, energy and transport prices. It therefore seems to have stabilised (at 1.8% in 2015 and 0.9% in 2016). Moreover, the country met the WAEMU deficit criterion two years ahead of schedule. Nevertheless, the debt level is the highest in the region and requires special efforts. The July 2019 IMF review found that Togo carries a moderate risk on its external debt and a high risk on its domestic debt. Although the debt stock has been declining since the IMF programme was launched in 2016, the country has the highest debt-to-GDP ratio in WAEMU in 2018 (76.2%), and this ratio is expected to remain above prudential levels until 2023.
With respect to specific measures against COVID-19, the Government has, in the short term, given priority to maintaining a sound macroeconomic policy and supporting SMEs/SMIs and the most fragile sectors (health, support for growth). In the medium to long term, priority will be given to mobilising revenue (both domestic and from the diaspora) to achieve the PND objectives, improve the functioning of the public expenditure chain (through systematic prioritisation of high-stake sectors and MTEFs), increase decentralisation and implementation of the National Agricultural Investment, Food and Nutritional Security Programme (PNIASAN 2018-2026), and pursue the industrialisation policy. Measures at national level are complemented by those of BCEAO at regional level (facilitating access to credit for businesses through commercial banks, easing the conditions for banks’ access to liquidity, and promoting electronic payment methods and sufficient cash supply to the banking system for the needs of the population, etc.). Political stability The country’s political stability has been significantly strengthened between 2018 and 2020 with the holding of parliamentary elections in 2018, local elections in 2019 after more than 30 years without local elections, and presidential elections that were won in 2020 by the outgoing President. XXXVI
The elections were recognised by international bodies, including ECOWAS (organisation that arbitrates political dialogue between Togolese political actors). The political stability, supported by the army, gives the Government political and institutional leeway not only to implement macro- economic reforms and improve the business environment, but also to deal with security threats on its border with Burkina Faso, which is prey to terrorist threats. However, despite the political stability that gives the Government greater confidence to conduct public policies, significant efforts are needed to meet the challenge of social cohesion that continues to be strained by deep divergences between political actors over the country's institutions and development policies. Financial risk The country has made significant progress in public finance reforms, particularly with respect to assessment domestic resource mobilisation. In addition, WAEMU directives have been transposed into national policy and Togo is making progress towards the establishment of programme budgets. A budget programming document will be prepared for the 2020-2022 period. The reforms, coupled with the joint action of economic support and programmes by the technical and financial partners in the country, will help to mitigate the risk caused by the shortcomings identified. Nevertheless, there are still weaknesses in the management of public investment and execution of expenditure, particularly in public procurement. With regard to procurement, the use of the latest Report on Assessment of Critical Indicators (RACI) (Bank version available) as from September 2019 shows that the Togolese procurement system presents an overall risk level deemed "substantial". However, it is worth noting the country's commitment to conduct a comprehensive assessment of its procurement system based on OECD’s MAPS II tool. The assessment is currently underway with Bank support and its findings will serve as basis for structural reforms to improve the procurement system. As this is an emergency budget support operation in response to a crisis, there is a need to strengthen fiduciary control by requesting an audit of financial flows and an audit of public contracts by the Court of Accounts. The country will submit to the Fund audit reports on flows and procurement related to the response to COVID 19, no later than six (6) months after the end of the fiscal year. Harmonisation Aid coordination between the Government and its partners is based on eleven (11) sector committees and ad hoc joint review and co-financing activities. In December 2010, the Government established a mechanism for coordinating, monitoring and evaluating development policies, which comprises two coordinating bodies: the Government-Donor Committee at central level and the Sector Committees at sector level. The establishment and operationalisation of the Directorate-General for External Aid Mobilisation and Partnership (DGMAP) in 2016 and 2017 is a positive step towards better aid coordination. The Bank is closely involved in the dialogue on tax reform, inclusive finance, economic infrastructure, and the agricultural sector. On the other hand, coordination of Government/TFP dialogue is not systematic and operational. Similarly, there is still no effective joint programming, except for the macro-economy and budget support.
More specifically, coordination of the COVID-19 response is co-chaired by the Prime Minister and the United Nations Resident Coordinator, with regular support from and consultation with the other partners. A committee of economists from various institutions and the Ministry of the Economy has been established under the auspices of the United Nations system to help the Government better understand the economic and social impact of the disease.
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ANNEX 2: RESULTS-BASED LOGICAL FRAMEWORK
A PROJECT INFORMATION ❚ PROJECT NAME: COVID-19 Response Support Programme (PAR- COVID-19) ❚ COUNTRY: TOGO ❚ OBJECTIVE: Contribute to reducing the impact of COVID-19 and strengthening Togo's socio-economic resilience to COVID-19 (i) Bank's COVID-19 National Response Strategy, (ii) the Bank's COVID-19 Pandemic Response Framework, and (iii) the Bank's Policy on Emergency Crisis Response Budget Support a) Country ambition: reduce: (i) the infection and morbidity rates; and (ii) the economic and social impacts of the crisis. ❚ PROJECT CONSISTENT WITH: b) CRF: Mitigate the impact of COVID-19 on African economies and societies, support economic and social recovery and resilience, and improve governance, health and supply systems and their preparedness. Alignment indicators:
(i) COVID-19 infection and morbidity rates: XXX (ii) Global Health Safety Index: XXX B RESULTS MATRIX TARGET AT REP STRUCTURES RESULTS CHAIN AND INDICATORS UNIT BASELINE PROGRAMME ORTI RESPONSIBLE COMPLETION NG ❚ IMPACT 1: The capacity to test and treat COVID-19 patients is improved Test capacity at INDICATOR 1.1: COVID-19 screening programme Activity report of the Annu Number of tests/day 600 capacity completion Ministry of Health al 5000. INDICATOR 1.3: Health facilities with Activity report of the Mont National coverage rate 30% 70% capacity to take care of patients Ministry of Health hly ❚ IMPACT 2: The impact of the crisis on poor and most vulnerable households is mitigated Activity report of the Annu INDICATOR 2.1: Food insecurity rate % population 5% 5% Ministry of al Agriculture ❚ IMPACT 3: The impact of the crisis on businesses and employment is mitigated INDICATOR 3.1: Number of businesses Activity report of the Quart Number of businesses 0 5000 supported Ministry of Finance erly ❚ OUTPUT 1: The national capacity for screening and management of patients is improved Annu INDICATOR 1.1: Screening test Activity report of the al laboratories in all the regions and districts are Number 05 08 Ministry of Health operational INDICATOR 1.2: Additional treatment Annu Number 1 9 Ministry of Health centres are established in the other regions al INDICATOR 1.3: A training plan for all A training plan Annu Activity report of the laboratory technicians in COVID-19 Plan 0 adopted and al Ministry of Health diagnosis and biosafety issues is adopted technicians trained ❚ OUTPUT 2 : The purchasing power of the most vulnerable population is sustained and food security strengthened INDICATOR 2.1: Cash transfers for the Number of Women Men: 350 000 Quart most vulnerable social groups MPENIT beneficiaries Men Women: 650 000 erly
Electricity: 415,223 households for a total Number of households cost of CFAF 5.7 benefiting from the billion, and social tranche for INDICATOR 2.2: Beneficiaries of the free Quart electricity 0 MME/MEERHV social tranche for electricity and water Water: 3,596,480 erly Population benefitting persons for a total free water cost of CFAF 1.4 consumption billion (including 51.4% women) An implementation report is produced INDICATOR 2.3: An Agricultural Response Implementation Report and the total amount MAPAH/ Annu Plan, including agricultural input loans for of the Agricultural 0 of resources allocated APRODAT al the 2020/2021 season, is implemented Response Plan is at least CFAF 96.7 billion. XXXVIII
OUTPUT 3: Business support measures approved and effective INDICATOR 3.1: An Ordinance on the 25% Amended finance special reduction on the tax instalment law for 2020 Amended finance law Annu referred to in Article 118 of the General Tax 0 MEF/OTR for 2020 al Code (CGI) and Article 83 of the Tax Procedures Code (LPF) is adopted INDICATOR 3.2: The payment of tax Amended finance law Amended finance instalments for businesses in sectors hard hit for 2020 law for 2020 Annu by the pandemic (transport, hotels, bars, 0 MEF/OTR al restaurants, and entertainment and recreational activities) is deferred on request. INDICATOR 3.3: Penalties for late Amended finance law Amended finance submission of financial statements expected for 2020 law for 2020 Annu by 31 March 2020 for sole proprietorships 0 MEF/OTR al and by 30 April 2020 for corporate businesses are deferred. INDICATOR 3.4: The second single Amended finance law Amended finance business tax (TPU) instalment referred to in for 2020 law for 2020 Article 57 of the Tax Procedures Code (LPF) Annu 0 MEF/OTR for single proprietorships, road hauliers, al artisans and similar businesses subject to the TPU is reduced by 50% OUTPUT 4: Governance arrangements for the pandemic management are defined
INDICATOR 4.1 : The COVID-19 response A Strategy adopted in Annu Response Strategy 0 MSHP strategy is adopted June 2020 al A Decree establishing the INDICATOR 4.2: The Decree establishing Pandemic Annu the Pandemic Coordination and Decree 0 MSHP Coordination and al Management Framework is adopted Management Framework adopted A Bill adopted in INDICATOR 4.3: The Amended Finance Amended Finance Bill Annu 0 2020 MEF Bill is adopted in a Cabinet Meeting 2020 al
INDICATOR 4.4: The audit of public An Audit Report Annu contracts awarded under the response to Audit Report 0 available in June al COVID-19 is conducted 2021
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ANNEX 3: Letter of Development Policy MINISTRY OF THE ECONOMY REPUBLIC OF TOGO AND FINANCE Work-Liberty-Fatherland ------PERMANENT SECRETARIAT FOR MONITORING OF REFORM POLICIES AND FINANCIAL PROGRAMS ------WB&AFDB RELATIONS MONITORING SERVICE ------N°______/MEF/SP-PRPF/BM-BAD Lomé, on______
Subject: Letter of Development Policy
The Minister
Mr. President,
This Letter of Development Policy (LDP) presents the status of the health crisis caused by the COVID-19 pandemic and its socio-economic effects. Indeed, the coronavirus pandemic that currently affects almost all countries worldwide has not spared Togo. Since the first recorded case on 6 March 2020, the pandemic has continued to spread unrelentingly. Initially, its spread appeared to stabilize, but the lifting of lockdown measures in neighbouring countries has led to an increase in the number of cases among incoming travellers. This pandemic is undermining the implementation of the National Development Strategy (PND 2018-2022), which seeks to structurally transform the economy to achieve robust, sustainable, resilient, inclusive growth that creates decent jobs and reduces poverty. To cope with the situation, the Government is seeking the technical and financial support of the various technical and financial partners, particularly the African Development Bank (AfDB) through its COVID-19 Response Support Programme.
I. Socioeconomic Context
1. Since December 2019, a coronavirus disease, termed COVID-19, that broke out in Wuhan (China), has been infecting people around the world. Given the large number of people and countries affected, the World Health Organization (WHO) declared it a pandemic. As of 15 June 2020, more than 7,823,289 people had been infected in 203 countries worldwide with more than 431,541 deaths and more than 3,872,963 people cured. In Togo, during the same period, there were 532 confirmed positive cases, comprising 211 active cases, 308 cured cases and 13 deaths. This dizzying trend of the pandemic is a challenge for all leaders worldwide. To curb the spread of COVID-19, several measures have been taken by all countries of the world, ranging from border closures to total lockdown of the population, leading to a slowdown in economic activity.
2. According to the International Monetary Fund (IMF), the coronavirus pandemic will trigger a worldwide economic recession in 2020. This recession could be worse than the one triggered by the 2008-2009 financial crisis. In this case, industrial production, exports and imports would fall drastically. XL
3. At the macroeconomic level, the services of the Ministry of the Economy and Finance conducted an analysis of the impact of the COVID-19 pandemic in Togo under two (2) scenarios. Scenario 1 assumes that the pandemic would last six months with partial lockdown of the population. The real GDP growth rate would be 1.3%, representing a loss of 4.2 growth points from the initial growth rate of 5.5% in 2020. Meanwhile, scenario 2 assumes that the pandemic would last nine months with partial lockdown of the population. The growth rate under this scenario would be -1.5%, representing a loss of 7.0 growth points compared to the growth rate initially forecasted. Inflation measured by the GDP deflator would be 3.1% in Scenario 1 compared to 2.8% in the initial forecast.
4. Private investment would be considerably reduced to CFAF 600.1 billion compared to CFAF 714.7 billion initially projected for 2020, representing a drop of CFAF 114.6 billion and CFAF 188.2 billion for scenario 1 and scenario 2 respectively.
5. With the slowdown in economic activity due to the Coronavirus pandemic, it would not be possible to achieve the State revenue (including grants) collection target, which was expected to reach CFAF 894.3 billion in 2020. In Scenario 1, tax and non-tax revenue would be CFAF 580.6 billion and CFAF 45.0 billion respectively, compared to CFAF 678.4 billion and CFAF 77.0 billion in the 2020 Finance Law. Thus, total State revenue would be CFAF 757.7 billion, representing a revenue loss of CFAF 136.6 billion compared to the baseline situation. This decline could worsen in scenario 2 to reach CFAF 197.5 billion.
6. On the public expenditure side, recurrent expenditure is expected to increase by CFAF 150 billion compared to the initial budget in scenario 1. Such increase would stem from the surge in public consumption on account of the COVID-19 pandemic. Capital expenditure would fall to 3.9% of GDP in Scenario 1 and 4.0% in Scenario 2, relative to 9.5% in the initial scenario. The overall budget balance would be -5.0% of GDP in Scenario 1 and -8.8% of GDP in Scenario 2 compared to the initial forecast of -1.9% of GDP.
II. Government Response Strategy to the Health, Social and Economic Crises
7. Like all the other countries in the world, Togo has taken appropriate measures to combat the COVID-19 pandemic. These measures, together with those taken by Togo's partner countries, have led to the shrinking of economic activity in all sectors, such as transport, tourism, catering, trade and manufacturing and extractive industries. The result would be a decline in production, foreign trade, private investment and private consumption. The extent of this impact will depend on the spread of the pandemic and the duration of the health crisis. The overall estimated cost at this stage could amount to CFAF 400 billion. Accordingly, the Government had set up a National Solidarity and Economic Recovery Fund of CFAF 400 billion. This fund, which is a state budget support fund, constitutes an integral part of the budget and is managed as budget lines, will be financed from State budget resources and through contributions from TFPs as well as all national and international entities of goodwill, and will make it possible to support the strategy developed to curb the effects of the pandemic.
The strategy is based on the following three (3) pillars:
8. Health response through the establishment of a health-focused state of emergency for a period of three (3) months from 1 April 2020; the establishment of mobile laboratories; and the application of all the barrier measures decreed by WHO to curb the spread of the pandemic. At the health level, the plan has two components, namely: immediate needs to curb the pandemic; and strengthening of the health system by rehabilitating infrastructure and providing health equipment in the medium term. A budget of CFAF 110 billion will be allocated to actions planned within this framework.
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9. Stabilisation of economic activity at an acceptable level by supporting household consumption mainly through cash transfers, free water and electricity supply for various population categories during the three months and the readjustment of working hours for civil servants. To stabilize economic activity, the Government will allocate resources amounting to CFAF 110 billion.
10. Revival of the economy through measures that favour businesses. Within this framework, some thought is being given to the situation of young entrepreneurs operating newly-launched businesses; specific attendant measures are being implemented to boost agricultural output and ensure food self-sufficiency; discussions are ongoing with the private sector with a view to adopting measures that boost consumption, production and job protection; and a study is being conducted on the fiscal situation of businesses, especially those most vulnerable to the impact of the crisis. A budget of CFAF 180 billion CFA francs will be reserved for actions aimed at reviving the national economy.
Implementation Status of the Government's COVID-19 Pandemic Response Strategy
11. As soon as the first case was discovered on 6 March 2020, appropriate measures were taken through the response strategy whose implementation status is appended hereto.
III. COVID-19 Response Support Programme
General Objectives
12. The Bank Group's COVID-19 Response Support Programme (PAR-COVID-19) seeks to help strengthen Togo's economic and health resilience to the novel coronavirus pandemic. The adopted reforms seek to support measures that mitigate the social and health impacts and to support Togo in its efforts to contain the repercussions of the pandemic on the private sector. The said measures are contained in two (2) components, namely:
1. Component 1: Support to the national COVID-19 health response strategy
13. It aims to strengthen the national screening capacity to detect as many cases as possible at an early stage and take appropriate measures to curb the spread of the disease. It is structured into two sub-components:
- Support to the COVID'-19 health response through: (i) the provision of standard screening test laboratory equipment to all regions and districts; (ii) the establishment of 9 additional treatment centres in the other regions; (iii) the adoption of a training plan for all laboratory technicians focused on the diagnosis of COVID-19 and on biosafety issues; (iv) the revision and implementation of the early warning system network for epidemiological surveillance; and (v) the adoption of the Contact Monitoring Strategy that has been developed.
- Strengthening of governance in the management of the Pandemic through: (i) the finalization, adoption and implementation of a strategic COVID-19 response plan; (ii) the establishment of the Pandemic Coordination and Management Framework; (iii) the adoption of the Amending Finance Bill taking into account all the additional expenses related to the pandemic; and (iv) the audit of public contracts awarded as part of the management of COVID-19 resources.
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Component 2: Support to the national strategy for mitigation of the socio-economic effects of COVID-19
14. This component is aimed at establishing mechanisms to maintain the purchasing power and food security of the most vulnerable people and to support productive activity. It is also subdivided into two sub-components:
- Strengthening social protection and food security through: (i) the establishment of a cash transfer operation for the most vulnerable social groups (including women); (ii) free water and electricity for vulnerable social groups for a period of three months starting in April and the establishment of a similar mechanism to defray similar expenditure in rural areas; and (iii) the establishment of a credit programme for agricultural producers: inputs and/or ploughing (necessary in the agricultural sector to ensure a good crop year).
- Strengthening the resilience of the domestic private sector through: (i) deferral on request of the payment of tax instalments by businesses in sectors heavily affected by the pandemic (transport, hotels, bars, restaurants, and entertainment and leisure businesses); (ii) the suspension of late payment penalties for taxes falling due during the second quarter with the exception of VAT; (iii) exemption from customs duties and taxes, excluding Community levies, service provision taxes, taxes on medical equipment and products used exclusively to combat COVID-19 during this period; (iv) the suspension of late penalties for companies that are unable to file their financial statements by the deadlines of 31 March 2020 for sole proprietorship businesses and 30 April for corporate businesses; (v) suspension of the application of tax penalties in the event of a tax reassessment. However, for the purposes of maintaining the fiscal statistics, these legally notified penalties will be accounted for; (vi) the 50% reduction on the second installment of the Single Professional Tax (TPU) provided for in Article 57 of the Tax Procedures Handbook (LPF) is granted to sole proprietorship businesses, road transporters, craftsmen and similar entities covered by the TPU; and (vii) the special reduction of 25% on the advance payment of the business tax referred to in article 118 of the General Tax Code (CGI) and article 83 of the LPF is granted to businesses in the transport sector, hotels, restaurants and similar approved entities, as well as to approved tour operators, for the 2020 fiscal year.
Programme Monitoring and Evaluation
15. The Ministry of the Economy and Finance is responsible for the overall implementation of the COVID-19 Response Support Programme. The day-to-day monitoring and evaluation of the programme is the responsibility of the Permanent Secretariat for Monitoring of Reform Policies and Financial Programmes (PS-PRPF). This structure coordinates implementation of the Government's reform policies and programmes. The Government will provide quarterly reports to the African Development Bank on progress in implementing the programme against agreed timetables and performance indicators.
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Financing Request
16. The Government hereby undertakes to take all the necessary steps to implement the measures and actions selected within the framework of the Covid-19 response programme and reiterates its request to the Bank to provide the sought financing.
Please accept, Mr President, the assurances of my highest consideration.
Sani YAYA
Mr. Akinwumi ADESINA President of the African Development Bank Group Avenue Joseph Anoma 01 BP 1387 Abidjan 01
COTE D'IVOIRE
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