AFRICAN DEVELOPMENT BANK

BUDGET SUPPORT PROGRAMME IN RESPONSE TO THE COVID-19 CRISIS (PABURC) APPRAISAL REPORT Date: June 2020

Team Leader: P. TOKO, Chief Governance Specialist ECGF Co-Team Leader: M. DIOP-LY, Chief Health and Social Sector Specialist AHHD Programme Team: K. LUMBILA, Chief Economic Governance Officer, Coordinator, Central ECGF Region COGA E. NYAMBAL, Senior Consultant, Governance H. LOHOUES, Lead Economist ECCE A. NSHIMYUMUREMYI, Chief Country Economist, C. MBENG, Chief Finance Specialist PIFD J. BISSAKONOU, Social Development Specialist COCM B. FOKO TAGNE AHHD1 N. THIOYE-DIALLO, Financial Management Coordinator SNFI.2 R. HANNE DIALLO, Procurement Officer SNFI.1 A. SANOGO, Public Health Consultant AHHD2 Appraisal M. KEI BOGUINARD, Chief Legal Counsel PGCL.1 Team O. COLE DE MEL, Consultant AHGC B. OLLAME, Operations Analyst RGDC Sector Director A. COULIBALY ECGF (Governance): Sector Manager W. ABIOLA ECGF Governance: Social Protection-Health B. OMILOLA AHHD2

Sector Director (Human M. PHIRI AHHD Development): Director, Country E. PINTO MOREIRA ECCE Economics: Director-General: S. KONE RDGE Country Manager R. MASUMBUKO COGA

A. IBRAHIM, Principal Economist ECGF Peer R. LAKOUE, Principal Economist ECGF Reviewers H. YAMUREMYE, Principal Country Programme Officer RDGC2

Public Disclosure Public Authorized

BUDGET SUPPORT PROGRAMME IN RESPONSE TO THE COVID-19

CRISIS (PABURC)

GABON Public Disclosure Public A APPRAISAL REPORT

uthorized

ECGF/RDGC/AHHD DEPARTMENTS June 2020

Translated Document

Table of contents

I. INTRODUCTION ...... 1 1.1 Management…………………………………………………………………… 1 1.2 The Programme's overall objective…………………………………………………………. . 1

II. CONTEXT ...... 1 2.1 Economic, Social and Governance Context ...... 1

III. RATIONALE FOR BANK SUPPORT ...... 3 3.1 Rationale ...... 3 3.2 Collaboration with other partners ...... 4 3.3 Compliance with eligibility criteria ...... 4

IV. PROPOSED PROGRAMME ...... 5 4.1 Programme Goal and Objective ...... 5 4.2 Proposed Programme ...... 5 4.3 Financing Needs and Mechanisms ...... 8 4.4 Programme Beneficiaries ...... 8 4.5 Prior actions ...... 8 4.6 Policy Dialogue...... 9 4.7 Impact on Gender, Poverty and Vulnerable Groups...... 9 4.8 Impact on Climate Change ...... 10 4.9 Environmental and social safeguard measures ...... 10

V. IMPLEMENTATION AND LEGAL DOCUMENTATION ...... 10 5.1 Implementation, Monitoring and Evaluation ...... 10 5.2 Identification and Compilation of Emergency Statistics ...... 10 5.3 Financial Management, Procurement and Disbursements ...... 10 5.4 Legal Documentation ...... 11 5.5 Risk management ...... 12

VI. RECOMMENDATION ...... 12 6.1 Management ...... 12

ANNEX 1: RESULTS-BASED LOGICAL FRAMEWORK ...... I ANNEX 2: COUNTRY BRIEF: SOCIAL SECTORS ...... Erreur ! Signet non défini. ANNEX 3: PBO GENERAL AND TECHNICAL CONDITIONS ...... III

CURRENCY EQUIVALENTS (As at May 2020)

UA 1 = CFAF 822.46 UA 1 = USD 1.39 UA 1 = EUR 1.25

FISCAL YEAR 1 January – 31 December

WEIGHTS AND MEASURES

1 metric tonne = 2 204 pounds (lbs) 1 kilogramme (kg) = 2.2 lbs 1 metre (m) = 3.28 feet (ft.) 1 millimetre (mm) = 0.03937 inches (”) 1 kilometre (km) = 0.62 miles 1 hectare (ha) = 2.471 acres

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ACRONYMS AND ABBREVIATIONS

Acronyms Description

AfDB African Development Bank AGANOR Gabonese Standards Agency APIEX Investment and Export Promotion Agency BEAC Central Bank of Central African States BPW Building and Public works CDE Business Development Centre CEMAC Central African Economic and Monetary Community CFAF BEAC CFA (XAF) CMR Multi-Sector Response Committee CNAMGS National Health Insurance and Social Guarantee Fund

COPIL Steering committee

CPG Gabonese Employers' Confederation CPI Corruption Perceptions Index CSP Country Strategy Paper DGBFIP Directorate-General of Budget and Public Finance DGEPF Directorate-General of Economy and Fiscal Policy DGPME Directorate of Small and Medium-Sized Enterprises ECCAS Economic Community of Central African States ECGF Governance and Public Financial Management Coordination Office ENEC National Survey on Employment and Unemployment ERP Economic Recovery Plan, 2017-2019

E&S Environmental and social impact studies

EUR FED Federal Reserve Bank GAP II Governance Strategic Framework and Action Plan, 2014-2018 GCI Global Competitiveness Index GDP GPN General Procurement Notice

Graines Gabonese Agricultural Achievements and Initiatives of Committed Nationals

IC Individual consultant IIAG Ibrahim Index of African Governance ILO International Labour Office ISS Bank's Integrated Safeguard System LLC Limited Liability Company MDG Millennium Ddevelopment Ggoals MEDF Ministry of Economy and Finance MIC Middle-income country

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MS Ministry of Health MSME Micro, small and medium-sized enterprises NICT new information and communications technologies NOO no-objection opinion NPPP National public procurement procedures NPS National procurement systems NSBD national standard bidding documents OHADA Organisation for the Harmonisation of Business Law in Africa

PABRC Budget Support Programme in Response to the COVID-19 Crisis

PIU Project Implementation Unit PP procurement plan PPH Public Procurement Hub PROMO GABON National Agency for the Promotion of Small and Medium-sized Enterprises. PSGE Emerging Gabon Strategic Plan QCBS Quality- and cost-based selection SBD standard bidding documents

SC Steering Committee SME small and medium-sized enterprises SMI small and medium-sized industries TFPs Technical and Financial Partners UA Unit of account UNDP Development Programme UNFPA United Nations Fund for Population Activities USD VSE very small enterprises Bank WB

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PROGRAMME INFORMATION INSTRUMENT : COVID-19 Crisis Response Budget Support PBO DESIGN MODEL : Single tranche support operation

LOAN INFORMATION Client’s information BORROWER : Republic of Gabon EXECUTING AGENCY : Ministry of Economy and Finance (MEF)

2020 Financing Plan

Source EUR Amount Instrument (2020)

AfDB EUR 100.5 million Loan EUR 134,7 million Loan IMF EUR 264 million Loan AFD EUR 0 million Loan TOTAL COST EUR 499.2 Million

Key AfDB Financing Information

Loan Currency: Euro (EUR)

Loan Type: Fully flexible loan

Tenor: To be determined (up to 25 years)

Grace Period: To be determined (up to 8 years)

Average Loan Maturity**: To be determined (function of the amortisation profile)

Repayments: Consecutive semi-annual payments after the grace period

Interest Rate: Base Rate + Funding Cost Margin +Lending Margin + Maturity Premium. This interest rate must be equal to or above zero.

Base Rate: Floating (6 Months EURIBOR as determined on 1 February and 1 August) A free option to fix the base rate is available.

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Funding Cost Margin: The Bank funding cost margin as determined on 1 January and 1 July and applied on 1 February and 1 August with the base rate.

Lending Margin: 80 basis points (0.8%)

Maturity Premium: To be determined: - 0% where the average loan maturity <= 12.75 years - 0.10% where 12.7515 years

Front-end Fee: 0.25% of the loan amount payable at or before the date of signature of the loan agreement

Commitment Fee: 0.25% per year on the undisbursed amount. Accruing 60 days after signature of the loan agreement and payable on the determined payment dates.

Option to convert the base rate*: In addition to the free option to fix the base rate, the Borrower may reconvert the fixed rate to the floating rate or refix it on part or full disbursed loan amount. Transaction fees are payable.

Option to cap or collar the base The Borrower may set both cap and floor on the base rate*: rate to be applied to part or full disbursed loan amount. Transaction fees are payable.

Option to convert the loan The Borrower may convert the loan currency for both currency*: undisbursed and disbursed amounts, in full or part, to another approved lending currency of the Bank. Transaction fees are payable.

Timeframe – Main Milestones (expected)

Approval of original programme concept note June, 2020

Effectiveness June, 2020

Disbursement June, 2020

First supervision September, 2020

Completion June, 2021 Closing date July, 2021

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I. INTRODUCTION

1.1 Management hereby submits the following report and recommendation for the award of a loan of EUR 100.5 million to Gabon from the resources of the African Development Bank (AfDB) to finance the Budget Support Programme in Response to the COVID-19 Crisis. This is a budget support to be disbursed in 2020. PABURC is consistent with the Bank’s recently approved COVID- 19 Rapid Response Facility (CRF).

1.2 The programme’s overall objective is to support the response and strengthening of the health system in the face of the COVID-19 crisis and mitigate its socio-economic impact on households and businesses. The expected outcomes are: (i) containment of the spread of COVID-19; (ii) increase in public resources allocated to the health sector; (iii) boost of the resilience of the most vulnerable communities; and (iv) maintenance of productive capacity in order to facilitate the rapid post-crisis recovery of Gabon’s economy.

II. CONTEXT

2.1 Economic, Social and Governance Context

2.1.1 COVID-19 Pandemic in Gabon.

On the epidemiological level, Gabon recorded its first confirmed case of COVID-19 on 12 March 2020. As of May 27, 2020, the total number of tests carried out was 12,060, of which 2,319 cases tested positive. Of the number of positive cases, there are 1674 active cases, 631 cases cured and 14 deaths. In daily terms, on May 27, 2020, the country registered 720 tests, 38 cures, 0 deaths and 12 cases in intensive care. The hotspot of the pandemic remains Grand and Port-Gentil. However, the risks of spread are high. The COVID-19 pandemic highlighted the structural weaknesses of the country's health and economic system, given the limited budgetary margins, the drop in oil prices and the insufficient human and financial resources allocated to health. The social security system built around four areas (sickness; accidents at work and occupational diseases; family benefits and; old-age, invalidity, death pensions) which has been mobilized to respond to the crisis requires improvements.

2.1.2 Poorly diversified, the Gabonese economy is very vulnerable to exogenous shocks. Despite recent progress in diversification, the country remains highly dependent on oil. In fact, in 2018, hydrocarbon exports represented almost 30% of Gabon’s gross domestic product, 79% of export revenue and 36% of budget revenue. The unprecedented health and economic crisis linked to the COVID-19 pandemic comes at a time when Gabon was gradually emerging from the crisis linked to the fall in oil prices in 2014. The 2017-2020 Economic Recovery Plan (PRE) implemented by the authorities with the support of partners - including the AfDB, which has released 600 million in budget support in recent years - had helped restore the country's economic and budgetary stability and laid the foundations for major reforms in public finances in support of economic diversification. The real GDP growth rate, which had dropped from 5.5% in 2013 to 0.5% in 2017, gradually increased to 3.4% in 2019. The budget balance improved from -4.9% of GDP in 2016 to + 0.7% in 2019. The AfDB's economic projections forecast growth rates of 3.7% and 3.6%, respectively in 2020 and 2021. The budget execution was expected to stabilize the budget surplus in 2020 (+ 1.0% of GDP) and in 2021 (+ 1.5%). The current account deficit was to decrease to - 0.6% of GDP in 2020 to balance in 2021. Unlike previous crises, the CODIV-19 pandemic caused the global economy to unexpectedly stop, disrupted lifestyles and reduced income and demand for goods and services. This crisis could affect the progress made in recent years in implementing the reforms.

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2.1.3 The crisis linked to the COVID-19 pandemic affects the economic and social environment of Gabon through three main transmission channels. First, the drop in global demand and the sharp fall in oil prices would contribute to a sharp deterioration in Gabon's terms of trade and a significant drop in budget revenues. Secondly, the shock wave would propagate in many sectors through both supply and demand effects. Containment measures would impact trade, transportation and other economic activities. The fall in household incomes and purchasing power, as well as the increase in uncertainty, may reduce consumer confidence. Finally, the instability of international capital flows due to the COVID-19 pandemic would lead to capital flight and the fall in external funding. The entire Gabonese economy would thus be affected by the effects of the crisis, with an increase in unemployment as well as a decrease in household consumption and investment.

2.1.4 The economic crisis linked to the corona virus pandemic will give rise to considerable additional funding needs. COVID-19 as well as the collapse in oil prices and production will affect all aspects of the economy in 2020. According to the simulations of the Statistical Department of the Bank, Gabon Table 1: Macroeconomic indicators should fall into recession in 2020 with a 2019 2020 2020 Post- 2021 negative real GDP growth rate of -1.7% Pre-covid covid (against growth of + 3.7% in the initial 19 (Optimist) GDP 3,4 3,7 -1,7 -0,3 finance law based on a price of a barrel of Inflation 3,4 3,1 4,0 3,5 oil at 57 dollars). Fiscal balance (% GDP) The budgetary and external positions will 0,7 1,0 -2,7 -2,6 Current account (%GDP) also be very weakened, which will generate -3,2 -0,6 -6,6 -5,6 additional financing needs. The authorities have retained for the collective budget the Public debt 56,5 58,7 69,1 65,0 projection of a barrel price of 30 dollars Public debt 56.5 58.7 69.1 65.0 which would translate into a fall in the State’s Source: Ministry of Economy and Finance April own revenue of 703.7 billion FCFA.

2.1.5 The COVID-19 crisis is exerting strong pressure on a national health system that is structurally deficient and poorly equipped to deal with major pandemics. Faced with the high risks of community transmission and the re-emergence of infectious and parasitic communicable diseases, in particular viral ones which are risk factors for the severity of COVID-19 infection, health facilities in Gabon are insufficient. The country has 4 recent hospital centres, 9 regional hospitals, 47 departmental hospitals, 34 health centers, 413 dispensaries and 157 health huts as well as structures for the detection of diseases with epidemic potential which are generally deficient and ill-equipped. The factors of vulnerability to COVID-19 are: (i) the poor reception capacity of health centers; (ii) the low number of beds for the management of covid ‐ 19 cases in intensive care (≈58 beds); or 2.9 beds per 100,000 inhabitants against 11.5 in Europe and 3.6 in Asia; (iii) the low appropriation of barrier measures by the populations due to the prevalence of informal activities. According to "Global Health Security”, Gabon is ranked 186th out of 195 countries in terms of preparation for dealing with an epidemic Index. In terms of rapid response, its rating is 20.6, while the global average is 38.4. Consequently, the increase in the number of COVID-19 patients could implode the health system and worsen the morbidity of traditional pathologies.

2.1.6 The pandemic could worsen the widening social disparities since the fall in oil prices in 2014. About one-fifth of the population continues to live on less than 2 USD per day and unemployment affects 60% of young people under 30, a rate well above the national average of 21% on a population of 2,100,000 inhabitants, half of whom are under 19 years of age. In addition, the country ranks 115th in the world out of 189 for the (HDI) in 2018. The decline in activity linked to confinement will cause a drop in employment and income levels, with more impact on economically vulnerable Gabonese whose number before the crisis was estimated at 762,814 people by the National Health Insurance and Social Security Fund. 2

2.1.7 The stability of the country’s institutions and improved governance framework provide a strong basis on which the State can count on in response to the COVID-19 crisis. The Government has established a COVID-19 Response Steering Committee under the oversight of the Prime Minister. With support from WHO and the Red Cross, this Committee has updated Gabon’s COVID-19 Epidemic Response Plan. This team relies on an independent, scientific and economic council tasked with taking all the relevant intellectual, doctrinal, scientific and technical measures pertaining to COVID-19. In terms of governance, Gabon has implemented far-reaching reforms, in particular, the adoption of CEMAC guidelines and establishment of new anti-corruption institutions. An audit of the use of COVID-19 funds is planned because of public procurement weaknesses as well as a notice of compliance from the Court of Auditors on the use of funds.

III. RATIONALE FOR BANK SUPPORT

3.1 Rationale

3.1.1 The use of a Crisis Response Budget Support (CRBS) is justified by the Operational Guidelines for the Programming, Design and Management of PBOs (ADB/BD/IF/2014/40), in particular the following criteria: (i) economic crisis, defined as a situation ‘where exogenous events threaten a sustained decline in GDP growth’ and (ii) humanitarian crisis, defined as a ‘a situation in which there is an exceptional and generalized threat to human life, health or livelihoods’.

3.1.2 Linkages to Country’s Strategic Directions

The proposed Programme is in keeping with the Bank’s High-Five Strategic Priorities. It is consistent with the Emerging Gabon Strategic Plan (PSGE) and the President of the Republic’s Social Pact which present the development vision up to 2025 focused on: (i) consolidation of the foundations of emergence; (ii) development of the pillars of emergence; and (iii) shared prosperity. The programme complements the Bank’s COVID-19 project aimed at eradicating the pandemic in CEMAC and DRC. It is aligned with the National COVID-l9 Epidemic Integrated Response Plan whose aim is to break the COVID-19 transmission chain and protect the population and businesses from the impacts of the crisis. This is an ambitious response plan of CFAF 407 billion whose implementation focuses on the following three pillars: (i) a health programme of CFAF 66 billion, including CFAF 2.1 billion for the Special Fund to finance user fees to facilitate access to health care; (ii) a social programme of CFAF 33 billion to strengthen social safety nets and build community resilience and; (iii) an economic programme of CFAF 308 billion, including CFAF 225 billion to finance the cash-flows of struggling businesses, and CFAF 83 billion for tax rebates to mitigate the impacts of the crisis on the private sector. To finance this social plan, the Government has established a COVID-19 Solidarity Fund at the Caisse des Dépôts et Consignations (Deposit and Consignments Fund) with an initial allocation of CFAF 22 billion (Government contribution).

Authorities have also focused on strengthening the resilience of the economy to reduce dependence on the oil sector and food imports. Regarding food security, the response plan aims to ensure a regular supply of food products through the following measures: (i) strengthening of surveillance of the internal market; (ii) building up and monitoring security stocks for all basic necessities during the crisis; (iii) keeping prices of the main basic necessities and medical products at their pre-crisis level during the period of the pandemic; (iv) consumer access to good quality products throughout the national and; (v) mitigation of the impacts on the national supply and the facilitation of commercial operations. These measures complement the structural efforts aimed at increasing national agricultural production through the GRAINES project supported by the Bank. Regarding the diversification of the economy, with the support of the Support Project for the Diversification of the Gabonese Economy (PADEG) financed by the Bank, the authorities wish to

3 accelerate industrialization through the transformation of priority sectors (wood, mines); developing the Nkok Economic Zone1 and supporting SMEs and SMIs to promote job creation and investment. 3.1.3 The Bank’s comparative advantage: The Bank’s comparative advantage lies in its budget support experience in countries faced with exogenous and humanitarian shocks. It has learned a number of lessons from budget support granted to Gabon in recent years to support reforms aimed at strengthening public finance and diversifying the economy following the 2014 collapse in oil prices. It is essential to align programmes with national policies in order to create as much synergy as possible with institutional support projects. The Bank also has experience in emergency support to fight pandemics such as in several African countries.

3.2 Collaboration with other partners

Collaboration with other development partners: The Bank, in particular through the COGA country office, plays an important role in coordinating with the authorities and the Technical and Financial Partners (WHO, UNDP, AFD, IMF, World Bank). This collaboration was greatly enriched by the experience acquired in the design and implementation of the programs funded within the framework of the coordinated response of the TFPs to the CEMAC countries in response to the 2016/2017 crisis following the fall of the oil prices. Building on this achievement, this operation is developing strong synergy and complementarities with the IMF program which has just released $ 147 million under the rapid financing instrument (RFI), last April and with budget support. $ 150 million from the World Bank is under preparation. Detailed information on TFP interventions is presented in the technical annex 8.

3.3 Compliance with eligibility criteria

3.3.1 The proposed operation, which is a crisis response budget support (CRBS) operation, complies with the Bank-Group Policy on Programme-Based Operations adopted in March 2012 (ADF/BD/WP/2011/38). Gabon fulfils the eligibility criteria for budget support operations. Despite the current crisis, the authorities have maintained their commitment to poverty reduction through the Emerging Gabon Strategic Plan (PSGE). Macroeconomic stability is confirmed by the country’s sound performance in ongoing programmes with the IMF and the Bank’s previous budget support operations. Regarding the political criterion, Gabon’s institutions are stable and the political climate appears to be relatively calm despite the current challenges. As regards the public finance management and fiduciary frameworks, the 2020 assessment shows that the risks remain substantial despite progress made. However, the authorities have made a commitment to implement all the recommendations of the report mentioned in Technical Annex 7 on the assessment of fiduciary risk.

3.3.2 Application of good practice principles on conditionality: This operation’s design is aligned with good practices on conditionality, namely: ownership by the country, sharing of responsibilities, disbursement predictability and the relevance and realism of the measures retained. The Bank’s financing is based on conditionalities discussed with the other TFPs in the absence of a common matrix.

1 The Nkok Economic Zone has already created more than 12,500 jobs (2016). The authorities' objective is to increase this to 18,000 jobs (2022) thanks to the second and third transformation of wood and the transition from a zone essentially dedicated to wood to a multisectoral zone.

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3.3.3 Application of Bank Group Policy on Non-Concessional Debt Accumulation: While it remains below the CEMAC threshold of 70%, Gabon’s public debt has been rising rapidly, surging from 33% in 2014 to 58.7% in 2020. The country’s repayment capacity is adequate, but subject to risks if the present crisis deteriorates, given the strong sensitivity of the debt profile to falling oil prices. Such a deterioration could create risks at the regional level regarding coverage of pooled reserves. In this context, the IMF recently recommended a prudent debt policy as well as fiscal consolidation efforts as soon as the economic outlook improves.

IV. PROPOSED PROGRAMME

4.1 Programme Goal and Objective

The programme’s overall objective is to support the emergency response and strengthen the health system in order to curb the spread of COVID-19 and mitigate the socio-economic impact of the crisis on households and businesses. Its main expected outcomes are: (i) containment of the spread of the virus, mainly by building preventive, testing and patient care capacities; (ii) an increase in the volume of public resources allocated to the health sector; (iii) stabilisation of the incomes of vulnerable households by maintaining purchasing power, distributing food aid and providing effective social protection; and (iv) strengthening of the resilience of businesses in order to maintain the production system and pave the way for rapid recovery.

4.2 Proposed Programme

4.2.1 The programme is structured around two components: (i) support for the COVID-19 response and mobilisation of resources to strengthen the health system; and (ii) support to mitigate the impact of the crisis on households and businesses.

4.2.2 Component 1. Support for the COVID-19 response and strengthening of the health system This component aims to assist the authorities in implementing a rapid and efficient response to COVID-19 and enhancing transparency in the management of resources allocated to the health sector. The first sub-component will support implementation of the emergency health response plan whose objectives are to ensure the coordination, monitoring and evaluation of activities; strengthen the epidemiological surveillance, prevention and treatment of COVID-19 (procurement of prevention and testing kits, materials and drugs); and step up communication and sensitisation campaigns. The second sub-component concerns resource mobilisation to ensure more efficient, transparent and accountable management of the health sector.

Sub-component 1.1 Health Response to the COVID-19 Crisis

4.2.3 Context and Challenges The main challenges of Gabon’s health sector in managing COVID-19 concern: (i) the lack of epidemiological surveillance systems and adequate skills to identify, monitor and assess the quality of care provided for COVID- 19 cases, although there is an early warning system; (ii) insufficient capacity for the collection, transportation and testing of COVID-19 samples and for COVID-19 patient care; (iii) lack of necessary equipment for combating the pandemic (gloves and for carers and patients, hydroalcoholic gel, testing kits, ventilators, patient care capacity in intensive care units); (iv) inadequate preparation of medical staff (physicians, nurses, caregivers and others); (v) shortage of qualified emergency personnel, which requires the rapid training of medical personnel in emergency care to cope with rising patient numbers; (vi) shortage of drugs; and (vii) limited logistical and communication capacities.

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4.2.4 Recent Government Measures In order to stem the spread of COVID-19, the authorities took the following health measures: (i) closure of the borders and suspension of maritime and air transport within the country with the exception of freight transport; (ii) suspension of non-essential economic activities (closure of bars, restaurants and hotels); (iii) introduction of a partial lockdown of the population prohibiting all movement between 7.30 p.m. and 6.00 a.m., and mandatory wearing of face masks; (iv) distribution of masks, gel and ThermoFlash thermometers to protect the population and detect potential cases; (vi) the establishment of 60 testing centres countrywide; (vii) adoption of a chloroquine- based therapeutic protocol, on the recommendation of the Scientific Committee; (vii) ordering of 4 million surgical masks for medical personnel as well as defence and security forces; and (viii) strengthening of hospital intensive care units by an order for 200 respiratory aid devices, 10 ambulances and one imaging kit per .

4.2.5 Programme-supported Measures The Programme will support the following measures to ensure effective implementation of the health response plan: (i) Creation of the steering committee for the monitoring and response plan against the coronavirus epidemic in Gabon and appointment of the members of the steering committee and the COPIL subcommittee (Prior Action 1); (ii) prepare an operational guide on the functioning of the Steering Committee and other committees involved in the implementation of the Health Response Plan and the Plan’s monitoring and evaluation mechanisms; (iii) equip intensive care units in hospitals with 200 respiratory aid devices2 and each province with 10 ambulances and one mobile imaging kit; (iv) launch a testing campaign for COVID-19 symptomatic cases; (v) provide free health care for COVID-19 confirmed cases in public facilities to be identified by the Government; (vi) strengthen human resources (health training for medical personnel, laboratories and front-line workers on risk mitigation measures and the use of COVID-19 equipment); and (vii) carry out communication and sensitisation campaigns for the general public.

Expected results: (i) the steering committee for the National Plan for Preparing and Responding to the coronavirus epidemic is operational; (ii) the intensive care units are equipped; (iii) at least 2,000 resident people tested per day; (iv) at least 500 medical personnel are trained in risk mitigation and the use of equipment related to COVID 19 and; (v) the population is better informed about COVID-19

Sub-component 1.2. Increased mobilisation and more transparent management of budget resources allocated to the health sector

4.2.6 Context and Challenges In order to generate higher and more inclusive growth, it will be necessary to focus on resource mobilisation in order to support the financing of priority social sectors. Compared with the other CEMAC countries, Gabon already allocates a significant proportion of its revenue to the health and social protection sector. Social protection accounts for 19.7% in the 2019 budget, 15.3% of which was allocated to spending on the health sector and other areas of social protection excluding education. This exceeds the sub-regional average but remains low relative to countries having a comparable income per capita. There are also persisting inequalities in terms of access to care and the territorial distribution of medical personnel, which are biased in favour of Libreville and Port-Gentil. Less than half of the population (i.e. 45 %) consults a physician when ill (compared with 40% in rural areas), which justifies the need to strengthen mobilisation and ensure more efficient and transparent management of resources allocated to health.

4.2.7 Programme-supported Measures The Programme will support the following measures: (i) adopt a Supplementary Budget Law reflecting the measures of the Integrated Health, Social and Economic Response Plan and a reduction in current and investment expenditure; (ii) Creation and organization of the COVID-19 Solidarity Fund and appointment of the Management Committee (Prior action 2); (iii) publish a quarterly report on the implementation of the COVID-19 plan

2 This number of ventilators is predicated on hospital intake capacity and trained staff available. 6 including a list of contracts exceeding CFAF 50 million; and (iv) Commitment to carry out an audit of public contracts specific to COVID-19 in 2021 (Prior action 3).

4.2.8 Expected outcomes: (i) the amendment to the finance law is adopted; (ii) the resources allocated to the health sector are increased; (iii) the audit of COVID-19 expenses is carried out; (iv) the COVID-19 Solidarity fund is operational and; (v) reports on the implementation of COVID-19 are available to the public.

Component 2. Support to households and businesses to mitigate COVID-19 impacts

Sub-component 2.1. Support to households to build resilience to the crisis

4.2.9 Context and Challenges The health crisis caused by COVID-19 has resulted in an economic and social crisis that could increase unemployment and plunge many families into poverty. It will, therefore, be necessary to build the resilience of households and strengthen social protection institutional mechanisms in order to more effectively target vulnerable communities. In order to achieve the target goal with greater accuracy, the Government used social protection system data, in particular, data from the National Health Insurance and Social Guarantee Fund on economically vulnerable Gabonese (762,814 people) regarding food aid-related aspects as well as data from Gabon’s Power and Water Utility (SEEG) on bill payment assistance. The longer-term objective is to create a single social register. The Government has also recruited volunteers for food aid distribution, which will also cover rural areas.

4.2.10 Recent measures under the Government’s Social Agenda In order to support low-income households, the Government has put in place a Social Safety Net Plan for a total amount of CFAF 33 billion. In view of the country’s food dependency on imports from abroad, the authorities have included a food security component in the Integrated Response Plan against COVID 19. To facilitate the implementation of the food component of the response plan, the Government has decided to reallocate part of the undisbursed resources of the Bank's agricultural portfolio (an amount of 14.95 billion FCFA from the GRAINES project) to the benefit of the response to the immense food crisis caused by COVID-19. Indeed, the main world producers of cereals and other essential agricultural products having suspended their exports of food products, it is important that Gabon stimulates national production thanks to the availability and ease of agricultural inputs for farmers. With COVID-19 and interruptions in global supply chains, it is estimated that by 2021, it will be necessary to produce 75,000 to 100,000 tonnes of food in Gabon to replace food imports and maintain the level minimum consumption of nutrients recommended by the World Health Organization.

4.2.11 Programme-supported Measures The Programme will support: (i) implementation of the following measures of the social plan (a) Reduction in household expenditure: payment by the government of the Gabon Power and Water Utility (SEEG) water and electricity bills; (b) Maintenance of household income: allocation of furlough leave allowances of between 50% and 70% of gross salary, net of bonuses and maintenance of full income for salaries ranging from CFAF 80,000 and 150,000; and (c) establishment of a Food Bank to provide vouchers for purchases of products for 400,000 vulnerable people or 60,000 households; (ii) preparation of a procedures manual on the functioning of monitoring mechanisms for the distribution of food kits to vulnerable communities; (iii) updating of CNAMGS databases on economically vulnerable Gabonese citizens for access to the Food Bank; and (iv) launching of the study on the cross-referencing of data from the National Health Insurance and Social Guarantee Fund (CNAMGS), Social Affairs, the National Social Security Fund (CNSS), the Gabon Power and Water Utility

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(SEEG) and the National Employment Agency (ONE), in order to gradually establish a single social protection target.

4.2.12 Expected outcomes: (i) 248,000 ( for electricity) and 150,000 (for water) vulnerable households benefit from the payment of electricity and water bills; (ii) 60,000 vulnerable households benefit from food aid in Greater Libreville per month; (iii) incomes of vulnerable households are maintained and; (iv) databases on vulnerable communities are updated.

Sub-component 2.2. Mitigation of the impact of the crisis on businesses

4.2.13 Constraints and challenges: The Gabonese private sector is not very diversified. Apart from the oil and gas sector, it mainly comprises SME/SMIs and micro-enterprises. The effects of the slump in global demand and national activity because of COVID-19 call for the provision of fiscal and financial support for businesses in the Supplementary Budget Law being finalised in agreement with the IMF.

4.2.14 Programme-supported measures: (i) 50% reduction in the cost of patents and withholding tax for small businesses and companies providing services to individuals; (ii) finalisation of the agreement with banks on the establishment of an emergency financing mechanism of CFAF 225 billion for business cash flow requirements; (iii) Commitment of the Government to settle in priority in 2020 the debts of the domestic debt lower than 100 million FCFA to help the PME-PMI. (Prior action 4); (iv) effective payment of the domestic debt due to SME- SMI retained on the plan of clearance for the year 2020; and (v) tax and customs duty exemptions on health products.

4.2.15 Expected outcomes: (i) tax relief for very small Table 4: Financing Requirement (CFAF billion) - Source: DGPEF 2020 enterprises; (ii) at least 100 enterprises in difficulty 2019 2020 OBL benefit from the banks’ Cash Flow Facility; (iii) Revised A. Total Revenue and grants 2105 2,112.6 1,549.3 SME/SMI cash flows are improved through domestic - Oil revenue share 747,2 684.3 463.5 debt payment; and (iv) jobs safeguarded through tax -Non-oil revenue share 1357,8 1,411.3 1,060.7 B. Total expenditure 1969,4 2,040.1 1,897.6 measures. C. Overall balance (commitment basis) (A-B) - 135.6 72.5 348.3

D.Arrears (- =reduction; + =accumulation - 12.1 - 9.6 4.3 Financing Needs and Mechanisms 22.8 E. Overall balance (cash basis) (C+D) 112.8 84.6 -357.9 G. Domestic financing (net) - - 429.1 - 178.4 The double shock created by COVID-19 and the 429.1 F. External financing (net-minus the Bank’s collapse in oil prices will slow down economic activity 316.3 344.5 536.3 and exert pressure on the fiscal and external positions. contribution) including amortisation Project loans 106.2 276,1 252.8 According to the IMF, despite the planned adjustment, Budget support 464,1 144.3 378.9 Gabon will need urgent supplementary financing -AfDB 49 65,6 equivalent to over 3% of GDP in 2020, which will -IMF 299.5 29,3 160 -World Bank 115.4 115.0 87.8 require additional financing and adjustment efforts. - 49.2 0 0 Financing gap 0 0 -65,6 4.4. Programme Beneficiaries Beneficiaries: The Programme will benefit the Government and population as a whole by providing more public resources to address the COVID-19 crisis and mitigate its socio-economic impact. In particular, it will benefit the following groups: (i) vulnerable communities that will benefit from emergency social measures to offset job and income losses, and from improved access to health services; and (ii) Gabonese entrepreneurs and foreign investors who could benefit from the fiscal and financial measures implemented to address the crisis.

4.5. Prior actions The Government of Gabon has already taken the following measures (Table 3, below) which are programme prerequisites prior to Board presentation.

8

Table 3: Prior Actions

actions Implmentation Evidences status

1 Measure n ° 1: Creation of the steering committee for the Prime Ministerial Order establishing the Steering monitoring and response plan against the coronavirus epidemic Committee for the watch and response plan against in Gabon and appointment of the members of the steering the coronavirus epidemic in Gabon committee and the COPIL subcommittee. Measure n ° 2: Creation and organization of the COVID-19 (i) Publication in the Official Journal of the Decree 2 Solidarity Fund and appointment of the Management of the President of the Republic establishing and Committee organizing the COVID-19 Solidarity Fund.

(ii) Order of the Minister of Economy and Finance appointing the members of the Management Committee of the COVID-19 Solidarity Fund Measure n ° 3: Commitment to carry out an audit of public 3 contracts specific to CODIV-19 in 2021 Letter from the Minister of Economy and Finance (i) Letter of commitment from the Minister of 4 Measure n ° 4: Commitment of the Government to settle in Economy and Finance transmitting a copy of the priority in 2020 the debts of the domestic debt lower than 100 Arrears Clearance Plan to be paid in 2020 million FCFA to help the PME-PMI. relating primarily to receivables of less than 100 million FCFA and (ii) transmission of a copy of the strategy approved by the Minister of Economy and Finance.

4.6. Policy Dialogue

Policy dialogue focused on the effectiveness of the mechanisms put in place to eradicate COVID- 19 and mitigate the impact of the crisis on households and businesses. This dialogue should continue around the following areas: (i) Impact of the measures of the integrated plan on the stability of the macroeconomic framework and the reform of public finances initiated within the framework of previous budgetary support from the Bank; (ii) Transparency measures: Given that the procurement system represents the main weakness at the fiduciary level, it was agreed to take measures (audit of COVID-19 public contracts and notice of compliance by the Court of Auditors) that will allow the dialogue to continue; (iii) Fight against poverty: The COVID crisis response plan shows the need to take better account of the reform of social sectors such as health and education and the establishment of social safety nets, with a particular focus on targeting vulnerable groups, the impact and sustainability of social policies and monitoring and evaluation mechanisms; (iv) Resilience and diversification of the economy: In line with the guidelines of the CSP, the Bank will continue the dialogue begun several years ago with the authorities on the diversification of the economy in order to overcome dependence on the hydrocarbon sector and strengthen food security. Finally, in collaboration with the other donors, the Bank will continue the dialogue on the impact of the crisis in order to identify with the authorities, the priority areas of reform for the recovery of the economy.

4.7. Impact on Gender, Poverty and Vulnerable Groups.

As at 13 April 2020, Gabon had recorded more cases of women infected by COVID 19 than men (35 women out of 57 people). Even though the country has made considerable progress in the of gender, social and economic disparities persist. Indeed, 66% of young men are in employment compared to 43% of young women (AfDB 2017). Furthermore, majority earn their incomes from informal activities such as trading, catering, etc. The slowdown in these activities due to the pandemic could increase their economic vulnerability. Moreover, health care personnel in Gabon, especially caregivers, are mostly women and are, therefore, more exposed to the risk of contamination. The project will implement specific gender mainstreaming activities: (i) involvement of women in community capacity building activities and rapid response teams; (ii) sensitisation on basic hygiene rules; and (iii) inclusion of a support quota for women household heads, the informal sector and SMEs in order to prevent any erosion of gender equality efforts. The project will provide financial and food aid directly to

9 vulnerable households, including women. The project is classified in Category 3, according to the Bank’s Gender Marker System.

4.8. Impact on Climate Change

The program is emergency budget support that supports health, economic and social reforms without direct impact on the environment and climate change. Consequently, it is classified in category 3 of the Bank's climate risk system. COVID-19 weakens the health system and exacerbates the country's vulnerability to hazards, notably climate change. Its impact transcends the economic and social sectors. By responding to the challenges posed by COVID-19, the Program will increase the resilience of the population to the effects of long-term climate change. This will facilitate the implementation of the Bank's action plan on climate change at the national level.

4.9. Environmental and social safeguard measures

Any negative impacts that appear during execution will be managed in accordance with national law and the ISS. During the implementation of the program, the Borrower undertakes to manage the biomedical waste and the waste generated in accordance with the national legislation relating thereto, the good international practices recommended by the WHO or any technically efficient and financially feasible practice for the country. Any other environmental or social aspect which appears during implementation, in particular aspects of occupational health and safety, will be managed in accordance with national legislation and the requirements of the Bank's Integrated Safeguard System (ISS). An E&S report is sent to the Bank at the end of the emergency activity. The Environmental and Social Compliance Note (NOCES) for the project (in French and English) is included in the PAR Technical Annexes.

V. IMPLEMENTATION AND LEGAL DOCUMENTATION

5.1 Implementation, Monitoring and Evaluation

5.1.1 The programme will be implemented by the Ministry of Economy and Finance (MEF). This Ministry has satisfactorily coordinated all the Bank’s previous budget support operations as well as those of other donors in recent years. It will work closely with the national system established by the Authorities, in particular the COVID-19 Response Steering Committee under the oversight of the Prime Minister, committees and sector ministries concerned and the scientific advisory body composed of academics, biologists, epidemiologists, clinicians and public health doctors, sociologists and WHO. The MEF will be responsible for data collection and the coordination of monitoring/evaluation. Religious leaders and NGOs will act as observers for the distribution of aid to vulnerable families.

5.2 Identification and Compilation of Emergency Statistics

The identification and compilation of emergency statistics on employment (including the informal sector) in urban areas will contribute to the analysis of monitoring/evaluation results in light of the possible economic and social impacts of the emergency measures planned under the proposed programme. These statistics will concern the usual sector indicators (employment, incomes, women’s empowerment, health, credit, savings, regionalisation, etc.) likely to be impacted by the programme measures.

5.3 Financial Management, Procurement and Disbursements 5.3.1 Disbursement The loan will be disbursed in a single tranche subject to fulfilment by the Government of Gabon of the related general and specific conditions. The Bank will disburse the funds into a specifically designated Treasury Account 10 opened at BEAC. The Bank has undertaken to align its support with the 2020 budget cycle subject to fulfilment of the conditions precedent to disbursement. When the funds have been deposited in the aforementioned account, the local currency equivalent shall be transferred to the Treasury single Account. The Ministry of Finance shall submit to the Bank within thirty (30) days of the disbursement a letter confirming the transfer indicating the total loan amount received, converted and deposited into the Treasury Account accompanied by a transaction statement issued by the Central Bank.

5.3.2 Financial Management The Ministry of Finance will assume responsibility for the operation’s administrative, financial and accounting management. The financing allocated to the programme will be entered on a separate line in the 2020 Supplementary Budget Law. Because of the type of operation (budget support), financial resources shall be used in compliance with existing regulatory texts. The entire public expenditure circuit will be used and the related internal control rules and procedures applied. Gabon’s public finance management (PFM) has evolved considerably following the transposition of CEMAC PFM directives into the national legal system. However, the fiduciary risk assessment concluded that the fiduciary risk was substantial in light of the shortcomings noted in the different PFM areas, despite the momentum to promote good governance and modernise public finances carried out by the Government. Details of the fiduciary risk assessment are presented in the annex.

5.3.3 Audit In light of the procurement system and financial risk management assessments, it was agreed that all the implementation reports would be made available to Gabon’s Court of Auditors to enable it to audit the financial flows as at 31 December 2020. The audit will be performed in accordance with terms of reference agreed upon and approved by the Bank. The deadline for submission of the audit report to the Bank shall be six months after the closure of the programme. Furthermore, as part of its public expenditure external control prerogatives, the Court of Auditors will review the budget execution reports and draft Budget Review Laws for the 2020 fiscal year in order to prepare its notice of compliance. The 2020 Budget Review Law and Court of Auditor’s notice of compliance shall be submitted to the Bank no later than 31 December 2021.

5.3.4 Procurement: Since the programme is a general budget support, the expected resources will be entered in the budget for the procurement of the necessary goods and services to meet government requirements. Procurement under the budget support operation will be made using the national systems. Despite the progress made following adoption of a new Public Procurement Code in 2018, shortcomings persist for reasons linked, among others, to the institutional framework, the control environment and the quality of redress mechanisms. Consequently, an audit of contracts relating to COVID-19 expenditure has been planned in the programme as well as the Court of Auditors’ notice of compliance.

5.4 Legal Documentation 5.4.1 The legal instrument to be used under the programme is a loan agreement between the African Development Bank and the Republic of Gabon (‘Borrower’).

5.4.2 Conditions precedent to loan effectiveness: Loan effectiveness shall be subject to fulfilment of the conditions stipulated in Section 12.01 of the General Conditions Applicable to the Bank’s Loan Agreements and Guarantee Agreements (‘General Conditions’).

5.4.3 Conditions precedent to Board presentation of the Programme The Programme’s presentation to the Board of Directors shall be subject to the fulfilment of the prior actions identified in Section 4.5.

5.4.4 Conditions precedent to disbursement In addition to loan effectiveness in accordance with the provisions of Section 12.01 of the General Conditions, disbursement of loan resources shall be subject to fulfilment by the Borrower, to the Bank’s satisfaction, of the following condition precedent: submission to the Bank of evidence of the

11 existence of a Treasury account opened at the Bank of Central African States (BEAC) for the payment of the loan resources.

5.5 Risk management Table 5 below presents the programme risks and mitigation measures.

Table 5: Risks and mitigation measures Risk Mitigation Measures Risk 1: Insufficient supplies of drugs and equipment to Increase sources of supply at the international and local levels combat COVID-19 Risk 2: Lack of assistance measures to mitigate the impacts Strengthen supportive measures for businesses to prevent bankruptcies of the crisis on businesses Risk 3: Lack of resources to finance the health, economic Adopt a supplementary budget law and reinforce fiscal adjustment or increase donor and social response plan support Audit of public procurement and public procurement performance in the context of Risk 4: Fiduciary risk linked to emergency procedures COVID-19.

VI. RECOMMENDATION

6.1 Management requests that the Board of Directors approve an AfDB loan of EUR 100.5 million to the Republic of Gabon for the purposes and under the conditions stipulated in this report.

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ANNEX 1: RESULTS-BASED LOGICAL FRAMEWORK

A- PROJECT INFORMATION ❚ PROJECT NAME: Budget Support Programme in response to COVID-19 (PABRC) ❚ COUNTRY: GABON ❚ OBJECTIVE: Contribute to the eradication of the COVID-19 pandemic and mitigate its socio-economic impact on households and businesses a) National Health, Social and Economic Response Plan to the ❚ PROJECT ALIGNED ON: coronavirus epidemic in Gabon b) Bank’s CFR COVID-19 pandemic response Alignment indicators: (ii) % of population living in

multidimensional poverty (give percentage) B- RESULTS MATRIX TARGET AT BASELIN REPORTIN RESULTS CHAIN AND INDICATORS UNIT PROJECT MoV E G COMPLE TION ❚ OUTCOME 1: Health response and strengthening of health system to withstand COVID-19 Ministry INDICATOR 1: of Number of people tested for COVID-19 Number 720 2000 Health Annual COVID report ❚ OUTCOME 2: Mitigation of the impact of the crisis on households and businesses MEF – 500,000 report on Number of COVID- households 0 Quarterly 19 Plan

impleme INDICATOR 2: ntation Incomes of poor households stabilised because of measures MEF – to maintain purchasing power (% Of women considered in report on the sample of COVID- 100% 100% Quarterly 500,000 19 Plan households) impleme ntation INDICATOR 3: Businesses protected from bankruptcy Number 0 500 MEF Annual Number of 50,000 Annual 0 (2020) jobs (2021)

INDICATOR 4: Jobs safeguarded MEF – 100% whose 100% (% of female (2020) (2021) jobs) COMPONENT I- SUPPORT FOR COVID-19 PANDEMIC RESPONSE AND STRENGTHENING OF HEALTH SYSTEM ❚ OUTPUTS 1.1: Health response to COVID-19 crisis INDICATOR 1.1.1 Prime Appointment of the Steering Committee for the National Minister Coronavirus Epidemic Preparedness and Response Plan Order Yes No (Yes/no)

Min. Quarterly

0 Health Indicator 1.1.2 Number 500 COVID Medical personnel trained in risk mitigation and the use of Report equipment linked to COVID 19

0(2020) 200 Number of Ministry (2021) new of INDICATOR 1.1.3: Intensive care units in hospitals ventilators Health Quarterly equipped with 200 respiratory assistance devices; and each 0(2020) installed in COVID province with 10 ambulances and one mobile imaging kit intensive care report 0(2020) 10 (2021

I

units of hospitals 1 (2021)

Number of ambulances and mobile imaging kits per province

❚ OUTPUT 1.2: Resource mobilisation to ensure more efficient and transparent health system management INDICATOR 1.2.1: MEF- Supplementary Budget Law reflecting the measures of the Publication No Yes Official Monthly Integrated Health, Social and Economic Response Plan and a (Yes/no) Gazette reduction in current and investment expenditure MEF- INDICATOR 1.2.2. Increased health system resources in % 0 (2020) 10% Budget Annual Budget Laws Law INDICATOR 1.2.3. Quarterly report on the implementation of the Publication of COVID-19 Plan including a list of contracts exceeding CFAF 50 No Yes MEF Quarterly report Yes/No million INDICATOR 1.2.4: Audit of procurements and public procurement specific to Conduct of No Yes MEF Annual COVID-19 expenditure to improve transparency in COVID- audit Yes/No 19 funds management. COMPONENT II- SUPPORT FOR HOUSEHOLDS AND BUSINESSES TO MITIGATE THE IMPACTS OF THE CRISIS ❚ OUTPUT 2.1: mitigation of crisis impacts on households 58582 Number of househol INDICATOR 2.1.1: MEF- households ds ((May 60 000 Distribution of food aid to vulnerable individuals and 6, 2020 i.e. COVID Quarterly receiving households (first phase in Greater Libreville) 97.6%) report food aid

Number of 248200 vulnerable 0 (electricit INDICATOR 2.2.2: people whose (electricit y) MEF- Payment of electricity bills for low-income people (with a electricity and y) water COVID Quarterly social rate subscription) water bills are (from report paid by the 0 (water) May government 2020) INDICATOR 2.2.3: MEF- Number of Payment by central government of full income for salaries between 0 5000 COVID Quarterly beneficiaries CFAF 80,000 and 150,000 during the crisis report

❚ OUTPUT 2.2: Mitigation of crisis impacts on businesses Supplem INDICATOR 2.2.1: 50% reduction in cost of patents and Supplementar entary withholding tax for small businesses and companies providing No Yes Once only y Budget law Budget services to individuals in the supplementary budget law law Signing of INDICATOR 2.2.2: MoU between MEF- Establish an emergency financing mechanism of CFAF 225 the Six No Yes Rapport billion to meet the cash flow requirements of businesses in government monthly COVID difficulty and banks Yes/No INDICATOR 2.2.3: Government arrears clearance plan for 2020 prioritising debts below CFAF 100 million to ensure SME/SMI cash flow

MEF- Supplem CFAF billion 0 30 entary Annual Budget Law

II

ANNEX 2: PBO GENERAL AND TECHNICAL CONDITIONS

Conditions Observations on current situation

Government The Government has a development programme, the Emerging Gabon Strategic Plan commitment to (PSGE), which extends until 2016 and which organizes the country’s development poverty reduction vision until 2025. This plan, which is welcomed by the international community, identifies the major challenges and defines the actions envisaged to deal with them. It sets out the path towards emergence and aims to continue deepening economic and sector reforms to strengthen the competitiveness and diversification of the Gabonese economy, and generate strong and sustainable growth based on solidarity and capable of generating jobs. The PSGE is based on three pillars, namely: (i) Industrial Gabon Pillar, which supports the transformation from a rent-based economy to a diversified one; (ii) Green Gabon Pillar, which supports the full development of Gabon's mineral wealth; and (iii) Services Gabon Pillar, which concerns human capital development. This programme aims to address the three challenges identified by the country, namely: (i) the need to accelerate economic growth and diversify its sources; (ii) the urgent need to reduce poverty and social inequalities; and (iii) ensure sustainable resource management for future generations.

While the PSGE remains the medium-term reference document, the authorities have prepared a COVID-19 Emergency Response Plan. This plan is based on the Economic and Social Resilience Programme, for which the FORCE-COVID 19 fund will be the main financial vehicle and which will have three main components: (i) strengthening of the health system; (ii) support for households (food aid, etc..); and (iii) support for businesses.

On the health front, the authorities have embarked upon the following health measures to contain the spread of COVID-19: (i) distribution of masks, gel and ThermoFlash thermometers to protect the population and detect potential cases; (ii) the establishment of 60 testing centres countrywide; (iii) free testing in public facilities; (iv) closure of air, land and sea borders; (v) minimum provision of non- essential public and private sector services and (vi) 7.30 p.m. curfew. An action plan has also been implemented under the oversight of the Prime Minister to eradicate the COVID-19 pandemic and promote patient care for the sick and also the most vulnerable segments of the population.

On the social front, the establishment and widespread extension of social security, increased family, transport and accommodation allowances as well as the establishment of a National Social Assistance Fund and total care for cancer patients and families in serious difficulties demonstrate the Government’s commitment and determination to actively reduce poverty.

Macroeconomic The COVID-19 crisis and the slump in oil prices could exert fiscal pressure stability thereby preventing any effective response to the crisis. In fact, the original Budget Law was based on a growth rate of 3.8% and a price of USD 57 per barrel of Gabonese oil. Owing to the shock caused by the global growth downturn (-3%) which affected over 80% of Gabon’s export revenue and the impact of the slowdown in activity as a result of COVID-19, the authorities worked on several scenarios: Scenario 1 with the price per barrel at USD 50 would reduce growth from 3.8% to 2.7% and central government revenue by about CFAF 232 billion in 2020. The scenario retained for the supplementary budget is based on a price per barrel of USD 30, which would result in a drop in growth from 3.8% to 0.3% and a sharp decrease in the government’s own revenue by CFAF 703.7 billion following the CFAF -313.7

III

billion decrease in oil revenue compared with the original Budget Law (-45.8% relative to the OBL) and a drop in non-oil revenue (-CFAF -372.9 billion) caused by the decrease in customs revenue (CFAF -83.5 billion, i.e. 24.9% relative to the OBL) and lower tax revenue (-26.9% relative to the OBL, or about CFAF 289 billion. The authorities have prepared an action plan to mitigate the impact of the crisis on businesses and cushion its macroeconomic impact. A revised Budget Law will be adopted, reflecting all the Government’s health, economic and social measures to address the crisis.

Satisfactory The fiduciary risk assessment of the public financial management system reveals fiduciary risk moderate residual fiduciary risks overall thanks to reforms targeting public finance assessment management in general, and improvement of the expenditure chain in particular, following previous donor recommendations to introduce programme-based budgeting (PBB). Reforms have been carried out: (i) at the legislative and regulatory level, especially the transposition into national law of the CEMAC directives and the drafting of instruments already adopted; (ii) with regard to the budget preparation, implementation and programme operationalisation guide; and (iii) the introduction of a performance-based approach in Government departments. Other actions are ongoing. Nevertheless, there are priority areas for action to ensure the continuous improvement of the public finance management system.

Political stability The stability of the country’s institutions and improved governance framework provide a strong base on which the State can count to ensure an efficient response to the COVID-19 crisis. The Government has established a COVID-19 response Steering Committee under the oversight of the Prime Minister as well as a National Response Committee coordinated by the Military Health Services and the Ministry of Health. With support from WHO and the Red Cross, this Committee has updated Gabon’s COVID-19 Epidemic Response Plan. In terms of governance, Gabon has embarked upon a series of far-reaching reforms affecting public sector management and the fight against corruption in particular, through the establishment of new institutions such as the National Commission Against Illicit Enrichment (CNLEI), the National Financial Investigation Agency (ANIF) and the deployment of branches of the Court of Auditors throughout the country as well as the recent acceleration of the anti-corruption campaign at the level of the administration and the highest levels of government in order to enhance transparency in the management of public wealth.

Harmonisation This programme was designed based on ongoing dialogue with the different structures of central government and in close cooperation and consultation with the TFPs and other partners including the private sector and civil society. The Bank, through the COGA Country Office has played a major role in coordinating TFP actions. The IMF has just released USD 147 million under the rapid financing instrument (RFI) to help Gabon grapple with the terms-of-trade shock and the COVID-19 pandemic. Gabonese authorities have also established a Steering Committee under the oversight of the Prime Minister responsible for the internal coordination of the COVID-19 response and to serve as a relay with the donors.

IV

ANNEX 3: LETTER OF ECONOMIC POLICY

MINISTRY OF ECONOMY AND FINANCE ------OFFICE OF THE MINISTER

No.______/MEF/CABM/LFL Libreville,

The Minister

to

The President of the African Development Bank (Côte d’Ivoire)

Subject: Economic situation/African Development Bank (AfDB) Budget Support.

7

Mr. President, The macroeconomic framework of Gabon stabilised at the end of 2019 as a result of the economic and structural reforms initiated under a Three-Year programme. Consequently, real growth rose to 3.9% in 2019 compared with 0.8% in 2018 and 2.1% in 2016. The fiscal deficit narrowed from -6.6% of GDP in 2016 to almost +1% of GDP in 2019 while the current account balance improved to -0.8% of GDP in 2019 compared with -10.4% of GDP in 2016. Concomitantly, currency reserves rose from 1.4 to 2.5 months of imports.

At a time when economic activity was expected to recover from 2020, the COVID-19 crisis broke out, impeding this momentum. On 12 March 2020, Gabon recorded its first case of coronavirus (COVID-19), and other cases have since been confirmed. The Government reacted swiftly to meet the medical needs of those affected by this virus which has already plunged many families in the world into mourning. Our response strategy was immediate and comprehensive with drastic measures including the closure of borders, schools, bars and restaurants and the suspension of international flights. We also took economic and social measures.

At the same time, Gabon has been affected by the slump in international oil prices. It is expected that there will be a significant slowdown in economic growth as well as a deterioration in the external position and in the public finance balances. At a time when severe risks are weighing on oil sector

V activities, non-oil sector production will also be affected by the direct impact of COVID-19 on the population and by the lockdown measures and restrictions imposed, especially on goods and freight transport.

The slowdown of economic activity will have a negative impact on fiscal revenue and raise expenditure, in particular to address health needs and support the most vulnerable communities.

It was in this environment that the Government prepared a COVID-19 response strategy, which is a cohesive plan containing health, economic, and social actions to prevent COVID-19, support the economy and protect household purchasing power.

Accordingly, the Government of Gabon wishes to request financial support, amounting to USD 200 (two hundred) million from the African Development Bank. This budget support will partly close the financing gap and help to ease the pressure on the government’s cash flows.

In a bid to address all these developments, we are currently preparing a supplementary budget law for 2020 to meet the population’s needs. This will allow us to redefine the priorities set under the original budget, especially for capital expenditure financed from domestic resources.

Against a backdrop of deteriorating international macroeconomic prospects, we confirm our determination to work to restore the stability of the macroeconomic framework and boost economic growth.

Please accept, Mr. President, the assurances of my highest consideration.

Minister of Economy and Finance

Jean-Marie OGANDAGA Attach. /- Summary of COVID-19 Response Plan.

VI